Final Results

North River Resources plc / Ticker: NRRP / Index: AIM / Sector: Mining

22 May 2012

North River Resources plc ('North River' or 'the Company')

Final Results

North River Resources plc, the AIM listed resource company focussed on Southern Africa, announces its results for the year to 31 December 2011.

Managing Director's Statement

North River Resources plc has made a great deal of progress during 2011 and post-period end with exploration activities across its portfolio of projects in Namibia. Following completion of drilling programmes, metallurgical test work and data analysis, the Company is now in a strong position to advance development activities at two of its projects, the previously producing Namib Lead-Zinc Project ('Namib Mine') and the Malachite Pan copper deposit ('Malachite Pan'), in tandem with further exploration work across its wider portfolio.

Drilling programmes have been completed on four different licence areas, including one underground programme. Soil sampling has been carried out on four targets and three geophysical investigations were completed. In addition to the exploration works the Company has advanced the rehabilitation and dewatering of the Namib Mine to the point where it is almost ready for future development, should that decision be made.

The standout progress for the year has been the continued emergence of both the Namib Mine and Malachite Pan as likely development projects. All indications, including the high grade drill intersections achieved during the year, are that the Namib Mine can be developed into a profitable and medium life mine, while preliminary results indicate that a similar situation can be achieved at Malachite Pan. The Directors view the conceptual production rates of 250,000 tonnes of ore per year from the Namib Mine and production rates of 8,000 tonnes of copper per year from Malachite Pan as credible target production levels, and planning is progressing on this basis.

The Company remains an active explorer, however, the main focus in 2012 will be the rapid advancement of both the Namib Mine and Malachite Pan. A Scoping Study for the Namib Mine is underway. A similar study on Malachite Pan is planned to commence in 2012, pending further drilling results.

Namibia

Namib Lead & Zinc Mine

Significant progress was made at the Namib Mine during the period, the most important being the drilling of high grade mineralisation from the lowest accessible point in the mine, below the base of historic mining. These intersections justified the commencement of dewatering activities.

Pumping equipment was installed in Q4 2011 and the dewatering was completed in April 2012 with a total of 14.3 million litres of water pumped from the mine. All newly accessible development areas are in good condition and support the view that the mine was closed for reasons other than ore depletion.

An underground survey was completed as far as the standing water level in 2011 and 3D scanning of all accessible underground voids was carried out. The survey of the newly dewatered areas is to commence in May 2012. The main underground roadway was partially rebuilt allowing straightforward vehicle access to the bottom of the mine.

On the basis of the very high grade drill intersections achieved in the period, the Board decided to commission an airborne electromagnetic survey of a significant portion of the licence area. The airborne survey will be flown at a 25m line spacing and it is expected that such a high resolution survey will detect any additional ore bodies in the licence area. It is hoped that the survey will indicate continuation of mineralisation at depth as well as identifying any surface targets on the Exclusive Prospecting Licence ('EPL'). The survey will be flown as soon as all local authorisations are obtained, which is anticipated to occur in Q2 2012.

Samples of both the tailings from previous operations and fresh ore samples from the dewatered areas were sent to South Africa for preliminary metallurgical investigation. The results from the fresh ore samples are as follows:

·; Grab samples collected for preliminary metallurgical test work assaying 5% lead ('Pb'), 10% zinc ('Zn') and 119g/t silver ('Ag')

·; First flotation testing on grab sample material yielding recoveries of over 96% Pb, over 94% Zn and over 80% Ag

·; Lead flotation concentrate grades were over 50% Pb

·; Zinc flotation concentrate grades were over 56% Zn

·; Silver recoveries were over 80%

The Board considers these results to be excellent, and further supports our view that the mine can be brought back into production.

The geological mapping of the mine is now underway as are structural geology studies, both of which will assist with exploration target generation.

A Scoping Study at Namib Mine has commenced with results expected in two to three months. If results from the Scoping Study and exploration are in line with management expectations, the Company will plan a major new phase of excavation and drilling to move the mine towards production.

Brandberg Energy

As announced on 21 September 2010, North River signed an agreement with a major Australian uranium explorer, Extract Resources Limited, to jointly explore three highly prospective uranium licences in Namibia.

In accordance with the terms of the joint venture agreement, NRR Energy Minerals Limited, a wholly owned subsidiary of North River, has acquired a 50% interest in the issued shares of Brandberg Energy (Proprietary) Limited ('Brandberg Energy') following the payment of US$800,000 by North River to Brandberg Energy in January 2012.

Brandberg Energy has completed a 1,500 metre drill programme to test two uranium targets identified by horizontal loop electromagnetic ('HLEM') surveys completed in 2011. The drilling has confirmed the existence of a significant palaeochannel, although not to the depth suggested by the modelled geophysics. While uranium bearing calcrete was intersected in the channel the extent of calcretisation was less than anticipated. The drilling typically intersected cemented calcrete in the top three to ten metres of the holes followed by inconsistent layered calcrete. The Company is awaiting results from a selection of samples submitted for laboratory analysis however results obtained electronically in the field were typically less than 300ppm. The Company does not regard the drilled targets as having significant future potential. Once the final laboratory results are delivered, the Board of Brandberg Energy will decide on the future of the projects.

Brandberg Energy was established by Extract Resources Limited to explore for uranium within EPL3327 and EPL3328. The area was identified in literature from the early 1980's as having potential to host uranium mineralisation based on historical occurrences of primary and secondary uranium in the area and a broadly defined uranium bearing palaeochannel and known as the Brandberg uranium occurrence.

David Steinepreis and Luke Bryan have joined the Board of Brandberg Energy, where they will be joining the two Extract appointed directors.

Witvlei and Dordabis Copper Projects ('Witvlei and Dordabis') - 100% owned

On 2 February 2012, North River announced a maiden JORC Compliant Resource for the Malachite Pan deposit on its Witvlei Copper Project, and an upgrade of the Koperberg deposit JORC compliant resource on its Dordabis Copper Project subsequent to the end of the period. The JORC resources were calculated by The MSA Group in South Africa.

Using a 0.5% Cu cut-off grade the current JORC compliant resources are detailed in the table below:

This maiden resource from Malachite Pan, in addition to the upgraded resource at Koperberg, provides the Company with a solid foundation for North River's copper resource inventory. Importantly, both the Malachite Pan and Koperberg deposits are open down-dip, and mineralisation at Malachite Pan is open to the south-east. A further drill programme of approximately 6,000 metres is planned at Malachite Pan and this started in April 2012 with the intention of progressing to feasibility stage by Q3 2012. The Board believes the Company has the potential to grow the current resource inventory substantially following the completion of further exploration activities on the Malachite Pan extensions.

In addition, the Company received highly encouraging results from metallurgical test work completed on samples from Malachite Pan and Koperberg. The metallurgical test work showed that excellent copper and silver recoveries are achievable at Malachite Pan using froth flotation, which the Board believes demonstrates encouraging economic potential.

For the purpose of the test work, samples from Malachite Pan were segregated into two composite samples, one representing the oxide fraction of the deposit, the other the sulphide fraction. Recoveries of 82.4% copper and 77.7% silver were achieved from the oxide sample and recoveries of 92.8% copper and 83.5% silver were achieved from the sulphide sample. At Koperberg the single sample consisted of both oxide and sulphide fractions and a recovery of 83% copper was achieved.

In 2012, the Company engaged a consultant resource geologist to assist with re-interpretation of historic results at Malachite Pan. In conjunction with this, a number of holes will be drilled which are intended to increase the resource base and a diamond drill rig is currently on site with drilling underway.

Regional Exploration Programme

Both Malachite Pan and Koperberg are located within prospective areas with numerous known prospects in close proximity. In 2012, the Company will focus primarily on the Malachite Pan Project and the wider Witvlei Licence Area. Work will be centred on extending the Malachite Pan deposit and with this in mind drilling re-commenced in April 2012. The aim of the next drilling campaign will be to deliver a resource model of sufficient detail to support a Feasibility Study. It is currently anticipated that the Feasibility Study will commence in Q4 2012.

Additionally, the Company will focus on upgrading other known copper prospects and exploring for new prospects. An airborne magnetic survey is scheduled to be completed at Witvlei in 2012, as soon as all local authorisations are obtained.

Hero

The Hero Project comprises three contiguous licences, EPL4487, EPL4488 and EPL4489, located to the east of Grootfontein and the established mining town of Tsumeb in the Grootfontein and Rundu Regions of Northern Namibia.

The geology of the area is underlain by the Cenozoic Kalahari Group and unconsolidated sands of the Kalahari Desert. The area is considered prospective for extensions of the Neoproterozoic Damara Supergroup, which host significant deposits such as the Tsumeb polymetallic deposit, the Kombat Copper Mine, the Berg Aukas Lead-Zinc Mine. These extensions continue under the Kalahari sand cover sequences and are believed to be between 50m and 200m thick.

Existing regional airborne geophysical data was acquired and reinterpreted. This work resulted in two target areas being identified. These will be followed up by soil sampling in 2012.

Kamkas

The Kamkas Project, which comprises EPL4419, is located in the Maltahohe region of southern Namibia near the town of Maltahohe.

Water borehole drilling in the area in recent years indicated elevated copper-zinc-lead-silver ('Cu-Zn-Pb-Ag') values in a grab sample from the drill cuttings, but from an unknown depth within the borehole. The Company completed reconnaissance work in the area, collected drill cuttings to attempt comparison assays and completed downhole geophysics in water bore holes.

The results of these works were not encouraging and the Kamkas Project will be relinquished.

Mozambique

Monte Muande - JV with Baobab Resources plc ('Baobab')

In November 2010, the Company signed a JV agreement with Baobab for the development of the Monte Muande licences in Mozambique, which are prospective for magnetite, phosphate, uranium and gold.

Following completion of a data compilation and analysis exercise, Baobab announced two drill targets, the Rio Mufa coal prospect and the more significant Monte Muande magnetite/phosphate target. Drilling was completed at both targets in 2011 with c.2,000 metres completed at the Monte Muande target.

The Monte Muande magnetite/phosphate deposit is located 25km to the northwest of the provincial capital of Tete. The international highway to Zambia passes within 3km of the project. The deposit is hosted in a carbonatite and was explored during the 1980s by the Geological Institute of Belgrade ('GIB'). GIB completed two phases of vertical diamond drilling between 1983 and 1985 totalling 5,570m, 2,960m of which falls within the Joint Venture area. The institute also completed more than 10km of trenching and bench-scale metallurgical test work.

Using the GIB data sets in conjunction with more recent soil geochemistry and aeromagnetic surveys completed by Omegacorp, consultants Coffey Mining calculated an Exploration Target of 200Mt to 250Mt to an average depth of c.40m below surface. Coffey also carried out a high level review of the GIB metallurgical data which indicated that a magnetite concentrate containing 67% iron ('Fe') could be generated via a process of coarse grinding and magnetic separation, followed by regrinding and a flotation circuit to recover a phosphate rock concentrate containing 36% phosphorus ('P2O5'). Total magnetite and apatite recoveries of 92% and 70% respectively were recorded.

During the latter half of 2011, Baobab completed a c.2,000m diamond drilling campaign at Monte Muande. The programme comprised 10 angled drill holes sited along a staggered traverse transecting the central portion of the deposit. Drilling has intersected broad zones of shallow dipping magnetite and apatite mineralisation. Following analysis by the ALS Chemex laboratory in Western Australia the Company announced significant drill results from magnetite rich intersections, with premium quality concentrate grades of 69% Fe at a mass recovery of 26% (weighted average). The magnetite concentrates are generally very low in deleterious elements with additional test work underway to further improve characteristics. Phosphate mineralisation is ubiquitous with bench-scale test work required to determine quality and yield of a potential concentrate product. The head grades are in line with Coffey Mining's shallow depth 200Mt to 250Mt exploration target announced in March 2011. The sizing and analysis of trench samples is on-going.

The Rio Mufa prospect includes 12 square kilometres of Lower Karoo lithologies underlying the southwestern corner of licence 1119L. Baobab conducted a scout drilling programme at the Rio Mufa coal target during late 2011, aimed at investigating the coal prospectivity of this section of the Monte Muande licence area. Whilst the scout drilling intersected minor seams of carbonaceous material, these are not deemed to be economically viable. In light of this, Baobab will continue to focus on the development of the area's magnetite/phosphorus mineralisation, which has already demonstrated potential for Direct Shipping Ore and amenity to bulk open pit mining.

Mavuzi - JV with Jacana Resources Limited ('Jacana')

During the period, the Company signed a JV agreement with Jacana Resources Limited ('Jacana') over the Mavuzi licence, which cover 54,580ha in Mozambique. The licence, which includes the Castro and Inhatobui targets and the previously producing Mavuzi and Castro uranium mines, are prospective for uranium and rare earth elements ('REEs').

During the period Jacana completed a significant data acquisition exercise and as at the year end was in the process of digitising the significant quantities of data obtained.

Jacana was purchased by Syrah Resources Limited, an Australian listed resource company, in November 2011. It is expected that Syrah will move to design and complete a drilling programme on the JV licence once the digitisation process is complete and targets have been identified.

Kalahari Minerals Plc

Kalahari Minerals Plc ('Kalahari') is North River's largest shareholder, holding approximately 38 per cent of the Company's issued share capital.

On 8 December 2011, a recommended cash offer ('the Offer') for Kalahari by Taurus Mineral Limited ('Taurus'), a Company formed at the direction of CGNPC Uranium Resources Co Ltd and the China-Africa Development Fund, was announced, and the Offer completed on 28 February 2012.

The Board is in discussions with representatives of Taurus with regard to Taurus's long term strategic vision for the Company.

Outlook

The Company expects 2012 to be a transformational year with the expectation that two projects, the Namib Mine and Malachite Pan, will progress with significant appraisal drilling and Scoping Studies. This will see North River increase its staff levels and overall footprint in Namibia to support the increased pace of work.

North River has a comprehensive schedule of work planned for the remainder of 2012. Notable highlights include airborne surveys over two EPLs and drilling programmes and Scoping Studies at Malachite Pan and the Namib Mine. It is hoped the two Scoping Studies will lead into Feasibility Studies at both projects.

North River will likely commence mining operations at the Namib Mine in 2012 in order to conduct exploration openings for underground diamond drilling.

In addition, the Company awaits results from the joint venture with Baobab Resources in Mozambique as well as commencement of drilling on the Jacana joint venture.

The Board continues to evaluate potential acquisitions, however its primary focus will be on the development of its two near term production projects.

I would like to take this opportunity to thank our shareholders and my fellow Board members for their continued support.

David Steinepreis

Managing Director

21 May 2012

For further information please visit www.northriverresources.com or contact:

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR TO 31 DECEMBER 2011

CONSOLIDATED AND PARENT COMPANY STATEMENTS OF FINANCIAL POSITION

AS AT 31 DECEMBER 2011

CONSOLIDATED AND PARENT COMPANY STATEMENTS OF CHANGES IN EQUITY

FOR THE YEAR TO 31 DECEMBER 2011

CONSOLIDATED AND PARENT COMPANY STATEMENTS OF CHANGES IN EQUITY

FOR THE YEAR TO 31 DECEMBER 2011

CONSOLIDATED AND PARENT COMPANY STATEMENTS OF CASH FLOWS

FOR THE YEAR TO 31 DECEMBER 2011

Cash and cash equivalents comprise cash on hand and bank balances.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR TO 31 DECEMBER 2011

The Group has adopted the accounting policies set out below in preparation of the financial statements. All of these policies have been applied consistently throughout the period unless otherwise stated.

The financial statements are prepared in accordance with the historical cost convention and in accordance with the International Financial Reporting Standards ("IFRSs") including IFRS 6, Exploration for and Evaluation of Mineral Resources, as adopted by the European Union ("EU") and in accordance with the provisions of the Companies Act 2006.

The Group's financial statements for the year ended 31 December 2011 were authorised for issue by the Board of Directors on 21 May 2012 and the Statements of Financial Position were signed on the Board's behalf by David Steinepreis. The Group financial statements are presented in UK pounds sterling.

In accordance with the provisions of Section 408 of the Companies Act 2006, the Parent Company has not presented a Statement of Comprehensive Income. A loss for the year ended 31 December 2011 of £1,360,011 (2010: loss of £6,142,318) has been included in the Group's Statement of Comprehensive Income.

During the year ended 31 December 2011 the Group made a loss of £2,913,029 (2010: a loss of £7,397,418). At the Statement of Financial Position date the Group had net assets of £11,846,816 (2010: net assets of £11,727,338) of which £3,765,414 (2010: £3,536,920) was cash at bank. The operation of the Group is currently being financed from funds which the Parent Company raised from private and public placings.

The Group's capital management policy is to only raise sufficient funding to finance the Group's near term exploration and development objectives. Upon completion of objectives, or identification of new projects, the Directors will seek new funding to finance the next stage of the development programme or the new projects. The Directors believe that the Group has sufficient funds for it to comply with its foreseeable commitments and, accordingly, are satisfied that the going concern basis remains appropriate for the preparation of these financial statements. The Group will need additional funding to support the next stage of its development programme.

The consolidated financial statements incorporate the accounts of the Parent Company and its subsidiaries and have been prepared by using the principles of acquisition accounting ("the purchase method") which includes the results of the subsidiaries from their date of acquisition. Intra-group sales, profits and balances are eliminated fully on consolidation.

Goodwill is the difference between the amount paid on the acquisition of the subsidiary undertakings and the aggregate fair value of their separable net assets. Goodwill is capitalised as an intangible asset and in accordance with IAS 36 'Impairments of Assets' is not amortised but tested for impairment annually and when there are any indications that its carrying value is not recoverable. As such, goodwill is stated at cost less any provision for impairment in value. If a subsidiary undertaking is subsequently sold, goodwill arising on acquisition is taken into account in determining the profit and loss on sale.

Where appropriate the Group reviews the carrying amounts of its tangible assets, intangible assets and investments 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. 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.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. 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 (cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of comprehensive income, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the 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 (cash-generating unit) in prior years.

Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged so as to write off the costs of assets, over their estimated useful lives, using the straight line method, on the following basis:

Plant and machinery 4 years

Motor vehicles 4 years

Fixtures, fittings and equipment 4 years

Computers and software 3 years

The Group capitalises the fair value of the consideration paid for exploration and prospecting rights. All other costs incurred are expensed as they are incurred. The Group has taken into consideration the degree to which expenditure can be associated with finding specific mineral resources. The intangibles are amortised over the length of the mining licences and the amortisation expense is included within the Administration expenses line in the statement of comprehensive income.

Revenue is measured at the fair value of consideration received or receivable from the sale of goods and services from the Group's ordinary business activities. Revenue is stated net of discounts, sales and other taxes. There was no revenue received in the year.

The only bank interest received in the year was on cash held at bank.

Operating expenses are recognised in the statement of comprehensive income upon utilisation of the service or at the date of their origin. Interest income and expense are reported on an accrual basis.

The Parent Company's investments in subsidiary companies are stated at cost less provision for impairment in the Parent Company's Statement of Financial Position.

Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognised in the consolidated statement of financial position at cost. The Group's share of post-acquisition profits and losses is recognised in the consolidated statement of comprehensive income, except that losses in excess of the Group's investment in the associate are not recognised unless there is an obligation to make good those losses. The Parent Company's investments in associated companies are stated at cost less provision for impairment in the Parent Company's Statement of Financial Position.

Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate. The investors' share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate.

Any premium paid for an associate above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the associate. Where there is objective evidence that the investment in an associate has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.

Items included in the Group's financial statements are measured using the currency of the primary economic environment in which the Group operates ("the functional currency"). The financial statements are presented in pounds sterling ("£"), which is the functional and presentational currency of the Parent Company and the presentational currency of the Group.

Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the Statement of Financial Position date and the gains or losses on translation are included in the Statement of Comprehensive Income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the original transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

The assets and liabilities of foreign operations are translated into sterling at the rate of exchange ruling at the Statement of Financial Position date. Income and expenses are translated at weighted average exchange rates for the period. The resulting exchange differences are recognisedin other comprehensive income.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the Statement of Financial Position date and are expected to apply when the related deferred tax is realised or the deferred liability is settled.

Deferred tax assets are recognised to the extent that it is probable that the future taxable profit will be available against which the temporary differences can be utilised.

Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand and short term deposits held at call with banks and other short term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 

Receivables are carried at original invoice amount less provision made for impairment of these receivables. A provision for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the assets' carrying amount and the recoverable amount. Provisions for impairment of receivables are included in the Statement of Comprehensive Income.

Trade payables and other payables represent liabilities for goods and services provided to the Group priorto the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecuredand are usually paid within 30 days of recognition. 

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

The Parent Company has granted equity settled options. The cost of equity settled transactions with employees is measured by reference to the fair value at the date on which they were granted and is recognised as an expense over the vesting period, which ends on the date the employee becomes fully entitled to the award. Fair value is determined by using the Black-Scholes option pricing model. In valuing equity settled transactions, no account is taken of any service and performance (vesting conditions), other than performance conditions linked to the price of the shares of the Parent Company (market conditions). Any other conditions which are required to be met in order for an employee to become fully entitled to an award are considered to be non-vesting conditions. Like market performance conditions, non-vesting conditions are taken into account in determining the grant value.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market or non-vesting condition, which are vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance or service conditions are satisfied.

At each Statement of Financial Position before vesting, the cumulative expense is calculated; representing the extent to which the vesting period has expired and management's best estimate of the number of equity instruments that will ultimately vest. The movement in the cumulative expense since the previous Statement of Financial Position date is recognised in the Statement of Comprehensive Income, with a corresponding entry in equity.

Where the terms of the equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if the difference is negative.

Where an equity based award is cancelled (including when a non-vesting condition within the control of the entity or employee is not met), it is treated as if it had vested on the date of the cancellation, and the cost not yet recognised in the Statement of Comprehensive Income for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense in the Statement of Comprehensive Income.

The preparation of financial statements in conformity with International Financial Reporting Standards requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions, actual results ultimately may differ from those estimates. IFRSs also require management to exercise its judgement in the process of applying the Group's accounting policies.

The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are as follows:

Valuation of goodwill and investments

Management value goodwill and investments after taking into account potential ore reserves, and cash flow generated by estimated future production, sales and costs. If the assumed factors vary from actual occurrence, this will impact on the amount at which the asset should be carried on the Statement of Financial Position.

Further detailed analysis of the critical judgements and estimates relating to goodwill and investments is addressed in Note 17.

Share based payments

The Group records charges for share based payments.

For option based share based payments management estimate certain factors used in the option pricing model, including volatility, exercise date of options and number of options likely to be exercised. If these estimates vary from actual occurrence, this will impact on the value of the equity carried in the reserves.

Further detailed analysis of the critical judgements and estimates relating to share based payments is addressed in Note 16.

IFRS7 requires information to be disclosed about the impact of financial instruments on the Group's risk profile, how the risks arising from financial instruments might affect the entity's performance, and how these risks are being managed.

Financial assets and financial liabilities are recognised on the Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument.

The Group's policies include that no trading in derivative financial instruments shall be undertaken.

The required disclosures have been made in Note 19 to the accounts.

Basic earnings per share is calculated by dividing the profit / (loss) attributable to equity holders of the Parent Company, excluding any costs of servicing equity other than dividends, by the weighted average number of Ordinary shares in issue, adjusted for any bonus elements.

Diluted earnings per share is calculated as net profit / (loss) attributable to members of the Parent Company, adjusted for:

·; costs of servicing equity (other than dividends);

·; the after tax effect of dividends and interest associated with dilutive potential Ordinary shares that have been recognised as expenses; and

·; other non-discretionary changes in revenues or expenses during the year that would result from the dilution of potential Ordinary shares.

Share options are considered anti-dilutive as the Group is in a loss making position.

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group.

Management anticipates that all of the pronouncements will be adopted in the company's accounting policy for the first period beginning after the effective date of the pronouncement. The new standards and interpretations are not expected to have a material impact on the Group's financial statements.

Based on the Group's current business model and accounting policies, management does not expect material impacts on the Group's financial statements when the new Standards and Interpretations become effective.

The Group does not intend to apply any of these pronouncements early.

For the purposes of segmental information, the operations of the Group are focused in the United Kingdom, Namibia and Mozambique and comprise one class of business: the exploration and evaluation of mineral resources.

The Parent Company acts as a holding company.

The Group's operating loss for the period arose from its operations in the United Kingdom, Namibia and Mozambique. In addition, all the Group's assets are based in the United Kingdom, Namibia and Mozambique.

Geographical Segment - Group 31 December 2011

At the end of 31 December 2011, the Group had not commenced commercial production from its exploration sites and therefore had no turnover for the period.

Geographical Segment - Group 31 December 2010

 The consolidated operating loss before tax is stated after charging:

Options in issue are not considered diluting to the earnings per share as the Group is currently loss making.

In accordance with the Share Purchase Agreement (dated 5 October 2009) entered into with Kalahari Gold Ltd, Kalahari Diamonds Ltd and Kalahari Minerals plc, the Parent Company acquired, on 20 November 2009, the entire issued share capital in, and the shareholder loans to, West Africa Gold Exploration (Namibia) (Pty) Ltd ("WAGE") and Namib Lead and Zinc Mining (Pty) Ltd ("Namib Lead"), formerly Craton Diamonds (Pty) Ltd. The consideration paid by the Parent Company for these two Namibian entities and the shareholder loans was satisfied by the allotment of 266,666,667 Ordinary shares of £0.002 ("Ordinary shares") each at 3 pence per Ordinary share.

The acquisition of the two Namibian entities was accounted for using acquisition accounting ("the purchase method"). The aggregate assets and liabilities were as follows:

Note a:

Following the acquisition of WAGE, on 2 March 2010, the Parent Company issued 2,200,000 Ordinary shares at 3 pence per Ordinary share to two individuals in exchange for the royalty contracts of WAGE's future earnings owned by the individuals.

It is the Directors' view that whilst the acquisition of the royalty contracts increases the value of WAGE to the Group no separately identifiable asset was created, accordingly an increase to goodwill was recognised.