Half-yearly Report

30 June 2014 Sula Iron & Gold plc ("Sula" or the "Company") Interim Results for the six months to 31 March 2014 Sula Iron & Gold plc ("Sula" or the "Company"), the AIM listedexploration and development company focused on iron ore and gold in SierraLeone, is pleased to announce its unaudited Interim Results for the six monthsended 31 March 2014, for the Company and its wholly owned subsidiary, BlueHorizon (SL) Ltd, (together the "Group"). OPERATIONAL HIGHLIGHTS - Drilling programme to define a JORC Compliant Direct Shipping Ore("DSO") Mineral Resource Estimate on the main BIF now completed; - Drilling programme to define a JORC Compliant Magnetite MineralResource Estimate expected to complete in July 2014; - Assay results received from Batches 1-5 demonstrate multipleintercepts greater than 55% Fe content; and - Gold geochemical study of over 6,000 samples and a geophysicalsurvey over a 15 sq km area completed. FINANCIAL HIGHLIGHTS - Cash position in excess of £2.2 million at 31 March 2014 (30September 2013: £0.01 million); - c£3.5 million successfully raised from equity placements andexercise of warrants; and - Loss for the period of £0.68 million (2013: £0.99 million loss),resulting in a loss per share of 0.37 pence (2013: 0.83 pence). Nick Warrell, Chief Executive Officer of Sula commented: "The Group remains in good health. We are focused on workingtowards delivering a defined iron ore resource and are on target to reportboth JORC Compliant DSO and JORC Compliant Magnetite Mineral ResourceEstimates before the end of 2014. The Group is also confident about its goldprospectivity and continues its exploration activities to identify drilltargets in the YDS region of the Ferensola Licence area. We are cautiouslyoptimistic about the future." Enquiries: Sula Iron & Gold plc +44 (0) 20 7583 8304Nick Warrell / Matt Woodwww.sulairongold.com Cairn Financial Advisers LLP (nominated adviser) +44 (0) 20 7148 7900James Caithie / Avi Robinson Daniel Stewart & Company Plc (broker) +44 (0) 20 7776 6550Martin Lampshire / David Hart Yellow Jersey PR +44 (0) 7768 537 739Dominic Barretto / Kelsey Traynor Notes to Editors: Sula Iron & Gold plc is a multi-commodity exploration company focused on WestAfrica. The Company's main objective is to explore and advance its FerensolaProjects, in Northern Sierra Leone, that are highly prospective for iron andgold. Sula is currently focused on defining a maiden JORC compliant iron oreresource estimate and evaluating the gold prospectivity. The 153 sq. kmlicence area is contiguous to African Minerals' operational Tonkolili IronMine, which has a JORC compliant resource of 12.8 billion tonnes ironmineralisation. Exploration work at the project has confirmed the presence of BIF at surface,which has a known strike length of 3.1km. The BIF is proven to extend NE fromthe Tonkolili licence and into Sula's licence area. A 2,000m scout drillingprogramme conducted over a 2.2km section of BIF, confirmed the licence area'sprospectivity for high grade iron mineralisation. Significant Greenstone Belt-style gold mineralisation has also been identifiedat various prospects within the licence area. Five target areas for hard rockgold mineralisation have been identified based on the location of historicdrill intercepts, the source areas for alluvial gold deposits, and theposition of major structures as defined by airborne magnetic data and drainageorientation. The information in this release that relates to Exploration Results has beenreviewed by Mr Andrew Dacey, Non-Executive Technical Director of Sula Iron &Gold plc. Mr Dacey is a Fellow of the Institute of Materials Minerals andMining, a Registered Professional Geologist with the Australian Institute ofGeoscientists and a Competent Person as defined in the Australasian Code forReporting of exploration results and Mineral Resources and Ore Reserves. CHIEF EXECUTIVE OFFICER'S STATEMENT During the period 1 October 2013 to 31 March 2014 and subsequently, theCompany has been focused on delivering its defined exploration programme,strengthening its management team, improving its cash position and enhancingthe value of its assets. We have reported significant advances in terms ofboard structure, financing and exploration news. OPERATIONS SRK VALUATION In January 2014, mining consultants SRK Exploration Services Ltd("SRK ES") published a valuation of Sula Iron and Gold plc, which is availablein full on Sula's website at www.sulairongold.com/investors. Of particularnote is the Technical Valuation, which was based upon the geologicalinformation available at that time and SRK ES's opinion regarding the statusof the assets. I remain greatly enthused with the result of the valuation, andbelieve it to be testament to the value potential of Sula. IRON ORE Following the successful scout drilling programme carried out in2013 on the main Banded Iron Formation ("BIF") unit within the licence, a keyfocus for us during the period under review was to ensure we had the necessaryfinancial and technical resources to exploit this potential. In March wesuccessfully raised approximately £2.1 million of new funds via an equityplacing with the specific objective of carrying out a drill programme whichwould ultimately lead to a JORC Compliant Resource on the DSO by the end of2014. I am pleased to report that we are well on the way to achievingthis objective. In April 2014, we implemented a drilling programme ofapproximately 5,700 metres to establish a maiden JORC Compliant Resource forthe DSO ("DSO Drill Programme"). Assay Batches 1 to 5 out of a total of 10 batches have already beensuccessfully reported, with multiple intercepts in excess of 55% Fe. Batches6, 7 & 8 have already been dispatched to ALS in Monrovia for samplepreparation and will be sent subsequently to ALS in Ireland for assay results.The remaining two batches are currently being prepared for freighting toMonrovia for preparation ahead of being despatched to Ireland. Not only has the DSO Drill Programme been delivered on schedule andbelow budget, but whilst we had the capabilities on site, we designed andplanned a further JORC Compliant Resource drill programme for the freshmagnetite that sits below the DSO within the main BIF unit. Drilling hascommenced on this programme and, subject to favourable weather and othervariables, the planned 1,550 metres of drilling is scheduled to complete inJuly 2014. Accordingly, I'm pleased to report that the Group is on target toreport both JORC Compliant DSO and magnetite Mineral Resource Estimates beforethe end of 2014. GOLD In November 2013, the Group commenced an initial gold exploration programme atthe Yanfarina-Lagunda-Send ("YDS") area of the Ferensola Licence. Thisexploration comprised a 15 sq km geophysical and a geochemical soil samplingprogramme and was completed in February 2014. A ground magnetic survey wasconducted in order to delineate geological structures and over 150 line km ofground magnetic surveying was carried out on a 100m line spacing over theprincipal target areas. Additionally, more than 6,000 soil/regolith sampleswere collected on a 100m x 25m grid pattern. The results of this programmehave enabled us to target hard rock gold mineralisation and potential drilltargets. At the beginning of April 2014, our wholly owned subsidiary, BlueHorizon (SL) Limited, which holds the exploration licence, successfullyobtained permission from the Sierra Leone Minerals Advisory Board ("MAB") tocarry out trial mining within its licence area. This permission was sought toallow Blue Horizon to extract batch samples of alluvial gold for technicalvaluation and sale. I am pleased to report that Blue Horizon began the trialmining test work in April which proved that the gold is amenable to gravityseparation by water without chemical use and is averaging a 92% purity. As aconsequence, since April 2014, Blue Horizon has been able to generate smallsales of its gold which, aside from the technical merit, has offset the costof the trial mining programme. Sula intends for Blue Horizon to continuemining and selling batch samples of gold for the foreseeable future. FINANCIAL REVIEW I am pleased to report that at the period end, Sula had a healthy lookingbalance sheet, with net assets standing at approximately £6.7 million (30September 2013: £4.1 million). During the period under review we raised almost £3.5 million of newmoney through the issue of new equity with institutional and private clientinvestors, having begun the period with less than £0.01 million of cash. Atthe period end, the cash balance was more than £2.2 million. The loss for the period was £0.68 million (2013: £0.99 million),representing a loss per share of 0.37 pence (2013: 0.83 pence). A large proportion of the Group's expenditure in the period was inthe gold geophysical and a geochemical soil sampling programme. In the periodunder review, exploration costs of £0.17 million in respect of the DSO DrillProgramme were capitalised. EQUITY PLACING During the period under review the Group successfully raised anaggregate of £3.5 million, of which £0.8 million was raised in a placing of40.0 million shares at 2.0 pence in October 2013 to advance the Company'sFerensola Project and for working capital purposes. A further £0.6 million wasraised from the exercise of 19.2 million warrants at 3.0 pence in January 2014and February 2014 with an additional £2.1 million raised via a placing at 2.25pence in March 2014, specifically for the DSO Drill Programme. BOARD CHANGES In November 2013 and December 2013, we strengthened our Board with theappointments of Matt Wood and Andrew Dacey, respectively. Matt joined initially as a Non-Executive Director but I am pleasedto say agreed to become the Group's part-time Finance Director in early March2014. Matt is a chartered accountant and an experienced non-executive directorof growth companies and a corporate financier with 15 years' City experience.Matt is also the Managing Director and founder of CMS Advisory Group ("CMS"),a City-based multi-disciplined advisory firm to AIM companies. Andrew joined as Non-Executive Technical Director on 31 December2013 and has over 18 years' experience in the mining sector. He has a strongtrack record, having worked throughout the world for numerous junior resourcecompanies and played a pivotal role in the Golden Hills 3.3Moz Au-equivalentdiscovery in Mongolia. I am totally confident that their respective financial andresources experience will be of great value to the Group as we anticipateincreasing the intrinsic value of Ferensola. In October 2013 and December 2013, Non-Executive Director, GavinBurnell, and Non-Executive Technical Director, Gareth O'Donovan, resigned fromthe board, respectively. We thank them both for their contributions and wishthem well in their future endeavours. OUTLOOK The Group remains in good health. We are focused on working towards deliveringa defined iron ore resource and are on target to report both JORC CompliantDSO and JORC Compliant Magnetite Mineral Resource Estimates before the end of2014. The Group is also confident about its gold prospectivity and continuesits exploration activities to identify drill targets in the YDS region of theFerensola Licence area. We are cautiously optimistic about the future. SULA IRON AND GOLD PLCCONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE SIX MONTHS ENDED 31 MARCH 2014 6 months 6 months Year ended ended ended 31-Mar-14 31-Mar-13 30-Sep-13 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000 Revenue - - -Cost of sales - - -Gross profit - - - Administrative expenses (568) (657) (1,691)Share based payment expense 11 (108) (331) (331)Results from operating (676) (988) (2,022)activities Loss before taxation (676) (988) (2,022) Taxation - - -Loss for the period (676) (988) (2,022) Other comprehensive (loss)/IncomeExchange translation (51) - 7 Total other comprehensive loss for the period (727) (988) (2,015) Loss per shareBasic and diluted loss per 12 (0.37) (0.83) (1.68)share (pence) SULA IRON AND GOLD PLCCONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 31 MARCH 2014 31-Mar-14 31-Mar-13 30-Sep-13 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000 AssetsProperty, plant and 7 337 248 239equipmentIntangible assets 8 3,995 4,034 3,824Non-current assets 4,332 4,282 4,063 Trade and other receivables 102 19 40Cash and cash equivalents 2,242 605 14Current assets 2,344 624 54 Total assets 6,676 4,906 4,117 EquityShare capital 9 2,815 1,220 1,220Share premium 9 6,515 4,681 4,679Share based payments 439 331 331reserveForeign exchange reserve (4) - 47Retained deficit (3,301) (1,551) (2,625) 6,464 4,681 3,652LiabilitiesLoans and borrowings - 94 66Bank overdraft 1 - 14Trade and other payables 211 131 385Current liabilities 212 225 465 Total liabilities 212 225 465 Total equity and 6,676 4,906 4,117liabilities SULA IRON AND GOLD PLCCONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE SIX MONTHS ENDED 31 MARCH 2014 Attributable to owners of the Company Share Share Share Exchange Retained Total capital premium based reserve deficit equity payment reserve £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 October 2013 1,220 4,679 331 47 (2,625) 3,652(audited) Loss for the period - - - - (676) (676)Total other comprehensive - - - (51) (51)incomeTotal comprehensive loss for - - - (51) (676) (727)the period Issue of ordinary shares 1,595 2,021 - - - 3,616Issue costs - (185) - - - (185)Share based payment - - 108 - - 108transactions 1,595 1,836 108 - - 3,539 Balance at 31 March 2014 2,815 6,515 439 (4) (3,301) 6,464(unaudited) SULA IRON AND GOLD PLCCONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE SIX MONTHS ENDED 31 MARCH 2013 Attributable to owners of the Company Share Share Convertible Share Retained Total capital premium notes based deficit equity payment reserve £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 October 2012 820 3,226 520 - (563) 4,003(audited) Loss for the period - - - - (988) (988)Total comprehensive loss for - - - - (988) (988)the period Issue of ordinary shares 400 1,738 (520) - - 1,618Issue costs - (283) - - - (283)Share based payment - - - 331 - 331transactions 400 1,455 (520) 331 - 1,666 Balance at 31 March 2013 1,220 4,681 - 331 (1,551) 4,681(unaudited) SULA IRON AND GOLD PLCCONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 SEPTEMBER 2013 Attributable to owners of the Company Share Share Convertible Exchange Retained Total capital premium notes reserve deficit equity £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 October 2012 820 3,226 520 - (563) 4,003(audited) Loss for the period - - - (2,002) (2,002)Total other comprehensive income - 47 (40) 7Total comprehensive loss for the - - - 47 (2,062) (2,015)period Issue of ordinary shares 270 1,348 - - - 1,618Conversion of notes 130 390 (520) - - -Costs of share issue - (285) - - - (285)Share based payment - - - - 331 331transactions 400 1,453 (520) - 331 1,664 Balance at 31 September 2013 1,220 4,679 - 47 (2,294) 3,652(audited) SULA IRON AND GOLD PLCCONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE SIX MONTHS ENDED 31 MARCH 2014 6 months 6 months Year ended ended ended 31-Mar-14 31-Mar-13 30-Sep-13 (unaudited) (unaudited) (audited) £'000 £'000 £'000Cash flows from operatingactivitiesResults from operating activities: (676) (988) (2,022)- Depreciation 40 72 75- Impairment 7 - -- Share based payment transaction 108 331 331- Expenses financed by issue of 4 - 54shares- Foreign exchange differences (26) - 14 (543) (585) (1,548)Changes in:- trade and other receivables (62) 9 (12)- trade and other payables (173) 29 271Net cash from operating activities (235) (547) (1,289) Cash flows from investingactivitiesAcquisition of property, plant and equipment (157) (50) (51)Exploration expenditure capitalised (171) (210) -Net cash used in investing (328) (260) (51)activities Cash flows from financingactivitiesProceeds from issue of share 3,616 1,618 1,618capitalExpenses financed by issue of (4) - (54)sharesIssue costs (185) (283) (285)Loan repayments (80) - -Net cash flows from financing 3,347 1,335 1,279activities Net increase in cash and cash equivalents 2,241 528 (61)Cash and cash equivalents at beginning of - 61 61periodCash and cash equivalents at end of period 2,241 589 - SULA IRON AND GOLD PLCNOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORT 1. Reporting entity Sula Iron & Gold plc (the "Company") is a company domiciled in theUnited Kingdom. The condensed consolidated interim financial report of theCompany as at and for the period ended 31 March 2014 comprises of the Companyand its subsidiary (together referred to as the "Group"). The Group primarilyis involved in the exploration and exploitation of mineral resources in SierraLeone. 2. Basis of preparation (a) Statement of compliance This condensed consolidated interim financial report has beenprepared in accordance with IAS 34 Interim Financial Reporting. Selectedexplanatory notes are included to explain events and transactions that aresignificant to an understanding of the changes in financial performance andposition of the Group since the last annual consolidated financial statementsas at and for the period ended 30 September 2013. This condensed consolidatedinterim financial report does not include all the information required forfull annual financial statements prepared in accordance with InternationalFinancial Reporting Standards. This condensed consolidated interim financial report was approvedby the Board of Directors on 30 June 2014. (b) Judgements and estimates Preparing the interim financial report requires Management to makejudgements, estimates and assumptions that affect the application ofaccounting policies and the reported amounts of assets and liabilities, incomeand expense. Actual results may differ from these estimates. In preparing this condensed consolidated interim financial report,significant judgements made by Management in applying the Group's accountingpolicies and key sources of estimation uncertainty were the same as those thatapplied to the consolidated financial statements as at and for the periodended 30 September 2013. 3. Significant accounting policies The accounting policies applied by the Group in this condensedconsolidated interim financial report are the same as those applied by theGroup in its consolidated financial statements as at and for the period ended30 September 2013. 4. Financial instruments Financial risk management The Group's financial risk management objectives and policies areconsistent with those disclosed in the consolidated financial statements as atand for the period ended 30 September 2013. 5. Operating segments The Company acts primarily as a holding company of a group involvedin mineral resources exploration and exploitation in Sierra-Leone and aretherefore considered to operate in a single geographical and business segment.The expertise and management skills of the directors and staff of the Companyare charged to the Company's subsidiary. 6. Seasonality of operations The Group is not considered to be subject to seasonal fluctuations. 7. Property, plant and equipment Acquisitions During the six months ended 31 March 2014 the Group acquired assetswith a cost of £157,000 (period ended 31 March 2013: £50,000, period ended 30September 2013: £333,000). 8. Intangible Assets During the six months ended 31 March 2014 the Group has capitalisedexploration expenditure of £171,000 (period ended 31 March 2013: £210,000,period ended 30 September 2013: £3,824,000 (acquired with subsidiary). 9. Share capital and reserves As at 01 October 2013, the Company had 121,966,674 Ordinary Sharesof 1 pence ("Ordinary Shares") in issue. On 10 October 2013, the Company issued a further 40,000,000Ordinary Shares at a share price of 2 pence per Ordinary Share, together with40,000,000 warrants to subscribe for one Ordinary Share at 3 pence each. On 12 December 2013, the Company issued 4,217,878 new OrdinaryShares in settlement of outstanding loans and fees totalling £84,357.56 owedby the Company at a share price of 2 pence per Ordinary Share. On 31 December 2013, the Company issued 2,807,134 new OrdinaryShares in settlement of all remaining outstanding loans and fees totalling£56,142.68 owed by the Company at a share price of 2 pence per Ordinary Share. Between 10 January 2014 and 12 February 2014, the Company issued anaggregate of 19,160,000 new Ordinary Shares pursuant to the exercise of19,160,000 warrants granted in October 2013. On 7 March 2014, the Company issued an aggregate of 93,333,272 newOrdinary Shares at a share price of 2.25 pence, together with 23,333,318warrants to subscribe for one Ordinary Share at 4 pence each. Issue costs of £185,875 were offset against the share premiumaccount in the period ended 31 March 2014. Dividends No dividends were declared or paid in the six months ended 31 March2014 (period ended 31 March 2013: £nil, period ended 30 September 2013: £nil). 10. Share-based payment arrangements 6 months 6 months Year ended ended ended 31-Mar-14 31-Mar-13 30-Sep-13 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Share based payment expense (108) (331) (331)Measurement of fair values The fair value of the share-based payments was measured based onthe Black-Scholes formula. Expected volatility is estimated by consideringhistoric average share price volatility for similar entities on AIM. Equity-settled share-based payment plans The inputs used in the measurement of the fair values at grant dateof the equity-settled share-based payment plans were as follows: Warrants Expected volatility 40%Expected life* 10 yearsExpected dividend yield 0%Risk free investment rate 1.87%Weighted average share price at grant 2.35Weighted average exercise price 3.23 \* The Company's share warrants have exercise periods of between oneand ten years from the day of grant, predominately 10 years. Please see note11 Share Warrant below for details. 11. Share warrants Reconciliation of outstanding share warrants Weighted average exercise price (pence) Number of warrantsOutstanding at 1 October 2013 3,750,000 7.6 Granted during the period 73,157,009 3.2Warrants exercised (19,160,000) 3.0Forfeited (3,750,000) 7.6Outstanding at 31 March 2014 53,997,009 3.3Exercisable at 31 March 2014 44,173,318 4.0Warrants were granted on the Company's admission to AIM on 9October 2012 at 8 pence each on the basis of 1 warrant for each 2 OrdinaryShares subscribed for ("Admission Warrants"). The Admission Warrants lapsed on9 October 2013. Please see details of warrants granted during the 6 month interimperiod to 31 March 2014, in the table below: Number of Exercise period Warrants Date of Grant Exercise price From To (P) 40,000,000 15/10/2013 3.0 15/10/2013 15/10/2013 3,323,691 24/12/2013 2.0 24/12/2013 24/12/2018 6,500,000 10/03/2014 2.5 10/03/2014 10/03/201923,333,318 24/03/2014 4.0 24/03/2014 24/03/2015 73,157,009 12. Loss per share Basic and diluted loss per share The calculation of basic and diluted loss per share is based on theloss attributable to ordinary shareholders of £676,000 and a weighted averagenumber of ordinary shares in issue of 182,689,967.