Annual Results

AIM: KEFI 3 June 2013 Annual Results for the 12 months ended 31 December 2012 KEFI Minerals, the AIM-quoted gold and copper exploration company, is pleased to announce its audited results for the year ended 31 December 2012. Highlights * The Gold and Minerals JV (G&M) was granted by the Kingdom of Saudi Arabia's Deputy Ministry for Mineral Resources two ExplorationLicences (ELs) in January 2012 and a further EL in July 2012. The G&M JV now has four ELs and 17 EL applications (ELAs) at various stages of permitting. * Exploration work at the Selib North project defined new gold-bearing dykes at the Camel Hill prospect with best trench results of 17m at 3.4g/t Au. Diamond drilling commenced in July 2012. * Exploration at the Jibal Qutman prospect returned encouraging intersections, including 7m at 6.13g/t Au and 3.8m at 5.46g/t Au. * The Company completed two placements during the period, raising a total of £2.8m. Post Period Highlights * The results of the ongoing Phase 2 RC drilling at Jibal Qutman currently totals a JORC compliant Inferred Resource of 10.3Mt at an average grade of 0.94g/t Au for 313,000oz Au, which can potentially be economically mined in a shallow open cut 60-70m deep. The mineralisation remains open along strike in the 3 zones drill tested so far. * The Phase 2 RC drilling, targeted to extend the Jibal Qutman resource, returned encouraging intersections, including: 13m at 4.08g/t Au, 32m at 1.14g/t Au, 8m at 2.71g/t Au, 9m at 1.98g/t Au and 27m at 0.86g/t Au. * Trench channel sampling results at Jibal Qutman returned impressive intersections, including 95m at 1.69g/t Au, 44m at 1.56g/t Au and 5m at 3.33g/t Au. * Positive results obtained from an initial internal scoping study for an open cut heap leach operation at Jibal Qutman. * New "shear zone hosted" gold mineralisation discovered in the Western Zone at Jibal Qutman. * The Company aims to complete a pre-feasibility study at Jibal Qutman and lodge an application for its first Mining Licence for G&M in Q4 2013 / Q1 2014. * G&M has undertaken to purchase its own multi-purpose drill rig - enabling increased drilling capacity, lower overall drilling costs and increased flexibility. Mr Jeffrey Rayner, KEFI Mineral's Managing Director, said: "2012 was an exciting and very busy year for KEFI Minerals. We are very pleased with the progress of our exploration programme and the prospect of our first mining operation at Jibal Qutman." "The next two ELAs are in a very advanced stage of permitting and they are both highly prospective for economic gold/copper mineralisation. Progress is being made on all other ELAs and they will provide a steady stream of exploration projects containing ancient gold and copper occurrences to be evaluated using modern exploration methods." Enquiries: KEFI Minerals Fox-Davies Capital Bishopsgate Communications Jeffrey Rayner Susan Walker Nick Rome +90 533 928 19 13 +44 203 463 5028 +44 207 562 3355 www.kefi-minerals.com References in this announcement to exploration results and resourceshave been approved for release by Mr Jeffrey Rayner (BSc.Hons). Mr Rayner is a geologist and has more than 25years relevant experience in the field of activity concerned. He is a member of the Australasian Institute of Mining and Metallurgy (AusIMM) and has consented to the inclusion of the material in the form and context in which it appears. Chairman's Report Dear fellow shareholder, KEFI Minerals remains focused on developing significant mineral deposits in the Kingdom of Saudi Arabia. On that front, the Company has continued its exploration programme - with the quick drilling results we reported during the period highlighting the benefits of operating in this underexplored and prospective region. Additionally, we continue to wait for more Exploration Licences (ELs) to be granted so that we can expand our activities. We remain well placed to develop our operations thanks to our Joint Venture with Abdul Rahman Saad Al-Rashid and Sons LLC (ARTAR), a leading local industrial group owned by Sheikh Al-Rashid and his family. As a 40% partner in the Gold and Minerals (G&M) Joint Venture we have established a strong foothold from which to build on the momentum achieved to date. During the period we were granted three licences. The Hikyrin and Hikyrin South licences, granted at the beginning of the year, are located in the Central Arabian Gold Region (CAGR) where Ma'aden published a gold resource estimate of over 8Moz. Additionally, the Jibal Qutman licence, which covers an area of 99.9km2 and hosts part of the prospective Nabitah-Tathlith Fault Zone, was granted in July. Our low cost drilling programme and well-managed operations, led by our Managing Director Jeff Rayner, are key to the continued success of our Company. We have a team which integrates international and local specialists. Drilling results to date highlight the quality of our portfolio of licences. Results from Selib North confirmed the management's view that that the gold is hosted in a series of steeply-dipping pyritic dykes. We have identified three target zones for further testing. Meanwhile, rock chip channel sampling results from the on-going trenching programme at Jibal Qutman confirmed there is high grade gold and silver contained in quartz veins with interceptions including 7m at 6.13g/t Au and 3.8m at 5.46g/t Au, surrounded by low grade material of 0.5 to 1.5g/t Au in zones up with widths of up to 50m. Continued drilling undertaken this year has further increased the estimated size of the mineralised system. We are focused on further developing a long term minerals business with our partner ARTAR. We also greatly appreciate the strong support of our shareholders in what can only be described as a volatile and challenging capital market for mineral exploration and development. I look forward to seeing some of you at the Annual General Meeting on 26 June 2013 in London. Harry Anagnostaras-Adams Chairman of Directors Managing Director's Report Dear fellow shareholder, KEFI Minerals continues to consolidate its exploration progress within the Kingdom of Saudi Arabia as a 40% equity holder and operator of the G&M Joint Venture. During 2012 and in the post reporting period, we have made rapid progress at the Jibal Qutman project in the south-central part of the Arabian Shield. The second phase of reverse circulation (RC) drilling, which is in progress, continues to discover more gold bearing structures. The three mineralised zones currently being drilled remain open along the strike. Results from Phase 1 diamond drilling completed in 2012 on a 50m x 25m grid and Phase 2 RC drilling in 2013 which is being carried out on a 50m x 40m grid, has allowed us to estimate our maiden Inferred Resource. At the end of Phase 2 and once the limits of the mineralisation have been outlined, the drill spacing will be infilled to 25m x 20m where required, to upgrade to an Indicated and Measured Resource. As at May 2013, the JORC compliant Inferred Resource is 10.3Mt at an average grade of 0.94g/t Au for a total of 313,000 oz. Au which can potentially be economically mined in a shallow open cut to a maximum 60-70m below surface, due to low energy and labour costs in Saudi Arabia and good infrastructure close to the project area. The increase in resources compared to the 90,000oz Au (comprising 2.28Mt at 1.25g/t Au) non-JORC estimate of January 2013, are primarily from the West Zone, which still remains open to the north and south. Due to limited drill rig availability, little or no RC drilling was performed on the South and Main Zones, this is now planned for H2, 2013. In addition numerous gold-bearing structures have been discovered elsewhere in the 99km2 Jibal Qutman EL and these will be systematically drill tested in the future. Metallurgical test-work is underway in Perth, Australia to define the extraction method, either Heap Leach or Carbon-in Leach process. The Company aims to complete a pre-feasibility study and lodge an application for its first Mining Licence for G&M by the end of Q4 2013/Q1 2014. This represents very rapid progress and demonstrates the efficient, cost effective exploration and development strategy of the Company, especially considering work only commenced in July 2012, upon the grant of the Jibal Qutman EL. Continuing with the strategy for cost and time effective exploration, G&M has undertaken to purchase its own multi-purpose drill rig, which can drill diamond core (HQ size) to 900m depth and RC to 250m depth. There is a short supply of drilling rigs and drilling contractors in Saudi Arabia, and this purchase will enable G&M to increase drilling capacity, lower overall drilling costs and increase flexibility. Funding KEFI Minerals completed two placements in February and July 2012 which raised a total of £2.8M. These funds have been sufficient to complete Stages 1 and 2 drilling at Selib North, IP geophysics at Selib North, and Stage 1 drilling at Jibal Qutman in 2012. In addition, the Company has sufficient funds to purchase the multi-purpose drill rig, complete the scheduled 15,000m Phase 2 RC programme, and to commence a PFS in H2 at Jibal Qutman in 2013. The G&M JV is funded 60% by ARTAR and 40% by KEFI Minerals. Outlook 2012 was an exciting and busy year for KEFI Minerals. We are very pleased with the progress of our exploration programme and the prospect of our first mining operation at Jibal Qutman. To date, through the Joint Venture we have been granted four ELs with 17 exploration licence applications (ELAs) at various stages of permitting, including two at an advanced stage; surface sample results returned to date from these ELAs suggests that they are both highly prospective for gold/copper mineralisation. Progress is being made on all other ELAs and they are expected to provide a steady stream of exploration projects containing ancient gold and copper occurrences to be evaluated using modern exploration methods. We are fully committed to consolidate G&M's presence in the Kingdom of Saudi Arabia and are pleased by our exploration results thus far, as we embark on the stages leading to the potential development of the Jibal Qutman gold deposit. They demonstrate the benefit of the patient and dedicated efforts by our Joint Venture partner and our enthusiastic and skilled geological team, led by Exploration Manager Fabio Granitzio. Jeffrey Rayner Managing Director Consolidated income statement Year ended 31 December Notes 2012 2011 Revenue - - Exploration costs (93) (426) Gross loss (93) (426) Administrative expenses (716) (901) Share-based payments 17 (265) (157) Share of loss from jointly controlled entity 18.2 (612) (154) Change in value of available-for-sale 13 (33) (7) financial assets Other income 5 - 67 Operating loss 6 (1,719) (1,578) Foreign exchange loss (9) (13) Loss before tax (1,728) (1,591) Tax 8 - (1) Loss for the year (1,728) (1,592) Other comprehensive income: Exchange differences on translating foreign 21 37 operations Total comprehensive loss for the year (1,707) (1,555) Basic and fully diluted loss per share 9 (0.39) (0.44) (pence) The Company has taken advantage of the exemption conferred by section 408 of Companies Act 2006 from presenting its own statement of comprehensive income. Loss after taxation amounting to GBP1.5 million (2011: GBP2.0 million) has been included in the financial statements of the parent company. Statements of financial position 31 December Notes The The The The Group Company Group Company 2012 2012 2011 2011 ASSETS Non-current assets Property, plant and equipment 10 1 - 2 - Intangible assets 11 - - - - Fixed asset investments 12.1 - 1 - 1 Investments in joint ventures 12.2 67 181 181 181 68 182 183 182 Current assets Financial assets at fair 13 10 10 43 43 value through profit or loss Trade and other receivables 14 302 249 86 3 Cash and cash equivalents 15 1,924 1,910 640 611 2,236 2,169 769 657 Total assets 2,304 2,351 952 839 EQUITY AND LIABILITIES Equity attributable to owners of the Company Share capital 16 4,712 4,712 3,650 3,650 Share premium 16 4,439 4,439 2,719 2,719 Share options reserve 17 541 541 385 385 Foreign exchange reserve (149) - (170) - Accumulated losses (7,502) (7,563) (5,883) (6,142) Total equity 2,041 2,129 701 612 Current liabilities Trade and other payables 19 263 222 251 227 263 222 251 227 Total liabilities 263 222 251 227 Total equity and liabilities 2,304 2,351 952 839 On 31 May 2013, the Board of Directors of KEFI Minerals Plc authorised these consolidated financial statements for issue. Consolidated statement of changes in equity Year ended 31 December 2012 Share Share Share Foreign Accumulated Total capital premium losses options exchange reserve reserve At 1 January 2011 3,311 1,697 396 (207) (4,459) 738 Comprehensive loss for the - - - - (1,592) (1,592) year Other comprehensive income - - - 37 - 37 Recognition of share based - - 157 - - 157 payments Exercise of options/ - - (73) - 73 - warrants Forfeit of options/ - - (95) - 95 - warrants Issue of share capital 339 1,113 - - - 1,452 Share issue costs - (91) - - - (91) At 31 December 2011 3,650 2,719 385 (170) (5,883) 701 Comprehensive loss for the - - - - (1,728) (1,728) year Other comprehensive income - - - 21 - 21 Recognition of share based - - 265 - - 265 payments Exercise of options - - (35) - 35 - Forfeit of options - - (74) - 74 - Issue of share capital 1,062 1,829 - - - 2,891 Share issue costs - (109) - - - (109) At 31 December 2012 4,712 4,439 541 (149) (7,502) 2,041 The following describes the nature and purpose of each reserve within owner's equity: Reserve Description and purpose Share capital amount subscribed for share capital at nominal value Share premium amount subscribed for share capital in excess of nominal value, net of issue costs Share options reserve reserve for share options granted but not exercised or lapsed Accumulated losses cumulative net gains and losses recognised in the statement of comprehensive income, excluding foreign exchange gains within other comprehensive income Foreign exchange reserve cumulative foreign exchange net gains and losses recognised on consolidation Company statement of changes in equity Year ended 31 December 2012 Share Share Share Accumulated Total capital premium losses options reserve At 1 January 2011 3,311 1,697 396 (4,344) 1,060 Comprehensive loss for the - - - (1,966) (1,966) year Recognition of share based - - 157 - 157 payments Exercise of options/warrants - - (73) 73 - Forfeit of options/warrants - - (95) 95 - Issue of share capital 339 1,113 - - 1,452 Share issue costs - (91) - - (91) At 31 December 2011 3,650 2,719 385 (6,142) 612 Comprehensive loss for the - - - (1,530) (1,530) year Recognition of share based - - 265 - 265 payments Exercise of options - - (35) 35 - Forfeit of options - - (74) 74 - Issue of share capital 1,062 1,829 - - 2,891 Share issue costs - (109) - - (109) At 31 December 2012 4,712 4,439 541 (7,563) 2,129 The following describes the nature and purpose of each reserve within owner's equity: Reserve Description and purpose Share capital amount subscribed for share capital at nominal value Share premium amount subscribed for share capital in excess of nominal value, net of issue costs Share options reserve reserve for share options granted but not exercised or lapsed Accumulated losses cumulative net gains and losses recognised in the statement of comprehensive income Consolidated statement of cash flows Year ended 31 December 2012 Notes 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax (1,728) (1,591) Adjustments for: Depreciation of property, plant and equipment 10 1 3 Loss on disposal of property, plant and equipment - 14 Profit on disposal of subsidiary - (12) Gain on exchange of shares - (50) Net loss on financial assets at fair value through 13 33 7 profit or loss Share based payments 17 199 101 Issue of warrants 17 66 56 Share of loss from jointly controlled entity 18 612 154 Write off of loans received - (67) Exchange differences on borrowings (15) 44 Exchange difference 9 13 (823) (1,328) Changes in working capital: Trade and other receivables (216) 120 Trade and other payables 12 16 Net cash used in operating activities (1,027) (1,192) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of subsidiary 12.1 - 61 Share of cash from jointly controlled entity - (95) Advances to joint venture (471) (160) Proceeds from sale of property, plant and equipment - 11 Net cash used in investing activities (471) (183) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of share capital 16 2,891 1,452 Issue costs 16 (109) (91) Loan from related party - 115 Net cash from financing activities 2,782 1,476 Net increase in cash and cash equivalents 1,284 101 Cash and cash equivalents: At beginning of the year 15 640 539 At end of the year 15 1,924 640 Company statement of cash flows Year ended 31 December 2012 Notes 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax (1,530) (1,966) Adjustments for: Impairment of intercompany balances 78 206 Gain on exchange of shares 13 - (50) Net loss on financial assets at fair value through 13 33 7 profit or loss Share based payments 17 199 101 Issue of warrants 17 66 56 Impairment of amount receivable from Saudi Arabia 461 154 joint venture Joint-venture balances write-off - 445 Centerra advances write-back - (251) Exchange differences on borrowings 37 52 Exchange difference (13) (6) (669) (1,252) Changes in working capital: Trade and other receivables (246) - Trade and other payables (5) 18 Net cash used in operating activities (920) (1,234) CASH FLOWS FROM INVESTING ACTIVITIES Advances to joint venture (461) (160) Loan to subsidiary (78) (1) Net cash used in investing activities (539) (161) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of share capital 16 2,891 1,452 Issue costs 16 (109) (91) Loan from related party - 115 Repayment of loan from related party (24) - Net cash from financing activities 2,758 1,476 Net increase in cash and cash equivalents 1,299 81 Cash and cash equivalents: At beginning of the year 15 611 530 At end of the year 15 1,910 611 Notes to the consolidated financial statements Year ended 31 December 2012 1. Incorporation and principal activities Country of incorporation KEFI Minerals Plc (the "Company") was incorporated in United Kingdom as a public limited company on 24 October 2006. Its registered office is at 27/28, Eastcastle Street, London W1W 8DH. Principal activities The principal activities of the Group for the year were: * To explore for mineral deposits of precious and base metals and other minerals that appear capable of commercial exploitation, including topographical, geological, geochemical and geophysical studies and exploratory drilling. * To evaluate mineral deposits determining the technical feasibility and commercial viability of development, including the determination of the volume and grade of the deposit, examination of extraction methods, infrastructure requirements and market and finance studies. * To develop mineral deposits and market the metals produced. 2. Accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied throughout the period presented in these financial statements unless otherwise stated. Basis of preparation and consolidation The Company and the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. They comprise the accounts of KEFI Minerals Plc and all its subsidiaries made up to 31 December 2012. The Company and the consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments. Going concern The Directors have formed a judgment at the time of approving the financial statements that there is a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. The financial information has been prepared on the going concern basis, the validity of which depends principally on the discovery of economically viable mineral deposits and the availability of subsequent funding to extract the resource or alternatively the availability of funding to extend the Company's and Group's exploration activities. The financial information does not include any adjustments that would arise from a failure to complete either option. Functional and presentational currency Items included in the Group's financial statements are measured using the currency of the primary economic environment in which the entity operates ("the functional currency") which is British Pounds (GBP). The financial statements are presented in British Pounds (GBP). Foreign currency translation (1) Foreign currency translation Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss in the statement of comprehensive income. (2) Foreign operations On consolidation, the assets and liabilities of the consolidated entity's foreign operations are translated at exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any, are recognized in the foreign currency translation reserve and as a component of other comprehensive income, and recognized in profit or loss on disposal of the foreign operation. Revenue recognition The Group had no sales/revenue during the period under review. Property plant and equipment Property plant and equipment are stated at their cost of acquisition at the date of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition less depreciation. Depreciation is calculated using the straight-line method to write off the cost of each asset to their residual values over their estimated useful life. The annual depreciation rates used are as follows: Furniture, fixtures and office 10% equipment Motor Vehicles 20% Acquisitions and goodwill The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Any costs directly attributable to the business combination are written off to the statement of comprehensive income. The acquirees identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognized at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell. Where the Group acquires a subsidiary for less than the fair value of its assets and liabilities, this results in negative goodwill which is recognized in profit and loss. Purchased goodwill is capitalized and classified as an asset on the statement of financial position. Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized. Goodwill is reviewed for impairment on an annual basis. When the directors consider the initial value of the acquisition to be negligible, the goodwill is written off to the statement of comprehensive income immediately. Trading results of acquired subsidiary undertakings are included from the date of acquisition. Goodwill is deemed to be impaired when the present value of the future cash flows expected to be derived is lower than the carrying value. Any impairment is charged to the statement of comprehensive income immediately. Interest in joint ventures Joint venture arrangements that involve the establishment of a separate entity in which each venturer has joint control are referred to as jointly controlled entities. The results and assets and liabilities of joint ventures are included in these financial statements for the period using the equity method of accounting. Finance costs Interest expense and other borrowing costs are charged to the statement of comprehensive income as incurred. Tax The tax payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognized for all taxable differences and deferred tax assets are recognized to the extent that taxable profits will be available against which deductible temporary differences can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same fiscal authority. Investments Investments in subsidiary companies are stated at cost less provision for impairment in value, which is recognized as an expense in the period in which the impairment is identified, in the Company accounts. These investments are consolidated in the Group accounts. Exploration costs The Group has adopted the provisions of IFRS 6 "Exploration for and Evaluation of Mineral Resources". Exploration, evaluation and development expenditure, including acquisition costs of licences, in respect of each identifiable area of interest is expensed to the statement of comprehensive income as incurred. Once mining activities commence, development expenditure will be capitalised as incurred and amortised over the estimated useful life of the area according to the rate of depletion of the economically recoverable reserves or over the estimated useful life of the mine, if shorter. A regular review will be undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Accumulated capitalised costs in relation to an abandoned area of interest will be written off in full against profit in the year in which the decision to abandon the area is made. Share-based compensation benefits IFRS 2 "Share-based Payment" requires the recognition of equity-settled share-based payments at fair value at the date of grant and the recognition of liabilities for cash-settled share-based payments at the current fair value at each statement of financial position date. The total amount expensed is recognized over the vesting period, which is the period over which performance conditions are to be satisfied. The fair value is measured using the Black Scholes pricing model. The inputs used in the model are based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Financial instruments Financial assets Loans and receivables are recognized when the Group becomes party to the contractual provisions of the financial instrument. Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as `loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are initially measured at fair value, which generally equates to acquisition cost. Subsequent to initial recognition, when a financial asset is designated as such on initial recognition, it is classified as held at fair value through profit or loss. Assets other than held for trading are designated at fair value through profit and loss when the Group manages the holdings and makes purchase and sale decisions based on fair value assessments and documented risk management and investment strategies. Attributable transaction costs and changes in fair value are recognised in profit or loss. Financial liabilities - equity Financial liabilities are recognized when the Group becomes party to the loan. Financial liabilities represent trade payables and are initially measured at fair value and subsequently at amortized cost. Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs. The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise cash at bank and in hand with an original maturity date of less than three months. 3. Financial risk management Financial risk factors The Group is exposed to market risk (interest rate risk and currency risk), liquidity risk and capital risk management arising from the financial instruments it holds. The risk management policies employed by the Group to manage these risks are discussed below: Market risk - Interest rate risk Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group's income and operating cash flows are substantially independent of changes in market interest rates as the Group has no significant interest-bearing assets. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group's management monitors the interest rate fluctuations on a continuous basis and acts accordingly. At the reporting date the interest rate profile of interest-bearing financial instruments was: 2012 2011 Variable rate instruments Financial assets 1,934 683 Sensitivity analysis An increase of 100 basis points in interest rates at 31 December 2012 would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. For a decrease of 100 basis points there would be an equal and opposite impact on the profit and other equity. Equity Profit or Equity Profit or Loss Loss 2012 2012 2011 2011 Variable rate instruments Financial assets 19 19 7 7 Currency risk Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the Group's functional currency. The Group is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the Euro, Turkish Lira, US Dollar and Saudi Arabian Riyal. The Group's management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows: Liabilities Assets Liabilities Assets 2012 2012 2011 2011 Euro 15 3 17 3 New Turkish Lira 1 65 26 127 US Dollar - 249 - - Saudi Arabian Riyal 25 - - 39 Sensitivity analysis A 10% strengthening of the British Pound against the following currencies at 31 December 2012 would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. For a 10% weakening of the British Pound against the relevant currency, there would be an equal and opposite impact on the loss and equity. Equity Profit or Equity Profit or Loss Loss 2012 2012 2011 2011 Euro 1 1 1 1 Turkish Lira (6) (6) (10) (10) US Dollar 25 25 - - Saudi Arabian Riyal (3) (3) 4 4 Liquidity risk Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Group has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities. The following tables detail the Group's remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. Carrying Contractual 3 months 3 - 12 1 - 2 2 - 5 More amounts cash flows months years years than 5 or less years 31 December 2012 Trade and other 263 263 263 - - - - payables 31 December 2011 Trade and other 251 251 251 - - - - payables Capital risk management The Group manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to shareholders through the optimization of the debt and equity balance. This is done through the close monitoring of cash flows. The capital structure of the Group consists of cash and cash equivalents of GBP1,924,000 (2011: GBP640,000) and equity attributable to equity holders of the parent, comprising issued capital of GBP4,712,000 (2011: GBP3,650,000), reserves of GBP4,831,000 (2011: GBP2,934,000) and accumulated losses of GBP7,502,000 (2011:GBP5,883,000). The Group does not use derivative financial instruments and has no long term debt facilities. Fair value estimation The fair values of the Group's financial assets and liabilities approximate their carrying amounts at the reporting date. Carrying Fair Values Amounts 2012 2011 2012 2011 Financial assets Cash and cash equivalents (Note 15) 1,924 640 1,924 640 Financial assets designated at fair value 10 43 10 43 through profit and loss (Note 13) Trade and other receivables (Note 14) 302 86 302 86 Financial liabilities Trade payables (Note 19) 263 251 263 251 Financial assets designated at fair value through profit and loss are classified as Level 1 within the fair value hierarchy, based on prices quoted (unadjusted) in active markets for identical assets or liabilities. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group used a variety of methods, such as estimated discounted cash flows, and makes assumptions that are based on market conditions existing at the statement of financial position date. The nominal value less any estimated credit adjustments for financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate available to the Group for similar financial instruments. Use and revision of accounting estimates and judgements The preparation of the financial report requires the making of estimations and assumptions that affect the recognized amounts of assets, liabilities, revenues and expenses and the disclosure of contingent liabilities. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. There were no significant accounting estimates being made. Significant judgements include: Going concern The going concern presumption depends principally on the discovery of economically viable mineral deposits and the availability of subsequent funding to extract the resource or alternatively the availability of funding to extend the Company's and Group's exploration activities. Share based payments In calculating the fair value at the grant date, the Black Scholes model requires us to estimate the inputs to this model, in particular in respect of volatility. This assessment is based on historical share price movements assuming these will continue into the future. Impairment review of asset carrying values Events or changes in circumstances can give rise to significant impairment charges or reversals of impairment in a particular year. Where the recoverable amounts of Group cash generating units are assessed by analyses of discounted cash flows, the resulting valuations are particularly sensitive to changes in estimates of long term commodity prices, exchange rates, operating costs, the grouping of assets within cash-generating units and discount rates. 4. Operating segments The Group has only one distinct operating segment, being that of mineral exploration. The Group's exploration activities are located in the Kingdom of Saudi Arabia (through the jointly controlled entity) and its administration and management is based in Cyprus. Cyprus Turkey Bulgaria Total 2012 Operating (loss)/profit (1,013) (95) 1 (1,107) Foreign exchange profit/(loss) 12 (18) (3) (9) (1,001) (113) (2) (1,116) Share of loss from jointly (612) controlled entity Loss before tax (1,728) Tax - Loss for the year (1,728) Total assets 2,235 66 3 2,304 Total liabilities 248 1 14 263 Depreciation of property, plant and - 1 - 1 equipment Cyprus Turkey Bulgaria Total 2011 Operating loss (1,330) (91) (3) (1,424) Foreign exchange profit/(loss) 6 (22) 3 (13) (1,324) (113) - (1,437) Share of loss from jointly (154) controlled entity Loss before tax (1,591) Tax (1) Loss for the year (1,592) Total assets 790 157 5 952 Total liabilities 209 25 17 251 Depreciation of property, plant and - 3 - 3 equipment 5. Other Income 2012 2011 Expenses recharged to jointly controlled entities (Note - 67 18.3) - 67 6. Expenses by nature 2012 2011 Exploration costs 93 426 Staff costs (Note 7) 59 133 Depreciation of property, plant and equipment (Note 10) 1 3 Warrants issue costs (Note 17) 66 56 Share based benefits to employees (Note 17) 67 101 Share of losses from jointly controlled entity (Note 612 154 18.2) Change in value of available-for-sale financial assets 33 7 (Note 13) Directors' fees and other benefits (Note 20.1) 358 196 Consultants' costs 192 83 Travelling expenses 43 65 Auditors' remuneration - audit current year 48 25 - audit previous year 15 - - other 17 15 Other expenses 115 381 1,719 1,645 Other income (Note 5) - (67) Operating loss 1,719 1,578 The Group's stage of operations as at the year-end and as at the date of approval of these financial statements have not yet met the criteria for capitalization of exploration costs. 7. Staff costs 2012 2011 Salaries 53 118 Social insurance costs and other funds 6 15 59 133 Average number of employees 2 4 8. Tax 2012 2011 Loss before tax (1,728) (1,591) Tax calculated at the applicable tax rates (245) (194) Tax effect of expenses not deductible for tax purposes 208 102 Tax effect of tax loss for the year 82 93 Tax effect of allowances and income not subject to tax (45) (28) Tax effect on exploration expenses taxed separately - 27 Defence tax - 1 Charge for the year - 1 The Company is resident in Cyprus for tax purposes. A deferred tax asset of GBP680,056 (2011: GBP598,232) has not been accounted for due to the uncertainty against future recoverability. Cyprus The corporation tax rate is 10%. Under certain conditions interest income may be subject to defence contribution at the rate of 15% (10% to 30 August 2011). In such cases this interest will be exempt from corporation tax. In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 20% for the tax years 2012 and 2013 and 17% for 2014 and thereafter (up to 31 August 2011 the rate was 15% and was increased to 17% for the period thereafter to 31 December 2011). Due to tax losses sustained in the year, no tax liability arises on the Company. Under current legislation, tax losses may be carried forward and be set off against taxable income of the five succeeding years. As at 31 December 2012, the balance of tax losses which is available for offset against future taxable profits amounts to GBP3,135,571 (2011: GBP3,036,815). Bulgaria Mediterranean Minerals (Bulgaria) EOOD, the 100% subsidiary of the Company, is resident in Bulgaria for tax purposes. The corporation tax rate is 10%. Due to tax losses sustained in the period, no tax liability arises on the Mediterranean Minerals (Bulgaria) EOOD. Under current legislation, tax losses may be carried forward and be set off against taxable income of the following five years. As at 31 December 2012, the balance of tax losses which is available for offset against future taxable profits amounts to GBP189,250 (2011: GBP186,996). Turkey Doğu Akdeniz Mineralleri Sanayi ve Ticaret Limited Şirket (Doğu Akdeniz Mineralleri), the 100% subsidiary of Mediterranean Minerals (Bulgaria) EOOD, and ultimately 100% subsidiary of the Company, is resident in Turkey for tax purposes. The corporation tax rate is 20%. Under local tax legislation, exploration costs are can only be set off against income from mining operations. As at 31 December 2012, the balance of exploration costs that is available for offset against future income from mining operations amount to GBP1,939,824 (2011: GBP1,845,087). 9. Loss per share The calculation of the basic and fully diluted loss per share attributable to the ordinary equity holders of the parent is based on the following data: 2012 2011 Net loss attributable to equity shareholders (1,728) (1,592) Average number of ordinary shares for the purposes of 443,124 361,851 basic loss per share (000's) Loss per share: Basic and fully diluted loss per share (pence) (0.39) (0.44) The effect of share options and warrants on losses per share is anti-dilutive. 10. Property, plant and Motor Furniture, Total equipment fixtures vehicles and office equipment The Group Cost At 1 January 2011 72 21 93 Disposals (24) - (24) Exchange difference on translation (17) (8) (25) of subsidiaries At 31 December 2011 / 1 January 31 13 44 2012 Disposals - (2) (2) At 31 December 2012 31 11 42 Accumulated Depreciation At 1 January 2011 56 10 66 Charge for the year 2 1 3 Disposals (24) - (24) Exchange difference on translation of (3) - (3) subsidiaries At 31 December 2011 / 1 January 31 11 42 2012 Charge for the year - 1 1 Disposals - (2) (2) At 31 December 2012 31 10 41 Net Book Value at 31 December - 1 1 2012 Net Book Value at 31 December - 2 2 2011 The above property, plant and equipment are located in Turkey and Saudi Arabia. The Company has no property, plant and equipment. 11. Intangible assets The Group and Company Goodwill Cost 364 At 1 January 2011, 31 December 2011 and 31 December 2012 Impairment At 1 January 2011, 31 December 2011 and 31 December 2012 (364) Net Book Value At 1 January 2011, 31 December 2011 and 31 December 2012 - The goodwill arose on the acquisition of Mediterranean Minerals (Bulgaria) EOOD in 2006 and was impaired in the year of acquisition of the company. 12. Investments 12.1 Fixed asset investments The Company 2012 2011 Cost At 1 January 1 721 Disposals - (720) At 31 December 1 1 Provision for impairment At 1 January - 720 Reversal of impairment - (720) At 31 December - - Net Book Value 1 1 Subsidiary companies Date of Country of Effective acquisition/ incorporation proportion of incorporation shares held Mediterranean Minerals (Bulgaria) 08/11/2006 Bulgaria 100%-Direct EOOD Doğu Akdeniz Mineralleri Sanayi ve 08/11/2006 Turkey 100%-Indirect Ticaret Limited Şirket On 8 November 2006, the Company entered into an agreement to acquire from EMED Mining Public Limited the whole of the issued share capital of Mediterranean Minerals (Bulgaria) EOOD, a company incorporated in Bulgaria, in consideration for the issue of 29,999,998 ordinary shares in the Company. Mediterranean Minerals (Bulgaria) EOOD owns 100% of the share capital of Doğu Akdeniz Mineralleri ("Dogu"), a private limited liability company incorporated in Turkey, engaging in activities for exploration and developing of natural resources. In July 2011, KEFI Minerals completed the sale the Company's Artvin Project in north-eastern Turkey to a Turkish mining company. The Artvin Project comprised 15 Exploration Licences (totalling 254km2) located in the Eastern Pontide Belt in north-eastern Turkey. Kackar Madencilik San. Tic. Ltd, KEFI Mineral's subsidiary holding these licences, was sold in return for a cash payment of US$100,000 (GBP61,957) and a 1% Net Smelter Royalty on all future mineral production from the Artvin licences. 12.2 Investment in joint ventures 2012 2011 The Group At 1 January 181 181 Retranslation of investment (16) - 115 181 Less share of loss of joint venture (98) - At 31 December 67 181 The Company At 1 January/31 December 181 181 Joint venture Date of Country of Effective acquisition/ incorporation proportion incorporation of shares held Gold and Minerals Co. Limited (G&M) 04/08/2010 Saudi Arabia 40%-Direct 13. Financial assets at fair value through profit or loss 2012 2011 The Group and the Company On 1 January 43 - Additions - 50 Change in value of available-for-sale financial assets (33) (7) On 31 December 10 43 The Company successfully divested four Licences in July 2011 to AIM listed Ariana Resources (AIM:AAU) for a nominal cash payment of 10,000 Turkish Lira, 910,747 new ordinary shares in Ariana as consideration for the acquisition of relevant mineral exploration data and drill core samples and a Net Smelter Royalty ("NSR") of 2%. The NSR is payable by Ariana's wholly owned Turkish subsidiary Galata Madencilik San. ve Tic. Ltd. ("Galata") to KEFI Mineral's Turkish Subsidiary, Dogu, on commercial production of any mineral from the licences. No value has been attributed in these financial statements for the NSRs. 14. Trade and other receivables 2012 2011 The Group Trade receivables 1 3 Amount receivable from Saudi Arabia Joint Venture (Note 249 - 20.3) Amount receivable from Joint Venture partner (Note 20.3) - 39 VAT 46 31 Deposits and prepayments 6 13 302 86 2012 2011 The Company Trade receivables - 3 Amount receivable from Saudi Arabia Joint Venture (Note 249 - 20.3) 249 3 Amounts owed by group companies total GBP78,000 (2011: GBP206,000). Balances have been fully provided for due to the uncertainty over the timing of future recoverability. 15. Cash and cash equivalents 2012 2011 The Group Cash at bank and in hand 1,924 640 The Company Cash at bank and in hand 1,910 611 16. Share capital Number Share Share Total of Capital premium shares '000 Issued and fully paid At 1 January 2011 331,317 3,311 1,697 5,008 Issued 4 January 2011 at GBP0.0125 1,670 16 4 20 Issued 28 January 2011 at GBP0.0314 1,150 12 25 37 Issued 21 February 2011 at GBP0.05 26,000 260 1,040 1,300 Issued 5 March 2011 at GBP0.0288 1,296 13 24 37 Issued 5 March 2011 at GBP0.0125 1,800 18 5 23 Issued 5 March 2011 at GBP0.016 684 7 4 11 Issued 6 April 2011 at GBP0.016 563 6 3 9 Issued 20 June 2011 at GBP0.0122 500 5 1 6 Issued 7 November 2011 at GBP0.0472 200 2 7 9 Share issue costs - - (91) (91) At 31 December 2011 365,180 3,650 2,719 6,369 Issued 17 February 2012 at GBP0.03 61,666 617 1,233 1,850 Issued 6 July 2012 at GBP0.023 42,000 420 546 966 Issued 1 November 2012 at GBP0.03 2,500 25 50 75 Share issue costs - - (109) (109) At 31 December 2012 471,346 4,712 4,439 9,151 Issued capital 2012 On 17 February 2012, 61,666,667 shares of GBP 0.01 were issued at a price of GBP 0.03. Upon the issue, an amount of GBP 1,233,333 was credited to the Company's share premium reserve. On 6 July 2012, 42,000,000 shares of GBP 0.01 were issued at a price of GBP 0.023. Upon the issue, an amount of GBP 546,000 was credited to the Company's share premium reserve. On 1 November 2012, 2,500,000 shares of GBP 0.01 were issued at a price of GBP 0.03. Upon the issue, an amount of GBP 50,000 was credited to the Company's share premium reserve. 2011 On 4 January 2011, 1,670,000 shares of GBP 0.01 were issued at a price of GBP 0.0125. Upon the issue, an amount of GBP 4,000 was credited to the Company's share premium reserve. On 28 January 2011, 1,150,000 shares of GBP 0.01 were issued at a price of GBP 0.0314. Upon the issue, an amount of GBP 25,000 was credited to the Company's share premium reserve. On 21 February 2011, 26,000,000 shares of GBP 0.01 were issued at a price of GBP 0.05. Upon the issue, an amount of GBP 1,040,000 was credited to the Company's share premium reserve. On 5 March 2011, 1,296,456 shares of GBP 0.01 were issued at a price of GBP 0.0288. Upon the issue, an amount of GBP 24,000 was credited to the company's share premium reserve. On the same day, 1,800,000 shares of GBP 0.01 were issued at a price of GBP 0.0125. Upon the issue, an amount of GBP 5,000 was credited to the Company's share premium reserve. Similarly on the same day, 684,375 shares of GBP 0.01 were issued at a price of GBP 0.016. Upon the issue, an amount of GBP 4,000 was credited to the Company's share premium reserve. On 6 April 2011, 562,500 shares of GBP 0.01 were issued at a price of GBP 0.016. Upon the issue, an amount of GBP 3,000 was credited to the Company's share premium reserve. On 20 June 2011, 500,000 shares of GBP 0.01 were issued at a price of GBP 0.0122. Upon the issue, an amount of GBP 1,000 was credited to the Company's share premium reserve. On 7 November 2011, 200,000 shares of GBP 0.01 were issued at a price of GBP 0.0472. Upon the issue, an amount of GBP 7,000 was credited to the Company's share premium reserve. Warrants 2012 On 20 February 2012, the Company issued 2,916,667 warrants to subscribe for new ordinary shares of GBP 0.01 each at GBP 0.03 per share. 2011 On 22 February 2011, the Company issued 780,000 warrants to subscribe for new ordinary shares of GBP0.01 each at GBP 0.05 per share. Details of warrants outstanding as at 31 December 2012: Grant date Expiry date Exercise Number of price warrants 000's 8 October 2010 19 October 2013 1.25p 830 22 February 21 February 2016 5p 780 2011 20 February 19 February 2017 3p 2,917 2012 4,527 The Company has issued warrants to advisers to the Group. All warrants, except those noted below expire five years after grant date and are exercisable at the exercise price. Number of warrants 000's Outstanding warrants at 1 January 2012 1,610 - granted 2,917 Outstanding warrants at 31 December 2012 4,527 The estimated fair values of the warrants were calculated using the Black Scholes option pricing model. The inputs into the model and the results are as follows: 20 Feb 12 22 Feb 11 8 Oct 10 Closing share price at issue date 3.19p 7.5p 2.04p Exercise price 3p 5p 1.25p Expected volatility 84.6% 162% 167.5% Expected life 5yrs 5yrs 3yrs Risk free rate 5% 4.75% 2.25% Expected dividend yield Nil Nil Nil Discount factor 0% 0% 50% Estimated fair value 2.26p 7.12p 0.54p Expected volatility was estimated based on the likely range of volatility of the share price. For 2012, the impact of issuing warrants is a net charge to income of GBP66,000 (2011:GBP56,000). At 31 December 2012, the equity reserve recognized for share based payments, including warrants, amounted to GBP541,000 (2011: GBP385,000). 17. Share options reserve 2012 2011 Opening amount 385 396 Warrants issued costs (Note 6) 66 56 Share options issued to employees (Note 6) 67 101 Share options issued to directors (Note 6) 132 - Exercise of options (35) (73) Forfeit of options (74) (95) Closing amount 541 385 Details of share options outstanding as at 31 December 2012: Grant date Expiry date Exercise Number of shares price 000's 18 December 18 December 4p 14,000 2006 2014 12 March 2007 11 March 2013 3.5p 250 24 June 2008 23 June 2014 3.25p 50 12 June 2009 11 June 2014 2.4p 8,385 28 February 27 February 0.71p 450 2011 2016 29 September 28 September 3.78p 1,000 2011 2016 13 September 12 September 4p 14,800 2012 2018 38,935 Weighted average ex. Number of shares price 000's Outstanding options at 31 December 2011 26,335 - granted 17,500 - exercised 4.3p (2,500) - cancelled/forfeited (2,400) Outstanding options at 31 December 2012 38,935 The Company has issued share options to directors, employees and advisers to the Group. All options, except those noted below, expire six years after grant date and are exercisable at the exercise price in whole or in part no more than one third from the grant date, two thirds after two years from the grant date and the balance after three years from the grant date. On 18 December 2006, 12,000,000 options were issued which expired six years after the grant date, and were exercisable at any time within that period. On 18 December 2012, the expiry date of these options was extended to 18 December 2014, with the exercise price increased from 3p per Ordinary Share to 4p per Ordinary Share and at the same time and extra 2,000,000 options were issued at 4p per Ordinary Share, expiring on 18 December 2014. On 12 June 2009, 9,000,000 options were issued which expire five years after the grant date, and are exercisable at any time within that period. On 28 February 2011, 550,000 options were issued which expire five years after the grant date, and are exercisable at any time within that period. On 29 September 2011, 2,000,000 options were issued which expire five years after the grant date, and are exercisable at the exercise price in whole or in part no more than one half after one year from the grant date and one half two years from the grant date. On 13 September 2012, 15,500,000 options were issued which expire six years after the grant date, and are exercisable at the exercise price in whole or in part no more than one half after one year from the grant date and one half two years from the grant date. The option agreements contain provisions adjusting the exercise price in certain circumstances including the allotment of fully paid ordinary shares by way of a capitalisation of the Company's reserves, a sub division or consolidation of the ordinary shares, a reduction of share capital and offers or invitations (whether by way of rights issue or otherwise) to the holders of ordinary shares. The estimated fair values of the options were calculated using the Black Scholes option pricing model. The inputs into the model and the results are as follows: 18 13 29 Sep. 14 Jul. 28 12 24 12 Dec. Sep. 2011 2011 Feb. Jun. Jun. Mar. 2011 2009 2007 2012 2012 2008 Closing share price at 3.17p 3.63p 3.78p 5.15p 6.4p 2.00p 3.25p 3.30p issue date Exercise price 4.00p 4.00p 3.78p 5.15p 6.4p 2.40p 3.25p 3.50p Expected volatility 53.8% 56.9% 105.51% 133.46% 162.0% 238.5% 147.6% 68.06% Expected life 2 yrs 6 yrs 5 yrs 5 yrs 5 yrs 5 yrs 6 yrs 6 yrs Risk free rate 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.73% Expected dividend Nil Nil Nil Nil Nil Nil Nil Nil yield Discount factor 0% 0% 0% 0% 0% 55% 30% 30% Estimated fair value 0.08p 2.05p 2.99p 4.54p 5.98p 0.89p 2.13p 1.50p Expected volatility was estimated based on the likely range of volatility of the share price. For 2012, the impact of share option-based payments is a net charge to income of GBP265,000 (2011: GBP157,000). At 31 December 2012, the equity reserve recognised for share option-based payments, including warrants, amounted to GBP541,000 (2011: GBP385,000). 18. Joint ventures 18.1 Joint Venture with Centerra Gold (KB) Inc. On 22 October 2008, the Company entered into a Joint Venture Agreement ("Joint Venture Agreement") in respect of its 100%-owned Artvin Project with Centerra Gold (KB) Inc ("Centerra KB"), a wholly-owned subsidiary of Centerra Gold Inc. In August 2011, KEFI Mineral's subsidiary holding these licences, was sold in return for a cash payment of US$100,000 and a 1% Net Smelter Royalty on all future mineral production from the Artvin licences. 18.2 Joint Venture with Gold and Minerals Company name Date of Country of Effective incorporation incorporation proportion of shares held at 31 December Gold & Minerals Co. 3 August 2010 Saudi Arabia 40% Limited SAR'000 GBP'000 Amounts relating to the Joint 2012 2011 2012 2011 Venture Non-current assets 949 - 63 - Current assets 4,043 2,500 266 173 4,992 2,500 329 173 Non-current liabilities 19,146 - 1,261 0 Current liabilities 832 44 55 3 19,978 44 1,316 3 Net (liabilities)/assets (14,986) 2,456 (987) 170 Share capital 2,500 2,500 165 173 Accumulated losses (17,486) (44) (1,152) (3) (14,986) 2,456 (987) 170 Exchange rates SAR to GBP Closing rate 0.1647 0.1725 In May 2009, KEFI Minerals announced the formation of a new minerals exploration joint venture, Gold & Minerals Co. Limited ("G&M"), a limited liability company in Saudi Arabia, with leading Saudi construction and investment group Abdul Rahman Saad Al-Rashid & Sons Company Limited ("ARTAR"). KEFI Minerals is the operating partner with a 40% shareholding in G&M with ARTAR holding the other 60%. KEFI Minerals provides G&M with technical advice and assistance, including personnel to manage and supervise all exploration and technical studies. ARTAR provides administrative advice and assistance to ensure that G&M remains in compliance with all governmental and other procedures. G&M is treated as a joint venture and has been equity accounted and has reconciled its share in G&M's losses. The above figures reported in 2012 represent cumulative exploration activity incurred by G&M since its incorporation in 2009. The accounting policy for exploration costs recorded in the G&M audited financial statements is to capitalise qualifying expenditure and review for impairment, if applicable. This is in contrast to the Company's accounting policy relating to exploration costs which is to expense costs through profit and loss (Note 2). Consequently, exploration costs of G&M at 31 December 2012 amounting to SAR17.4 million have been adjusted to bring the figures in line with the Company's accounting policies. Up to 31 December 2011, the Group recorded its 40% share of all costs associated with exploration activities through profit or loss in the statement of comprehensive income and the Group recognised losses of GBP540,000. Consequently, a loss of GBP612,000 was recognised by the Group for the year ended 31 December 2012 representing the Group's share of losses in the year. As at 31 December 2012 KEFI Minerals owed ARTAR an amount of GBP25,000 (2011: receivable GBP39,000) - Note 20.4. As at 31 December 2012, G&M owed KEFI Minerals an amount of GBP249,000 (2011: nil) - Note 20.3. 18.3 Joint Venture with listed Centerra Gold Inc. KEFI Minerals previously had a joint venture with Centerra Gold Inc. ("Centerra") in the Bakir Tepe Project in Turkey. On 15 December 2010, Centerra withdrew from the joint venture which resulted in an income of GBP66,733 being recognised in the 2011 accounts. 19. Trade and other payables The Group 2012 2011 Accruals and other payables 141 130 Payable to shareholders (Note 20.2) 97 121 Payable to Joint Venture partner (Note 20.4) 25 - 263 251 The Company 2012 2011 Accruals and other payables 125 106 Payable to shareholders (Note 20.2) 97 121 222 227 The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above. 20. Related party transactions The following transactions were carried out with related parties: 20.1 Compensation of key management personnel The total remuneration of the Directors and other key management personnel was as follows: 2012 2011 Directors' fees * 189 153 Directors' other benefits 37 43 Share option-based benefits to directors (Note 17) 132 - 358 196 2012 2011 Other key management personnel fees - 57 * The Managing Director's salary up to 30 September 2012 was paid by the Company. As from 1 October 2012, and after an agreement with G&M, part of the salary of the Managing Director is paid directly by G&M. The Company has an on-going service agreement with EMED Mining Public Ltd for provision of management and other professional services (Note 20.5). Share-based benefits The Company has issued share options to directors and key management. All options, except those noted in Note 17, expire six years after grant date and are exercisable at the exercise price in whole or in part no more than one third from the grant date, two thirds after two years from the grant date and the balance after three years from the grant date. 20.2 Payable to 2012 2011 shareholders Name Nature of Relationship transactions EMED Mining Public Ltd Finance Shareholder 97 121 20.3 Receivable from related parties The Group 2012 2011 Name Nature of Relationship transactions Abdul Rahman Saad Finance Joint Venture - 39 Al-Rashid & Sons Partner Company Limited ("ARTAR") Gold & Minerals Co. Finance Joint Venture 249 - Limited 249 39 The Company 2012 2011 Name Nature of Relationship transactions Gold & Minerals Co. Finance Joint Venture 249 - Limited 249 - 20.4 Payable to related parties The Group 2012 2011 Name Nature of Relationship transactions Abdul Rahman Saad Finance Joint Venture 25 - Al-Rashid & Sons Partner Company Limited ("ARTAR") 25 - 20.5 Transactions with shareholders 2012 2011 Name Nature of Relationship transactions EMED Mining Public Ltd Provision of Shareholder 117 115 management and other professional services 21. Contingent liabilities In 2006, EMED Mining Public Ltd acquired a proprietary geological database that covers extensive parts of Turkey and Greece and also EMED transferred to the Company that part of the geological database that relates to areas in Turkey. Under the agreement, the Company has undertaken to make a payment of approximately GBP59,700 (AUD105,000) for each tenement it is subsequently awarded in Turkey and which was identified from the database. The maximum number of such payments required under the agreement is four, resulting in a contingent liability of up to GBP238,800. These payments are to be settled by issuing shares in the Company. To date, only one tranche of shares have been issued under this agreement in June 2007 for GBP43,750 (AUD105,000). 22. Relationship deed A Relationship Deed between EMED and the Company dated 7 November 2006, by which EMED agrees not to operate in Bulgaria and Turkey, and the Company agrees not to operate in Albania, Armenia, Azerbaijan, Cyprus, Greece, Hungary, Iran, Oman, Romania, Saudi Arabia, Serbia or Slovakia the "EMED Area". The Relationship Deed provides that EMED has the right to appoint one non-executive director of the Company. It also provides EMED with a right of first refusal in respect of funding any proposed mining or exploration project of the Company. The Relationship Deed provides that the Company shall refer any opportunity to conduct mining or exploration activity in the EMED Area to EMED, and EMED shall refer any such opportunity in Bulgaria or Turkey to the Company. EMED has since granted the Company the right to explore in Saudi Arabia in return for which it will receive, to the extent possible under legislation in Saudi Arabia, first right of refusal over participation in any projects developed (or not taken up) by the joint venture established on 28 May 2009 in that country with Abdul Rahman Saad Al-Rashid & Sons Company Limited. 23. Capital commitments The Group has no material capital or other commitments as at 31 December 2012. 24. Events after the reporting date There were no other material, after the period, events which have a bearing on the understanding of the financial statements. 25. Adoption of new and revised International Financial Reporting Standards (IFRSs) During the current year the Company adopted all the new and revised International Financial Reporting Standards (IFRS) as adopted by EU that are relevant to its operations and are effective for accounting periods beginning on 1 January 2012. This adoption did not have a material effect on the accounting policies of the Company. At the date of approval of these financial statements, standards and interpretations were issued by the International Accounting Standards Board which were not yet effective. Some, but not all of these were adopted by the European Union. The Board of Directors expects that the adoption of these accounting standards in future periods will not have a material effect on the financial statements of the Company. At the date of approval of these financial statements the following accounting standards were issued by the International Accounting Standards Board but were not yet effective: (i) Standards and Interpretations adopted by the EU New standards * IFRS 10 ''Consolidated Financial Statements'' (effective for annual periods beginning on or after 1 January 2014 for EU companies). * IFRS 11 ''Joint Arrangements'' (effective for annual periods beginning on or after 1 January 2014 for EU companies). * IFRS 12 ''Disclosure of Interests in Other Entities'' (effective for annual periods beginning on or after 1 January 2014 for EU companies). * IFRS 13 ''Fair Value Measurement'' (effective for annual periods beginning on or after 1 January 2013). Amendments IFRS Interpretations Committee * Amendments to IFRS 1 - Severe Hyperinflation and Removal of Fixed Dates for First-Time Adopters (effective for annual periods beginning on or after 1 January 2013). * IFRS 7 (Amendment) Financial Instruments: Disclosures - ''Offsetting Financial Assets and Financial Liabilities'' (effective for annual periods beginning on or after 1 January 2013). * IFRS 9 ''Financial Instruments'' (issued 12 November 2009) and subsequent amendments (amendments to IFRS 9 and IFRS 7 issued 16 December 2011) (effective for annual periods beginning on or after 1 January 2015). * Amendments to IAS 1, ''Presentation of items of other Comprehensive Income'' (effective for annual periods beginning on or after 1 July 2012). * Amendments to IAS 12 - ''Deferred tax'': Recovery of Underlying Assets: (effective for annual periods beginning on or after 1 January 2013). * Amendments to IAS 19 - ''Employee Benefits'' (amendments) (effective for annual periods beginning on or after 1 January 2013). * IAS 27 (Revised): ''Consolidated and Separate Financial Statements'' (effective for annual periods beginning on or after 1 January 2014 for EU companies). * IAS 28 (Revised): ''Investments in Associates'' (effective for annual periods beginning on or after 1 January 2014 for EU companies). * Amendment to IAS32 ''Offsetting Financial Assets and Financial Liabilities'' (effective for annual periods beginning on or after 1 January 2014). New IFRICs * IFRIC 20: ''Stripping Costs in the Production Phase of a Surface Mine'' (effective for annual periods beginning on or after 1 January 2013). (ii) Standards and Interpretations not adopted by the EU New standards * IFRS 9 ''Financial Instruments'' issued in November 2009 and amended in October 2010 introduces new requirements for the classification and measurement of financial assets and financial liabilities and for derecognition. (effective for annual periods beginning on or after 1 January 2015). Amendments * Improvements to IFRSs 2009-2011 issued in May 2012 (effective for annual periods beginning on or after 1 January 2013). * Transition Guidance for IFRS 10, 11 & 12 (effective for annual periods beginning on or after 1 January 2013). * Investment Entities amendments to IFRS 10, IFRS 12, and IAS 27 (effective for annual periods beginning on or after 1 January 2014).

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