Final Results and Notice of AGM

Alecto Minerals plc / EPIC: ALO / Market: AIM / Sector: Exploration & Development

6 June 2012

Alecto Minerals plc ('Alecto' or 'the Company')

Final Results and Notice of AGM

Alecto Minerals plc, the AIM listed multi-commodity exploration and development company with projects in Ethiopia, Mauritania, and an option over a highly prospective bauxite asset in Guinea, announces its audited results for the year ended 31 December 2011 and gives notice of its AGM to be held at the Washington Mayfair Hotel, 5 Curzon Street, London W1J 5HE on 29 June 2012 at 11.00am. The report and accounts have today been sent to shareholders and will be available on the Company's website at www.alectominerals.com.

Highlights

·; Strengthened portfolio through two gold acquisitions offering exposure to prime mineralised regions in Ethiopia

·; Planned drilling at Wayu Boda gold licence in Ethiopia for Q3 2012 to advance targets highlighted through artisanal and historical work

·; Advanced Mauritanian Iron Oxide Copper Gold ('IOCG') licences to drill ready status to build knowledge of copper anomalies - drilling planned Q3 2012

·; Acquired option over Guinean bauxite licence 223 - potential to host a 500Mt resource with near term production potential due to quality of resource and close proximity to infrastructure

·; Raised £1.47 million and secured experienced cornerstone investor - ideally positioned to implement 2012 exploration programme

Alecto Managing Director Damian Conboy said, "This has been a year of solid development for Alecto, during which we have increased our exposure across a range of prime and under-explored regions. We now have a prospective Iron Oxide Copper Gold and gold portfolio in known mineralised areas of Mauritania and Ethiopia, as well as an option over an exciting Guinean bauxite licence with near term production potential. 

"During the year, we implemented systematic exploration campaigns across our assets and have been very encouraged by the results. Importantly, a cornerstone investor has also seen the Company's potential and provided us with the funds to progress our assets up the exploration curve to build value. We are therefore now focussed on drilling at the Wad Amour Iron Oxide Copper Gold Licence in Mauritania and the Wayu Boda Gold Licence in Ethiopia, in tandem with further reconnaissance work. We also anticipate rapidly developing the Guinean bauxite asset, subject to the successful completion due diligence, which we are confident can provide us with cash flow from production within two years."

Chairman's Statement

I am pleased to report that over the past year we successfully implemented our strategy to build and advance a portfolio of prospective resource assets in under-explored mineralised regions of Africa. This work has led to the delineation of a iron-oxide-copper-gold ('IOCG') anomaly at our Mauritanian licences, the acquisition of two gold licences located in known mineralised areas of Ethiopia and, post year end, an option to acquire a bauxite licence with near term production potential ('Licence 223') in Guinea.

Post year end, despite difficult markets, we attracted an experienced strategic investor, raising £1.47 million by way of a placing of 95,000,000 New Ordinary Shares at 1.55p per share. The new cornerstone investor, Mr. Fahad Al-Tamimi, is a highly successful businessman, who has taken a 29.5% stake in the Company in recognition of our African portfolio's exciting growth potential. Mr. Al-Tamimi is the founder and owner of a substantial diversified business group based in Riyadh, Saudi Arabia, and we look forward to working closely with him going forward.

We now have a solid cash position to unlock the intrinsic value of our portfolio over the coming months. These funds will enable us to commence drilling at both our Mauritanian IOCG prospect, which has been the focus of a defined work programme to date, and our Wayu Boda Gold licence, where artisanal work has provided us with advanced drill targets, in tandem with reconnaissance work across our entire portfolio. Additionally, further to the completion of due diligence at Licence 223, we plan to rapidly undertake environmental assessments and design a drill programme aimed at developing this potentially transformational asset up the value curve.

Operational Review

Mauritania

The attractive nature of our three gold and base metal licences, totalling 1,802 sq km, has become increasingly apparent over the year following a comprehensive reconnaissance programme conducted by SRK Exploration Services ('SRK ES'). Having identified two copper anomalies with strike lengths of over 800m (the Chiron anomaly) and 900m (the Oued d'Amour anomaly), as well as a third target through phase one of our exploration programme at the 613 sq km Wad Amour licence, we made the decision to conduct geochemistry, rock chip sampling, trenching, geophysical surveys and mapping as part of phase two to gain a greater understanding of the IOCG mineralisation.

Results from this work have led SRK ES to believe that the licence has the potential to host significant copper/gold occurrences similar to First Quantum Mineral Limited's 3.6Mtpa Guelb Moghrein IOCG deposit. A total of 1,401 samples were taken and analysed over three grids and 249 rock chip samples were collected predominantly from two sampling grids over the Chiron and Oued d'Amour targets. A total of nine trenches were excavated, six at the Oued d'Amour target and three at the Barkeol 001 target. At Chiron, the detailed rock chip samples were taken in part in lieu of trenching, which is difficult in the area due to hard rocks near surface. Ground based magnetic and electromagnetic ('EM') geophysics surveys were conducted at both the Chiron and Oued d'Amour targets.

The Chiron target returned positive exploration results in the central region of the Wad Amour licence. 177 rock chip samples were taken on a 10 x 20m grid from mineralised haematite breccia ridges with copper oxides. This returned grades up to 5.8% Cu, 0.66g/t Au and 13.9g/t Ag, with anomalous results occurring over a straight line distance of 630m.

Geophysical surveys and satellite imagery showed the mineralisation to have a strong structural control with mineralisation occurring at the intersection of north-east trending structures with major north-west trending structures. Therefore it is suspected that all three mineralised areas form part of a single body and with this in mind, the Company plans to undertake a circa 1,500m scout drilling programme, comprising 12 holes, to test the extent of this mineralisation at depth and to discover whether the mineralisation extends between these surface bodies. A number of additional holes will be placed from information gathered while drilling. 

We expect this campaign to commence in Q3 and look forward to updating shareholders at the appropriate time.

Ethiopia

During the year, Alecto successfully built a footprint in Ethiopia, which is increasingly becoming a target for mineral exploration, through the acquisition of a 1,953 sq km gold exploration licence in the highly prospective Aysid-Metekel region of north western Ethiopia in May 2011. Six months later, this was followed by the 945.5 sq km Waya Boda gold licence in the highly prospective central-southern Adola greenstone belt in southern Ethiopia. Both prospects provide us with exposure to exciting and emerging mineral districts, and since the acquisitions, reconnaissance work has been conducted to identify future targets.

Ethiopia offers an established and prospective environment in which to operate. The government has a clear strategy to maximise the development of its mineral resources within the context of a free-market economic policy and a five-year (2011-16) National Growth and Transformation Plan, and we have found it to be a mining-friendly place to operate.

Wayu Boda

This is the more advanced of the two assets due to the major artisanal workings on site and its close proximity to good infrastructure. Importantly, the Ethiopian newspapers recently reported that the National Mining Corporation has discovered a major gold deposit in the regional state of Oromia, located within 20km of Wayu Boda's eastern boundary, which provides a sound basis for successful exploration.

Extensive historical and current artisanal high grade quartz vein gold mining activity has provided the Company with readymade initial exploration targets which will enable us to commence drilling in the shorter term. A number of the workings are more than 25m deep and follow the steeply westerly dipping quartz veins.

There are two spatially distinct mine sites: one 270m to the north of the miner's village; and the other located some 1,000m to the SSW. The northern pits occur along a strike length of approximately 70m at a bearing 022 - 202 degrees. The dip direction, when non vertical, is orientated towards 270 degrees. The northern workings are located on the western side of a subdued hill with little outcrop or obvious quartz veins and associated shears. This deposit appears to be open both to the north and south.

The southern pits, located in a small valley, are more extensive, occurring along 140m strike length with a north south strike and again a slight westerly dip when beds are not vertical. The northern extension of the quartz veins disappears under recent alluvial cover.

There has been no recent, modern, large-scale exploration or mining within the project area and with this in mind, we appointed a Senior Geologist to undertake reconnaissance work over the period. The results from this have been positive to date and now that the Company has the funds in place, we have bolstered our exploration team and will look to refine and commence a drill programme by Q3 2012.

Aysid-Metekel

This 1,953 sq km licence, located approximately 50km north and north-east respectively from the highly prospective Towchester and Brantham tenements of AIM quoted Nyota Minerals Limited, is in the right address, located within the prime Arabian-Nubian shield on the Western Akobo Greenstone belt. The licence is also approximately 80km from the Fiti skarn gold deposit discovered by MIDROC Gold Mine plc.

Since completion of the acquisition, we have been conducting an initial reconnaissance type exploration programme and evaluating historical data. Six exploration targets have been identified by Alecto and, although at a more grass-roots stage than Wayu Boda, results from sampling to date have highlighted some similarities to other mineralisation styles in the area. In line with this, we look forward to carrying out more of this type of work over the coming months to define further targets of merit.

Guinea

As touched on previously, we have entered an option agreement relating to the staged acquisition of Forward Africa Resources ('FAR'), which holds the 711 sq km bauxite licence 223 ('Licence 223'). Due to its location in the prospective south west coastal region of Guinea, which already has established infrastructure and producing bauxite operations, and its near term production capacity, we believe that this acquisition opportunity has the potential to be ground-breaking for Alecto. Notably, unlike many other bauxite deposits in the country, we are in very close proximity to the only operating railway line in the country, which means that we could bring this asset into production over the next two years to generate cash flow. 

Licence 223 is located immediately north and contiguous to the Kindia Mine on the coast plain approximately 100km inland of the capital city of Conakry. Based on historic exploration, the Board believes that Licence 223 has the potential to host in-situ bauxite resources of over 500Mt. Whereas quality (defined by high alumina content and low silica levels) will vary across the bowals, limited higher quality areas will provide viable mineral reserves to support a life-of-mine of several decades at the initial planned production of between 1-2 Mt per annum ('Mtpa').

We have extended our due diligence period, which provides us with more time to address some minor issues, and we will update the market with regards to this progress over the coming weeks. The rainy season occurs in Guinea during the summer months, but, subject to completion of this acquisition, we will swiftly embark on a environmental study which is required to ensure the project's development.

Corporate

In October 2011, we were delighted to welcome Mr. Michael Smith to the Company as Technical Consultant. Michael has over 30 years of corporate and operational experience in the resource industry. His knowledge of the Guinean bauxite industry is also very strong, and we look forward to benefitting from this as our work on the asset progresses.

Financial Review

The loss before taxation of the Group for the year ended 31 December 2011 amounted to £1,242,121 (31 December 2010: £655,806).

The Group's cash position at 31 December 2011 was £715,153 (31 December 2010: £2,015,012) and this will be used to implement defined exploration programmes in Ethiopia.

Outlook

Having diversified our portfolio of resource assets across a range of minerals and geographies and increased our understanding of the mineralisation through structured exploration programmes, we are excited about the future and believe that all our assets demonstrate substantial upside potential. This belief is shared by others, as highlighted by the number of experienced investors who participated in our recent placing. 

Over the coming months, we will be actively working on adding value to our portfolio. We aim to commence our circa 1,500m drill programme at the Wad Amour licence in Mauritania in Q3 2012, which should provide us with results in Q1 2013, in tandem with further regional work and geophysics. Drilling at Wayu Boda is also on the cards for Q3/Q4 2012, following further minor reconnaissance work to refine the drill programme design. This will be focussed on artisanal areas, thus greatly shortening our lead time, and solidifying our exploration footprint in the region. At our north-west licence, we will continue to implement sampling programmes to further prioritise areas of prospectivity.

We also intend to secure our holding over our Guinean bauxite licence. Subject to completion over the next few weeks, an environmental study will commence ahead of drilling once the rainy season finishes in October 2012. This project will be a potential game-changer for Alecto, providing us with the potential to generate cash flow in the near term, using which we will be able to progress our current licences and pursue additional under-developed resource assets in prime mineralised regions, in line with our stringent investment strategy.

I look forward to reporting regularly on developments throughout the rest of the coming year and I would like to take this opportunity to thank all our shareholders, along with our dedicated team, for their support and loyalty over the period.

Malcolm James

Chairman

5 June 2012

For further information, please visit www.alectominerals.com or contact:

BALANCE SHEETS

As at 31 December 2011

GROUP INCOME STATEMENT

For the year ended 31 December 2011

The loss for the Company for the year was £1,174,237 (31 December 2010: £559,247).

The Company has elected to take the exemption under Section 408 of the Companies Act 2006 from presenting the Parent Company Income Statement and Statement of Comprehensive Income.

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2011

GROUP STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the year ended 31 December 2011

COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the year ended 31 December 2011

GROUP CASH FLOW STATEMENT

For the year ended 31 December 2011

Major non-cash transactions

On 20 May 2011 the Company issued 8,064,516 ordinary shares of 0.7 pence each fully paid at 3.72 pence per share in consideration for a business acquisition during the year (refer Note 19). On the same date the Company issued 806,452 ordinary shares of 0.7 pence each fully paid at 3.72 pence per share in settlement of certain introducer fees in relation to the acquisition.

At 31 December 2011 £10,610 of exploration and evaluation additions remained outstanding and unpaid.

The Group revalued its available-for-sale investments to their fair value at the reporting date, in accordance with the requirements of IAS 39. The resultant loss of £271,000 (net of tax) was included within other comprehensive income.

COMPANY CASH FLOW STATEMENT

For the year ended 31 December 2011

Major non-cash transactions

On 20 May 2011 the Company issued 8,064,516 ordinary shares of 0.7 pence each fully paid at 3.72 pence per share in consideration for a business acquisition during the year (refer Note 19). On the same date the Company issued 806,452 ordinary shares of 0.7 pence each fully paid at 3.72 pence per share in settlement of certain introducer fees in relation to the acquisition.

The Group revalued its available-for-sale investments to their fair value at the reporting date, in accordance with the requirements of IAS 39. The resultant loss of £271,000 (net of tax) was included within other comprehensive income.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2011

1. General information

The principal activity of Alecto Minerals Plc ('the Company') and its subsidiaries (together 'the Group') is the exploration and development of precious and base metals. The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange. The Company is incorporated and domiciled in the UK.

On 23 May 2011 the Company received shareholder approval at its Annual General Meeting and changed its name from Alecto Energy Plc to Alecto Minerals Plc to better reflect the activities of the Group.

The address of its registered office is 200 Strand, London WC2R 1DJ.

2. Summary of Significant Accounting Policies

The principal Accounting Policies applied in the preparation of these Financial Statements are set out below. These Policies have been consistently applied to all the periods presented, unless otherwise stated.

2.1 Basis of Preparation of Financial Statements

The Group Financial Statements have been prepared in accordance with EU-endorsed International Financial Reporting Standards (IFRSs) and International Financial Reporting Interpretations Committee (IFRIC) interpretations and the parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Group Financial Statements have also been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets.

The Financial Statements are presented in Pound Sterling rounded to the nearest pound.

The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's Accounting Policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements are disclosed in Note 4.

2.2 New and Amended Standards

(a) New and amended standards and interpretations mandatory for the first time for the financial year beginning 1 January 2011 and relevant to the Group

- A revised version of IAS 24 "Related Party Disclosures" simplified the disclosure requirements for government-related entities and clarified the definition of a related party. This revision was effective for periods beginning on or after 1 January 2011; and

- IFRIC 19 "Extinguishing Financial Liabilities with Equity Instruments" clarified the treatment required when an entity renegotiates the terms of a financial liability with its creditor, and the creditor agrees to accept the entity's shares or other equity instruments to settle the financial liability fully or partially. This interpretation was effective for periods beginning on or after 1 July 2010.

(b) New and amended standards and interpretations mandatory for the first time for the financial year beginning 1 January 2011 but not currently relevant to the Group

- An amendment to IFRS 1 "First-time Adoption of International Financial Reporting Standards" relieved first-time adopters of IFRSs from providing the additional disclosures introduced in March 2009 by "Improving Disclosures about Financial Instruments" (Amendments to IFRS 7). This amendment was effective for periods beginning on or after 1 July 2010; and

- An amendment to IFRIC 14 "IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction", on prepayments of a minimum funding requirement, applies in the limited circumstances when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements. The amendment permits such an entity to treat the benefit of such an early payment as an asset. This amendment was effective for periods beginning on or after 1 January 2011.

(c) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2011 and not early adopted

Unless otherwise stated, the Directors are assessing the possible impact of the following on the Financial Statements:

- IFRS 10 "Consolidated Financial Statements" builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement;

- IFRS 11 "Joint Arrangements" provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form (as is currently the case). The standard addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement;

- IFRS 12 "Disclosure of Interests in Other Entities" is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement;

- IFRS 13 "Fair Value Measurement" improves consistency and reduces complexity by providing, for the first time, a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. It does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required or permitted by other standards. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement;

- Amendments to IFRS 1 "First-time Adoption of International Financial Reporting Standards" require that first-time adopters apply the requirements in IFRS 9 "Financial Instruments" and IAS 20 "Accounting for Government Grants and Disclosure of Government Assistance" prospectively to government loans existing at the date of transition to IFRSs. Entities may choose to apply the requirements retrospectively if the information needed to do so have been obtained at the time of initially accounting for the loan. This standard is effective for annual periods beginning on or after 1 January 2013, subject to EU endorsement. This is not expected to have an impact on the Group as IFRS has been historically used;

- Amendments to IFRS 7 "Financial Instruments: Disclosures" require disclosure of information that will enable users of financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity's recognised financial assets and recognised financial liabilities, on the entity's financial position. This standard is effective for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods, subject to EU endorsement;

- Amendments to IFRS 9 "Financial Instruments" and IFRS 7 "Financial Instruments: Disclosures" require entities to apply IFRS 9 for annual periods beginning on or after 1 January 2015 instead of on or after 1 January 2013, subject to EU endorsement. Early application continues to be permitted. The amendments also require additional disclosures on transition from IAS 39 "Financial Instruments: Recognition and Measurement" to IFRS 9;

- IFRIC 20 "Stripping Costs in the Production Phase of a Surface Mine" clarifies when stripping costs incurred in the production phase of a mine's life should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. This interpretation is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. This will affect the Group's Financial Statements, but the Directors believe they are in a position to ensure compliance with this standard when it becomes effective;

- IAS 27 "Separate Financial Statements" replaces the current version of IAS 27 "Consolidated and Separate Financial Statements" as a result of the issue of IFRS 10 (see above). This revised standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement;

- IAS 28 "Investments in Associates and Joint Ventures" replaces the current version of IAS 28 "Investments in Associates" as a result of the issue of IFRS 11 (see above). This revised standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement;

- Amendments to IAS 1 "Presentation of Financial Statements" require items that may be reclassified to the profit or loss section of the income statement to be grouped together within other comprehensive income (OCI). The amendments also reaffirm existing requirements that items in OCI and profit or loss should be presented as either a single statement or two consecutive statements. This is effective for annual periods beginning on or after 1 July 2012, subject to EU endorsement;

- Amendments to IAS 12 "Income Taxes" introduce 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. This standard is effective for annual periods beginning on or after 1 January 2012, subject to EU endorsement. This is not expected to have an impact on the Financial Statements.

2.3 Basis of Consolidation

The Group Financial Statements consolidate the Financial Statements of Alecto Minerals Plc and the audited management accounts of all of its subsidiary undertakings made up to 31 December 2011.

Subsidiaries are entities over which the Group has control. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred unless they result from the issuance of shares, in which case they are offset against the premium on those shares within equity. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at their fair values at the acquisition date.

Investments in subsidiaries are accounted for at cost less impairment.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group. All significant intercompany transactions and balances between Group enterprises are eliminated on consolidation.

2.4 Going Concern

The Group's business activities together with the factors likely to affect its future development, performance and position are set out in the Chairman's Report on pages 3 to 5. In addition, Notes 3 and 4 to the Financial Statements include the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and its exposure to credit and liquidity risk.

The Financial Statements have been prepared on a going concern basis. Although the Group's assets are not generating revenues and an operating loss has been reported, the Directors believe that the Group has sufficient funds to undertake its operating activities over the next 12 months including any additional payment required in relation to its current exploration projects. The Group has financial resources which, the Directors believe, will be sufficient to fund the Group's committed expenditure both operationally and on various exploration projects for this time period. However, in order to meet the minimum spending requirements over the life of existing projects and as additional projects are identified additional funding will be required. On 21 May 2012, the Directors raised £1,472,500 by way of placing 95,000,000 ordinary shares of 0.7 pence each fully paid at 1.55 pence per share (Note 29). 

The Directors have a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

2.5 Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions.

2.6 Foreign Currencies

(a) Functional and presentation currency

Items included in the Financial Statements of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the 'functional currency'). The functional currency of the UK parent entity is Sterling and the functional currency of the BVI subsidiary is US Dollars. The currency of Mauritania is the Mauritanian Ouguiya; however all material contracts with the Mauritanian subsidiary are denominated in Euros which is, therefore, its functional currency. The currency of Ethiopia is the Ethiopian Birr, therefore the functional currency of the Ethiopian subsidiaries. The functional currency of the Group's previously owned Australian subsidiary was Australian Dollars. The Financial Statements are presented in pound sterling, rounded to the nearest pound, which is the Company's functional and Group's presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where such items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

(c) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

·; assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

·; income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

·; all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of monetary items receivable from foreign subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future are taken to other comprehensive income. When a foreign operation is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale.

2.7 Intangible assets

(a) Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Company's interest in the fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.

(b) Exploration and evaluation

The Group recognises expenditure as exploration and evaluation assets when it determines that those assets will be successful in finding specific mineral resources. Expenditure included in the initial measurement of exploration and evaluation assets and which are classified as intangible assets relate to the acquisition of rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource. Capitalisation of pre-production expenditure ceases when the mining property is capable of commercial production.

Exploration and evaluation assets are recorded and held at cost.

Exploration and evaluation assets are assessed annually for impairment. The assessment is carried out by allocating exploration and evaluation assets to cash generating units, which are based on specific projects or geographical areas.

Whenever the exploration for and evaluation of mineral resources in cash generating units does not lead to the discovery of commercially viable quantities of mineral resources and the Group has decided to discontinue such activities of that unit, the associated expenditures are written off to the income statement.

2.8 Plant and Equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is provided on all tangible assets to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight line basis at the following annual rates:

Equipment - 20% straight line

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised within 'Other (losses)/gains' in the income statement.

2.9 Impairment of non-financial assets

Assets that have an indefinite useful life, for example, intangible assets not ready to use, are not subject to amortisation and are tested annually for impairment. Tangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

2.10 Financial Assets

Classification

The Group classifies its financial assets in the following categories: loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

(i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Group's loans and receivables comprise trade and other receivables, restricted assets and cash and cash equivalents in the balance sheet.

(ii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period.

 Recognition and measurement

Financial assets are initially recognised at fair value plus transaction costs. Financial assets are derecognised when the rights to receive cash flows from the assets have expired or have been transferred, and the Group has transferred substantially all of the risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value unless the Group is precluded from doing so as, in the case of unlisted equity securities, the range of reasonable fair value estimates is significant and the probabilities of the various estimates cannot be reasonably assessed. In such circumstances available-for-sale financial assets are held at cost and reviewed annually for impairment. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognised in other comprehensive income. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as "gains and losses from investment securities."

Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement as part of other income. Dividends on available-for-sale equity instruments are recognised in the income statement as part of other income when the Group's right to receive payments is established.

Impairment of financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset, or a group of financial assets, is impaired. A financial asset, or a group of financial assets, is impaired, and impairment losses are incurred, only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a "loss event"), and that loss event (or events) has an impact on the estimated future cash flows of the financial asset, or group of financial assets, that can be reliably estimated.

The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:

·; significant financial difficulty of the issuer or obligor;

·; a breach of contract, such as a default or delinquency in interest or principal repayments;

·; the disappearance of an active market for that financial asset because of financial difficulties;

·; observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio; or

·; for assets classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost.

(i) Assets carried at amortised cost

The amount of impairment is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred), discounted at the financial asset's original effective interest rate. The asset's carrying amount is reduced, and the loss is recognised in the income statement. As a practical expedient, the Group may measure impairment on the basis of an instrument's fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the income statement.

(ii) Assets classified as available-for-sale

The cumulative impairment loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement - is removed from equity and recognised in the income statement.

2.11 Cash and Cash Equivalents

Cash and cash equivalents comprise cash in hand, and are subject to an insignificant risk of changes in value.

2.12 Share Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.13 Share Based Payments

The Group operates a number of equity-settled, share-based schemes, under which the entity receives services from employees or third party suppliers as consideration for equity instruments (options and warrants) of the Group. The fair value of the third party suppliers' services received in exchange for the grant of the options is recognised as an expense in the income statement or charged to equity depending on the nature of the service provided. The value of the employee services received is expensed in the income statement and its value is determined by reference to the fair value of the options granted:

·; including any market performance conditions;

·; excluding the impact of any service and non-market performance vesting conditions (for example, profitability or sales growth targets, or remaining an employee of the entity over a specified time period); and

·; including the impact of any non-vesting conditions (for example, the requirement for employees to save).

Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense or charge is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement or equity as appropriate, with a corresponding adjustment to a separate reserve in equity.

When the options are exercised, the Company issues new shares. The proceeds received, net of any directly attributable transaction costs, are credited to share capital (nominal value) and share premium when the options are exercised.

2.14 Trade Payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value, and subsequently measured at amortised cost using the effective interest method.

2.15 Taxation

The tax credit or expense for the period comprises deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled.

Deferred tax assets and liabilities are not discounted.

2.16 Operating leases

Leases of assets under which a significant amount of the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Operating lease payments are charged to the income statement on a straight-line basis over the period of the respective leases.

2.17 Finance income

Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.

3. Financial Risk Management

3.1 Financial Risk Factors

The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk and price risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

Market Risk

(a) Foreign currency risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Euro, Ethiopian Birr, Mauritanian Ouguiya and the British Pound. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The Group negotiates all material contracts for activities in relation to its subsidiaries in either British Pounds or Euros which in the Directors' opinion are more stable than the respective local currencies. The Group also holds minimal liquid assets in Mauritanian Ouguiya and Ethiopian Birr. The Group does not hedge against the risks of fluctuations in exchange rates. The volume of transactions is not deemed sufficient to enter into forward contracts. The Group has not sensitised the figures for fluctuations in foreign exchange rates as the Directors are of the opinion that these fluctuations would not have a significant impact on the financial statements of the Group at the present time. The Directors will continue to assess the effect of movements in exchange rates on the Groups financial operations and initiate suitable risk management measures where necessary.

(b) Price risk

The Group is exposed to equity securities price risk because of investments held by the Group as available-for-sale financial assets. The Group's investments in equity of other entities that are publicly traded are listed on AIM. There is a limited volume of shares traded in the Company's investee and if the Company was to dispose of a significant percentage of its shares this could have a substantial impact on the realisable value of these shares.

The Group does not have a substantial portfolio of shares and manages its price risk by undertaking specific company research prior to investing. The Group's listed equity investment is held for long term growth which the Directors believe mitigates the risk of crystallising short term speculative reductions in value.

The table below summarises the impact of increases/decreases in the AIM index on the Group's other comprehensive income for the year. The analysis is based on the assumption that the AIM index had increased/decreased by 10% with all other variables held constant and all the Group's listed equity investments moved according to the historical correlation with the index.

Other comprehensive income would increase/decrease as a result of gains/losses on listed equity securities classified as available-for-sale. Post tax losses would increase/decrease as a result of the utilisation of tax losses arising from the movement in fair value of listed equity securities classified as available-for-sale.

(c) Interest rate risk

As the Group has no borrowings, it is not exposed to interest rate risk on financial liabilities. The Group's interest rate risk arises from its cash held on short-term deposit, which is not significant.

Credit Risk

Credit risk arises from cash and cash equivalents as well as outstanding receivables. Management does not expect any losses from non-performance of these receivables.

The amount of exposure to any individual counter party is subject to a limit, which is assessed by the Board.

The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk.

Liquidity Risk

In keeping with similar sized mineral exploration groups, the Group's continued future operations depend on the ability to raise sufficient working capital through the issue of equity share capital. The Directors are confident that adequate funding will be forthcoming with which to finance operations. Controls over expenditure are carefully managed.

3.2 Capital Risk Management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, in order to enable the Group to continue its exploration and evaluation activities. The Group has no debt at 31 December 2011 and defines capital based on the total equity of the Company. The Group monitors its level of cash resources available against future planned exploration and evaluation activities and may issue new shares in order to raise further funds from time to time.

3.3 Fair value estimation

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

·; Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1)

·; Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The following table presents the Group's assets that are measured at fair value. The Group does not have any liabilities measured at fair value.

The fair value of financial instruments traded in an active market is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in Level 1. Instruments included in Level 1 comprise AIM listed equity investments classified as available-for-for sale financial assets.

If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.

The following table presents the changes in Level 3 instruments for the year ended 31 December 2011:

The transfer into Level 3 is as a result of the events as described below in Note 4. At 31 December 2011 the Group's listed equity securities held as available-for-sale investments were delisted from trading on AIM.

4. Critical Accounting Estimates and Judgements

The preparation of the Financial Statements in conformity with IFRSs requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the year. Actual results may vary from the estimates used to produce these Financial Statements.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Significant items subject to such estimates and assumptions include, but are not limited to:

Impairment of exploration and evaluation costs

Exploration and evaluation costs have a carrying value at 31 December 2011 of £3,000,921 (2010: £768,489). Such assets have an indefinite useful life as the Group has a right to renew exploration licences and the asset is only amortised once extraction of the resource commences. Management tests annually whether exploration projects have future economic value in accordance with the accounting policy stated in note 2.7. Each exploration project is subject to an annual review by either a consultant or senior company geologist to determine if the exploration results returned during the year warrant further exploration expenditure and have the potential to result in an economic discovery. This review takes into consideration long term metal prices, anticipated resource volumes and supply and demand outlook. In the event that a project does not represent an economic exploration target and results indicate there is no additional upside a decision will be made to discontinue exploration. The Directors have reviewed the estimated value of each project prepared by management and have concluded that no impairment charge is necessary.

Share based payment transactions

The Group has made awards of options and warrants over its unissued share capital to certain Directors and employees as part of their remuneration package. Certain warrants have also been issued to shareholders as part of their subscription for shares and suppliers for various services received.

The valuation of these options and warrants involves making a number of critical estimates relating to price volatility, future dividend yields, expected life of the options and forfeiture rates. These assumptions have been described in more detail in note 17.

Available-for-sale financial assets

Available-for-sale financial assets have a carrying value at 31 December 2011 of £50,000 (2010: £365,000). The Group holds unlisted equity securities as available-for-sale financial assets.

At 31 December 2011 the Group's listed equity securities held as available-for-sale investments were delisted from trading on AIM. The Board of the delisted company are actively pursuing a new transaction to have the company relisted onto the AIM market. The Directors have a reasonable expectation that the transaction will be completed and the investee's shares will be readmitted to AIM for trading. Should the readmission not occur the carrying value of the Group's listed equity securities of £50,000 may be impaired.

The fair value of financial instruments that are not traded in an active market (for example un-listed equity securities) is determined, where possible, by using valuation techniques. Management has concluded that in the case of unlisted securities held as available-for-sale financial assets, the range of reasonable fair value estimates is significant and estimates cannot be reasonably assessed. In such circumstances the Group is precluded from measuring the instruments at fair value and have thus valued these investments at cost less impairment.

The Group follows the guidance of IAS 39 to determine when an available-for-sale equity investment is impaired. This determination requires significant judgement. In making this judgement, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of the short-term business outlook for the investee, including factors such as industry and sector performance and operational and financing cash flow.

5. Segment Information

Management has determined the operating segments based on reports reviewed by the Board of Directors that are used to make strategic decisions. During the year Group has interests in three geographical segments; the United Kingdom, Mauritania and Ethiopia, through the new acquisition (see Note 19). Activities in the UK are mainly administrative in nature whilst the activities in Ethiopia and Mauritania relate to exploration and evaluation work. The prior year activities in Australia relate to various costs of closure for a subsidiary of the Group which was dissolved in the previous year.

The Group had no turnover during the year.

Activities occurring in Australia were classified as discontinued in 2010. All other reportable segments are classified as continuing operations.

A reconciliation of adjusted loss from operations per reportable segment to profit/(loss) before tax is provided as follows:

6. Operating Loss

7. Property, Plant and Equipment

Depreciation expense of £1,925 has been charged in administration expenses.

8. Intangible Assets

Exploration and evaluation assets are all internally generated.

Exploration projects in Ethiopia and Mauritania are at an early stage of development and no JORC or non-JORC compliant resource estimates are available to enable value in use calculations to be prepared. The Directors therefore undertook an assessment of the following areas and circumstances that could indicate the existence of impairment:

·; The Group's right to explore in an area has expired, or will expire in the near future without renewal;

·; No further exploration or evaluation is planned or budgeted for;

·; A decision has been taken by the Board to discontinue exploration and evaluation in an area due to the absence of a commercial level of reserves; and

·; Sufficient data exists to indicate that the book value will not be fully recovered from future development and production.

Following their assessment the Directors concluded that no impairment of exploration and evaluation assets was necessary during the year ended 31 December 2011.

9. Investments in Subsidiary Undertakings

Investments in Group undertakings are stated at cost, which is the fair value of the consideration paid, less any impairment provision.

Details of Subsidiary Undertakings

10. Restricted Assets

11. Available-for-Sale Financial Assets

Available-for-sale financial assets include the following:

On 27 January 2010 the Company signed an agreement with Bulgarian Mining Corporation ("BMC") for the provision of a working capital facility. The Company also paid the shareholders of BMC £90,000 through the issue of shares in the Company for a 90 day exclusivity period in which to investigate the possible purchase of BMC. Following a detailed technical review by independent consultants, on 21 July 2010 the Company converted the working capital facility of £45,000 provided to BMC into a 20% equity holding in BMC.

The Company has no presence on the Board of BMC and the remaining 80% of the shares are owned by a majority shareholder. For these reasons, despite the Company holding 20% of the ordinary share capital of BMC, the Directors are of the opinion that the Company does not exercise significant influence over the financial and operating policy decisions of BMC. As a result, the Directors are satisfied that the investment in BMC does not fall within the scope of IAS 28 'Investments in Associates' and have accounted for the investment as an available-for-sale financial asset in the Group Financial Statements.

The Directors are of the opinion that the equity interest held in BMC no longer has any value to the Company and as such have written the investment off to the profit or loss.

No other available-for-sale financial asset is impaired.

Available-for-sale financial assets are denominated in the following currencies:

12. Trade and Other Receivables

Trade and other receivables are all due within one year. The fair value of all receivables is the same as their carrying values stated above.

All trade and other receivables are denominated in Pound Sterling. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security.

At 31 December 2011 all trade and other receivables were fully performing.

13. Cash and Cash Equivalents

All of the Company's cash at bank is held with institutions with an AA credit rating.

14. Trade and Other Payables

Trade payables include amounts due of £10,610 (2010: £53,764) in relation to exploration and evaluation activities.

Other creditors include amounts due of £300,000 to the previous owners of Nubian Gold Exploration Limited and £540,000 to the previous owners of Rift Valley Resources Limited.

15. Deferred tax

An analysis of deferred tax assets and liabilities is set out below.

The gross movement on the deferred tax account is as follows:

The movement in the deferred tax liability during the year is as follows:

Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. A deferred tax asset of £nil (2010: £44,000) has been recognised in respect of capital losses that would be available to offset against the taxable gain arising on the revaluation of available-for-sale financial assets.

The Group has additional capital losses of approximately £440,000 (2010: £220,000) and other losses of approximately £2,475,589 (2010: £1,484,293) available to carry forward against future taxable profits. No deferred tax asset has been recognised in respect of these tax losses because of uncertainty over the timing of future taxable profits against which the losses may be offset.

16. Share Capital

Authorised

Issued - Group and Company

(1) Includes aggregate issue costs of £161,912

(2) Includes issue costs of £8,087

(3) Includes issue costs of £40,427

On 20 May 2011 the Company issued 8,064,516 ordinary shares of 0.7 pence each fully paid at 3.72 pence per share in consideration for a business acquisition during the year (refer Note 19). On the same date the Company issued 806,452 ordinary shares of 0.7 pence each fully paid at 3.72 pence per share in settlement of certain introducer fees in relation to the acquisition. The share price being the last 30 days weighted average share price of the Company.

Under the terms of the acquisition and introducer fee agreements the Company was required to issue £330,000 worth of ordinary shares in the Company on or before 22 March 2012 in settlement of their deferred consideration obligations. Refer to note 19 for further information.

During the year the Company received payment for 2,880,554 ordinary shares in the Company that were issued but unpaid at 31 December 2010. At 31 December 2011 181,818 ordinary shares in the Company remained issued and unpaid.

17. Share Options and Warrants

Share options and warrants outstanding and exercisable at the end of the year have the following expiry dates and exercise prices:

The Company and Group have no legal or constructive obligation to settle or repurchase the options in cash.

The fair value of the share options and warrants was determined using the Black Scholes valuation model. The parameters used are detailed below: