Final Results

30th Jun 2009 13:21



30 June 2009 AIM: FML

Frontier Mining Ltd 

("Frontier" or "the Company")

Final Results for the year ended 31 December 2008

Highlights

Benkala License

 

Completed license transfer of the rights and obligations for the Benkala project to 50% owned joint venture, KazCopper LLP.

Metallurgical test work indicates viability of heap leaching and flotation methods and SX-EW processing for the oxidised part of Benkala. 

Three drill rigs with Boart Longyear equipment mobilized to Benkala and commencement of infill drilling program and field camp for 30 persons constructed.

Naimanjal License

Test production revenue of US$804,513 of gold & silver, being 772 ounces of gold and 8,809 ounces of silver sold at an average price of $868 and $15 per ounce, respectively.

Approval of Naimanjal 2009/2010 exploration work program.

Extension of exploration period at Koskuduk, Baitimir, Beschoku and Yubileiny. 

Post-Period Highlights

Corporate

Erlan Sagadiev appointed as Chairman and Chief Executive Officer of Frontier. 

Strengthened management teams.

$14 million financing completed, comprising $4m equity placement and $10m debt facility.

Benkala License

Progress made towards production and cash flows from oxide/supergene zone at Benkala with 29 holes totalling over 5,000 metres drilled under infill drilling program at Benkala since Q4 2008.

Technical and regional authority approval for electricity connection obtained and site Infrastructure, construction foundation works for 20,000 tpa SX-EW cathode copper plant to commence Q3 2009.

SX-EW Cathode copper production forecast Q1 2011.

 Naimanjal License

Extended pilot production license at Naimanjal complex. 

Recommencement of production at Naimanjal Gold Complex.

Submitted application for commercial production at Naimanjal Complex.

Submitted application for pilot production at Koskuduk, Beschoku and Yubileiny.

2009 forecast pilot production of 6,000 ounces gold and 60,000 ounces silver.

2010 forecast commercial production of 15,000 ounces gold and 150,000 ounces silver.

Enquiries:

Frontier Mining Ltd	Thomas Sinclair	+44 (0)20 7898 9019
Libertas Capital	Sandy Jamieson	+44 (0)20 7569 9695
Walbrook PR	Louise Goodeve / Leah Kramer	+44 (0)20 7933 8780

Notes to Editors:

About Frontier Mining Ltd: 

Frontier Mining Ltd. is a mineral exploration and development Company that was incorporated in the state of Delaware, USA, on 5 August 1998 for the purpose of exploring and developing gold and copper deposits in the Republic of Kazakhstan. Through its subsidiaries and affiliates, Frontier locates, evaluates, acquires, explores and develops mineral properties

Frontier currently owns two licenses in Kazakhstan. They are the Naimanjal exploration and mining licence, held by FML Kazakhstan, and, 50% of U.S. Megatech BVI which holds the Benkala licence. FML Kazakhstan is a wholly-owned subsidiary of Frontier Mining Ltd. Frontier has one producing gold mine, Naimanjal; one pre-feasibility stage gold project, Koskuduk; and the recently acquired 50% interest in the Benkala copper mine.

Frontier also has a potential copper porphyry deposit with associated gold and molybdenum, Baitimir; and several copper/gold prospects along a 25-km trend including both VMS and porphyry types. Metallurgical tests on its Beschoku and Yubileiny copper projects confirm the oxide copper ore is amenable to extraction using low cost SX-EW technology.

Frontier owns a 50% interest in KazCopper LLP, the joint venture company that owns the Benkala copper-molybdenum-gold deposit located in north-western Kazakhstan within the Urals gold/copper ore belt. A Competent Persons Report ("CPR") on the Benkala project completed by Wardell Armstrong International ("WAI") in March 2007 estimates 47.75 Mt at an average grade of 0.36% Cu for the oxide mineralization, and 873.75 Mt at an average grade of 0.30% Cu for the sulphide mineralisation, representing some 2.8 million tonnes of contained copper, and at a 10% Discount Rate and a $1.5/lb Cu price, the Benkala Project has an NPV approaching $500M. The development of this project is being fast tracked forward towards a pre- feasibility study, with a view to beginning production early 2011.

Issued Share Capital

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

Frontier currently has 425,913,522 issued ordinary shares and 21,812,009 reserved and outstanding options. In addition, it has granted warrants for 407,540,430 ordinary shares, of which 81,508,086 have been issued.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S STATEMENT

Summary

As newly appointed Chairman and CEO of Frontier Mining Ltd, I am pleased to report the Financial Results of Frontier for the year ended December, 31 2008. Following a challenging year for Frontier in 2008, the Company has emerged in 2009 as a much stronger entity and is now well positioned to progress the Benkala Copper deposit and continue production and further development of the Naimanjal Complex. 

Notwithstanding loss for the year of $5.3 million (2007 $4.2 million), the Company has a solid balance sheet with $48.2 million of total assets versus liabilities of $17.4 million and access to a finance facility of $10 million.

Benkala

The Benkala Project ("Benkala"), a copper-molybdenum-gold deposit, is Frontier's flagship asset and is managed through KazCopper LLP, the 50% joint venture between Frontier and Coville Intercorp Ltd. Benkala is located in northwestern Kazakhstan in the Urals gold/copper ore belt, north east of Aktobe Oblast and 100km south east of the Zhetikara Mountains, an area close to the Russian border with a long regional mining history. Benkala is in an attractive position for mine development given that it already contains developed infrastructure, including a main line railway, an all weather highway and excellent power supply to the site. 

A Competent Persons Report ("CPR") on the Benkala project completed by Wardell Armstrong International ("WAI") in March 2007 estimates 47.75 Mt at an average grade of 0.36% Cu for the oxide mineralization, and 873.75 Mt at an average grade of 0.30% Cu for the sulphide mineralisation, representing some 2.8 million tonnes of contained copper.

KazCopper mobilized three drill rigs equipped with Boart Longyear equipment to site in September 2008, constructed a field camp for 30 people and commenced infill drilling. KazCopper has to date now completed a total of 29 infill drill holes in the Benkala deposit totalling over 5,000m. By September 2009 an additional 20 holes totalling 2,500 metres are expected to have been drilled. Assay results are now expected by December 2009 and a JORC compliant resource statement for the oxide/supergene zone is anticipated to be completed by Q1 2010. 

KazCopper LLP has received technical and regional authority approval to connect electricity to the Benkala site. Construction work for this and other site infrastructure and the foundation works for a 20,000 tonne per year SX-EW cathode copper plant are planned to commence in Q3 2009.

This will allow KazCopper to progress towards full feasibility, production and near term-cash flow on the oxide/supergene and mixed sulphide ores at Benkala in early 2011 subject to further regulatory, permitting and production approvals.

Benkala is  set to be a key driver in bringing the Company into significant revenue streams in the short to medium term. The Company is exploring funding options to accelerate the development of this site so that it can enter production within a shorter time scale.

Naimanjal Complex

The Naimanjal Complex is a highly mineralized commercial discovery area of about 170 square kilometres and the existing Naimanjal mine represents a small part of that area. The Naimanjal Complex also includes 6 identified satellite prospects and more than 100 exploration targets. The Measured, Indicated, and Inferred resource at the Naimanjal deposit using a cut-off grade of 0.3 g/t gold equivalent totals 11,803,332 tonnes at an average grade of 0.67 g/t gold and 18.46 g/t silver containing 252,648 ounces of gold and 7,007,175 ounces of silver. 

Naimanjal is currently Frontier's only cash producing, mining operation. The Company is operating under a Pilot Production license and during 2008 produced 772 ounces of gold and 8,522 ounces of silver sold for an average price of $868 per ounce gold and $15 per ounce silver resulting in income of $804,513 

Frontier has received confirmation of the extension of its pilot production license at the Naimanjal Complex and has submitted an application for commercial production. The Company currently anticipates receiving news on its application in the third quarter of 2009 and it is expected that commercial production will commence in 2010.

Mining and crushing operations are underway at Naimanjal and to date in 2009, 30,000 tonnes of ore at an average grade of 1.1 g/t has been stacked on the leach pads with gold production is well underway.

The focus for Frontier's management at Naimanjal is to ensure that the revenue generation capacity of the deposit is maximised in the shortest possible period. With a new management team on site and a positive start to 2009, Frontier is confident Naimanjal will deliver this revenue in 2009 and subsequent years. Gold shipments in 2009 are already underway with forecast projections of 6,000ozs in 2009 and 15,000ozs in 2010. 

Koskuduk, Beschoku and Yubileiny

We plan to start Beschoku operations next spring and submit required paperwork to the authorities this winter. We expect to truck ore from Beschoku ore body to the Naimanjal plant as this represents the most economical solution for 2010. There are plans for a new plant to be put into production at Beschoku in 2010-2011.

In 2009 and 2010 Frontier mining will keep drilling Koskuduk and Yubileiny territories and finalizing processing technology with the goal of bringing these assets into production in 2011. 

Directors & Management

In December 2008 George Cole joined the board of Frontier as an Executive Director. George has been Financial Controller of Frontier Mining Ltd since April 2008. He has worked in Kazakhstan and Russia since 1994 in a number of senior financial and administrative roles with a variety of resource and services companies. 

I would also like to thank Brian Savage, outgoing CEO and Chairman of Frontier for the service he has given over many years to Frontier. Brian remains on the board as a non-executive and continues to provide invaluable support.

Alexandre Babii was appointed as President of Frontier Mining Ltd Kazakhstan in March 2009. Alexandre has extensive experience in mining in Kazakhstan and the former CIS and is primarily responsible for ensuring the Naimanjal Complex progresses smoothly to deliver expected revenue streams, whilst continuing to develop new deposits.

Outlook

With access to a new financial facility, the expected revenue flow from the Naimanjal complex and management changes, Frontier is confident that 2009 will be a significant growth year in the Company's history. Our core focus is to ensure that the Company's cash flow from existing and new operations will strongly support future expansion plans and acquisitions. 

The Share price has risen considerably in recent months as this new focus takes hold and management believe that this share price growth can continue as the Company endeavours to further increase shareholder value through solid operating performance and deliverance of results. 

Erlan K Sagadiev

Chairman & Chief Executive Officer 

FRONTIER MINING LTD 

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2008

(expressed in us dollars)

 

	Notes	2008		2007
Revenue	6	-		-
Cost of sales		-		-
Gross profit		-		-
Selling, general and administrative expenses	7	(4,519,160 )		(3,526,071)
Write-off of exploration and evaluation assets	9	-		(695,056)
Operating loss		(4,519,160)		(4,221,127)
Interest income		16,976		-
Finance costs	8	(277,771 )		(88,540)
Other (expenses)/income, net		(24,751)		37,314
Foreign exchange loss, net		(210,766)		(41,920)
Loss before taxation		(5,015,472)		(4,314,273)
Income tax (expense)/benefit	24	(304,174)		60,199
Loss for the year		(5,319,646 )		(4,254,074)
Loss per share
Basic and diluted	27	(0.02)		(0.03)

  FRONTIER MINING LTD 

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED BALANCE SHEETAT DECEMBER 31, 2008(expressed in us dollars)

ASSETS	Notes	2008		2007
Non-current assets
Exploration and evaluation assets	9, 10	25,795,891		32,220,409
Mine development assets	9	16,405,755		6,213,086
Property, plant and equipment	11	4,649,712		6,922,788
Intangible assets		20,886		36,043
Advances for long-term assets		23,982		-
Value added tax receivable	12	-		797,707
Cash deposit	13	13,053		112,000
Deferred tax asset	24	807,997		1,112,038
Total non-current assets		47,717,276		47,414,071
Current assets
Inventories	14	263,766		422,463
Trade accounts receivable	15	-		41,762
Prepaid expenses	16	65,582		136,585
Other receivables	17	138,467		39,738
Long-term assets held for sale		31,400
Cash and cash equivalents	18	14,768		2,473,952
Total current assets		513,983		3,114,500
TOTAL ASSETS		48,231,259		50,528,571
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity
Share capital	19	2,181,201		2,181,201
Additional paid-in-capital	19	51,824,776		51,824,776
Option premium on convertible notes	20	425,185		425,185
Equity settled employee benefits reserve	19	232,925		232,925
Accumulated losses		(23,895,596 )		(18,575,950)
Total shareholders' equity		30,768,491		36,088,137
Non-current liabilities
Borrowings	20	2,096,299		1,962,963
Site restoration provision	21	699,353		624,423
Due to Government of the Republic of Kazakhstan	22	648,700		708,135
Due to the US Trade and Development Agency	23	340,000		340,000
Deferred tax liability	24	182,222		182,222
Total non-current liabilities		3,966,574		3,817,743
Current liabilities
Trade accounts payable	25	1,244,506		117,456
Borrowings	20	7,129,630		7,129,630
Due to Government of the Republic of Kazakhstan	22	-		64,120
Other current liabilities	26	5,122,058		3,311,485
Total current liabilities		13,496,194		10,622,691
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES		48,231,259		50,528,571

  FRONTIER MINING LTD 

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY  FOR THE YEAR ENDED DECEMBER 31, 2008

(expressed in us dollars)

	Note	Share capital		Additional paid-in-capital		Accumulated losses		Option premium on convertible notes		Equity settled employee benefit reserve		Total
Balance at January 01, 2007		1,325,816		36,440,425		(14,321,876)		-		-		23,444,365
Issue of shares	19	855,385		15,384,351		-		-		-		16,239,736
Issue of convertible notes	20	-		-		-		607,407		-		607,407
Equity settled employee benefit reserve	19	-		-		-		-		232,925		232,925
Related income tax	19	-		-		-		(182,222)		-		(182,222)
Loss for the year		-		-		(4,254,074)		-		-		(4,254,074)
At January 01, 2008		2,181,201		51,824,776		(18,575,950)		425,185		232,925		36,088,137
Loss for the year		-		-		(5,319,646)		-		-		(5,319,646)
At December 31, 2008		2,181,201		51,824,776		(23,895,596)		425,185		232,925		30,768,491

  FRONTIER MINING LTD 

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2008

(expressed in us dollars)

	Notes	2008		2007
OPERATING ACTIVITIES:
Loss for the year		(5,319,646)		(4,254,074)
Adjustments for non cash flow items:
Income tax expense/(benefit) recognized in profit or loss	24	304,174		(60,199)
Depreciation of property, plant and equipment		63,495		43,566
Amortization of intangible assets		12,819		7,436
Equity settled employee benefit reserve	19	-		232,925
Foreign exchange loss		229,159		41,920
(Gain) from disposal of property, plant and equipment		(10,925)		-
Provision for non-recovery of advances paid		67,898		-
Provision for obsolete inventory	14	53,261		-
Provision for VAT receivable	12	688,057		-
Finance costs	8	277,771		88,540
Operating cash flows before movement in working capital		(3,634,070)		(3,899,886)
Decrease in inventories	14	105,436		61,695
Decrease in trade accounts receivable	15	41,762		544,642
Decrease/(increase) in prepaid expenses	16	3,105		(1,707)
(Increase) in other receivables	17	(98,729)		(13,637)
Increase/(decrease) in trade accounts payable	25	1,127,050		(842,264)
Increase in other current liabilities	26	1,920,223		2,738,038
NET CASH USED IN OPERATING ACTIVITIES		(535,223)		(1,413,119)
INVESTING ACTIVITIES:
Increase in exploration and evaluation assets	9	(1,330,671)		(3,154,240)
Increase in mine development assets	9	(1,809,511)		(1,413,839)
Cash proceeds from test production sales	6	804,513		2,353,016
Benkala acquisition costs	10	-		(1,032,715)
Purchase of property, plant and equipment	11	(89,081)		(55,919)
Proceed from sale of property, plant and equipment		654,983		-
Increase in advances for long-term assets		(23,982)		-
Cash deposit		(1,053)		-
Withdrawal of cash deposit	13	100,000		-
NET CASH USED IN INVESTING ACTIVITIES		(1,694,802)		(3,303,697)
FINANCING ACTIVITIES:
Proceeds from share placement	19	-		7,400,000
Cost of share placement	19	-		(1,216,454)
Increase in value added tax receivable	12	-		(41,548)
NET CASH FLOWS FROM FINANCING ACTIVITIES		-		6,141,998
Net (decrease)/ increase in cash and cash equivalents		(2,230,025)		1,425,182
Effects of exchange rate changes on the balance of cash and cash equivalents held in foreign currencies		(229,159)		(204,293)
Cash and cash equivalents at the beginning of year		2,473,952		1,253,063
Cash and cash equivalents at the end of year	18	14,768		2,473,952

  FRONTIER MINING LTD 

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008

1. NATURE OF THE BUSINESS

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. 

The principal activities of the Company and its subsidiaries (the "Group") as of December 31, 2008 are as follows:

Operating entity	Principal activity	Country of incorporation
Frontier Mining Ltd	Management of the Group	United States of America
FML Kazakhstan LLP ("FMLK")	Exploration and development	Republic of Kazakhstan
Baltemir LLP ("Baltemir")	Dormant	Republic of Kazakhstan
Kazcopper LLP	Exploration	Republic of Kazakhstan

Frontier is the ultimate parent entity of the Group.

Through its wholly owned subsidiary, FMLK, Frontier holds interests in, or is the beneficial owner of, gold and copper properties in Kazakhstan. 

The Group has two licenses: the wholly owned Naimanjal contract license area and the 50% owned Benkala Joint Venture licence. The Naimanjal contract dated August 16, 1999 provides combined exploration and extraction rights for a 30-year period. The Naimanjal license No. 1166DD currently covers an approximate area of 529 square kilometres in North Eastern Kazakhstan. It includes five deposits, the current status of which is shown below:-

Area of interest	Current activity	Licence activity renewal date
Naimanjal	Exploration and pilot production	December 2009
Koskuduk	Exploration and development	March 2010
Baritovy	Pilot production	December 2009
Beschoku	Exploration and development	March 2010
Yubileiny	Exploration and development	March 2010

In May 2009 FMLK submitted an application for commercial production at Naimanjal and applications for pilot production at Koskuduk, Beschoku, and Yubileiny. The Company currently anticipates receiving approvals on its applications in the third quarter of 2009 with commercial production expected to commence at Naimanjal in 2010.

During November 2007, Frontier acquired a 50% interest in US Megatech BVI ("US Megatech"). A wholly owned subsidiary of US Megatech, US Megatech Inc, owned the Benkala copper-molybdenum-gold deposit located in North-western Kazakhstan within the Urals gold/copper ore belt. The Benkala project has a 4 year exploration licence followed by a 25 year mining licence and is currently in feasibility analysis stage. In September 2008 all rights and obligations for the Benkala project and licences were transferred from the subsidiary of US Megatech to KazCopper LLP ("KazCopper"). KazCopper is a wholly owned subsidiary of US Megatech. 

  

During 2007, the Group decided to relinquish the licence held by Baltemir so as to concentrate on its other properties which were assessed as having greater development potential. In 2008 the company notified the regulatory authority of its relinquishment of the licence.

At December 31, 2008, the Company's registered office was located at: 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, the USA. At December 31, 2008 the Company had four representative offices, two of which were located in the Republic of Kazakhstan, one in Colorado, USA and one in London, England.

The number of employees of the Group at December 31, 2008 was 75 people (2007: 88 employees).

Organization history - On July 10, 1998 the founders of Frontier agreed that Frontier, upon its incorporation, would issue 280,000 ordinary shares at $0.01 par value per share to its founders as compensation and acquire, from SEMTECH in exchange for the assets and assumption of liabilities and the issuance of 200,000 ordinary shares of Frontier at par value:

100% of Polygon Resources LLP, 

70% of Beschoku LLP ("Beschoku") and 

50% of Semgeo LLP.

Purchase accounting was used to account for the acquisition and, accordingly, the assets acquired and liabilities assumed were recorded at their respective fair market values as of the acquisition date. 

On October 31, 1998 Polygon Resources LLP was re-registered in Kazakhstan as FMLK to reflect the name change and the Company's 100% ownership. 

In September 1999 Frontier acquired 100% of Baltemir LLP by issuing to the owners 50,000 ordinary shares of Frontier and agreeing to pay historical exploration expenses to the main shareholder.

Beschoku LLP and Semgeo LLP ceased their operations and were liquidated by the Company in January and February 2004, respectively.

Political and economic environment - The Kazakhstan economy continues to display certain traits consistent with that of a market economy in transition. These characteristics have in the past included: 

higher than normal historic inflation, 

lack of liquidity in the capital markets, and 

the existence of currency controls, which cause the national currency to be illiquid outside of Kazakhstan. 

The continued success and stability of the Kazakhstan economy will be significantly impacted by the government's continued actions with regard to supervisory, legal, and economic reforms.

Recent volatility in global and Kazakh financial markets. 

In recent months a number of major economies around the world have experienced volatile capital and credit markets. A number of major global financial institutions have either been placed into bankruptcy, taken over by other financial institutions and/or supported by government funding. As a consequence of the recent market turmoil in capital and credit markets both globally and in Kazakhstan, notwithstanding any potential economic stabilisation measures that may be put into place by the Kazakh Government, there exists as at the date these financial statements are authorised for issue economic uncertainties surrounding the continual availability, and cost, of credit both for the entity and its counterparties, the potential for economic uncertainties to continue in the foreseeable future and, as a consequence, the potential that assets may be not be recovered at their carrying amount in the ordinary course of business, and a corresponding impact on the entity's profitability.

  Government programs. 

The Kazakh government has exercised, and continues to exercise, significant influence over the Kazakh economy. In response to the economic crisis, the government of Kazakhstan implemented broad economic reform programs which are aimed to improve economic conditions. As part of those reform programs, the government acquired ownership in major banks in Kazakhstan by contributing capital to improve liquidity of the banking sector. Also, on February 4, 2009 the National Bank of Kazakhstan announced a new target for the exchange rate at "150 Tenge per US Dollar, plus or minus 3%", which represents an approximate 25% devaluation of the local currency against US Dollar. Kazakhstan is a resource-rich country and the country's tax revenue is highly dependent on the world prices of commodities, such as oil, grain, gold, zinc, copper and uranium. The sufficiency of tax revenues and accumulated reserves is critical to support the programs initiated by the government. 

Increase in country credit risk. Subsequent to December 31, 2008 the trading levels of Kazakhstan sovereign 5-year credit default swaps as well as the increased yields on Kazakhstan corporate bonds present significant difficulties in attracting foreign capital into the country.

Inflation. In recent years, Kazakhstan has experienced high levels of inflation. The annual rate of inflation, as measured by changes in the Consumer Price Index, was 18% for 2007, 11% for 2008 and is projected at the rate of approximately 9% for 2009. If inflation is not maintained within the government's projections, the economy of Kazakhstan and, consequently, the Group's financial condition and results of operations may be adversely affected.

2. PRESENTATION OF FINANCIAL STATEMENTS

Consolidated subsidiaries - The consolidated financial statements include the Company and its consolidated subsidiaries namely FMLK (100% ownership) and Baltemir LLP (100% ownership) 

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. The US Dollar is the functional currency and is used as the presentation currency. Management consider that using the US Dollar as the functional currency best represents the economic effects of transactions, events and conditions related to the Group's operations. Transactions in other currencie are treated as transactions in foreign currencies.

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

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

The Group operates as a natural resources exploration and development company. To date, the Group has not earned significant revenues and is considered to be in the exploration and development stage. The Group incurred losses of $5,319,646 and $4,254,074 for the years ended December 31, 2008 and 2007, respectively, and has accumulated losses of $23,895,596 and $18,575,950 as at December 31, 2008 and December 31, 2007, respectively. The Group currently has a pilot production licence for the Naimanjal licence area and the Directors anticipate that commercial production will commence in 2010 following receipt of the required regulatory approvals pursuant to the application made by the Group. At present, mining operations at the Naimanjal complex are the Group's sole source of operating cash inflow.

As disclosed in Note 32, on April 30, 2009 Frontier announced to the market the completion of a $10 million financing agreement (due for renewal on April 30, 2011) as well as the extension of the repayment date of the convertible note (refer Note 20) to December 31, 2009 which is associated with the acquisition of the Group's interest in the Benkala license area (refer Note 10).

Following conclusion of the above financing arrangements, the Group has recommenced mining operations and expects expanded production at the Naimanjal complex.

The major risks and uncertainties which could impact upon the Group's ability to generate operating cash inflows in the period up to June 30, 2010 are its level of gold production and gold prices.

The Directors believe that production at the Naimanjal complex will be at or above levels included in the Group's operating and financial budgets. The key factors included in this assessment are:- 

the appointment of new management with proven successful Kazakhstan business and mining experience;

the revision of technical circuits at end of 2006 that have been undergoing test production which have significantly improved the recovery of gold and silver in 2007 and 2008; and

the availability of sufficient working capital via a new finance facility (refer Note 32).

The Group's cash flow forecasts, based on the assumption that budgeted production at the Naimanjal complex will be achieved and on the prevailing outlook for the gold price and taking into account reasonably possible changes in the level of production and gold prices, show that the Group will be cash generative for the foreseeable future and that its borrowings due for repayment in the period up to June 30, 2010 can be repaid.

Accordingly at the time of approving the consolidated financial statements, the directors have a reasonable expectation 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 annual financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Critical judgements 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.

Exploration, Evaluation and Development- The mining industry in general is inherently risky in nature. Mineral properties are often non-productive for reasons that cannot be anticipated in advance and the Group may be subject to risks from operations, mining law, environmental regulations, permits and licenses and financing.

Exploration activities rely on the exploration results collected at that time and on the professional judgment of people involved in the exploration business. There can be no assurance that exploration programs will result in a discovery being made. In the event that a discovery is made, no assurance can be given that the discovery will result in either resources or reserves being established on the property. If reserves are established, it may take a number of years and substantial expenditures until production is achieved, during which the economical feasibility of the project may change.

The long-term profitability of the Group's operation will, in part, be directly related to the success of its exploration programs in finding additional reserves, which may be affected by a number of factors that are beyond the control of the Group.

The Group assesses on an annual basis the recoverability of exploration and evaluation assets, mine development assets and property, plant and equipment having regard to factors such as drilling results, commodity prices and estimates of recoverable reserves.

Useful economic lives of property, plant and equipment - The Group's mining and non-mining property, plant and equipment are depreciated on a straight-line basis over their useful economic lives or life of mine whichever is shorter. Management periodically reviews the appropriateness of the economic useful lives of the assets. The review is based on the current condition of the assets and the estimated period during which they will continue to 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 in the various jurisdictions, terms of the license agreements and internally generated engineering estimates. Provision is made, based on net present values, for mine abandonment and site restoration costs as soon as the obligation arises. Actual costs incurred in future periods could differ materially from the amounts provided. Additionally, future changes to environmental laws and regulations, life of mine estimates and discount rates could affect the carrying amount of this provision.

Impairment of assets - The Group reviews the carrying amounts of its non-current assets to determine whether there is any indication that those assets are impaired. In making the assessment of impairment, assets that do not generate independent cash flows are allocated to an appropriate cash generating unit. Management necessarily applies its judgment in allocating assets that do not generate independent cash flows to appropriate cash generating units and in estimating the timing and value of the underlying cash flows within the value in use calculation. Subsequent changes to the cash generating unit allocation or to the timing of cash flows could impact the carrying value of the respective assets.

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.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4.1 Principles of consolidation

The consolidated financial statements of the Group include Frontier and the companies that it controls, and from which it obtains economic benefits. This control is normally evidenced when the 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 in the consolidated income statement from the effective date of acquisition or up to the 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 purchase 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 Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination.

The acquiree's identifiable assets and liabilities are recognized at their fair values at the acquisition date. Any premium paid as part of the purchase consideration is assessed as to whether it relates to mining properties or exploration potential before determining whether goodwill on acquisition is to be recognized.

  

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 of the parties sharing control.

Joint venture arrangements that involve the establishment of a separate entity in which each venturer 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 & losses are 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 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

Frontier is subject to United States (federal and state) and foreign income taxes. The Group's liability for current tax is calculated using tax rates enacted or substantially enacted at the balance sheet date.

Deferred tax

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 income statement, 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.

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 income statement as incurred.

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

	Years
Buildings	10 - 14
Machinery and equipment	4 - 10
Other	5 - 12

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 on a 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 extracting a mineral resource.

Expenditures not included in the initial measurement of exploration and development 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 expenditure for each area of interest, other than that acquired from the purchase of another mining company, is 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 development.

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. Exploration and evaluation assets are reallocated to mine development assets at the time a decision is made to proceed to development.

Development expenditure is recognised at cost. Upon reaching designed commercial production capacity, exploration and evaluation assets and mine development assets are amortized using the unit of production method based on the volumes of proved and probable reserves of ore. 

4.12 Intangible assets

Intangible assets include non-mining and exploration licenses and computer software. Intangible assets under development are not amortized. Amortization of these assets will begin 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 and are amortized 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 revalued 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 net and realizable value. Cost, including an appropriate portion of fixed and variable overhead expenses, are 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, deposits with banks with original maturity terms not more than three months.

4.17 Cash deposits (non-current)

Cash deposits with banks are made pursuant to subsurface use contracts. The Group accumulates cash to meet 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 shown as a finance cost in the consolidated income statement. 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 or economic useful life of existing operations.

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.

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 remeasured. 

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

Adoption of new and revised standards 

At the date of authorisation of these financial statements, the following Standards and Interpretations were issued but were not yet effective: 

IFRS 2 (Revised) Share-based payment	Effective for annual periods beginning on or after July 1, 2009
IFRS 3 (Revised) Business Combination	Effective for annual periods beginning on or after July 1, 2009
IFRS 5 (Revised) Non-current Assets Held for Sale and Discontinued	Effective for annual periods beginning on or after July 1, 2009
IFRS 8 (Revised) Operating Segments	Effective for annual periods beginning on or after January 1,2009
IAS 1 (Revised) Presentation of Financial Statements	Effective for annual periods beginning on or after January 1,2009
IAS 16 (Revised) Property, Plant and Equipment	Effective for annual periods beginning on or after January 1,2009
IAS 19 (Revised) Employee benefits	Effective for annual periods beginning on or after January 1,2009
IAS 23 (Revised) Borrowing costs	Effective for annual periods beginning on or after January 1,2009
IAS 27 (Revised) Consolidated and Separate Financial Statements	Effective for annual periods beginning on or after January 1,2009
IAS 31 (Revised) Interest in Joint Venture	Effective for annual periods beginning on or after January 1,2009
IAS 32 (Revised) Financial Instruments: Presentation	Effective for annual periods beginning on or after January 1,2009
IAS 36 (Revised) Impairment of Assets	Effective for annual periods beginning on or after January 1,2009
IAS 38 (Revised) Intangible Assets	Effective for annual periods beginning on or after January 1,2009
IAS 39 (Revised) Financial Instruments: Recognition and Measurement	Effective for annual periods beginning on or after July 1,2009

  In May 2008 the International Financial Reporting Standards Committee, in the framework of the annual initiative aimed at the general improvement of existing International Financial Reporting Standards, made changes to 21 existing standards. These changes affected wordings and issues regarding submission of financial statements, questions of acknowledgement and evaluation. New editions of the standards stated above are effective for reporting periods beginning on or after  1 January 2009.

Management anticipates that all of the above Standards and Interpretations will be adopted in the Group's financial statements for the period commencing January 1, 2009 and that the adoption of those Standards and Interpretations will have no material impact on the financial statements of the Group in the period of initial application.

5. SEGMENTAL ANALYSIS

A segment is a distinguishable component of a company that is engaged in providing products or services in a particular business sector (business segment) or in providing products or services in a particular economic environment (geographic segment), which is subject to risks and rewards different to those of other segments. The Group operated for the year in one segment, the exploration and development of mineral properties and in one principal geographic area, Kazakhstan.

6. REVENUE 

In late 2006 the Group decided to make substantial changes to its processing plant circuits to enhance silver and gold extraction from the heap leach solutions. A comprehensive review of the performance of the existing Merrill Crowe system was undertaken and modifications were made to operate the Merrill Crowe circuit in combination with the introduction of a carbon circuit utilising five in-line carbon columns. Various production trials were undertaken to determine the optimum processing layout. As a result, the processing plant went out of full production and into a production testing phase in 2007. 

In 2008 the processing plant continued to operate in the production testing phase. During 2008 the Group sold $804,513 of gold and silver, being 772 ounces of gold and 8,809 ounces of silver at an average price of $868 and $15, respectively (2007 figures were 3,132 ounces of gold and 20,173 ounces of silver totalling $2,394,778) The Group did not record revenue as it was in the test production phase and instead has offset this amount against capitalized mine development costs.

Full commercial production is expected to commence in the first quarter of 2010.

7. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

	2008		2007
Employee benefit expenses	1,392,543		1,263,040
Provision for VAT receivable (Note 12)	688,057		-
Travel and accommodation	507,074		485,159
Financial and consulting services	497,997		394,525
Audit and accounting fees	375,602		123,799
Public relations and promotion	237,726		208,513
Rent and office services	171,923		301,586
Taxes other than income tax	158,114		78,154
Insurance	99,675		100,683
Depreciation and amortization	74,302		43,566
Provision for non-recoverable advance paid	67,898		-
Telecommunication	60,804		57,991
Printing stationary and office miscellaneous	57,440		134,883
Provision for obsolete inventory (Note 14)	53,261		-
Bank charges	13,978		24,665
Equity settled employee benefit expense (Note 19)	-		232,925
Other expenses	62,766		76,582
	4,519,160		3,526,071

8. FINANCE COSTS

		2008				2007
Interest expense		133,336				-
Un-winding of discount on amount due to Government of the Republic of Kazakhstan (Note 22)		69,505				82,742
Un-winding of discount for site restoration provision (Note 21)		74,930				5,798
		277,771				88,540

9. EXPLORATION AND EVALUATION ASSETS

	2008		2007
Naimanjal license area Benkala license area (Note 10)	4,808,122 20,987,769		10,811,067 21,409,342
	25,795,891		32,220,409

Movements for the year are summarised as follows:

	2008		2007
At 1 January	32,220,409		6,312,304
Benkala additions	1,330,671		620,437
Transfer to mine development assets (Naimanjal) from exploration and evaluation assets	(7,755,189)		-
Naimanjal additions	-		5,193,819
Acquisition of Benkala	-		20,788,905
Write-off of Baltemir	-		(695,056)
	25,795,891		32,220,409

Mine development assets

Mine development assets of $16,405,755 (2007: $6,213,086) represents costs incurred on the Naimanjal licence area following the decision to proceed to development of the gold and silver mine on that property.

Movements for the year are summarised as follows:

	2008		2007
At 1 January	6,213,086		4,652,719
Transfer from exploration and evaluation assets to mine development assets (Naimanjal)	7,755,189		-
Additions, net	2,437,480		1,560,367
	16,405,755		6,213,086

10. INTEREST IN BENKALA PROJECT

During November 2007 the Group acquired a 50% interest in the Benkala project (refer Note 1).

 

In accordance with its accounting policies, the Group has accounted for its investment in this joint venture entity based on proportional consolidation and, accordingly, has recorded the Group's share of the license to explore and develop the Benkala deposit.

The following amounts are included in the Group consolidated financial statements as a result of the proportionate consolidation of the entities which hold the Benkala license December, 31 2008:

	2008		2007
Current assets	8,844		89,618
Non-current assets	877,099		614,953
Current liabilities	274,339		756,256

	2008		2007
Income	-		-
Expenses	257,575		31,248
Loss	257,575		31,248

11. PROPERTY, PLANT AND EQUIPMENT

Cost:	Buildings		Machinery & equipment		Transport & vehicles		Office equipment		Capital work in progress		Total
At December 31, 2006	-		3,647,777		898,321		336,692		4,742,773		9,625,563
Additions	1,397		48,048		2,213		4,261		-		55,919
Transfer	3,962,270		627,867		-		-		(4,590,137)		-
At December 31, 2007	3,963,667		4,323,692		900,534		340,953		152,636		9,681,482
Additions	-		5,234		19,490		53,649		10,708		89,081
Transfer	51,147		(156,069)		60,866		25,884		18,172		-
Disposals	-		(1,003,019)		(429,649)		(10,947)		(120,032)		(1,563,647)
At December 31, 2008	4,014,814		3,169,838		551,241		409,539		61,484		8,206,916
Accumulated Depreciation:
At December 31, 2006	-		(861,002)		(187,952)		(218,767)		-		(1,267,721)
Charge for the year	(168,978)		(1,019,610)		(240,331)		(62,054)		-		(1,490,973)
At December 31, 2007	(168,978)		(1,880,612)		(428,283)		(280,821)		-		(2,758,694)
Charge for the year	(421,909)		(1,012,786)		(192,249)		(62,093)		-		(1,689,037)
Transfer	(12,425)		(34,535)		45,327		1,633		-		-
Disposals	-		657,117		224,232		9,178		-		890,527
At December 31, 2008	(603,312)		(2,270,816)		(350,973)		(332,103)		-		(3,557,204)
Net Carrying Amount:
At December 31, 2007	3,794,689		2,443,080		472,251		60,132		152,636		6,922,788
At December 31, 2008	3,411,502		899,022		200,268		77,436		61,484		4,649,712

Depreciation charged for the year includes $1,625,542 (2007: $1,447,407) which has been capitalized to mine development assets. In the consolidated statement of cash flows, an adjustment of $1,447,407 has been made to the 2007 comparative balances of increase in exploration and evaluation assets (investing activities) and depreciation added back to the loss for the year (operating activities) to exclude depreciation from the asset additions in that year.

12. VALUE-ADDED TAX RECEIVABLE

A value-added tax (VAT) receivable of $797,707 was recorded in the books of FMLK as a non-current asset at December 31, 2007. In 2008, the Group decided to take a full provision against this item as it now expects that FMLK will export all gold production and there is not a strong likelihood of being able to recover this VAT.

	2008		2007
Long-term portion of value added tax receivable	688,057		797,707
Provision for non-recovery	(688,057)		-
	-		797,707

13. CASH DEPOSIT

A cash deposit as of December 31, 2008 in the amount of $13,053 (December 31, 2007: $112,000), represents cash held for future site restoration works. Pursuant to the Naimanjal Subsurface Use Contract, the Group is required to accumulate cash after commencement of commercial production to meet future obligations to restore and make the mines safe after use and the estimated costs of cleaning up any chemical leakage. With the commercial production application not occurring in 2008, FMLK transferred $100,000 of this cash to working capital. With commercial production expected to be approved in 2009 the $100,000 amount will be reinstated.

14. INVENTORIES

	2008		2007
Raw materials	264,187		364,534
Fuel	33,217		24,802
Spare parts	17,560		30,583
Other	2,063		2,544
	317,027		422,463
Provision for obsolescence	(53,261)		-
Total	263,766		422,463

15. TRADE ACCOUNTS RECEIVABLE

There are no trade receivables as of December 31, 2008 (2007: $41,762). 

16. PREPAID EXPENSES

As of December 31, 2008 and December 31, 2007 prepaid expenses primarily relate to materials, works and services for the operation of the plant at the Naimanjal mine and Benkala project. 

  

17. OTHER RECEIVABLES

	2008		2007
Receivable for sale of fixed assets	87,485		-
Taxes	33,697		-
Due from employees	9,732		16,282
Security deposit on office rent	-		10,891
Other	7,553		12,565
	138,467		39,738

18. CASH AND CASH EQUIVALENTS

	2008		2007
KZT current bank account	11,480		293,502
US Dollars current bank account	2,610		365,850
GBP current bank account	-		1,814,433
Cash on hand	678		167
	14,768		2,473,952

19. SHARE CAPITAL

As of December 31, 2008 the Company's authorized capital comprises 500,000,000 ordinary shares of $0.01 par value per share (December 31, 2007: 500,000,000 shares at $0.01 par value each).

Movements in the issued share capital for the years ended December 31, 2008 and 2007 were as follows:

	Number of shares and outstanding		Nominal amount		Additional paid in capital		Total		Issue price per share (USD cents)
December 31, 2006	132,581,600		1,325,816		36,440,425		37,766,241
Issued in relation to Benkala acquisition (Note 10):
- to director-related entity	42,748,495		427,485		8,378,705		8,806,190		21
- to vendor	6,250,000		62,500		1,187,500		1,250,000		20
Share placement	36,540,000		365,400		7,034,600		7,400,000		20
Cost of share placement	-		-		(1,216,454)		(1,216,454)
	85,538,495		855,385		15,384,351		16,239,736
December 31, 2007	218,120,095		2,181,201		51,824,776		54,005,977
December 31, 2008	218,120,095		2,181,201		51,824,776		54,005,977

  Stock options

Changes to the Company's stock options are summarized as follows:

	2008						2007
	Number of options		Weighted average option price			Number of options			Weighted average option price
At beginning of year	4,180,000		$0.30			4,180,000			$0.30
Granted	-		-			-			-
Exercised	-		-			-			-
Expired	-		-			-			-
At end of year	4,180,000		$0.21			4,180,000			$0.30

The Company maintains an incentive share option plan ("plan") under which directors, officers and key personnel may be granted options to purchase ordinary shares of the Company. Management believes the Company is in compliance with the Association of British Insurers' guidelines allowing up to 10% of the issued shares to be made available in options to executive directors and employees. 

The key terms of the share options are as follows:

each option converts into one ordinary share of $0.01 on exercise 

the expiry date is 2 September 2009

the exercise price of the options is 15 GBP pence each, payable in cash

the options carry neither rights to dividends nor voting rights

The grant date of the share options was November 16, 2006. The allocation of options was made by the Directors having regard to the need to retain key personnel. 

The fair value of the options at grant date was assessed to be $0.06 per share. Options were priced using the Black-Scholes pricing model. It was assumed that all option holders would exercise their options on the expiry date. The key inputs into the model were:

Share price at grant date: 14.75 GBP pence 

Exercise price: 15 GBP pence

Dividend yield: 0%

Expected life: 3 years

Risk-free interest rate: 4.52%

Volatility: 19.44%

The Group recorded $232,925 of expense during the 2007 year relating to the issue of the stock options. As these are fully vested there is no additional expense associated with these stock options. 

20. BORROWINGS

Convertible notes

The Group issued $9.7 million of convertible notes in November 2007. The terms of these notes are as follows:

$2 million issued to a director related entity: These notes are convertible into Frontier shares at a price of 20 pence ($ 0.29) per share. The notes are convertible at the holder's option within a 3 year period from date of issue. These convertible loan notes were interest-free until 29 February 2008 and bear interest at 8% per annum after that date and are repayable, if not converted, in November 2010. Interest is payable annually in arrears and accrued interest at December 31, 2008 was $133,336 (2007: nil).

$7.7 million issued to the vendor of US Megatech. These notes are convertible into shares of Frontier at a price of 14 pence ($0.20) per share. The original terms were that the notes were convertible for a period of 12 months after the date of registration of the Benkala subsurface use contract (which was November 19, 2007) and were non-interest bearing. By mutual agreement with the vendor, this note has been extended to December 31, 2009 (see Note 32).

The conversion feature has been segregated from the liability and recorded separately on the balance sheet. The convertible notes have been recorded as a liability of $9,225,929 ($7,129,630 current liability and $2,096,299 non-current) - 2007: total of $9,092,593 classified as current liability of $7,129,630 and non-current liability of $1,962,963- and equity related to the conversion feature of $425,185 (2007: $425,185) net of related income tax effect.

21.  SITE RESTORATION PROVISION

Environmental restoration provisions are related to obligations to restore and make safe mines after use and the estimated costs of cleaning up any possible contamination. Most of these costs are expected to be incurred at the end of mining operations, approximately between the years 2027 to 2028. The extent and cost of future remediation programs are inherently difficult to estimate. They depend on the estimated lives of the mines, the scale of any possible contamination and the timing and extent of corrective actions.

	2008		2007
As of January 1	624,423		59,477
Un-winding of the discount	74,930		5,798
Changes in estimate	-		559,148
As of December 31	699,353		624,423

The following assumptions were used to estimate the net present value of the provision for future site restoration:

Total undiscounted amount of future estimated cash out flows in current year 2008 prices is $6,000,000 (2007 : $6,000,000)

Expected timing of future cash outflows 20 years

Discount rate - approximately 12% per annum

Inflation rate - approximately 8% per annum

To fund the future costs of the Naimanjal and Benkala mine site restoration, the Group is required to transfer funds into a special deposit account (see Note 13).

22. DUE TO GOVERNMENT OF THE REPUBLIC OF KAZAKHSTAN

The Group is obligated to reimburse the Government of Kazakhstan the amount of $1,436,400 for the historical cost of geological studies performed in respect of the Naimanjal contract. The Group paid $14,364 upon assuming the liability: the remaining amount was discounted at a rate of 12% per annum to arrive to the net present value of the remaining liability. Pursuant to the subsurface use and exploration contracts, the historical cost of geologic studies is to be repaid in 40 equal, quarterly instalments, commencing from the date of commercial production as evidenced by an approval from the appropriate governmental authority. 

	2008		2007
As of January 1	772,255		731,775
Obligations raised during the period	-		-
Change in estimate	(193,060)		(42,262)
Un-winding of the discount	69,505		82,742
As of December 31	648,700		772,255
Current portion	-		64,120
Non-current portion	648,700		708,135
	648,700		772,255

The original estimate of the obligation as of December 31, 2005 was based on the assumption that full commercial production would begin in early 2007. In 2006 the expected start of the full commercial production was deferred to the last quarter of 2007. In 2007 it was subsequently revised until the third quarter of 2008 and in 2008 it was revised until the first quarter of 2010. This resulted in a revision to the estimated fair value of the liability.

23. DUE TO THE US TRADE AND DEVELOPMENT AGENCY 

	2008		2007
Non-current portion	340,000		340,000
	340,000		340,000

The Company has received a grant from the US Trade and Development Agency ("TDA"). The grant is denominated in US Dollars. In accordance with the terms of the grant, the grant is refundable to the TDA when the Company succeeds in obtaining funding for the Naimanjal mine based on the feasibility study that the grant was provided to finance.

24. TAXATION 

24.1  Income tax recognized in profit or loss

	2008		2007
Income tax expense comprises:
Current tax expense	-		-
Deferred tax expense relating to the origination and reversal of temporary differences	304,174		(60,199)
Total income tax expense/(benefit)	304,174		(60,199)

The total charge for the year can be reconciled to the accounting profit/loss as follows:

	2008		2007
Loss before income tax	(5,015,472)		(4,314,273)
Tax benefit at the statutory tax rate of 30%	(1,504,642)		(1,294,282)
Effect of change in income tax rate	790,446		-
Deferred tax asset not recognized	312,808		-
Permanent differences	705,562		1,234,083
Income tax	304,174		(60,199)

24.2 Deferred tax balances

	2008		2007
Deferred tax asset
Temporary differences
Exploration and evaluation assets; mine development assets; and property plant and equipment	551,059		882,276
Inventory obsolescence provision	10,652		-
Accrued expenses	3,196		-
Site restoration provision	104,903		26,619
Due to Government of the Republic of Kazakhstan	97,305		-
Employee benefit expense (share options)	-		69,878
	767,115		978,773
Unused tax losses	40,882		133,265
Total	807,997		1,112,038
Deferred tax liability
Issue of convertible notes	(182,222)		(182,222)
	(182,222)		(182,222)

Amendment of tax law - In December 2008, a new tax code was adopted by the Kazakhstan Government which came into force on January 1, 2009. According to the new tax code, the corporate income tax rates are as follows:

Year		Rate
2009		20.0%
2010		17.5%
2011		15.0%

24.3  Unrecognized deferred tax assets

A deferred tax asset has not been recognized in relation to carry-forward tax losses of Frontier Mining Limited, the USA incorporated parent entity of the Group, as recovery of those losses against future taxable income is not regarded as probable. The unrecognised deferred tax asset is approximately $2.7 million (2007: $2.4 million). 

25. TRADE ACCOUNTS PAYABLE

	2008		2007
Trade payables	1,128,516		81,123
Other	115,990		36,333
	1,244,506		117,456

The average credit period on purchases is 30 days. No interest is charged on trade payables.

26. OTHER CURRENT LIABILITIES

	2008		2007
Payables to related parties	3,787,138		2,583,285
Due to employees	840,734		297,947
Tax penalties provision	380,000		380,000
Taxes other than on income	63,224		44,132
Unused vacation	33,302		-
Other	17,660		6,121
	5,122,058		3,311,485

27. EARNINGS/LOSS PER SHARE

Basic loss per share is calculated by dividing the net loss for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

Diluted loss per share is calculated by dividing the net loss for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, adjusted for the effects of dilutive options and other shares reserved for issuance.

The following reflects the net loss for the year and share data used in the basic and diluted loss per ordinary share computations:

	2008		2007
Net loss attributable to common shareholders for basic and diluted earnings per share	(5,319,646)		(4,254,074)
Weighted average number of common shares for basic and diluted earnings per share	218,120,095		142,424,386
Loss per share basic and diluted	(0.02)		(0.03)

Potential ordinary shares related to the share options (refer Note 19), convertible notes (refer Note 20) and equity settled employee benefits (refer Note 19) have not been included in the computation of diluted earnings per share as the effect would be to decrease reported loss per share (that is, they are anti-dilutive).

28. RELATED PARTY TRANSACTIONS 

The parent entity and ultimate controlling entity is Frontier Mining Ltd., incorporated in Delaware, USA.

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. 

At December 31, 2008 related parties include the directors and management of Sokol Holdings Inc. and Coville Intercorp Ltd. 

Sokol Holdings Inc. is a related party to Frontier as Brian Savage (a non-executive Director of Frontier) and Thomas Sinclair (CFO and an executive director of Frontier) are shareholders of Sokol Holdings Inc.

Coville Intercorp Ltd is a related party to Frontier as it is the other 50% interest holder in US Megatech Inc.

During the years ended December 31, 2008 and 2007, the Group entities entered into the following transactions with related parties:

In 2007, the Company purchased a 50% interest in US Megatech Inc. (refer Note 10).

 Sokol Holdings Inc. and Coville Intercorp Ltd were owed $3,787,138 at December 31, 2008 (2007: $2,583,285) relating to advances made to the Group for working capital funds (refer Note 26). The amounts are repayable within twelve months.

 At December 31, 2008 and 2007 the Company had three key management personnel. Total compensation to key management personnel included in the general and administrative expenses in the consolidated income statement was $591,291 for the year ended December 31, 2008 (2007: $634,507). This amount is for short term employee benefits including applicable taxes.

 As described in Note 19, the Group recorded an expense in 2007 of $232,925 relating to the issue of stock options to employees and others.

29. COMMITMENTS AND CONTINGENT LIABILITIES

License commitments

Naimanjal. In 2008 the Group continued the contract for exploration and subsequent production for the Naimanjal license. The contract includes a work program defining the Group's obligations to invest in exploration in the license areas. The total amount of the minimum work program requirement to December 31, 2009 is $3.5million and the Group invested $67,500 in 2008. 

There is also a requirement to expend an amount of 1% of total investment on education of employees and the Group spent $5,865 in 2008 it believes it has fulfilled this obligation under its license commitment.

Benkala. KazCopper LLP has minimum work program commitments on the Benkala license area which at December 31, 2008 totaled $1,400,000. In 2008 the Ministry of Energy and Mineral Resources of the Republic of Kazakhstan declared that all work program commitments could be reduced by 50% due to economic conditions. As Kazcopper LLP achieved 88% of its revised obligation it believes it has fulfilled its license commitment. 

Under the Benkala subsurface contract, there are commitments for social obligation payments totalling $7.5 million over the 29 year period of the licence. The Group' share of this commitment is $3.75 million. The full commitments are only payable if the project moves from exploration into commercial mining and production. In 2008, the amount of payments made by KazCopper LLP totalled $100,000 (2007: nil) and Kazcopper LLP fulfilled its commitments. 

Historical costs commitments for work that was already performed within the license territory total $98,480 per annum and Kazcopper LLP fulfilled this commitment for 2008.

There is a requirement to expend an amount of 1% of total investment on education of employees In 2008 Kazcopper LLP's investment totalled $530,000 requiring an expenditure of $5,300 on education. Kazcopper LLP spent $4,300 on education in 2008 and does not believe it will be penalised for not completely fulfilling its obligation.

The Group's share of all the Benkala commitments is 50%.

Taxation

Tax laws in the Republic of Kazakhstan are subject to frequent changes and varying interpretations. Management's interpretation of such legislation in applying it to business transactions of the Company may be challenged by the relevant regional and federal authorities enabled by law to impose fines and penalties. Recent events within the Republic of Kazakhstan suggest that the tax authorities are taking a more assertive position in their interpretation of legislation and assessments and as a result, it is possible that transactions that have not been challenged in the past may be challenged. Fiscal periods remain open to be reviewed by the tax authorities in respect of taxes for the three calendar years preceding the year of tax review. Under certain circumstances reviews may cover longer periods. While the Company believes it has provided adequately for all tax liabilities based on its understanding of the tax legislation, the above facts may create additional financial risks for the Company.

Environmental matters

The Group is subject to various environmental laws and regulations of the Republic of Kazakhstan. While management believes that substantial compliance with such laws and regulations has been achieved, there can be no assurances that contingent liabilities do not exist.

Legal issues

In the ordinary course of business, the Group can be subject to legal actions and complaints. Frontier is a party (along with others) to an unasserted claim that it is liable for an unspecified proportion of professional services invoices totalling $2.1 million. The Directors consider that this claim is invalid and, on the basis of legal advice received, consider that the claimant's likelihood of success is low. Management believes that the ultimate liability, if any, arising from such actions or complaints will not have a material adverse effect on the financial condition or the results of future operations of the Group.

Liquidation fund

The Group will be required to make a monetary contribution to the extent that the environmental clean-up costs required exceed the liquidation fund. The Group's management believes they are in compliance with the commitments set forth in the Naimanjal, Baltemir and Benkala Subsurface Use Contracts. However, such compliance may be questioned by the relevant authorities whose interpretation may differ significantly from the Group's.

Insurance

The insurance industry in the Republic of Kazakhstan is in the process of development, and many forms of insurance coverage common in developed markets are not yet generally available. The Group does not have full coverage for its mining, processing and transportation facilities, for business interruption, or for third party liabilities in respect of property or environmental damage arising from accidents on the Group's property or relating to the Group's operations

30. CONCENTRATION OF BUSINESS RISK

The Group's main business activities are within the Republic of Kazakhstan. Laws and regulations affecting businesses operating in the Republic of Kazakhstan are subject to rapid changes and the Group's assets and operations could be at risk due to negative changes in the political and business environment.

The Group sells all finished goods to Metalor Technologies S.A. The Group could be at risk to changes in the market situation in the country of the purchaser.

31. FINANCIAL INSTRUMENTS

In the normal course of its operations, the Group is exposed to commodity price, credit, currency, and operational risks. 

Commodity price risk 

The Group is exposed to fluctuations in gold product prices as a result of market conditions and changes in London Metal Exchange (LME) quotes. This exposure is not significant to the Group as it is a development stage entity. 

Credit risk 

Credit risk is the risk that customer may default or not meet its obligations to the Group on a timely basis, leading to financial loss to the Group. As at December 31, 2008, the Group believes that its maximum exposure to credit risk relates to its cash and accounts receivable as reflected in their carrying value.

Currency risk

Currency risk is the risk that the financial results of the Group will be adversely impacted by changes in exchange rates to which the Group is exposed.

The Group is subject to foreign currency risk on purchases and payables denominated in foreign currencies. The currency most associated with risk is the Kazakhstan Tenge (KZT). The risk associated with the Tenge is not able to be managed. Outlined below are the US dollar equivalent balances of KZT denominated assets and liabilities at balance date:

	2008		2007
Non-current assets
Restricted cash	13,053		112,000
Current assets
Cash and cash equivalents	11,105		96,934
Other receivables	104,770		28,369
Current liabilities
Trade accounts payable	81,658		77,463
Other current liabilities	57,075		147,507

Currency sensitivity analysis

The Company is mostly exposed to the risk of a fluctuation in the USD.

The following table shows the Company's sensitivity to a 10% increase and decrease in the USD in relation to the Tenge. 10% is the sensitivity level used in internal reporting to senior management with respect to the currency risk and is management's estimate of a reasonable change in exchange rates. A sensitivity analysis includes only unpaid cash items in foreign currency and adjusts their translation at the end of the period by 10%. A sensitivity analysis also includes loans, provisions, accounts payable and cash equivalents. A positive figure below indicates an increase in net income, when the USD strengthens by 10% against the Tenge. If the USD weakens by 10% against the Tenge the impact on net income will be the opposite, and the balances below will be negative.

	Impact of the KZT
	2008	2007
Profit or loss	19,000	57,000

The Group believes the above risk to be insignificant. There are no material effects on other equity balances.

Operational risk

Operational risk is the risk of the Group incurring financial losses as a result of business interruption and possible damage to the Group's property through natural disasters and technological accidents. In accordance with the subsoil contracts, the Group is obliged to carry medical insurance, insurance against accidents during production and occupational diseases to its employees. 

At December 31, 2008 the Group believes it had sufficient insurance policies in force in respect of public liability and other insurable risks.

Capital risk management

The capital structure of the Group consists of debt (the convertible notes described in Note 20), cash and cash equivalents and equity (comprising issued capital, reserves an accumulated losses). 

 

The Group's capital management strategy to date has been to raise proceeds from share placements to fund exploration and development activities. 

The gearing ratio at the year-end was as follows:

			2008		2007
Debt			9,225,929		9,092,593
Cash and cash equivalents			(14,768)		(2,473,952)
Net debt			9,211,161		6,618,641
Equity			30,948,579		36,088,137
Net debt to equity ratio			30%		18%

Interest rate risk management

The Group's only borrowings relate to convertible notes, which bear interest at a fixed rate.

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board of Directors which has established an appropriate policy for the management of the Group's funding requirements. The Group manages liquidity risk by maintaining adequate cash balances and through the capital risk management policy described above.

Fair value of financial instruments

Disclosure of estimated fair values of financial instruments is made in accordance with the requirements of IAS 32 "Financial instruments: Disclosure and presentation" and IAS 39 "Financial Instruments: Recognition and Measurement". Fair value is defined as the amount for which the instrument can be exchanged between knowledgeable willing parties in an arm's length transaction, other than in forced or liquidation sale. As no readily available market exists for a part of the Group's financial instruments, judgment is necessary in arriving at fair value, based on current economic conditions and specific risks attributable to the instrument. The estimates presented herein are not necessarily indicative of the amounts the Group could realize in a market exchange from the sale of its full holdings of a particular instrument. As of December 31, 2008 the following methods and assumptions were used by the Group to estimate the fair value of each class of financial instrument for which it is practicable to estimate such value:

Cash - Carrying amount of cash balances represents their fair value due to the short maturity of these instruments.

Trade and other accounts receivable - The carrying amount of trade and other accounts receivable is considered a reasonable estimate of their fair value due to the short term nature of these assets.

Accounts payable - The carrying amount of accounts payable is a reasonable estimate of their fair value due to the short term nature of these liabilities.

Convertible notes- The fair value at balance date is estimated to be $8,621,177 (2007: carrying amount approximated fair value).

32. SUBSEQUENT EVENTS

Tenge devaluation - On February 4, 2009, the National Bank of Kazakhstan ceased maintenance of the exchange rate of the Kazakhstani Tenge versus US Dollar at earlier level and announced of new exchange rate to be maintained at 150 Tenge per US Dollar (with the corridor of plus/minus 3%). This resulted in devaluation of the Tenge of around 25% versus the US Dollar. The sensitivity analysis of exposure to risk in fluctuations of USD is performed in Note 31.

 

Share authorization - On February 16, 2009 Frontier announced that the majority of shareholders had approved an increase the authorized number of shares of common stock of the Company from 500,000,000 to 1,500,000,000 each with $0.01 par value.

Appointment of Chief Executive Officer -On March 10, 2009 Frontier announced that Mr. Erlan Kenzhegalievich Sagadiev had been appointed as Chief Executive Officer and Chairman of the Board of Frontier Mining Ltd.  

Funding - On April 30, 2009 Frontier announced the completion of a $10 million debt facility with Zere Group JSC ("the Lender"), a company that is controlled by Erlan Sagadiev, the Chief Executive Officer and Chairman of Frontier. This facility has been granted for a period of two years with an interest rate of 15 per cent per annum. No principal payments are due within the two year period and interest is payable monthly. As at June 30, 2009 the Group has drawn down $3,500,000 under this facility. Under the terms of the facility, the Lender has been granted warrants to subscribe for 407,540,430 ordinary shares of US$0.01 each in the Company. Arrangement fees will become payable by the Company to the Lender for an aggregate of 100 million shares, payable on a pro rata basis as funds are drawn down by the company or by April 30, 2010.

In addition, Sokol Holdings Inc. (a director related entity) completed a subscription on April 30 2009, of US$4 million in cash for 187,793,427 new shares in Frontier at a price of 1.5p per share. The proceeds of the subscription were used to redeem $4 million of the convertible note due to Coville Intercorp Ltd, which then agreed that the repayment of the remaining amount of the convertible note will be due by December 31, 2009. An additional amount of $150,000 was agreed to be paid to Coville Intercorp Ltd as compensation for the delay in payment.

On June 2 2009 Frontier announced that, pursuant to the Zere Group debt facility agreement, the Company issued 20,000,000 ordinary shares and 46,508,086 warrants to River House Consultants Ltd, a company that is controlled by Mr Erlan Sagadiev, the Chief Executive Officer and Chairman of Frontier on the instructions of Zere Group JSC. The warrants entitle the holder to subscribe for new shares in the Company at an exercise price of 1.5p per share.

 Licenses - In May 2009 FMLK submitted an application for commercial production at Naimanjal and applications for pilot production at Koskuduk, Beschoku and Yubileiny. The Company currently anticipates receiving approvals on its applications in the third quarter of 2009 with commercial production expected to commence at Naimanjal in 2010.

ENDFR CKKKBDBKDKAN

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Related Shares:

FML.L