Final Results

Stratex International plc / Index: AIM / Epic: STI / Sector: Mining

Stratex International plc ('Stratex' or 'the Company')

Final Results for the year to 31 December 2011

Stratex International plc, an AIM-quoted gold exploration and development company focused on Turkey, East Africa and West Africa is pleased to announce its results for the year ended 31 December 2011.

HIGHLIGHTS

Operational Overview

·; Significant progress in all areas of operation

·; Total gold discovered to date reaches 2.26 million ounces

·; Substantial gold discovery at Öksüt in Turkey with over 1 million ounces

·; Major new gold systems identified in Ethiopia at Blackrock and Megenta within Stratex's epithermal province discovery

·; Important strategic land position in West Africa through acquisition of Silvrex Limited.

·; Feasibility study finalised at Inlice gold project, Turkey

·; New partner with mine development experience signed-up for the Altıntepe project, Turkey - Stratex free carried to production.

·; Maiden resource declared at Muratdere porphyry prospect in Turkey indicating a substantial multi-metal deposit.

·; Strategic alliance agreement entered into with Antofagasta for exploration of porphyry copper deposits in Turkey.

Financial Overview

·; Substantial reduction in pre-tax loss to £517,377 (2010: loss of £2.88million) assisted by:

o gain of £527,199 on the sale of the stake in Sheba Exploration

o gain of £805,068 on gaining full control of Altıntepe Madencilik Sanayi ve Ticaret AS.

·; Net assets at 31 December 2011 were over £8.27 million, an increase of 82% in the year, reflecting:

o additions to the exploration assets, principally at Blackrock and Shehagne

o the acquisition of the Dalafin project in Senegal

·; Over £3 million of cash at year end.

Christopher Hall, Chairman, commented: "I am delighted with the progress that Stratex has achieved in 2011. We are first and foremost an exploration and development company and in the past twelve months we have achieved significant progress in Turkey and East Africa while I believe our acquisition in West Africa gives us the potential to repeat our successes elsewhere. Looking forward, we embark on what looks like another exciting year for the company."

Chairman's Statement

Stratex made significant progress in all areas of operation during the 2011 financial year. In Turkey, we have created an advanced portfolio of development projects with experienced mine developers, and in Stratex East Africa we are now ready to pursue an aggressive gold exploration programme. Towards the end of the year Stratex also acquired a series of West African licenced properties for future delineation work.

I make no apologies for repeating that Stratex is first and foremost an exploration and development company. We have neither the skills nor the desire to become constructors and operators of mines and we remain focused on exploration for major mineral deposits, principally gold. We aim to create value for shareholders using experienced partners to develop our discoveries.

Mineral exploration is characterised by high risks and potentially high rewards. The majority of exploration programmes undertaken around the world do not result in economic mines. Nevertheless by closely monitoring all our activities, risks can be mitigated and each successive stage of every programme is carefully reviewed to ensure that the potential reward justifies the additional investment.

This has been the rationale behind many of our joint ventures where we seek to share, and sometimes eliminate, our risk by bringing in a partner. In the early days the terms were very much dictated by our partners, usually a major mining company. In the last couple of years, as our success has become clear and our expertise better appreciated, we have been able to negotiate progressively better terms enabling Stratex to retain a greater share of the potential rewards.

In some cases we are now carried, without further expenditure, to the completion of a feasibility study; in others we are carried right through into production.

At the year end, Stratex had discovered some 1.5 million oz of gold, mainly oxide which is generally easier to process. Since the year end we have announced an increased resource of over 1.0 million oz at Öksüt, bringing the Company's discovery total to 2.26 million oz, a very creditable result over the 7 years since it was formed. The costs involved in this have been considerable and would have been difficult, if not impossible, but for the joint ventures which have brought in over £5.3 million to cover exploration spending. Despite that inevitable dilution of interest, we have retained an equity interest in some 1.6 million ounces.

Our explorationists are among the best in the business and this is clearly backed up by the confidence of our joint venture partners who have chosen to take an interest in our projects which we generally manage on their behalf. They include Anglogold-Ashanti in partnership with the Thani Group from Dubai, Teck Resources, Antofagasta and Centerra, not forgetting our Turkish operating partners NTF and Bahar Mining.

Not only have our joint venture partners financed the work on the ground, they have also supported the company by purchasing equity. In 2011 we raised £4.3 million from our partners in share placements. Thani-Ashanti and AngloGold Ashanti have continued to show their support by following their interests through subsequent placements, including following the Silvrex acquisition.

In Turkey we now have three projects rapidly maturing to a point where real value can become apparent. At Inlice, with a modest total oxide gold reserve of almost 60,000 oz, our partners NTF are managing the project to production with a 55% interest. We have appointed GBM, a respected UK engineering firm, to act as owner's engineer for the development and construction and look forward to rapid progress once the environmental permits are granted. A review of the feasibility study is in hand and we look to an improvement in project economics.

NTF did not wish to commence work on our second production project, Altıntepe, until Inlice was in production. We therefore secured a second operating partner in Bahar Mining, a private Turkish company with experience of operating gold mines. Bahar Mining is earning a 55% interest in the 490,000 oz oxide and transition gold project by financing the project to production with no further calls for cash from Stratex. Once in production, they will receive 80% of cashflow until their investment is repaid, reverting to 55% thereafter.

Öksüt is developing into a major discovery with the announcement, after the year end, of a resource exceeding 1.0 million oz. Our partners, Centerra, have earned a 50% interest and have exercised their option to earn a total of 70% by investing a further US$3.0 million. The recent outstanding drilling results at Ortaçam North Zone, with multiple intersections of 200 m plus at over 2.0 g/t gold, are very exciting. Importantly, surface indications and early drilling of the zone were not encouraging, highlighting the importance of further work on other mineralised targets where early results were inconclusive. We remain optimistic of further success.

There has also been a significant amount of drilling in Ethiopia. At Megenta, our first discovery within the Afar joint venture, our partners Thani-Ashanti have completed their 2,000 m drill commitment. As expected, mineralisation was intersected beneath the surface structures, but textures and gold grades indicated that drilling had not tested the system deep enough to hit the targeted boiling zone believed to be an important gold concentration mechanism. Thani-Ashanti have commissioned an aeromagnetic survey and are expected to resume deeper drilling to complete their US$3.0 million earn in for 50%.

At our 95%-owned Blackrock programme we are well into a 5,000 m drill programme concentrating initially on the Theodore and Baker structures in the Black Water zone. Drilling commenced in the south on weak epithermal quartz veins and progressed towards the north where the structures thicken markedly. Early indications from this drill programme are very encouraging.

Furthermore, regional helicopter reconnaissance has resulted in additional discoveries of gold-bearing epithermal veins. More ground has been acquired and other applications are still pending.

Stratex now has the best land position in a large, highly prospective epithermal gold province in the Afar Region of Ethiopia and Djibouti, which we believe has similar potential to the Santa Cruz district of Patagonia where over 40 million oz have been discovered over the last 20 years. Exploration over large areas for this style of epithermal gold deposit is capital intensive with a typical 2.5 Moz plus deposit such as Cerro Negro requiring millions of dollars of exploration funding. However, discovery costs can still be well below US$100/oz which is attractive at current gold prices. Stratex will need to invest significant amounts in Ethiopia in future years if it is to do justice to the mineral potential, and your Board is actively considering the options for this.

Stratex had taken a modest position in PLUS-listed Sheba Exploration by way of an option fee on its Shehagne gold prospect in the Arabian-Nubian Shield, northern Ethiopia. During the year Stratex earned a 60% interest in the project, having completed a 1,000 m drilling programme. At the same time, Centamin, the Egyptian gold mining company, made a successful bid for Sheba which resulted in a gain of £527,199 on the Stratex investment. Stratex has now met all of its commitments under the agreement with Sheba and is in a position to vest 60% into the Shehagne project.

In December 2011 Stratex completed a successful offer to acquire Silvrex Limited, (subsequently renamed Stratex West Africa Ltd), a private company with mineral properties in Senegal and Mauritania. The terms involved a modest front-end payment in Stratex shares and a further payment in cash or shares at our option, if over 500,000 oz of gold is discovered in any of the five licence areas acquired within three years. We believe we can achieve the same levels of success in West Africa as we have in Turkey and East Africa with a combination of superior exploration skills, risk management and industry connections. I am pleased to welcome the Silvrex managing director, John Cole-Baker, as a director of Stratex with particular responsibility for West Africa. John is a civil engineer with a wealth of high level experience in the region.

Following an extremely successful 2011, Stratex has set itself even more challenges for the year ahead. I look forward to news flow on drilling in Turkey and Ethiopia, resource updates at Öksüt, progress towards production from Inlice and Altıntepe and commencement of a programme in West Africa. The Board is considering a number of options to secure the necessary finance for our activities. You can be assured that the enhancement of shareholder value is our prime objective, which we are determined to deliver.

Lastly, I would like to pay tribute to our dedicated team of geologists and support staff who often work in the most challenging conditions to help Stratex achieve its objectives. On behalf of the Board I thank them, and you our shareholders for your continuing support, as we embark on what looks like another exciting year for the company.

Christopher Hall

Chairman

13th March 2012

Copies of the Company's Annual Report and Notice of AGM will be sent to shareholders and uploaded to the Company's website in early April.

Financial Statements

Statement of Consolidated Comprehensive Income

Statement of Consolidated Financial Position

Statement of Consolidated Changes in Equity

Statement of Consolidated Cash Flows

The major non-cash transactions of the Group during the year were the acquisition of Silvrex Limited and the acquisition of Rift Resources PLC (see note 6). Also, as part of the proceeds from the sale of the shares in Sheba Exploration Ltd the Group received 266,666 ordinary shares in Centamin Egypt Ltd (see note 16).

Statement of Company Financial Position

Statement of Company Changes in Equity

Statement of Company Cash Flows

The major non-cash transactions of the Company during the year were the acquisition of Silvrex Limited and the acquisition of Rift Resources PLC (see note 6). Also, as part of the proceeds from the sale of the shares in Sheba Exploration Ltd the Company received 266,666 ordinary shares in Centamin Egypt Ltd (see note 16).

Notes to the financial statements

1. General information

 The principal activity of Stratex International Plc ('the Company') and its subsidiaries (together 'the Group') is the exploration and development of precious and high-value 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.

The address of its registered office is180 Piccadilly, London, W1J 9HF.

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 years presented.

2.1 Basis of preparation 

These financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) as adopted by the European Union (EU), IFRIC interpretationsand those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention as modified by the measurement of certain investments at fair value.

Going Concern

It is the prime responsibility of the Board to ensure the Company and the Group remains a going concern. At 31 December, 2011 the Group had cash and cash equivalents of £3,024,565 and no borrowings. A further £538,576 has been received in February 2012. The majority of the exploration costs in Turkey for the next 12 months and a significant portion of the exploration costs in Ethiopia will be borne by our exploration partners. The Company has minimal contractual expenditure commitments and the Board considers the present funds sufficient to maintain the working capital of the Group for a period of at least 12 months from the date of signing the annual report and financial statements. For these reasons the Directors continue to adopt the going concern basis in the preparation of the financial statements. The Board acknowledges that additional funds will be required to meet the exploration activities planned for 2012, including the funding of $500,000 of exploration work by 31 December 2012 at the Dalafin project in order to vest 51%, and further exploration work is planned for Ethiopia but no formal commitments have been entered into. In addition, the Company will be required to fund its share of the capital cost of the proposed mine at Inlice, which is expected to be approximately US$6m. The Directors have a reasonable expectation that they will secure the necessary funding when required.

Accounting Policies

Changes in accounting policy and disclosures

(a) New and amended standards adopted by the Group

There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning 1 January 2011 that would be expected to have a material impact on the Group.

(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

The following standards and amendments to existing standards have been published and are mandatory for the Group's accounting periods beginning on or after 1 January 2011 or earlier periods, but not currently 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.

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.

Amendments to IFRS 7 ''Financial Instruments: Disclosures" were designed to help users of financial statements evaluate the risk exposures relating to transfers of financial assets and the effect of those risks on an entity's financial position. These amendments were effective for periods beginning on or after 1 July 2011.

Amendments to IAS 32 ''Financial Instruments: Presentation" addressed the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. These amendments were effective for periods beginning on or after 1 February 2010.

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.

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 permitted 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

The Group's and Parent Company's assessment of the impact of these new standards and interpretations is set out below.

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. The Directors are assessing the possible impact of this standard on the Group's and Parent Company's Financial Statements.

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. The Directors are assessing the possible impact of this standard on the Group's and Parent Company's Financial Statements.

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. The Directors are assessing the possible impact of this standard on the Group's and Parent Company's Financial Statements.

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. The Directors are assessing the possible impact of this standard on the Group's and Parent Company's Financial Statements.

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. The Directors are assessing the possible impact of this standard on the Group's and Parent Company's Financial Statements.

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. The Directors are assessing the possible impact of this standard on the Group's and Parent Company's Financial Statements.

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. These amendments are effective for periods beginning on or after 1 July 2012, subject to EU endorsement. The Directors are assessing the possible impact of these amendments on the Group's and Parent Company's Financial Statements.

Amendments to IAS 19 ''Employment Benefits" eliminate the option to defer the recognition of gains and losses, known as the ''corridor method"; streamline the presentation of changes in assets and liabilities arising from defined benefit plans, including requiring remeasurements to be presented in other comprehensive income; and enhance the disclosure requirements for defined benefit plans, providing better information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in those plans. These amendments are effective for periods beginning on or after 1 January 2013, subject to EU endorsement, and are not expected to have an impact on the Group's or Parent Company's Financial Statements.

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. The Directors are assessing the possible impact of this standard on the Group's and Parent Company's Financial Statements.

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. These amendments are effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors are assessing the possible impact of these amendments on the Group's and Parent Company's Financial Statements.

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. 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.

Amendments to IAS 32 "Financial Instruments: Presentation" add application guidance to address inconsistencies identified in applying some of the criteria when offsetting financial assets and financial liabilities. This includes clarifying the meaning of "currently has a legally enforceable right of set-off" and that some gross settlement systems may be considered equivalent to net settlement. These amendments are effective for periods beginning on or after 1 January 2014, subject to EU endorsement, and are not expected to have an impact on the Group's and Parent Company's Financial Statements

2.2 Basis of consolidation

Stratex InternationalPLC was incorporated on 24 October 2005. On 21November 2005 Stratex International PLC acquired the entire issued share capital of Stratex Exploration Ltd by way of a share for share exchange. The transaction has been treated as a Group reconstruction and has been accounted for using the merger accounting method.Subsidiaries are entities controlled by the Group. 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 acquisition method is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured at fair value of the assets and equity instruments acquired, and the liabilities incurred or assumed at the date of exchange. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.

Any contingent consideration is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or a liability is recognized in accordance with IAS 39 either in profit or loss or as a change in other comprehensive income. The unwinding of the discount on contingent consideration liabilities is recognized as a finance charge within profit or loss.

Acquisition related costs are expensed as incurred.

The Group measures goodwill at the acquisition date as the excess of the fair value of the consideration transferred, plus the recognised amount of any non-controlling interests, less the recognised amount of the identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss.

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 groupentities are eliminated on consolidation.

Associates are all entities over which the Group has significant influence but not control over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50%of the voting rights. References to joint venture agreements do not refer to arrangements which meet the definition of joint ventures under IAS 31 "Interests in Joint Ventures" and therefore these Financial Statements do not reflect the accounting treatments required under IAS 31.

Investments in associates and jointly controlled entities are accounted for using the equity method of accounting and are initially recognised at cost. 

The Group's share of its associates' post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in reserves isrecognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. 

When the Group's share of losses exceeds its interest in an equity-accounted investee the carrying amount of the investment, including any other unsecured receivables, is reduced to zero, and the recognition of further losses is discontinued, unless the Group has incurred obligations or made payments on behalf of the investee.

Unrealised gains on transactions between the Group and equity-accounted investees are eliminated to the extent of the Group's interest in the investee. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.Accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses arising in investments in equity-accounted investees are recognised in profit or loss.

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions. Gains or losses on disposals to non-controlling interests are recorded in equity.

2.3 Foreign currency translation 

(a) Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the 'functional currency'). The consolidated financial statements are presented in sterling, which is the 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. 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 profit or loss.

(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:

(i)  assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position.

(ii) income and expenses in profit or loss for each statement of comprehensive income presented 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(iii) 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, exchange differences that were recorded in equity are recognised in profit or loss as part of the gain or loss on sale.

2.4 Property, plant and equipment 

Fixtures and equipment are measuredat cost less accumulated depreciation and accumulated impairment losses.

Depreciation is charged so as to write off the cost of assets over their estimated useful lives, using the straight-line method, on the following bases:

Motor vehicles 25%

Field equipment 33%

Furniture & fittings  20% - 33%

Office and computer equipment 25% - 33%

Software 33%

2.5 Intangible assets 

(a) Goodwill

Goodwill that arises on the acquisition of subsidiaries is presented with intangible assets and subsequently it is measured at cost less accumulated impairment losses.

(b) Exploration and evaluation assets

The Group recognises expenditure as exploration andevaluation 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 andwhich are classified as intangible assets relate to the acquisition of rights to undertake topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and other activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource.

2.6 Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers. The chief operating decision makers, who are responsible for allocating resources and assessing performance of the operating segments, have been identified as the executive Board of Directors.

2.7 Impairment of non-financial assets

Exploration and evaluation assets with indefinite useful economic lives are assessed for impairment annually. The assessment is carried out by allocating exploration and evaluation assets to cash generating units, which are based on specific projects or geographical areas. Where 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 at that unit, the associated expenditures will be written off to profit or loss.

In assessing the carrying values of its major exploration and evaluation assets, the Directors have used five year cash flow projections for each of the projects where a JORCcompliant resource has been calculated, namely Altıntepe (593,100oz Au), Öksüt (1,106,900oz Au) and Muratdere (204,96oz Au). The projections are based on a market value for gold of $1,500 per ounce, recovery rates of 80%-90%, cash operating costs of $415 per ounce and a discount rate of 10% and the calculations have been tested for sensitivity to changes in the key assumptions. The cash break-even point for all three projects at a market value for gold is approximately $500 per ounce.Certain of the other explorationprojects are at an early stage of development and no JORC compliant resource estimate has been completed. In these cases the Directors have assessed the impairment of the projects based onfuture explorationplans and estimates of geological and economic data. The Board does not believe that the key assumptions will change so as to cause the carrying values to exceed the recoverable amounts.To date impairment losses recognised have followed the decision of the Board not to continue explorationand evaluation activity on a particular project licence area where itis no longer considered an economically viable project or where the underlying exploration licence has been relinquished.Assets that are subject to amortisation and depreciation are reviewed for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. 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). For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (i.e. cash-generating units). If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased tothe revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately, 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.

2.8 Cash and cash equivalents 

Cash and cash equivalents comprise cash at bank and in hand, and demand deposits with banks and other financial institutions.

2.9 Financial instruments 

(a) Classification

The Group classifies its financial assets in the following categories: at fair value through profit or loss, 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) Financial Assets at Fair Value Through Profit or Loss

 Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term.

(ii) 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 end of the reporting period. These are classified as non-current assets. The Group's loans and receivables comprise Trade and Other Receivables and Cash and Cash Equivalents in the Statement of Financial Position.

(iii) 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 management intends to dispose of the asset within 12 months of the end of the reporting period.

(b) Recognition and Measurement

Regular purchases and sales of financial assets are recognised on the trade date - the date on which the Group commits to purchasing or selling the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments 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 and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss are presented in profit or loss within "Other income/(losses)" in the period in which they arise.

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 profit or loss as "gains and losses from investment securities".

(c) Offsetting Financial Instruments

Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

(d) Impairment of Financial Assets

(i) Assets Carried at Amortised Cost

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.

For the loans and receivables category, the amount of the loss 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 profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. 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 profit or loss.

(ii) Assets Classified as Available-for-Sale

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 significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative 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 profit or loss - is removed from equity and recognised in profit or loss. Impairment losses recognised in profit or loss are not reversed through profit or loss.

2.10 Held-for-sale assets 

Held-for-sale assets comprise explorationand evaluation costs of exploration projects previously treated as non-current intangible assets where their carrying value is to berecovered principally through a sale transaction and a sale is considered highly probable. Held-for-sale assets are stated at the lower of carrying amount and fair value less costs to sell. Impairment losses are recognized in profit or loss.

2.11 Deferred income tax   

 2.12 Share-based payments 

2.13 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 from the proceeds.

2.14 Trade receivables

Trade receivables are amounts due in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not they are presented as non-current assets. Trade receivables are recognized initially at fair value, and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

2.15 Trade payables

Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value, and subsequently measured at amortised cost using the effective interest method.

3. Risk management

The Group's operationsexpose it to a number of risks. The Directors' approach to the management of these risks is as follows:

3.1 Financial risk management

3.2 Capital risk management 

The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern, in order to provide returns for shareholders and benefits for other stakeholders, and to maintain anoptimal capital structure to reduce the cost of capital. The Company and Group monitor the level of cash resources available against future planned exploration and evaluation activities.

In order to maintain oradjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, or issue new shares.

4. Critical accounting estimates and judgments

The preparation of the financial statements 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 reporting date. Actual results may vary from the estimates used to produce these financial statements. The most significant judgment for the Group is the assumption that explorationat the various sites will ultimately lead to a commercial mining operation. Failure to do so could lead tothe write-off of the intangible assets relating to the particular site, see Note 2.7. Exploration and evaluation assets have a carrying value at 31 December 2011 of £4,295,560 (2010: 2,522,766).

The Group is subject to income taxes in numerous jurisdictions. Judgement is required in determining the worldwide provision for such taxes. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will bedue. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the current and deferred income tax assets and liabilities in the period in which such determination is made. A deferred tax asset of £172,212 has been recognised in respect of temporary timing differences relating to the Group's intangible assets. Should these timing differences not reverse, the Group may need to revise the carrying value of this asset.

Estimates and judgments 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.

(i) Fair Value Estimation

The fair value of the Group's Financial assets at fair value through profit or loss amounting to £217,466 (2010: nil) is the unadjusted bid price quoted on the London Stock Exchange as at 31 December 2011.

(ii) Acquisition of Subsidiary and estimated impairment of goodwill

The cost of the acquisition of Silvrex Limited includes a deferred consideration of £3,820,000 which is contingent on the discovery of no less than 500,000oz gold within three years at any of the acquired licence areas. The Directors have assessed the probability of achieving this as 10% based on the information available at the time and using their experience as qualified geologists. The resulting number has been discounted to present value. This has given rise to goodwill of £926,546. The territories in which the licences are located are known to have the potential for major gold and precious metal discoveries and the Directors consider this level of goodwill a fair cost to gain access to the territories and to the knowledge and experience of the senior staff of Silvrex Limited.

The Group assesses at the end of each reporting period whether there is objective evidence that the goodwill, is impaired, or that the deferred consideration requires recalculating.Any reduction in the value of the goodwill or increase in the deferred consideration will be included in profit or loss.