Half Yearly Report (Accounts)

NOVENTA LIMITED

Unaudited Condensed Consolidated Financial Statements

for the 3 and 6 months ended 30 June 2011

19 August 2011

Chairman's Statement

I must report that the last quarter has been a very difficult period for Noventa; the additional funding requirements that I discovered and were announced in June have proved to be significantly greater than previously envisaged by our business plan, including the new process plant at Marropino and other necessary projects. The Group made a loss before tax of $2.39 million for Quarter 2-2011 on revenues of $0.27m.

In March we commissioned the Interim Comminution Circuit ('ICC') at the Marropino Mine using the existing plant with additions to enable us to process run-of-mine material which contains a higher grade of Ta2O5 than the tailings that we have been processing since April 2010. The ICC was designed to increase the rate of production to 200,000 lbs of contained Ta2O5 per annum which will bring the Group closer to cash break even on monthly operations at the Marropino Mine. During Quarter 2-2011 the ICC substantially increased the rate of production at Marropino, but was not able to maintain the targeted rate of production of 200,000 lbs contained Ta2O5 per annum for a sustained period due to mechanical difficulties and the age of the old plant. The annual equivalent rate achieved in Quarter 2-2011 was 115,000 lbs contained Ta2O5. Corrective action has been taken, principally in June and July 2011, with output increasing to an annual equivalent rate of 177,000 lbs contained Ta2O5 in the second half of July 2011. Final measures have been implemented in July and early August 2011, increasing production to the target level of 200,000 lbs per annum Ta2O5. While the experience of commissioning the ICC has been invaluable to the Group, informing the commissioning plan for the new Marropino process plant and giving experience to our team in managing and mining the pit, the lower than anticipated volumes delivered have adversely impacted the Groups cash flows.

The Group undertook the preliminary hydrogeological study at Marropino in Quarter 2-2011. This study revealed that the level of water in the dams at Marropino is insufficient to supply the Marropino Process plant during 2011, principally due to low levels of precipitation. Action has been taken to provide water from the nearby river and from boreholes. The additional water supply pipeline announced on the 2 June 2011 is now well under construction and is on course to be completed during the fourth quarter of 2011.

During Half 1-2011, significant progress has been made on the engineering, procurement and civil construction phases of the Marropino process plant upgrade project ("Project ReStart"). The new process plant is scheduled to be fully operational by the end of 2011, and it is expected to be capable of an annual rate of production of circa 600,000 lbs of contained Ta2O5 or more by Quarter 3-2012. At this rate of production we expect the Group to be profitable and generate a positive cash flow. Despite the significant progress made, it has not been possible to negotiate either a satisfactory EPC (engineering, procurement and construction) or an EPCM (engineering, procurement, construction and management) contract with the proposed project manager or to find an alternative contractor for the construction of the new plant within the required time frame and on acceptable terms. This has led to increased in-house supervision costs with our own project team using the proposed project manager as a project administrator and consultant. The necessary replacement of the civil engineering contractor also led to delays in the expected commissioning date and the need for increased working capital, although these have largely been recovered subsequent to 30 June 2011.

In August 2011 the Group renegotiated better terms for one of its off-take agreements which took advantage of the increasing market price for Ta2O5 concentrate. All of the Group's production from the new process plant is now committed under the Group's off-take agreement until the end of 2013, or 2015 if options contained in the off-take agreements are exercised by the off-take parties. While the Group's off-take agreements have multiple pricing points and are between 31-61% below the current spot price, they provide a stable and profitable sales price for the Group's Ta2O5 concentrate.

As a result of changing practices in the shipping industry, the Company has altered its shipping arrangements, causing a short interruption to delivery of material to one of its clients and increasing its current shipping costs to its customers by an average of US$3.54 per lb of tantalum pentoxide contained concentrate. The tantalum pentoxide concentrate that Noventa produces is mildly radioactive and it is therefore shipped as a Class 7 material. Noventa has always shipped using this designation. The current denial and delay of Class 7 shipments has been recognised as an international problem by the IAEA, IMO and ICAO, and by the UK government. The IAEA has set up an International Steering Committee to coordinate international efforts to determine solutions to the denial and delay of Class 7 shipments which may include increasing the threshold for designation as Class 7 cargo. However, as a consequence of these generally recognised shipping issues in transporting such Class 7 material, Noventa has revised shipping arrangements with its customers and will be shipping to the USA through Walvis Bay (Namibia) and to Thailand (from Mozambique), the latter by agreement with its customer to ship the product to a different specification so that the material does not fall into the Class 7 category. The Company is currently evaluating its future long term solutions and shipping arrangements.

The Group has finalised the terms of a $37.6m equity raise to bring the new process plant at Marropino and other infrastructure for the Group into full operation. The Group has also completed an extensive review and update to the budget supporting the business plan in conjunction with its advisers.

At the Marropino Concession, the evaluation of the two recently identified pegmatites (one of which extends from the current open pit to the north east, and the other, some 1.5 kilometres to the south east) was completed in Quarter 2-2011were determined by drilling and independent laboratory assays as not economic at current market prices of Ta2O5, we continue to be optimistic about the potential of other pegmatites on the 11,280 hectare Marropino concession and our remaining mining concessions and exploration licenced sites, and is continuing its exploration programme. In July and August 2011, the Group has repeated the exploration of our mining concessions and exploration licenses by graduates from the University of Glasgow and undergraduates from Universidade Eduardo Mondale, Maputo, Mozambique led by our Senior Consultant Geologist.

During Half 1-2011, preliminary preparatory work was started at our Morrua mining concession, which contains a higher grade deposit than Marropino, to evaluate the metallurgy and access infrastructure and to develop a suitable mine plan. We are evaluating the possibility of bringing Morrua into production at the end of 2013.

During 2012, we intend to complete further geological work at Mutala in order to update the NI 43-101 report on our mineral resources. Subject to the results of these studies, we may supplement the feed for the Marropino processing plant with a pre-concentrate from the Mutala concession.

We take our relationship with the local community very seriously. The medical clinic, situated in Marropino village, from which we draw the majority of our work force, was financed and constructed by Noventa at a relatively modest cost and opened on 2 November 2010. It now has two nurses provided by the Government in housing built by Noventa, and continues to be supported by the Mine paramedic whose contribution to the health of the Mine staff and Marropino village has been outstanding. A program has been implemented with the University of Glasgow, Scotland to provide a team of doctors for 6 weeks together with doctors from the Medical School of the Universidade Eduardo Mondale, Maputo, Mozambique during July and August 2011 to improve the health of the village which provides a large number of our employees. The village primary school, also constructed and financed by the Group at modest cost, operates on two shifts and has increased its intake of pupils to 520. The Government has provided an additional teacher, increasing the number to five.

On 12th April 2011, Her Excellency Dr. Esperança Bias, the Minister for Mineral Resources for Mozambique, visited the Mine accompanied by Mozambique Television. The Minister publicly expressed her delight at the progress and improvements made at the Mine. The event was a significant endorsement of our relationship with the Mozambican authorities and our standing in the local community. I met with the Minister recently with our Mine General Manager and Director of our operating subsidiary Delio Darsamo, as well our consultant Geologist and we continue the effort to keep the Ministry and the Minister informed of our progress.

I would like to extend my thanks to the Management team and our employees for their commitment and efforts. Pat Lawless resigned on 5 May 2011 for personal family reasons to return urgently to the UK, and John Allan, a director and former CEO of Noventa Ltd, who is currently running Project ReStart, assumed the role of CEO as an additional duty. He will relinquish his appointment when Fernando Fernandez-Torres, who assumed the role of COO on 1 August 2011, becomes CEO during Quarter 4-2011. Zeca de Barros will be joining Noventa as the new CFO with effect from 5 September 2011 replacing Daniel Cassiano-Silva who resigned in July 2011. I also wish to thank my fellow Directors in a very difficult period for the Company and our advisors for their support, which is contributing to substantial progress on our path towards growth and profitability.

For further information please contact:

Eric F. Kohn TD

Chairman, Noventa Limited

+41 22 8500560 / +41 79 5030150

www.noventa.net

Nick Harriss/Emily Staples

Religare Capital Markets (Nomad)

+44 20 7444 0800

Daniel BriggsReligare Capital Markets (Broker)+44 20 7444 0500

Cautionary note regarding forward looking statements

This document contains "forward-looking information" which may include, but is not limited to, statements with respect to the future financial or operating performance of Noventa Limited ('Noventa' or 'the Company'), its subsidiaries (together 'the Group'), affiliated companies, joint ventures, its projects, the future price of Ta2O5 and morganite, the estimation of mineral reserves and mineral resources, the realization of mineral reserve and resource estimates, the timing and amount of estimated future production, revenues, margins, costs of production, estimates of initial capital, sustaining capital, operating and exploration expenditures, costs and timing of the development of new deposits, costs and timing of future exploration, requirements for additional capital, foreign exchange risks, governmental regulation of mining operations and exploration operations, timing and receipt of approvals, consents and permits under applicable mineral legislation, environmental risks, title disputes or claims, limitations of insurance coverage and regulatory matters. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "targets", "aims", "anticipates" or "believes" or variations (including negative variations) of such words and phrases, or may be identified by statements to the effect that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved.

Forward-looking statements involve known and unknown risks, uncertainties and a variety of material factors, many of which are beyond the Company's control which may cause the actual results, performance or achievements of Noventa, its subsidiaries, affiliated companies and/or joint ventures to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Readers are cautioned that forward-looking statements may not be appropriate for other purposes than outlined in this document. Such factors include, among others, future prices of Ta2O5 concentrate and morganite; general business, economic, competitive, political and social uncertainties; the actual results of current exploration and development activities; conclusions of economic evaluations and studies; fluctuations in the value of the U.S. dollar or the pound sterling relative to the local currencies in the jurisdictions of the Company's key projects; changes in project parameters as plans continue to be refined; possible variations of ore grade or projected recovery rates; accidents, labour disputes or slow downs and other risks of the mining industry; climatic conditions; political instability, insurrection or war, civil unrest or armed assault; labour force availability and turnover; delays in obtaining financing or governmental approvals or in the completion of exploration and development activities; as well as those factors discussed in the section entitled "Risk assessment" of the Management discussion & analysis. The reader is also cautioned that the foregoing list of factors is not exhausted of the factors that may affect the Company's forward-looking statements.

Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date of this document and, except as required by applicable law, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

Cautionary note regarding technical information

Technical information in this report is summarised or extracted from the report entitled 'Technical report on the Marropino project and associated properties, Zambezia Province, Mozambique', prepared by Scott Wilson Roscoe Postle Associates Inc on 27 September 2010 (the 'Scott Wilson 2010 report'). Information of a scientific or technical nature contained in this publication arising since the date of the Scott Wilson 2010 report is provided by Noventa management and has been prepared under the supervision of Donald Hains, of Scott Wilson Roscoe Postle Associates Inc., who is a "qualified person" in accordance with National Instrument 43-101 - Standards of disclosure for Mineral Projects ('NI 43-101').

Readers are cautioned not to rely solely on the summary of such information contained in this report, but should read the Scott Wilson 2010 report (which is available at www.noventa.net) and any future amendments to such report. Readers are also directed to the cautionary notices and disclaimers contained therein.

All results derive from continuing operations. The loss and total comprehensive loss for all periods presented are wholly attributable to equity holders of Noventa Limited.

The Interim and Quarter 2-2011 condensed consolidated financial statements of Noventa Limited, registered number 95036, were approved by the Board of Directors and authorised for issue on 19 August 2011. Signed on behalf of the Board of Directors:

1. Basis of preparation

The condensed consolidated financial statements of the Group for the three and six months ended 30 June 2011, which are unaudited and have not been reviewed by the Company's auditor, have been prepared in accordance with the International Financial Reporting Standards ('IFRS') accounting policies adopted by the Group and set out in the annual report for the year ended 31 December 2010. The Group does not anticipate any change in these accounting policies for the year ended 31 December 2011.

This Interim and Quarter 2-2011 report has been prepared to comply with Canadian legal requirements applicable to the Company's listing status on The Toronto Stock Exchange as a Designated Foreign Issuer and to comply with the requirements of the AIM rules of the London Stock Exchange (the 'AIM Rules'). In preparing this report, the Group has adopted the guidance in the AIM rules for interim accounts which do not require that the interim condensed consolidated financial statements are prepared in accordance with IAS 34, 'Interim financial reporting'. While the financial figures included in this report have been computed in accordance with IFRSs applicable to interim periods, this report does not contain sufficient information to constitute an interim financial report as that term is defined in IFRSs.

The financial information contained in this report also does not constitute statutory accounts under the Companies (Jersey) Law 1991, as amended. The financial information for the year ended 31 December 2010 is based on the statutory accounts for the year ended 31 December 2010. The auditors reported on those accounts: their report was unqualified and did not include any statement of emphasis of matter. Readers are referred to the auditors' report to the Group financial statements as at 31 December 2010 (available at www.noventa.net).

These condensed consolidated financial statements for the three and six months ended 30 June 2011 have been prepared in accordance with the IFRS principles applicable to a going concern, which contemplate the realisation of assets and liquidation of liabilities during the normal course of operations. Having carried out a going concern review in preparing these condensed consolidated financial statements for the three and six months ended 30 June 2011, the Directors have concluded that there is a reasonable basis to adopt the going concern principle. Further details are provided in the section of the MD&A titled 'Going concern'.

Critical accounting judgments adopted by the Directors in the preparation of these condensed consolidated financial statements are included in the section of the MD&A titled 'Critical accounting judgments and key sources of estimation uncertainty'.

2. Segment Information

Based on the risks and returns the Directors consider that the primary reporting format is by business segment. The Directors consider there to only be one business segment, being the mining, extraction and production of Ta2O5 concentrate, currently undertaken solely from the Marropino Mine in Mozambique. Morganite production is incidental to this principal activity and arises as a by-product of the Ta2O5 concentrate production. All administrative expenditure is allocated to this sole segment.

No geographical analysis of the results by region, other than revenue by destination which is reported below, is provided due to the dominance of the Group's operations in Southern Africa (The Republic of Mozambique and The Republic of South Africa) relative to those in Jersey (Channel Islands) other than for 'Cash and cash equivalents'. 'Cash and cash equivalents' balances are predominantly maintained in Jersey (refer to note 9.4.3).

Revenue by destination of the Group's customers was:

3. Revenue

An analysis of the Group's revenue is as follows:

Revenues derive from continuing operations in all periods presented.

Ta2O5 concentrate sales

During Quarter 2-2011 the Group sold 5,076 lbs (Half 1-2011 - 16,486) of Ta2O5 realising revenue of $264,000 (Half 1-2011 - $868,000). Revenue of $9,000 (Half 1-2011 - $9,000) was recorded on Ta2O5 volume adjustments from final customer assays on sales completed in Quarter 1-2011. The Group did not realise sales of Ta2O5 concentrate during Quarter 1-2010 and Half 1-2010 - production recommenced at the Marropino Mine in April 2010 with the first sales in Quarter 3-2010.

Morganite sales

Morganite production may occur as a by-product of the Ta2O5 concentrate production if morganite is found at the Marropino Mine while mining the pit. During Quarter 2-2011 and Half 1-2011 no morganite was found at Marropino. During Half 1-2010, the Group reached agreement with LJ International Limited for the sale of consignment stock held by Goldleaves Trading Limited and Miranda Gems (HK) under the Morganite Joint Venture Agreement between the Group, and these parties. The Morganite Joint Venture Agreement was terminated, with payment of $1,000,000 received by the Group for the sale of the consignment stock.

4. Net finance expense

During Quarter 1-2011 and Half 1-2011 the Group incurred preliminary expenditure of $116,000 for the arrangement of debt facilities from two European Development banks. These facilities are no longer required due to the placing of the Convertible Redeemable Preference Shares (refer to the section of the MD&A titled 'Funds raised'). The related expenditure has been expensed.

5. Intangible assets

The Group's intangible assets relate principally to the Morrua mining concession in the Zambezia Province of Mozambique to which the Group has full legal title. This intangible asset, representing acquisition costs of the mining concession, was impaired during financial year 2008 due to significant uncertainties regarding the extent and timing of any development of the concession. During Quarter 2-2011 the Group commissioned an updated Life-of-Mine study for Morrua from Mr Anton von Wielligh Pre Eng (ECSA) Member SAIMM of AB Global Mining Consultants. This report indicates a Mineral reserve of 6,432,466 at a price of US$ 120.0 per pound of Ta2O5. This mineral reserve includes 1,430,000 tonnes of stockpiled oversize material and 6,002,466 tonnes of pegmatite ore. The Group anticipates that confirmatory geological test-work and pre-feasibility work at Morrua will commence in Quarter 2-2012. Subject to satisfactory results from this work and appropriate market conditions, including the price of Ta2O5 concentrate, the Company intends to commence construction of the processing plant at Morrua in Quarter 4-2012 to bring Morrua into production by the end of 2013. The development of Morrua will need to be funded through external funding (shareholder investment or loan arrangements). The timing of any development in this mining concession remains uncertain. The remaining life of the estimated reserves in Morrua amounts to 7.5 years if the Mine produces at c600,000 lbs contained Ta2O5 per annum with a comparable recovery rate to that obtained at Marropino. If the Group is successful in establishing the commercial viability of Morrua, part or all of the impairment of intangible fixed assets may be written back. The Directors remain optimistic for the development of the concession.

During Quarter 1-2011 the Group commenced exploration and evaluation activities on two pegmatites on the Marropino Concession - the Marropino Extension pegmatite and the Marropino South pegmatite (refer to the section of the MD&A titled 'Mineral resources, exploration sites and geological outlook'). Expenditure of $304,000 was incurred in Quarter 1-2011 and a further $48,000 in Quarter 2-2011, totalling $352,000 in Half 1-2011 on drilling core samples and consultant geologist fees. It has been determined that these pegmatites are not economic at the current prices of Ta2O5 concentrate and the related exploration and evaluation expenditure has been impaired in Quarter 2-2011. Refer to the section of the MD&A entitled 'Mineral resources, exploration sites and geological outlook'.

6. Property, plant and equipment

The net book value of Property, plant and equipment at 30 June 2011 principally represents the equipment and construction costs of the ICC, mobile mining equipment, deposits and progress made on equipment for the Marropino Mine process plant upgrade, engineering consultant and project management fees directly attributable to the Marropino process plant upgrade, light transport vehicles and mining equipment currently in use. At 30 June 2011, the Group had entered into contractual commitments for the acquisition of Property, plant and equipment amounting to $10,800,000 (31 December 2010: $4,724,000).

The Group impaired its operating tangible fixed assets held as at 1 January 2009 and 31 December 2009, reflecting the uncertainty over the future profitability of the Marropino Mine due to the lack of available funding as at those dates for the Group to successfully install a comminution circuit at Marropino and complete a profit generating upgrade of the Marropino plant. If the Group is successful in implementing its plans and making the Marropino Mine a profitable operation, the Directors anticipate that a portion of the recorded impairment will be written back in future periods.

7. Inventories

8. Provisions

8.1 Short-term provisions

Half 1-2011

Year ended 31 December 2010

Taxation provisions represent probable taxation liabilities and penalties arising in Mozambique. Included in this provision is $119,000 (31 December 2010: $105,000; 30 June 2010: $nil) of assessed IVA (including penalties) relating to 2008 identified in the tax inspection into the tax affairs of the Group's subsidiary Highland African Mining Company Limitada undertaken by the Mozambique Tax Authority in December 2009. This provision was reported within Current tax liabilities as at 30 June 2010 at $108,000 at the applicable exchange rate between Mozambique Metical and US Dollar at that date reflecting the assessment, as at that date, that the liability was unavoidable. During 2010, the Group formally contested this assessed IVA with the Mozambique Tax Authority and may be successful in defending the assessment. Accordingly the amount is now reported within Short-term provisions. Of the remaining provision, $176,000 (31 December 2010: $101,000; 30 June 2010: $nil) relates to taxes which the Group has not paid in accordance with the Group's interpretation of the terms of its Mining Licence Agreement. The Mozambique Tax Authority has not formally confirmed this interpretation and there is a significant risk that the amounts may become payable. $17,000 (31 December 2010: $15,000; 30 June 2010: $nil) relates to possible exposures on income tax for 2009. The remaining balance of $40,000 (31 December 2010 and 31 March 2010: $nil) represents tax which the Group paid in 2007 and 2008 where the Mozambique Tax Authority is disputing the validity of the receipts held by the Group. This dispute was raised in Quarter 1-2011.

Other provisions represent liabilities arising from contractual arrangements of the Group under which the Group has obligations to indemnify the third party against costs or losses incurred if such costs or losses are presented. These provisions relate to the parent Company, Noventa Limited.

The Group anticipates that any cash outflow arising from short term provisions will be realised in 2011 or 2012.

8.2 Long-term provisions

The provision relates to the anticipated costs to be incurred in rehabilitating the open pit and surrounding area at Marropino once the mineral ore body has been fully exploited. The movement in the provision in all periods reflects the unwinding of the discount on the amount provided. The estimated remaining life of the mine is 55 months, which may be extended if the Group identifies pegmatites on the Marropino concession that prove to be economically viable resources (refer to the section of the MD&A titled 'Mineral resources, exploration sites and geological outlook').

9. Financial instruments

Details of the capital risk management policy of the Group are provided in note 11.

This note provides further information on the financial instruments of the Group including the risks associated to these instruments and the Group financial risk management policies to address these risks.

9.1 Significant accounting policies and classification of financial instruments

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the Group financial statements for the year ended 31 December 2010.

9.2 Financial risk management objectives

The Group actively manages the risks arising from its operations, and financial instruments at Board level. The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework and to ensure that the Group has adequate policies, procedures and controls to manage successfully the financial risks that the Group faces.

While the Group does not have a written policy relating to risk management of the risks arising from any financial instruments held, the close involvement of the Chairman, Chief Executive Officer and Chief Financial Officer in the day to day operations of the Group ensures that risks are monitored and controlled in an appropriate manner for the size and complexity of the Group. Financial instruments are not traded, nor are speculative positions taken. The principal risks that the Group faces with an impact on financial instruments are summarised below. Further details by class of financial instrument are described later in this note.

The Group's key financial market risks arise from changes in foreign exchange rates ('currency risk'). The Group is also exposed to credit risk. To a lesser extent the Group is exposed to interest rate risk and liquidity risk.

Currency risk

The Group is exposed to foreign currency exchange risk mainly between the US Dollar, South African Rand, Mozambique Metical and Great British Pound. The potential currency exposures are:

·; Transactional exposure in respect of:

·; operating costs and capital expenditures incurred in currencies other than the functional currency of operations; and

·; financial assets and liabilities denominated in currencies other than the functional currency of Group companies, such as bank balances held in currencies other than US Dollar, and trade payables denominated in Mozambique Metical or South African Rand.

·; Translational exposures in respect of investments in overseas operations which have functional currencies other than US Dollar.

The Group's policy is to minimise transactional exposure through maintaining detailed forecast cash flows by principal currency in which cash inflows and outflows are made, allowing the Group where possible to retain funds in the relevant currencies to create natural hedges against exchange fluctuations.

Credit risk

The Group principally has exposure to credit risk on its bank balances, trade receivables and other receivables. This risk is managed through the selection of bank counterparties based on the financial security of the counterparty, credit assessment of customers and contractual terms and conditions and monitoring.

Interest rate risk

The Group is, to a limited extent, exposed to interest rate risk which arises principally from the Group's bank and cash balances. The Group's interest bearing liabilities are at fixed rates.

Liquidity risk

The Group has limited liquidity risk as at 30 June 2011 due to its cash balances exceeding its monetary liabilities. Details regarding the Group's liquidity position at the date of this report and anticipated future liquidity are provided in the section of the MD&A entitled 'Going concern'.

9.3 Categories of financial instruments

Based on the application of the accounting policies with respect to financial instruments, amounts included in the relevant balance sheet items represent the following categories of financial instrument:

9.4 Classes of financial assets and liabilities

The Group analyses its financial instruments into the following classes based on the differing risks to which the instruments expose the Group:

9.4.1 Fair value

For all classes other than the Convertible preference share liability class, the book value and fair value are the same. The assumptions used by the Group to estimate the fair values of financial instruments are summarised below:

(i) For 'Short term operating assets' and 'Short term operating liabilities' the fair value approximates to book value because of the short maturities of these assets and liabilities.

(ii) For 'Bank balances and cash in hand', the fair value has been determined to approximate book value. The Group has no fixed rate deposits exceeding one month as at each reporting date.

(iii) For warrants the fair value has been calculated using a Black Scholes valuation model due to the short term of the derivative instruments. The warrants are carried at fair value and accordingly the book value and the fair value of the warrants is the same. The fair values of the warrants are derived from inputs other than quoted prices that are observable for  warrants, either directly (i.e. as prices) or indirectly (i.e. derived from prices) and they are therefore categorized within level 2 of the fair value hierarchy set out in IFRS 7.

(iv) The fair value of the Convertible preference share liability including accrued interest and excluding derivatives over equity is $10,710,000 at 30 June 2011, calculated using the Monis  Convertibles Model. The fair values of the Convertible preference share liability is derived from inputs other than quoted prices that are observable for the instrument, either  directly (i.e. as prices) or indirectly (i.e. derived from prices) and is therefore categorized within level 2 of the fair value hierarchy set out in IFRS 7.

9.4.2 Short term operating assets

These assets are principally subject to credit risk. The balance at 30 June 2011 principally comprises trade receivables from the sale of Ta2O5 concentrate, IVA recoverable in The Republic of Mozambique, and VAT recoverable in The Republic of South Africa (the balance at 31 December 2010 principally comprises trade receivables from the sale of Ta2O5 concentrate and IVA recoverable in The Republic of Mozambique; the balance at 30 June 2010 principally comprises trade receivables from the sale of Morganite, IVA recoverable in The Republic of Mozambique and amounts due from the subscribers of the June 2010 Conditional Placing). Credit risk arises due to changes in the credit rating of the counterparty. The Group's credit risk is reduced as it only transacts with a small number of counterparties who, in the opinion of the Directors, have a sound credit rating. The Group's exposure to credit risk is further controlled by reviewing its credit exposure to counterparties at regular intervals. The maximum exposure to credit risk is the carrying value of the class at all balance sheet dates. No amounts included in 'Short term operating assets' are past due and not impaired at either reporting date. The Group does not hold any security against the receivables in 'Short term operating assets'.

Included in the 'Short term operating assets' are receivables which have been provided against. Movements in the allowance account against 'Short term operating assets', which principally relates to the input IVA recoverable in Mozambique (refer to the section of the MD&A titled 'Critical accounting judgments and key sources of estimation uncertainty') is as follows:

The increase in the allowance account during Quarter 1-2011 reflects the increase in the underlying input IVA balance recorded by the Group of $33,000, an increase in the allowance against deposits for defendant legal costs of $23,000 and a foreign exchange loss of $25,000. Amounts written off in Quarter 1-2011 are irrecoverable bail monies paid by the Group in 2006 on behalf of employees. The increase in the allowance account during Quarter 2-2011 reflects the increase the underlying IVA input balance recorded by the Group of $36,000, provision against amounts paid for medical evacuation costs from the Marropino Mine which may not be recoverable from the Group medical insurance provider of $35,000 and further provisions against prepaid fees which are not considered recoverable of $20,000 and a foreign exchange loss of $37,000. The decrease in the allowance account in 2010 reflects the revision to the assessment of recoverability of the IVA balances as at 31 December 2009 of $1,081,000 and the effect of the devaluation of the Mozambique Metical on the IVA recoverable balance, partially offset by an increase in allowance against IVA accruing during 2010 of $38,000 and deposits for defendant legal costs of $92,000.

9.4.3 Bank balances and cash in hand

All amounts are carried at amortised cost, and, other than cash in hand, are interest bearing assets, with interest rates arranged with counterparty financial institutions based on commercial negotiations, reflecting the term, currency and amount of each deposit. As at all reporting periods, bank balances were held in current accounts or deposit accounts with a maturity of less than one month.

The principal risk arising for 'Bank balances and cash in hand' is credit risk in terms of counterparty default. In the current economic climate, the Group actively manages this risk through the monitoring of the credit status of the counterparty financial institutions. As at the balance sheet date the Group's assets in 'Bank balances and cash in hand' are principally held with the following banks, which are all high quality financial institutions:

The maximum amount subject to credit risk is the carrying value of this class.

'Bank balances and cash in hand' is also subject to the risk of changes in foreign currency exchange rates. The impact of changes in foreign currency exchange rates on the carrying value of 'Bank balances and cash in hand' is shown along with all other financial instruments, in the foreign currency sensitivity analysis below. At all reporting dates, the Group's bank and cash in hand balances are predominately held in USD.

9.4.4 Short term operating liabilities

'Short term operating liabilities' represents trade, and other payables arising in the normal course of business. No interest is chargeable on any of the items included in 'Short term operating liabilities', as long as the Group adheres to the agreed payment terms with each supplier.

The principal risks associated with 'Short term operating liabilities' are liquidity risk and the risk of changes in foreign currency exchange rates. The impact of these risks on the carrying value of this class are shown in the sections below respectively on liquidity risk and foreign currency sensitivity analysis along with all other financial instruments of the Group.

9.4.5 Warrants

'Warrants' contains warrants issued by the Company which are classified as derivative financial liabilities because the warrants are issued in GB£ which is not the functional currency of the Company.

Warrants falling within this category were issued by the Group in September 2009 (the '2009 warrants'), twice in September 2010 (the 'September 2010 warrants - 1' and the 'September 2010 warrants - 2', together the 'September 2010 warrants'), once in October 2010, once in December 2010 (collectively the '2010 warrants') and once in April 2011 (the '2011 warrants'). The warrants were issued as part of fundraisings secured in September 2009 and September 2010. Upon initial recognition, the fair value of the warrants is 'carved out' of the funds received from shareholder investment and recorded within derivative financial liabilities. At each reporting date the fair value of the warrants is measured, with changes in the fair value of the warrants recorded in the Consolidated statement of comprehensive loss within finance income/expense. At each exercise date, the derivative liability fair value of the warrants exercised is recorded to the Share premium account. The warrants do not create any obligation on the Company other than to deliver Ordinary Shares in the Company for a fixed price (360p per share for the September 2009 warrants subsequent to the March 2011 share consolidation and 200p per Ordinary Share for the 2010 and 2011 warrants subsequent to the March 2011 share consolidation), at the option of the holder, for 18 months from the date of issuance of the September 2009 warrants and 2 years from the date of issuance of the September 2010 warrants. The warrants do not therefore expose the Company or Group to any risks as at the balance sheet date. The September 2009 warrants expired unexercised in April 2011.

Subsequent to the March 2011 share consolidation, 20 warrants must be exercised to acquire one Ordinary Share in the Company. Movements in the number of warrants outstanding are as follows:

(1) 275,253 Ordinary Shares were issued upon the exercise of 5,505,075 warrants in Quarter 1-2011.

(2)If all warrants were exercised at 30 June 2011, the Company would be required to issue 1,919,466 (31 December 2010: 2,414,641; 30 June 2010: 468,750) Ordinary Shares.

Movements in the fair value of the warrants derivative financial liability are:

The fair value of warrants at the relevant period ends has been determined using a Black Scholes valuation model with the following inputs:

(1) Subsequent to the share consolidation of the Company's Ordinary Shares on 11 March 2011, 20 warrants must be exercised to acquire one Ordinary Share. The share price for the purposes of the valuation of the warrants is one twentieth of the market price for Ordinary Shares of the Company on any valuation date subsequent to the share consolidation.

The volatility assumption has been determined based on the volatility of the Company's Ordinary Share price.

9.4 Convertible preference share liability

The Convertible preference share liability represents the liability component of the Convertible redeemable preference shares issued by the Group on 11 April 2011 (refer to note 10). The Convertible preference share liability exposes the Group to limited liquidity risk because it is not redeemable at the holders call before 11 April 2016 and limited interest rate risk because the interest is fixed at 10% per annum payable quarterly.

9.5 Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group raises funds as and when required on the basis of forecast expenditure and inflows. When funding is required, the Group balances the costs and benefits of equity and debt financing. When funds are received they are deposited with banks of high standing in order to obtain competitive market interest rates. Further details on the Group's liquidity risk at the date of this report are provided in the section of the MD&A titled 'Going concern'.

At all reporting dates, the Group's short term operating liabilities are due on demand or within 30 days of the period end.

9.6 Foreign currency sensitivity analysis

The Group's foreign currency assets and liabilities are exposed to foreign currency transaction risk.

The following are the exchange rates applied by the Group between United States Dollars and currencies in which significant assets and liabilities are denominated:

The table below illustrates the hypothetical sensitivity of the Group's reported profit and equity to a simultaneous 10% increase and decrease in the United States Dollar exchange rate to £ Sterling, South African Rand and Mozambique Metical at the period-end assuming that all other variables remain unchanged. 10% represents the Directors' assessment of a reasonably possible change in the relevant exchange rates. A positive number below indicates an increase in profit and equity.