Full Year Results

Bellzone Mining plc

Nik Zuks/Graham Fyfe

+61 8 9420 8900

Canaccord Genuity Limited

Nominated Adviser and Joint Broker to Bellzone

Andrew Chubb/Tarica Mpinga

+44 (0)20 7050 6500

Renaissance Capital Limited

Joint Broker to Bellzone

Simon Matthews/Thomas Beattie

+44 (0)20 7367 7777

Tavistock Communications

Jos Simson/Paul Youens

+44 (0)20 7920 3150

Unaudited

31 December 2010

31 December 2009

Restated*

1 January 2009

Restated*

Notes

$'000

$'000

$'000

ASSETS

Non‑current assets

Property, plant and equipment

2

2,275

4,265

4,721

Mineral properties

3

9,277

4,214

-

Total non‑current assets

11,552

8,479

4,721

Current assets

Cash and cash equivalents

39,107

12,982

23,450

Trade and other receivables

835

396

721

Inventories

62

27

-

Other current assets

-

940

-

Total current assets

40,004

14,345

24,171

Total assets

51,556

22,824

28,892

EQUITY

Stated Capital

4

99,674

49,897

49,897

Retained losses

(50,286)

(26,175)

(13,064)

Reserves

5

1,065

(3,166)

(9,515)

Total equity

50,453

20,556

27,318

LIABILITIES

Current liabilities

Trade and other payables

901

2,176

1,556

Borrowings

-

-

5

Provisions

202

92

13

Total current liabilities

1,103

2,268

1,574

Total liabilities

1,103

2,268

1,574

Total equity and liabilities

51,556

22,824

28,892

Notes

Unaudited

2010

$'000

2009Restated*

$'000

Continuing Operations:

Other income

-

63

Employee benefits expense

(9,182)

(4,725)

Depreciation and amortisation expense

2

(2,885)

(2,393)

Administration expenses

(2,012)

(709)

Consulting expenses

(2,075)

(1,533)

Exploration expenses

(7,341)

(4,269)

Legal expenses

(353)

(227)

Occupancy expenses

(744)

(351)

Travel and accommodation expenses

(1,843)

(742)

Reversal/(Impairment) of advances to related parties

-

1,248

Foreign exchange profit/(loss)

1,877

(14)

Loss on sale of property, plant and equipment

-

(124)

Results from operating activities

(24,558)

(13,776)

Finance income net of finance costs

467

741

 Finance income

506

757

 Finance costs

(39)

(16)

Loss before income tax

(24,091)

(13,035)

Income tax expense

(20)

(76)

Loss from continuing operations

(24,111)

(13,111)

Loss for the year

(24,111)

(13,111)

Other comprehensive income for the year, net of tax:

Foreign currency translation differences - foreign operations

5

273

10

Total comprehensive loss for the year

(23,838)

(13,101)

Total comprehensive loss for the year is attributable to:

Equity holders of Bellzone Mining plc

(23,838)

(13,101)

Cents

Cents

Loss per share attributable to the ordinary equity holders of the parent entity:

Basic loss per share

(4.806)

(3.110)

Diluted loss per share

(4.806)

(3.110)

Notes

Ordinary shares

Reserves

Retained losses

Totalequity

$'000

$'000

$'000

$'000

Attributable to equity holders of the Company

Balance at 1 January 2009 (restated*)

49,897

(9,515)

(13,064)

27,318

Total comprehensive loss for the year

Loss for the year (restated*)

-

-

(13,111)

(13,111)

Other comprehensive income

Movement in reserves (restated*)

-

6,349

-

6,349

Balance at 31 December 2009 (restated*)

49,897

(3,166)

(26,175)

20,556

Unaudited balance at 1 January 2010 (restated*)

49,897

(3,166)

(26,175)

20,556

Total comprehensive loss for the year

Loss for the year

-

-

(24,111)

(24,111)

Other comprehensive income

Movement in reserves

-

273

-

273

Transactions with owners direct in equity

Contributions of equity, net of transaction costs

4

49,777

-

-

49,777

Share-based payment transactions

7c,7f

-

3,958

-

3,958

Unaudited balance at 31 December 2010

99,674

1,065

(50,286)

50,453

Unaudited

2010

2009

Restated*

Notes

$'000

$'000

Net cash (outflow) from operating activities

(18,716)

(7,148)

Cash flows from investing activities

Payments for property, plant and equipment

(930)

(221)

Consideration paid for asset purchase (net of cash)

-

(3,094)

Net cash (outflow) from investing activities

(930)

(3,315)

Cash flows from financing activities

Proceeds from issues of shares and other equity securities

4c

51,286

-

Payments for share issue costs

4c

(5,515)

-

Net cash inflow from financing activities

45,771

-

Net increase / (decrease) in cash and cash equivalents

26,125

(10,463)

Cash and cash equivalents at the beginning of the financial year

12,982

23,445

Cash and cash equivalents at end of year

39,107

12,982

Extracts from notes to the consolidated financial statements

1. Accounting Policies

a. Corporate

Bellzone is a listed public company incorporated and registered in Jersey, Channel Islands, complying with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

Policies are consistent with prior year except for the functional and presentation currency

b. Going concernThe unaudited results for the year reflect the current nature of the Group's activities being mineral exploration and project development. The current nature of the Group's activities does not provide the Group with production or trading revenue. The Group has met its working capital requirements by raising the required capital through the placing of shares with investors. The Company completed a £33.6 million capital raising in March 2010 and at April 2010 has raised a total of $107.5 million since incorporation.The funds currently available will not meet planned activities for the forthcoming twelve months. Those plans include significant feasibility study costs for Kalia, exploration and evaluation of the Mali project and evaluation and development costs of Forécariah. In order to fund those plans, the Company estimates it will require additional equity of at least $35 million in the foreseeable future. However these plans can be modified to significantly reduce levels of expenditure and the timing of expenditure if required and additional activity or accelerated development would require additional funding. The Director's believe that the Group will continue as a going concern and base this view on the factors set out below.

·; The pace of the development of the projects is subject to a number of variables largely within the control of the Group.

·; The project development programs and budgets are reviewed on an annual basis and approved by the Board. The Board in approving the budget takes into account the:

- working capital available for the next twelve months

- work required to continue to meet commitments and advance the project to the production phase; and

- maintenance of a sufficient buffer of working capital required for the foreseeable future.

·; The Board monitors expenditure against budgets on a monthly basis and adjusts the program as required.

The Directors believe that the Group has adequate resources to continue for the foreseeable future, the flexibility to adjust operations to suit funds and the ability to source funding through debt and equity markets to continue with the planned exploration and project development as well as any expansion of the scope or acceleration of activity, thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

c. Changes in accounting policies

Change in functional and presentation currency

Effective 1 January 2010 the Company changed its functional and presentation currency to the US dollar.

 This change reflects the primary economic environment in which the Group operates as it progresses to increase operational and investment activity in iron ore in West Africa. The change also better reflects the Group's business and improves the investor's ability to compare results with other publicly traded businesses in the mining industry. Prior to 1 January 2010 the Company presented its financial statements in Australian dollars.

As a result of the change in presentation currency, the Company is required to restate all comparative amounts to US Dollar by translating the assets and liabilities using the current rate method. Under this method the assets and liabilities are translated into US Dollar at the exchange rate in effect at the end of each prior reporting period, the income statement is translated using the average rate for the year/ period and shareholder's equity is translated at historical rates. All resulting exchange differences are reported as a separate component of shareholder's equity titled "Cumulative Translation Adjustment".

 d. Property, plant and equipment

Owned assets

Items of plant and equipment are stated at cost or deemed cost less accumulated depreciation. Where parts of an item of plant and equipment have different useful lives, they are accounted for as separate items of plant and equipment.

The Group recognises in the carrying amount of an item of plant and equipment the:

Cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the Group and the cost of the item can be measured reliably;

·; Freight costs used to bring the asset to its current location;

·; Any costs of site preparation, installation and assembly; and

·; Costs associated with decommissioning upon the removal or dismantling of the asset.

·; Work in progress ("W.I.P") consists of assets under construction / assembly and not commissioned as operational. The carrying costs as outlined above are accumulated as W.I.P during construction / assembly until completion and the asset is commissioned into use at which time the asset is then transferred to the asset register and depreciated according to the asset classification.

All other costs are recognised in the Statement of Comprehensive Income as an expense as incurred.

Depreciation

Depreciation is charged to the Statement of Comprehensive Income on a straight-line basis over the estimated useful lives of each part of an item of plant and equipment.

The estimated useful lives in the current and comparative periods are calculated from the date of operational commissioning and are as follows:

Freehold buildings

5 Years

Plant and equipment

3 - 5 years

Furniture, fittings and equipment

2 - 5 years

Motor vehicles

5 - 8 years

W.I.P

Not depreciated

The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually.

e. Mineral properties in the exploration and evaluation phase

The cost of acquiring exploration and evaluation assets, mineral reserves and mineral resources is capitalised on the balance sheet as incurred, under the heading "Mineral properties in the exploration and evaluation phase".

Mineral properties are, upon commencement of production, depreciated using a unit of production method based on the estimated economically recoverable reserves to which they relate or are written off if the property is abandoned.

The net carrying amounts of mineral properties are reviewed for impairment either individually or at the cash-generating unit level when events and changes in circumstances indicate that the carrying amount may not be recoverable. To the extent that these values exceed their recoverable amounts, that excess is fully expensed in the financial year in which it is determined.

f. Exploration and evaluation expenditure

Expenditure on exploration and evaluation activities in relation to areas of interest which have not yet reached a stage which permits reasonable assessment of the existence or otherwise of economically recoverable reserves are expensed as incurred.

Exploration and evaluation costs for each area of interest are carried forward as an asset where the following conditions are satisfied:

·; the rights to tenure for the economic development of the area of interest are current;

·; The exploration and evaluation expenditures are expected to be recouped through successful development of the area of interest or alternatively by its sale; and

·; The reserves are assessed as being economically recoverable through a financial and technical feasibility study.

Identifiable exploration assets acquired are accounted for in accordance with the consolidated entity's policy as mineral properties.

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the exploration and evaluation asset is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the varying amount that would have been determined had no impairment loss been recognised for the asset in previous years.

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 re‑classified to development.Amortisation is recognised in the Statement of Comprehensive Income on a unit of production basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.

g. Share-based payment transactions

Share-based payment arrangements in which the Group receives assets, goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Group.

The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The fair value of the options granted is measured using an option valuation model, taking into consideration the terms and conditions upon which the options were granted (see note 19b). The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognised as an expense, with a corresponding increase in liabilities, over the period in which the employees become unconditionally entitled to payment. The liability is reviewed and measured at each balance sheet date and at settlement date. Any changes in the fair value of the liability are recognised as a personnel expense in the Statement of Comprehensive Income.

The fair value of the employee share options and the share appreciation rights is measured using the Black-Scholes formula. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

h. Income tax

The Company is subject to an income tax rate of 0% in Jersey. Income tax represents taxation payable by the Group in other jurisdictions. Where applicable, tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.

2. Property, plant and equipment

Consolidated

Freehold buildings

$'000

Plant and equipment

$'000

Furniture, fittings and equipment

$'000

Motor vehicles

$'000

Work in progress$'000

Total

$'000

Opening net book value

209

3,409

304

343

-

4,265

Additions

29

80

125

430

266

930

Disposals

(2)

(18)

(28)

-

-

(48)

Depreciation charges

(69)

(2,503)

(152)

(161)

-

(2,885)

Exchange differences (net)

-

-

13

-

-

13

Unaudited closing net book value

167

968

262

612

266

2,275

At 31 December 2010

Cost

354

8,401

575

1,059

266

10,655

Accumulated depreciation

(187)

(7,433)

(313)

(447)

-

(8,380)

Unaudited Net book amount

167

968

262

612

266

2,275

At 31 December 2009 (restated*)

Cost

243

8,259

454

408

-

9,364

Accumulated depreciation

(34)

(4,850)

(150)

(65)

-

(5,099)

Net book value

209

3,409

304

343

-

4,265

At 1 January 2009 (restated*)

Cost

-

6,404

175

-

-

6,579

Accumulated depreciation

-

(1,828)

(30)

-

-

(1,858)

Net book value

-

4,576

145

-

-

4,721

3. Mineral properties in the exploration and evaluation phase

Reconciliation of carrying amount

31 December 2010

31 December 2009

Restated*

$'000

$'000

Opening net book amount

4,214

-

Acquisition through asset purchase

-

4,214

Addition through share-based payment transaction (deferred consideration for asset purchase) (see 19a)

5,063

-

Unaudited closing net book amount

9,277

4,214

At 31 December

Cost

9,277

4,214

Amortisation

-

-

Unaudited net book amount

9,277

4,214

As a requirement of the Agreement with CIF of 2 August 2101, the Company will relinquish ownership of:

·; 50% of the defined Kalia II area of the Kalia permit; and

·; 100% of the Faranah permit.

These mineral properties have a current carrying value of NIL.

4. Stated Capital

Unaudited

31 December 2010

31 December 2009

1 January 2009

Shares

$'000

Shares

$'000

Shares

$'000

a. Stated Capital

Ordinary shares of no par value

537,124,485

107,498

421,275,002

51,149

421,275,002

51,149

Share issue costs

(7,824)

(1,252)

(1,252)

99,674

49,897

49,897

b. Movements in ordinary shares

Date

Details

Number of shares

$'000

1 January 2010

Opening balance

421,275,002

51,149

5 March 2010

Shares issued (see note 19a)

9,604,483

5,063

23 March 2010

Shares issued at 91 cents (AUD1.00)

170,000

155

24 March 2010

Shares issued at 92 cents (AUD1.00)

75,000

69

1 April 2010

Shares issued at 35 pence in public offering

96,000,000

50,908

23 December 2010

Shares issued at 1 pence to Employee Benefit Trust

10,000,000

154

31 December 2010

Unaudited closing balance

537,124,485

107,498

Ordinary shares have no par value, carry one vote per share and carry the right to dividends. All shares have been fully paid.

c. Reconciliation of net cash inflow from financing activities

The above figures are reconciled to the statement of cash flows as follows:

d. Capital risk management

The Group's and the parent entity's objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

* - See note 1(c) and 5(b)(i)

5. Reserves

Unaudited

31 December 2010

$'000

31 December 2009Restated*$'000

1 January 2009Restated*$'000

a. Reserves

1,065

(3,166)

(9,515)

Cumulative translation adjustment

Foreign currency translation reserve

Share-based payment reserve

Total

$'000

$'000

$'000

$'000

Balance at 1 January 2009 (restated*)

(9,515)

-

-

(9,515)

Restatement of reserves as a result of change in presentation currency (restated*)

6,339

-

-

6,339

Currency translation differences arising during the year (restated*)

-

10

-

10

Balance at 31 December 2009 (restated*)

(3,176)

10

-

(3,166)

Balance at 1 January 2010 (restated*)

(3,176)

10

-

(3,166)

Share-based payment transactions

-

-

3,958

3,958

Currency translation differences arising during the year

-

273

-

273

Unaudited balance at 31 December 2010

(3,176)

283

3,958

1,065

5. Reserves (continued)

b. Nature and purpose of reserves

(i) Cumulative Translation adjustment

The Cumulative Translation adjustment arises on the translation of assets and liabilities previously stated in Australian dollar to US dollar as a result of the change in functional currency and presentation currency. Assets and liabilities were translated from the previous presentation currency (Australian dollar) to the US dollar at the beginning of the comparative period using the opening exchange rate and retranslated at the closing rate. Statement of Comprehensive Income items were translated at the average rate for the respective periods. Stated capital was translated at the historic exchange rates ruling on the date of the share issue. All resulting differences are reported in the Cumulative Translation adjustment.

The rates used to translate line items into US dollar are as follows:

(ii) Foreign currency translation reserve

Exchange differences arising on translation of foreign controlled entities are taken to the foreign currency translation reserve. The reserve is recognised in the Statement of Comprehensive Income when the net investment is disposed.

(iii) Share based payments reserve

The share-based payments reserve is used to recognise:

·; The grant date fair value of options issued to employees but not exercised

·; The grant date fair value of warrants issued

The reserve comprises the credit to equity for equity-settled share-based payment arrangements under IFRS 2 - Share based payment. The standard requires that the expense be charged to the profit and loss component of the statement of comprehensive income, while a credit needs to be raised against equity over the vesting period. When options are exercised, the reserve related to the specific options is transferred to share capital. If the options lapse after vesting, the related reserve is reversed through the profit and loss component of the statement of comprehensive income.

6. Contingent permit option

During October 2010 the Company entered into an Option and Sale agreement with Compagnie Miniere de L'Ouest Africain SA ("CMOA") whereby the Company acquired the right to carry out investigations with respect to Tenements owned by CMOA in Mali. On conclusion of the investigations the Company has the option to acquire 70% of the mining assets in CMOA for $4.5 million. As this payment is contingent on the successful outcome of the geological study, no liability has been raised in the balance sheet.

7. Share-based payment transactions

Unaudited

2010

2009

$'000

$'000

a. Deferred consideration

5,063

-

On 5 March 2010 the Company waived the condition that the deferred consideration payment to Mr Nikolajs Zuks of A$14,300,000 ("the Deferred Consideration Payment") payable when it raised new investment of a minimum of A$ 144,000,000 and as a set off against this right the Company issued to Mr Zuks 9,604,483 ordinary shares at a price of £0.90 per ordinary share, the number of ordinary shares issued being the nearest whole number to the Deferred Consideration Payment divided by such issue price per ordinary share calculated at an exchange rate of A$1.65432 to £1.00.

The fair value of the equity instruments granted and the corresponding asset recognised in Mining properties were measured at the share price on listing of 35 pence per share.

b. Share options

The following share options or rights over shares in the Company are in issue under the Company's "sign on option" scheme, all of which were approved by the board on 5 March 2010 and took effect from the Company's admission to AIM on 1 April 2010.

Under the scheme participants are granted options which can be exercised one calendar year after the date of admission ("holding period"). The options can be exercised by the holder in whole or in part at any time on completion of the holding period for a period ending six calendar years after the date of admission, subject to approval by the Board of Directors.

No further options shall be granted by the Directors on any date under the Company's "sign on options" scheme or any other employee share scheme if it would result in the number of ordinary shares issued or remaining issuable pursuant to options exceeding 9,750,000 Ordinary shares plus 10% of the Ordinary shares in issue at that time.

The following options were granted on admission:

Tranche 1

·; 4,000,000 options to Terrence Larkan at an exercise price equal to the placing price

·; 1,000,000 options to Bernhard Neehoff at an exercise price equal to the placing price

·; 250,000 options to Lyndon Calvert at an exercise price equal to the placing price

Tranche 2

·; 3,000,000 options to Graham Fyfe at an exercise price of A$1.00 (this was subsequently amended to conditions the same as Tranche 1)

·; 1,000,000 options to Graham Fyfe at an exercise price equal to the higher of the placing price or A$1.00 (this was subsequently amended to conditions the same as Tranche 1)

Unaudited

2010

2009

$'000

$'000

c. Warrants

1,057

-

Pursuant to a Warrant Instrument executed by the Company on 31 March 2010, the Company granted Canaccord Adams (now Canaccord Genuity) and Renaissance Capital warrants to subscribe to 4,800,000 Ordinary Shares (being 5% of the Placing Shares on admission). Each warrant entitles the holder to subscribe to one Ordinary Share at the Placing price per ordinary share exercisable at any time from Admission to the 18 month anniversary of the date of admission.

Set out below is a summary of options and warrants granted during the period:

Description

Grant date

Expiry date

Exercise price

Granted during the year

Estimated fair value

Share options - consolidated

Tranche 1

1 April 2010

1 April 2016

£0.35

5,250,000

£0.175

Tranche 2

1 April 2010 (modification date 9 July 2010)

1 April 2016

£0.35

4,000,000

£0.195

9,250,000

Warrants

1 April 2010

1 October 2011

£0.35

4,800,000

£0.145

14,050,000

No options were exercised or expired during the period.

f. Expenses arising from share-based payment transactions

Unaudited

2010

2009

$'000

$'000

Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows:

Shares issued under "sign on options" scheme

2,901

-

8. Commitments

a. Capital commitments

Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:

Unaudited

2010

2009

$'000

$'000

Payable:

Within one year

9,335

-

Later than one year but not later than five years

-

-

Later than five years

-

-

Commitments not recognised in the financial statements

9,335

-

b. Non‑cancellable operating leases

Unaudited

2010

2009

$'000

$'000

Commitments for minimum lease payments in relation to non‑cancellable operating leases payable:

Within one year

633

486

Later than one year but not later than five years

2,441

88

Later than five years

84

-

Commitments not recognised in the financial statements

3,158

574

The Group leases office buildings and apartments under operating leases. The lease terms range from three to five years.