Results for the six months to 30 September 2010

9th December 2010

Mwana Africa PLC

Unaudited results for the six months to 30 September 2010

Mwana Africa PLC ("Mwana", the "Group" or the "Company") is pleased to announce its unaudited interim financial results for the six months to 30 September 2010.

Operational Highlights

·; Successful production ramp-up at Freda Rebecca:

o 10,915oz gold produced in H1 2010 (H2 2009: 8,550oz)

o 5,334 oz gold produced in October and November

o Phase 1 production target rate of 30,000oz per annum reached in September

·; Bindura Nickel Corporation:

o good progress in pre-start activities at Trojan mine 

o full system from mining to tertiary crushing ready to operate, subject to completion of funding

o ore stockpiling has commenced

·; Klipspringer diamond mine: 15,050 carats produced in H1 2010 (H1 2009: 10,726 carats)

·; Zani Kodo: continued drilling outlined JORC compliant indicated resources of 255,916 oz and inferred resources of 997,850 oz of gold

·; UBS appointed as financial advisers

Financial Highlights

·; Consolidated revenue of £10.3m (H1 2009:£ 8.5m)

·; Loss before tax of £7.5m (H1 2009: £3.9m)

·; Consolidated net cash at 30 September 2010 was £4.8m (US$7.6m) (Sep 2009: £13.5m). Consolidated net cash at 1 December 2010 was £6.2m (US$9.7m) following the placing in October which raised net proceeds of £4.8m (US$7.6m).

·; Mwana Africa, excluding BNC held net cash of £2.9m (US$4.6m) at 30 September 2010 (Sep 2009: £9.1m). Net cash, excluding funds held by BNC, at 1 December 2010 was £5.3m (US$8.3m)

Highlights post the reporting period

·; Successful £5.1m placing in October allowing the Phase 2 production expansion to 50,000oz gold per year to proceed at Freda Rebecca

·; Phase 2 expansion programme commenced at Freda Rebecca in November

Six Month Review

The past six months have seen notable achievements at each of the Company's principal assets. Most significant of these was the continued success of the production ramp up at the Freda Rebecca gold mine in Zimbabwe. Production at the mine reached the planned Phase 1 annualised rate of production of 30,000 ounces of gold per year in September (2,662 oz for the month). 10,915 ounces of gold were produced in the period generating US$13.5m of gross revenue. 

At BNC, activity has focussed on preparing the mine and plant at Trojan for restart. The ore processing system from mining to tertiary crushing is now ready to operate. In August 2010, SRK Consulting completed a Competent Person's Report on the re-establishment of operations at Trojan. SRK considers the Trojan business plan to be both realistic and achievable. The completion of this report has enabled BNC to progress negotiations for off-take terms and for securing the finance required to restart production of nickel in concentrate.

Further drilling at Zani Kodo continues to demonstrate the potential of this gold project with the combined indicated and inferred resource now standing at 1.25Moz @ 3.53g/t at the Kodo Main area. Exploration at the Semkhat base metals concession continues to improve the geological model of this area.

We are pleased to announce that Mwana has appointed UBS as Financial Advisors.

Outlook

The board continues to be encouraged by economic and commercial developments in Zimbabwe, and notes the positive role that the resumption of production at Freda Rebecca is playing, and the role that BNC will play in the development of the Zimbabwean economy. 

The Company together with BNC have well developed plans for the restart of the Trojan mine and concentrator, and is in advanced stage discussions with various parties with regard to financing arrangements for the proposed restart, and, for off-take arrangements for the concentrate from Trojan.

In addition to consolidating Phase 1, the Company will focus on progressing Phase 2 at Freda Rebecca in the coming period. The placing completed by Mwana Africa in October 2010 will fund Phase 2. Phase 2 implementation started in November 2010, with the aim of raising gold production to an annualised rate of 50,000 ounces per annum. The Company will continue to work on achieving draw down of the IDC project finance facility which remains subject to fulfilment of certain conditions precedent. 

The board remains cautiously optimistic on the prospects for commodity prices in the markets in which Mwana operates. Gold continues to trade at high price levels which is benefiting the restart of Freda Rebecca. Meanwhile the board believes that the price of nickel has stabilised at a level at which BNC, once restarted, can operate sustainably.

In 2011, Mwana will focus on the return to positive cash flow from our producing assets at Freda Rebecca and Klipspringer and on the restart of operations at the Bindura Nickel Corporation Trojan mine.

This press release is available for download from the Company's website www.mwanaafrica.com.

Enquiries:

Mwana Africa PLC Tel: 020 7654 5580 

Oliver Baring, Executive Chairman

Donald McAlister, Finance Director

Ambrian Partners Limited Tel: 020 7634 4700

Richard Swindells/Jen Boorer

Merlin Tel: 020 7726 8400

David Simonson / Anca Spiridon

References to dollars or "$" refer to US dollars unless otherwise stated.

This press release includes 'forward-looking statements'. Words such as 'anticipates', 'expects', 'intends', 'plans', 'forecasts', 'projects', 'budgets', 'believes', 'seeks', 'estimates', 'could', 'might', 'should' and similar expressions identify forward-looking statements. All statements other than statements of historical facts included in this press release, including, without limitation, those regarding Mwana Africa's business strategy and plans and objectives of management for future operations and acquisition opportunities, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors which could cause the actual results, performance or achievements of Mwana Africa or the markets and economies in which Mwana Africa operates to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements, including, without limitation, political, regulatory and economic factors. Factors that would cause actual results or events to differ from current expectations include, among other things, political and regulatory risks and the other risks and hazards associated with mineral exploration, development and production. Mwana Africa believes that the assumptions inherent in the forward-looking statements are reasonable; however, forward looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein. Mwana Africa does not assume any responsibility to update any of such forward-looking statements, save as required by relevant law or regulatory authority. This report contains information regarding the results of various exploration activities. Where a mineral resource has not been defined, it should be noted that the potential quantity and grade is conceptual in nature, there has been insufficient exploration to define a mineral resource and that it is uncertain if further exploration will result in the target being delineated as a mineral resource. Charl du Plessis, Executive Vice President Exploration of Mwana Africa, who holds a PhD and is a Member of the AusIMM, is a 'Qualified Person' as defined in the AIM Rules and under NI 43-101, and the exploration and resource development information contained in this press release has been reviewed by Dr Du Plessis. Mineral resource estimates included herein are presented in accordance with the JORC Code. If presented in accordance with the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by the CIM Council, the mineral resource and mineral reserve presentation would be materially the same.

Operations Review

Freda Rebecca

Freda Rebecca Mine ramped up production following completion of the Phase 1 refurbishment programme with a total gold dore production of 10,915 ounces in the period compared with 8,550 ounces in the six months to March 2010. The average production for the last quarter was 2,260 ounces per month, compared with the first quarter of the period of 1,379 ounces per month. Importantly, the targeted annualised production rate of 30,000 ounces per year was achieved in September (2,662 oz), October (2,776 oz) and November (2,558 oz).

The mine is now consolidating the Phase 1 platform with improvements in target grade, tonnage mined from underground sources and plant recoveries.

Careful transition is now underway to migrate outsourced management functions to full time employees with the appointment of key staff in engineering, safety, health and environmental, technical services, and, in October 2010, the appointment of the new general manager, who brought with him a wealth of local and regional experience. As at the end of October 2010, the permanent labour compliment was 430 employees.

In addition to consolidating Phase 1 production, the Freda Rebecca team have started implementing Phase 2. This involves the recommissioning of Mill No.2 circuit and mobilisation of additional underground equipment. It is envisaged that Phase 2 will allow the mine to ramp up to approximately 80ktpm and achieve an annualised gold production rate of 50,000 ounces per annum.

Mwana Africa raised approximately US$8.0m in October 2010 allowing the Phase 2 programme to proceed. The IDC loan draw-down remains subject to the fulfilment of certain conditions precedent. The management team continues to work on drawing this loan down; the proceeds of which will be used to repay funding advanced by Mwana Africa to Freda Rebecca for Phase 1 and Phase 2. 

For the six month period to end September 2010, Freda Rebecca achieved gross revenue of US$13.5m. Net revenue after marketing and royalties was US$12.9m. The loss from operating activities for the period adjusted for depreciation was US$0.7m. Total Capital expenditure amounted to US$2.2m in the period.

Key performance indicators:

Bindura Nickel Corporation (BNC)

BNC's mines, smelter and refinery remain on care and maintenance. This programme is designed to preserve the condition of the existing infrastructure, in order to reduce the cost and risk of a return to operation. The programme, including dewatering of the mines, periodic test runs of key equipment and ongoing monitoring of major plant structures, was effectively carried out during this period and the integrity of all physical assets has been maintained.

The costs of the care and maintenance programme have continued to be met from BNC's existing resources. In the period, BNC realised US$0.8m of value from sales of existing stockpiles of in-process inventory and the disposal of quoted shares owned by BNC. 

The economic and operating environment in Zimbabwe is judged to be conducive for the re-start of operations. Furthermore, nickel prices traded in the range US$18,000 to US$27,000 per tonne during the period; well up from the lows seen in late 2008/early 2009.

Following the decision in the previous period to embark, subject to sufficient funds being raised, on the 1st phase of resuming operations at BNC, a programme of pre-start activities has been implemented at the Trojan mine and concentrator in order to accelerate production start up when funding becomes available. The whole Trojan system from mining to tertiary crushing is now ready to operate, including the hoisting system, and about 15,000 tonnes of waste and 2,700 tonnes of ore have been hoisted to date. All the hoisted ore has been crushed and stock piled. As part of the preparatory work, limited underground development has commenced at Trojan and 500m of development has been completed to date.

In August 2010, SRK Consulting completed a Competent Person's Report on the resumption of operations at Trojan nickel mine. SRK considers the Trojan business plan to be both realistic and achievable. The completion of this report has enabled BNC to progress negotiations for off take terms and for securing the required restart finance.

Klipspringer

The Klipspringer diamond mine in South Africa continued to operate despite challenges posed by excessive groundwater resulting from higher than average rainfall in April. The market value of diamonds has remained steady during the period. In May 2010 the mine achieved an average price of US$109 per carat, up from US$75 per carat in May 2009, whilst a further sale in September 2010 realised an average of US$114 per carat, up from US$84 per carat in September 2009. However, the strengthening of the South African Rand during the period has resulted in a decline in the revenue per carat expressed in rand terms and in upward pressure on costs.

In the six months to 30 September 2010 the mine produced 15,050 carats (H1 2009: 10,726 carats), was marginally loss making and operating cash outflow was $0.6m (H1 2009: $0.3m outflow).

Klipspringer remains well positioned to benefit from improving market conditions, however, the strength of the South African Rand is hindering plans for growth at present.

Exploration Review

Zani Kodo -Gold (DRC)

An updated resource estimate was calculated at the Zani Kodo gold deposit in the DRC, based on the results of deeper drilling along 700m of a trend which has been accurately delineated over a strike length of 9 kilometres. The estimate outlined JORC compliant indicated resources of 255,916 oz of gold at 3.21g/t (Sep 2009: 190,684 oz) and JORC compliant inferred resources of 997,850 oz of gold at 3.21 g/t (Sep 2009: 261,192 oz).

Drilling has commenced on the Badolite area which is targeting the southern continuation of the Zani-Kodo trend. Encouraging gold mineralistion of up to 28m @ 3.0 g/t has been intersected confirming the geological model and the continuation of gold mineralisation along the trend.

Semhkat -Base Metals (DRC)

A total of 55 holes for 5,831m have been completed at Kibolwe West. Copper mineralisation has been intersected in two distinct zones which appear to represent the limbs of an antiformal structure. Mineralised widths of up to 63m @ 2.16% Cu have been intersected. In addition a series of NNW trending breccias zones have been detected which appear to represent fault zones. Detailed geological modelling of the area is currently being undertaken. Work is planned to continue after the end of the rainy season.

Financial Review

The Group reported revenue of £10.3m for the period (H1 2009: £8.5m), with revenue from Freda Rebecca largely replacing revenue from BNC in H1 2009.

Operating costs of £18.3m (H1 2009: £12.6m) were increased from the previous year due to increased activity at Freda Rebecca where costs for the period rose to £9.0m (H1 2009: £0.9m).

Following the improved outlook for commodity prices and for the economic environment in Zimbabwe, no impairment of assets was recorded in the period. The Group reported a loss before tax of £7.5m (H1 2009: £3.9m). 

The Group recorded a net cash outflow, after foreign exchange movements, of £10.4m (H1 2009: £5.4m).

Given its status on care and maintenance, BNC recorded a net cash outflow of £2.7m (H1 2009: £2.0m inflow). The Group, excluding BNC, recorded a net cash outflow of £7.7m (H1 2009: £7.4m), relating to £0.6m on the Freda Rebecca gold mine, £0.6m on the Klipspringer diamond mine, £3.7m on the Company's exploration portfolio, and £2.8m on corporate costs.

Capital investment comprised £2.0m (H1 2009: £3.1m) on property, plant and equipment, principally at Freda Rebecca, and £3.8m (H1 2009: £1.2m) on exploration assets.

At 30th September 2010, the Group, excluding BNC, held cash balances of £2.9m (H1 2009: £9.1m). BNC held cash balances of £1.9m (H1 Sep 2009: £4.4m).

Condensed group interim financial statements

For the six months ended 30 September 2010

(Unaudited)

Contents

Condensed Group balance sheet

As at 30 September 2010

(Unaudited)

Condensed Group income statement

For the six months ended 30 September 2010

(Unaudited)

Condensed Group statement of other comprehensive income

For the six months ended 30 September 2010

(Unaudited)

Condensed Group statement of changes in equity

For the six months ended 30 September 2010

(Unaudited) 

Condensed Group statement of changes in equity (continued)

For the six months ended 30 September 2010

(Unaudited)

Condensed Group cash flow statement

For the six months ended 30 September 2010

(Unaudited)

Notes to the condensed Group interim financial statements (continued)

For the six months ended 30 September 2010

(Unaudited)

1. Reporting entity

Mwana Africa PLC (the "Company") is a company domiciled in the United Kingdom. The condensed consolidated interim financial statements of the Company as at and for the six months ended 30 September 2010 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interests in associates and jointly controlled entities. The audited consolidated financial statements of the Group as at and for the year ended 31 March 2010 are available upon request from the Company's registered office at Devon House, 12 - 15 Dartmouth Street, London, SW1H 9BL or at www.mwanaafrica.com.

2. Statement of compliance

These condensed financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34, Interim Financial Reporting, as adopted by the EU. These condensed financial statements have been prepared using the same accounting policies as used in the preparation of the Group's annual financial statements for the year ended 31 March 2010, which were prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS"). They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2010. The financial information presented in this document is unaudited.

The comparative figures for the financial year ended 31 March 2010 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor was unqualified, included an emphasis of matter paragraph in which the auditor drew attention to significant uncertainties that may cast significant doubt regarding going concern and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. These sections address whether proper accounting records have been kept, whether the Company's accounts are in agreement with those records and whether the auditor has obtained all the information and explanations necessary for the purposes of its audit.

3. Going concern

The directors, having considered current trading, the current funding position, and the projected funding requirements of the Group for at least 12 months from the date of approval of these financial statements, believe that it is appropriate to adopt the going concern basis in preparing the financial statements for the period ended 30 September 2010.

As at the 30th November, and after the issue of shares in October which raised £4.8m net of expenses, the Group held cash of £6.2m, of which £0.9m is held by BNC. The Group is expecting to be able to draw down US$ 4 million of the $10m IDC loan facility once final conditions have been satisfied.

Following the finalisation of the SRK report, BNC has well developed plans for the restart of the Trojan mine and concentrator and is close to finalising terms for an off take agreement for the concentrate product. BNC requires new funding by the end of the first quarter of 2011 to continue its care and maintenance programme as well as to restart Trojan. The directors consider that the requirement to raise new finance for BNC represents a material uncertainty that may cast significant doubt on BNC's ability to continue as a going concern beyond the first quarter of 2011. Nevertheless, discussions for debt and equity funding for BNC are advanced, and the directors are confident that funding can be raised within the required timescale. 

4. Significant accounting policies

In the preparation of this condensed set of financial statements, the Group has applied the same accounting policies as those presented in the Group's consolidated financial statements for the year ended 31 March 2010, as set out on pages 43 to 52 of the Annual Report, as adjusted for the effects of the following:

The following amendments to published standards and interpretations are effective for the Group for the half year ended 30 September 2010:

- IFRS 1 (revised), First-time adoption of international financial reporting standards;

- IFRS 3 (revised 2008), Business Combinations;

- Amendment to IAS 27, Consolidated and Separate Financial Statements;

- Amendment to IAS 39, Financial Instruments: Recognition and Measurement: Eligible Hedged Items;

- Amendment to IFRS 2, Share-based Payment: Group Cash-settled Share-based Payment Transactions;

- Improvements to IFRSs 2009;

- Amendment to International Financial Reporting Interpretations Committee (IFRIC) 9, Reassessment of Embedded Derivatives;

- IFRIC 15, Agreements for the Construction of Real Estate;

- IFRIC 17, Distributions of Non-cash Assets to Owners; and

- IFRIC 18, Transfers of Assets from Customers.

The Group has reviewed the effect of these amendments and interpretations, and has concluded that they have no material impact on these condensed consolidated interim financial statements.

The Group is currently assessing the potential impacts of the other new and revised standards and interpretations that will be effective from 1 April 2011 and beyond, and which the Group has not early adopted. The Group does not anticipate that these will have a material impact on the Group's overall results and financial position.

5. Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

Except as described below, in preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 March 2010.

During the six months ended 30 September 2010 management reassessed its estimates in respect of:

·; the recoverable amount of certain property, plant and equipment (see note 8)

·; provisions (see note 14)

6. Impairment

The directors have considered both external and internal sources in determining whether an impairment indicator exists. No impairment indicators exist and consequently no impairment testing has been performed at the end of the period. All assets and cash generating units will be subject to an annual impairment review at the end of the financial year, regardless of whether an impairment indicator exists.

7. Operating segments

The Group has four reportable segments, as described below, which are the Group's strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. The CEO reviews internal management reports for each of the strategic business units.

The following summary describes the operations in each of the Group's reportable segments:

·; Gold: Gold mining and prospecting activities

·; Nickel: Nickel mining, smelting and refining activities currently on care and maintenance

·; Diamonds: Diamond mining activities

·; Exploration: Gold and base metal exploration activities

Notes to the condensed Group interim financial statements (continued)

For the six months ended 30 September 2010

(Unaudited)

Information about reportable segments

Notes to the condensed Group interim financial statements (continued)

For the six months ended 30 September 2010

(Unaudited)

8. Property, plant and equipment

9. Intangible assets