Final Results

RNS Number : 6625K

Obtala Resources PLC

23 April 2010

 



OBTALA RESOURCES PLC ("Obtala" or the "Company")

Final Results

Obtala Resources plc ("Obtala") (AIM:OBT), the UK resources investment and development company, is pleased to announce its audited final results for the year ending 31 December 2009.

A copy of the Annual Report and Accounts and Notice of AGM is being posted to shareholders shortly and will be available from the Company's website - www.obtalaresources.co.uk.

Highlights

·     Gains on investing activities of £5.7 million (2008: nil) realising net profit of £1.8 million after tax, impairment and expenses (2008: £0.2 million loss)

·     Investment in Kopane Diamonds Developments plc generated a net gain of £5.7 million comprising £2.4 million realised and a further £3.3million of unrealised gains recognised as at 31 December 2009

·     Acquisition of 60% shareholding in Montara Continental Limited with an interest in 20,000 hectares of agricultural land in southern Tanzania

·     Post year end completion of Sierra Leone Hard Rock Limited acquisition settled by way of Obtala shares with a value of £4.3million for an estimated net book value of assets of £14.8million. Operations re-commenced in February 2010

·     Acquisition of 15% interest in Central China Goldfields plc

·     Cash reserves of £5.0 million

·     Successful implementation of new complimentary investment strategy, generating positive returns

F. Scolaro Chairman commented: "Obtala Resources was presented with significant hurdles in 2009 which were overcome positively, setting a new route forward to welcome 2010 into a more positive, productive and cash generative year".

Chairman's Statement

Following on from a successful listing on AIM in 2008, I am pleased to report the subsequent progress and development of Obtala Resources plc ("Obtala", "Company" or "Group") into an established mineral exploration and development group.

Obtala has continued its primary focus on mineral exploration in Tanzania but during 2009 has also diversified into investment activities, holding strategic interests in other global mineral exploration and development companies. 

Financial results

The current year was difficult for many exploration companies and given the hardships of the recent economic climate I am pleased with the overall performance of the Group. The Group generated a profit after tax of £1.8 million for the year to 31 December 2009 (period ended 31 December 2008:loss of £0.2 million), which included gains of £5.7 million on its investment activities (2008:nil). Cash and cash equivalents amounted to £5.0 million at the year end (2008:£3.2 million) and the Group also held liquid investments with a fair value of £5.1 million (2008:nil). The net equity attributable to the shareholders of Obtala amounted to £30.3 million (2008:£28.3 million). A foreign exchange loss of £2.4 million was recognised directly in other comprehensive income during the year (2008:gain of £7.5million) due to the retranslation of USD denominated assets. 

The directors reviewed the carrying value of the intangible licences and recognised an impairment of £1.8 million (2008:nil), mainly in relation to copper and gold licences. The carrying value of the intangible exploration licences has also decreased by £2.4 million (2008: gain of £7.5 million) during the year due to the foreign exchange movements. Capitalised exploration and evaluation expenditure was £0.6 million (2008:£0.9 million), additions were £0.2 million (2008:£17.1 million) and the year end carrying value for intangible licences was £21.6 million (2008:£25.2 million).

Obtala raised gross additional funds totalling £2.6 million in the year through two private placings of 9,450,000 and 5,722,223 new ordinary shares at 17p and 18p respectively.

Corporate investing activities

Obtala has augmented its pure exploration and development activities with complementary investment activities, focusing on opportunities in the natural resources sector. This has enabled Obtala to take advantage of investments in undervalued resource assets and to exploit potential synergies and strategic alliance opportunities. Whilst the Group has traded in numerous equity and derivative investments in order to enhance shareholder value, its primary investment is in the combination of equity and derivative instruments that Obtala holds in Kopane Diamonds Developments plc ("Kopane").

Kopane

In March 2009 Obtala acquired a 23.0 per cent interest in the ordinary share capital of Kopane, an AIM quoted diamond mining and exploration company. I am pleased to report that our investment has delivered a good return and through various market transactions has realised a gain of £2.4 million from the disposal of a 12 per cent interest in shares with further unrealised gains of £3.1 million recognised in the income statement in respect of equity and derivative financial instruments.  At the year end the Group held a direct equity investment of 11.1 per cent of the ordinary share capital and an indirect interest of 14.7 per cent through a derivative financial instrument. The realised funds are being used to undertake further exploration on the Tanzanian exploration projects and to develop our newly acquired subsidiaries Montara Continental Limited ("Montara"), and Sierra Leone Hard Rock Limited, which was acquired after the balance sheet date. Obtala remains committed to the future of Kopane and remains its largest shareholder.

Acquisition of Montara

In September 2009, we announced the successful acquisition of a controlling 60 per cent shareholding in Montara, a privately held East African agricultural and energy-focused company which currently holds an interest in agricultural farm land in Tanzania, with a Tanzanian partner, and also holds coal exploration licences in southern Tanzania.

The addition of Montara as a subsidiary allows Obtala to add coal exploration licences to the existing mineral asset portfolio and diversify into the agriculture sector. This will firmly place Obtala as a multi-commodity resource company positioned to benefit from and build on its local relationships in East Africa.

Acquisition of Sierra Leone Hard Rock Limited (subsequent to the year end)

In January 2010, Obtala acquired the entire issued share capital of Sierra Leone Hard Rock Limited ("SLHR") and its wholly owned subsidiary Sierra Leone Hard Rock (SL) Limited. This acquisition gives Obtala access to four diamond mining licences, covering an area of 162.40 km², seven exploration licences, covering an area of 2,590.75 km² and net assets with a carrying value of £14.82 million per the last financial statements to 30 June 2009. Consideration for the acquisition was satisfied by issuing 21,170,422 new ordinary shares in Obtala equivalent to 9.9 per cent of its enlarged issued share capital following completion. The share issue was equal to a total consideration value of £4,260,547.

The Konoma Project, where the four mining licences are held, serves as the headquarters for the company's diamond mining and prospecting operations, and is located in north-eastern Sierra Leone, approximately 220km east of Freetown, the capital city, and 58km northwest of Koidu. The project extends along the Lower Bafi River east of the confluence with the Sewa River and west of the Moinde River.

The previous owners of SLHR commenced extensive exploration activities in 2004 and commissioned the Konoma Mine 2Mtpa Dense Media Separation (DMS) plant, in June 2006. Up to the end of 2007, approximately 30,000 carats were recovered from over 40,000 stones at an average value per carat of US$408.

I believe that SLHR holds substantial potential in a recovering diamond market. The Konoma Project area has diamondiferous kimberlite dykes with potential surface strike lengths stretching to tens of kilometres. Should these kimberlite bodies be the source of the diamonds in the Bafi River then the grade could be very high. The mining of such bodies would be relatively simple and inexpensive.

Mining operations recommenced in early February 2010 and Obtala is currently in the process of taking the plant out of care-and-maintenance and commencing production. 

Directorate changes

The Obtala Board has been re-organised to four directors with the resignation of James Ede-Golightly on 31 May 2009 and the resignation of professor John Monhemius on 7 December 2009. I would like to take this opportunity to thank both of them for all their hard work as Non-executive Directors and their contribution to the early developments of the Group.

Outlook

I am confident that Obtala will make considerable progress in the coming year and in particular, that the diamond mining operations in Sierra Leone is expected to create further value for our shareholders. In addition Obtala will continue the exploration and development of its other mineral licences and other local assets.

Finally, I would like to thank my colleagues and our employees for all their hard work throughout the year for what has been a successful and eventful year.

Francesco Scolaro

Executive Chairman

22 April 2010

Contact:

Simon Rollason - Managing Director Frank Scolaro - Chairman www.obtalaresources.co.uk	[phone]
Obtala Resources plc
ZAI Corporate Finance Ltd
Ray Zimmerman/ Sarang Shah	[phone]

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2009

		Year ended	Period ended
	Notes	2009	2008
		£000	£000
Gain on investments	2	5,691	-
Administrative expenses	4	(918)	(406)
Impairment of intangible assets	4,11	(1,787)	-
OPERATING PROFIT/(LOSS)	4	2,986	(406)
Profit on disposal of licences	11	305	-
Finance income	6	14	207
Finance costs	7	(3)	-
PROFIT/(LOSS) BEFORE TAXATION		3,302	(199)
Taxation	8	(1,477)	(16)
PROFIT/(LOSS) FOR THE YEAR		1,825	(215)
Other comprehensive income:
Exchange differences on retranslation of foreign operations		(2,430)	7,452
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE PARENT		(605)	7,237
EARNINGS/(LOSS) PER SHARE
Basic and diluted (pence)	9	0.97	(0.15)

The profit/(loss) for the year arises from the Group's continuing operations.

The comparative figures are for the period 1 August 2007 to 31 December 2008.

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2009

Group

	Share capital	Share premium	Merger reserve	Foreign exchange reserve	Share based payment reserve	Retained (deficit)/ earnings	Total attribu-table to owners of parent
	£000	£000	£000	£000	£000	£000	£000
At 1 August 2007	-	-	-	-	-	-	-
Loss for the period	-	-	-	-	-	(215)	(215)
Exchange gains on retranslation of foreign operations	-	-	-	7,452	-	-	7,452
Total comprehensive income for the period	-	-	-	7,452	-	(215)	7,237
Issue of shares	1,775	3,325	16,400	-	-	-	21,500
Expenses on issue of shares	-	(497)	-	-	-	-	(497)
Share based payment	-	-	-	-	23	-	23
At 31 December 2008	1,775	2,828	16,400	7,452	23	(215)	28,263
Profit for the year	-	-	-	-	-	1,825	1,825
Exchange losses on retranslation of foreign operations	-	-	-	(2,430)	-	-	(2,430)
Total comprehensive income for the year	-	-	-	(2,430)	-	1,825	(605)
Issue of shares	152	2,485	-	-	-	-	2,637
Expenses on issue of shares	-	(23)	-	-	-	-	(23)
Share based payment	-	-	-	-	66	-	66
At 31 December 2009	1,927	5,290	16,400	5,022	89	1,610	30,338

Company			Attributable to the owners of the parent
	Share capital	Share premium		Merger reserve	Share based payment reserve	Retained (deficit)/ earnings	Total equity
	£000	£000		£000	£000	£000	£000
At 20 December 2007	-	-		-	-	-	-
Loss for the period	-	-		-	-	(57)	(57)
Total comprehensive income for the period	-	-		-	-	(57)	(57)
Issue of shares	1,775	3,325		16,400	-	-	21,500
Expenses on issue of shares	-	(497)		-	-	-	(497)
Share based payment	-	-		-	23	-	23
At 31 December 2008	1,775	2,828		16,400	23	(57)	20,969
Profit for the year	-	-		-	-	3,284	3,284
Total comprehensive income for the year	-	-		-	-	3,284	3,284
Issue of shares	152	2,485		-	-	-	2,637
Expenses on issue of shares	-	(23)		-	-	-	(23)
Share based payment	-	-		-	66	-	66
At 31 December 2009	1,927	5,290		16,400	89	3,227	26,933

STATEMENTS OF FINANCIAL POSITION                                                  Company number 06458554

For the year ended 31 December 2009

		Group	Group	Company	Company
		2009	2008	2009	2008
	Notes	£000	£000	£000	£000
ASSETS
Non-current assets
Investments in subsidiaries	10	-	-	20,784	19,805
Intangible exploration and evaluation assets	11	21,626	25,167	-	-
Property, plant and equipment	12	135	66	16	20
Total non-current assets		21,761	25,233	20,800	19,825
Current assets
Trade and other receivables	13	173	37	120	15
Financial investment assets	14	5,133	15	4,504	15
Cash and cash equivalents	15	5,010	3,184	3,684	1,371
Total current assets		10,316	3,236	8,308	1,401
TOTAL ASSETS		32,077	28,469	29,108	21,226
LIABILITIES
Current liabilities
Trade and other payables	16	(102)	(190)	(715)	(257)
Current tax liabilities		(543)	(16)	(366)	-
Financial investment liabilities	17	(160)	-	(160)	-
TOTAL CURRENT LIABILITIES		(805)	(206)	(1,241)	(257)
NON-CURRENT LIABILITIES
Deferred tax	8	(934)	-	(934)	-
Total non-current liabilities		(934)	-	(934)	-
TOTAL LIABILITIES		(1,739)	(206)	(2,175)	(257)
NET ASSETS		30,338	28,263	26,933	20,969
EQUITY
attributable to owners of the parent
Share capital	18	1,927	1,775	1,927	1,775
Share premium	19	5,290	2,828	5,290	2,828
Merger reserve	20	16,400	16,400	16,400	16,400
Foreign exchange reserve		5,022	7,452	-	-
Share based payment reserve		89	23	89	23
Retained earnings/(deficit)		1,610	(215)	3,227	(57)
TOTAL EQUITY		30,338	28,263	26,933	20,969

Approved by the board and authorised for issue on      22 April 2010

Frank Scolaro                                                                                    Michael Bretherton

Executive Chairman                                                                       Finance Director

STATEMENTS OF CASH FLOWS

For the year ended 31 December 2009

		Group	Group	Company	Company
		2009	2008	2009	2008
	Notes	£000	£000	£000	£000
OPERATING ACTIVITIES
Operating profit/(loss)		2,986	(406)	4,499	(199)
Adjustment for:
Depreciation of plant and equipment		28	12	11	5
Foreign exchange losses		19	92	16	-
Share based payments		66	23	66	23
Gains on investments		(5,691)	-	(5,522)	-
Impairment of intangible assets		1,787	-	-	-
Increase in trade and other receivables		(136)	(37)	(105)	(15)
(Decrease)/increase in trade and other payables		(88)	190	458	257
CASH (OUTFLOW)/INFLOW FROM OPERATIONS		(1,029)	(126)	(527)	71
Income taxes paid		(16)	-	-
Net cash (OUTFLOW)/ inflow from operations		(1,045)	(126)	(527)	71
INVESTING ACTIVITIES
Purchases of property, plant and equipment	12	(94)	(78)	(7)	(25)
Purchase of mining licences	11	(217)	(2,131)*	-	-
Expenditure on mining licences	11	(585)	(862)	-	-
Loan to subsidiary undertakings		-	-	(920)	(1,805)
Finance income		14	207	14	142
Finance expense		(3)	-	(3)	-
Proceeds from disposal of financial investment assets		5,137	-	5,137	-
Purchase of financial investment assets		(3,951)	(15)	(3,951)	(15)
Net cash INFLOW/(outflow) from investing activities		301	(2,879)	270	(1,703)
FINANCING ACTIVITIES
Proceeds from issue of share capital	18	2,637	6,500	2,637	3,500
Expenses of issue of share capital	19	(23)	(497)	(23)	(497)
Net cash inflow from financing activities		2,614	6,003	2,614	3,003
INCREASE IN CASH AND CASH EQUIVALENTS		1,870	2,998	2,357	1,371
Cash and cash equivalents at beginning of period		3,184	-	1,371	-
Effect of foreign exchange rate variation		(44)	186	(44)	-
CASH AND CASH EQUIVALENTS AT end of period		5,010	3,184	3,684	1,371

·     Excludes £15.0 million non-cash element of acquisition consideration settled in shares. 

NOTES TO THE FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

BASIs OF ACCOUNTING

The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted in the European Union ("IFRS") and the parts of the Companies Act 2006 applicable to companies reporting under IFRS.  The financial statements have been prepared under the historical cost convention except for financial investments and derivative trading assets and liabilities, which are included at fair value.

Obtala Resources plc is an AIM-quoted mineral exploration and investment company. The Company is incorporated and domiciled in England.

BASIS OF CONSOLIDATION

The consolidated financial statements incorporate those of Obtala Resources Plc and all of its subsidiary undertakings for the year.

As provided by section 408 of the Companies Act 2006, no income statement is presented for Obtala Resources Plc. The profit after tax dealt with in the income statement of the Company for the year ended to 31 December 2009 amounted to £3,284,000 (period to 31 December 2008: loss £57,000).

Subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than half of the voting rights. The existence and effects of potential voting rights are considered when assessing whether the Group controls the entity. Subsidiaries are fully consolidated from the date control passes.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.  The costs of an acquisition are measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.  Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at acquisition date irrespective of the extent of any minority interest. The difference between the cost of acquisition of shares in subsidiaries and the fair value of the identifiable net assets acquired is capitalised as goodwill and reviewed annually for impairment.Any deficiency of the cost of acquisition below the fair value of identifiable net assets acquired (i.e. discount on acquisition) is recognised directly in the income statement.

The purchase of the entire share capital of Mindex Invest Ltd and Uragold Ltd by Obtala Limited and the purchase of Montara Continental Limited by Mindex Invest Ltd have all been treated as purchases of assets.  Assets held by the respective companies at the time of their acquisition have been recognised at cost. These transactions are outside the scope of IFRS 3 Business Combinations, because the entities acquired do not meet the definition of a business at the date of acquisition.

Intra-group transactions

All intra-group transactions, balances, and unrealised gains on transactions between Group companies are eliminated on consolidation. Subsidiaries' accounting policies are amended where necessary to ensure consistency with the policies adopted by the Group. All financial statements are made up to 31 December 2009.

INVESTMENTS IN SUBSIDIARIES

Investments in subsidiaries are stated in the parent company balance sheet at cost less provision for any impairment.

SEGMENTAL REPORTING

The reportable segments are identified by the Directors (who are considered to be the Chief Operating Decision Makers) by the way management has organised the firm. The Group operates within two separate operational divisions comprising exploration and development activities in Tanzania and investing activities in the UK.

The Directors review the performance of the Group based on total revenues and costs, allocated on a time basis, for these two divisions and not by any other segmental reporting.

 

Revenue recognition

Realised profits and losses on the disposal of investments is the difference between the fair value of the consideration received less any directly attributable costs on the sale and the carrying value of the investments at the start of the accounting period or acquisition date if later.

Unrealised profits and losses on the revaluation of investments is the movement in carrying value of investments between the start of the accounting period or acquisition date if later and the end of the accounting period.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Dividend income from investments is recognised when the shareholders' rights to receive payment have been established (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably).

Going concern

An assessment of going concern is made by the directors at the date the directors approve the annual financial statements, taking into account the relevant facts and circumstances at that date including:

·     Review of profit and cashflow forecasts for the year ahead

·     Review of anticipated revenues against forecast

·     Timing of cashflows

·     Any financial or operational risks

After making enquiries the directors have reasonable expectation that the Group have adequate resources to continue in operational existence for the foreseeable future, and that it is therefore appropriate to adopt the going concern basis in preparing the financial statements.  The directors have satisfied themselves that the Group is in a sound financial position and will be able to meet the Group's foreseeable cash requirements.

FOREIGN CURRENCIES

Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency').  The consolidated financial statements are presented in sterling, which is the Company's functional and presentation currency.

Transactions and balances

In individual companies, transactions in foreign currencies are initially recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date.   Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in the income statement for the year.

In the consolidated financial statements, the assets and liabilities of subsidiaries with different functional currencies to the Company are retranslated into sterling at the rate ruling at the balance sheet date.  The results and cash flows are retranslated into sterling using average rates of exchange.  Exchange adjustments arising when the opening net assets and the results for the year are translated into sterling are taken directly to a foreign exchange reserve and reported directly in equity.  Exchange gains and losses arising on long-term intragroup foreign currency loans used to finance the subsidiary undertakings, which are deemed to be part of the net investment in the subsidiary, are also taken directly to equity.  On disposal of a subsidiary with a different functional currency to the Company, the deferred cumulative exchange differences recognised in equity relating to that particular operation are recognised in the income statement.

Foreign currency translation rates:

	At 31  December  2009	Annual  average for year	At 31  December 2008	Annual average for period
US dollars	1.593	1.532	1.448	1.875
Tanzanian shilling	2,166	2,043	1,950	2,290

INTANGIBLE EXPLORATION AND EVALUATION ASSETS

All costs associated with mineral exploration and evaluation including the costs of acquiring prospecting licenses, rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource, are capitalised as intangible exploration and evaluation assets and subsequently measured at cost.  The costs are allocated to base mineral/gemstone groupings within a region ("field"), which are treated as cash-generating units ("CGUs")/projects because the underlying geology and risks and rewards of exploration within a field are considered to be similar. 

INTANGIBLE EXPLORATION AND EVALUATION ASSETS (continued)

If an exploration project is successful, the related expenditures will be transferred at cost to plant and equipment and amortised over the estimated life of the commercial ore reserves on a unit of production basis.

Where a project does not lead to the discovery of commercially viable quantities of mineral resources and is relinquished, abandoned, or is considered to be of no further commercial value to the Company, the related costs are written off to the income statement.

The recoverability of deferred exploration costs is dependent upon the discovery of economically viable ore reserves, the ability of the Group to obtain necessary financing to complete the development of ore reserves and future profitable production or proceeds from the extraction thereof.

PLANT AND EQUIPMENT

Plant and equipment assets are stated at historical cost.

Depreciation is provided on all plant and equipment assets at rates calculated to write each asset down to its estimated residual value evenly over its expected useful life, as follows:

Motor vehicles                                                                 over 3 years

Fixtures and equipment                                               over 3 years

Computer and IT equipment                                      over 3 years

LAND AND BUILDINGS

Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the statement of financial position at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Depreciation is recognised so as to write off the cost of the assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. For leasehold land and buildings, the useful life is the period of the lease. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. Freehold land is not depreciated.

IMPAIRMENT OF EXPLORATION AND EVALUATION ASSETS AND PROPERTY, PLANT AND EQUIPMENT

Whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, an asset is reviewed for impairment.  An asset's carrying value is written down to its estimated recoverable amount (being the higher of the fair value less costs to sell and value in use) if that is less than the asset's carrying value.  Impairment losses are recognised in the income statement immediately.

Impairment reviews for intangible exploration and evaluation assets are carried out on the basis of mineral/gemstone fields with each field representing a single CGU.  An impairment review is undertaken when indicators of impairment arise but typically when one of the following circumstances applies:

·     unexpected geological occurrences that render the resources uneconomic;

·     title to the asset is compromised;

·     variations in mineral/gemstones prices that render the project uneconomic;

·     variations in the foreign currency rates; and

·     the Group determines that it no longer wishes to continue to evaluate or develop the field.

FINANCIAL ASSETS AND LIABILITIES

The Group classifies its financial assets and liabilities as follows:

Trade and other receivables

Trade and other receivables do not carry any interest and are initially recognised at fair value.  They are subsequently measured at amortised cost using the effective interest rate method, less any provision for impairment.

Impairment provisions are recognised when there is objective evidence that the Group will be unable to collect all of the amounts due under the terms of the receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable.

Financial assets at FAIR VALUE THROUGH THE PROFIT OR LOSS ("FVTPL")

Financial assets are classified at fair value through profit or loss when either they are held for trading or when they are initially designated at fair value through the profit or loss.

The fair value is derived from the closing bid-market price at the reporting date. Gains and losses arising from changes in fair value are recognised directly in the income statement.

A financial asset is classified as held for trading if:

·     it has been acquired principally for the purpose of selling in the near future; or

·     it is part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

·     it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

·     such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

·     the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

·     it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Derivative Financial Assets and Liabilities

Purchases and sales of derivative financial instruments are recognised at the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group only trades in derivative financial instruments that are quoted in active markets and the related financial assets and liabilities are stated at fair values based on the contracted actual costs and the quoted market prices of those instruments. Changes in the fair value of derivative financial instruments are recognised in the income statement as they arise.

Trade and other payables

Trade and other payables are not interest bearing and are initially recognised at fair value.  They are subsequently measured at amortised cost using the effective interest rate method.

Cash and cash equivalents

Cash and cash equivalents comprise cash at hand and deposits on a term of not greater than 3 months.

Share capital

Ordinary shares are classified as equity.  Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax from proceeds.

LEASES

Leases where the lessor retains substantially all of the risks and rewards of ownership are classified as operating leases and the rentals payments are charged to the income statement on a straight-line basis over the lease term.

SHARE BASED PAYMENTS

The share option programme entitles certain employees and Directors to acquire shares of the Company.  These options are granted by the Company.  The fair value of options granted is recognised as an employee expense with a corresponding increase in equity.  The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options.  The fair value of the options granted is measured using the Black Scholes valuation model, taking into account the terms and conditions under which the options were granted.  The amount recognised as an expense is adjusted to reflect the actual number of share options that vest.

PENSION COSTS

Contributions by the Group to personal pension schemes are charged to the income statement on a straight-line basis as they become due.

TAXATION

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax payable is based on taxable profit for the year. The Company's liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount 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 balance sheet liability method.

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based upon rates enacted and substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

CRITICAL ACCOUNTING ESTIMATES AND AREAS OF JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions that have the most significant effects on the carrying amounts of the assets and liabilities in the financial statements are those in relation to the impairment of intangible exploration and evaluation assets.

The Group is required to perform an impairment review, for each CGU/project, when facts and circumstances suggest that the carrying amount of the assets may exceed its recoverable amount.  The recoverable amount is based upon the Directors' judgements and are dependent upon the discovery of economically recoverable ore reserves, the ability of the Group to obtain necessary financing to complete development until the technical feasibility and commercial viability of extracting a mineral resource becomes demonstrable, at which point the value is estimated based upon the present value of the discounted future cash flows.

ADOPTION OF NEW AND REVISED STANDARDS

In the current year, the following new and revised Standards have been adopted and have affected the amounts reported in these financial statements.

Standards affecting presentation and disclosure

IAS 1 (revised 2007) Presentation of    Financial Statements - In the current year the Group has adopted IAS 1 (revised 2007), which introduces a statement of comprehensive income, which presents all items of income and expenses which are not recognised in the income statement. The Group has presented a single statement of comprehensive income for 2009 and 2008, including the income statement and other comprehensive income.

IFRS 8 Operating Segments - IFRS 8 is a disclosure standard. Adoption of this standard has not led to any changes in the Group's disclosure. The standard requires segmental reporting to be based on the information provided to the Chief Operating Decision Maker. The adoption of this standard has not had a significant impact on the Group's disclosures.

IFRS 7 Financial Instruments - Disclosures (Amendment) is a disclosure standard. The amendment requires enhanced disclosures about fair value measurement and liquidity risk and requires disclosure fair value measurement by level of fair value measurement hierarchy, which have been included in the financial statements.

The adoption of these Interpretations has not led to any changes in the Group's accounting policies.

ACCOUNTING STANDARDS AND INTERPRETATIONS NOT APPLIED

At the date of authorisation of these financial statements, the following standards and interpretations relevant to the Group that have not been applied in these financial statements were in issue but not yet effective or endorsed (unless otherwise stated):

		Effective Date
IFRS 2*	Share Based Payment (amendments)	1 July 2009
IFRS 8*	Operating Segments (amendments)	1 January 2010
IAS 1*	Presentation of Financial Statements (amendments)	1 January 2010
IAS 17* IAS7*	Leases (amendments) Statement of Cash Flows	1 January 2010 1 January 2010
IAS 24	Related Parties Disclosures (revision)	1 January 2011
IAS 32*	Financial Instruments: Presentation (amendments)	1 February 2010
IAS 36*	Impairment of Assets (amendments)	1 January 2010
IAS 38	Intangible Assets (amendments)	1 July 2009
IAS 39* IFRIC16* IFRIC17* IFRIC18* IFRIC14 IFRIC19 IFRS9	Financial Instruments: Recognition and Measurement (amendments) Hedges of a Net Investment in a Foreign Operation Distributions of Non-cash assets to Owners Transfers of Assets from Customers Amendment - Prepayments of a Minimum Funding Requirement Extinguishing Financial Liabilities with Equity Instruments Financial Instruments	1 July 2009 1 July 2009 1 July 2009 1 July 2009 1 January 2011 1 July 2010 1 January 2013

*endorsed by the EU.

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.

2. GAINs ON INVESTMENTS 

	Year ended 2009	Period ended 2008
GROUP	£000	£000
Gain on disposal of investments	2,357	-
Increase in fair value of financial investments	3,334	-
Revenues from investing activities	5,691	-

3. SEGMENTAL REPORTING

Segmental information is presented on the basis of the information provided to the chief operating decision maker ("CODM"), which is the board of directors.  

The Group is currently in the process of exploration and development of mineral projects, all of which were located in Tanzania during the year. In addition, the Group undertakes investing activities, which are based in the UK.

The Group's primary reporting segments are geographical segments, being the UK and Tanzania.

The following table shows the segment analysis of the Group's profit before tax for the year and net assets at 31 December 2009:

		Exploration and development -Tanzania	Investing activities - UK	Intra-group elimination	Total
		£000	£000	£000	£000
Income statement
Gains on investments		168	5,523		5,691
Management charges		594	-	(594)	-
Administrative expenses		(614)	(898)	594	(918)
Impairment of intangible assets		(1,787)	-	-	(1,787)
Segment operating (loss)/profit before interest		(1,639)	4,625	-	2,986
Profit on disposal of licences		305	-	-	305
Finance income		-	14	-	14
Finance expense		-	(3)	-	(3)
Profit before tax					3,302
Taxation					(1,477)
Profit after tax					1,825
NET ASSETS
Assets		23,698	12,356	(3,977)	32,077
Liabilities:
Current tax liability		(177)	(366)	-	(543)
Deferred tax liability		-	(934)	-	(934)
Other		(3,996)	(243)	3,977	(262)
Net assets		19,525	10,813	-	30,338
OTHER SEGMENT ITEMS
Depreciation		(19)	(10)	-	(29)
Foreign exchange loss		(2,430)	-	-	(2,430)
Capital expenditure:
Plant and equipment		87	7	-	94
Intangible exploration and evaluation assets		801	-	-	801

The following table shows the segment analysis of the Group's loss before tax for the period and net assets at 31 December 2008:

		Exploration and development-Tanzania	Investing activities - UK	Intra-group elimination	Total
		£000	£000	£000	£000
Income statement
Management charges		585	-	(585)	-
Administrative expenses		(604)	(387)	585	(406)
Segment loss before interest		(19)	(387)	-	(406)
Finance income		-	207	-	207
Loss before tax					(199)
Taxation					(16)
Loss after tax					(215)
NET ASSETS
Assets		26,014	5,031	(2,576)	28,469
Liabilities:
Current tax liability		-	(16)	-	(16)
Other		(2,679)	(87)	2,576	(190)
Net assets		23,335	4,928	-	28,263
Other segment items
Depreciation		(7)	(5)	-	(12)
Foreign exchange		7,452	-	-	7,452
Capital expenditure:
Plant and equipment		(53)	(25)	-	(78)
Intangible exploration and evaluation assets		862	-	-	862

4.  OPERATING PROFIT/(LOSS)

	Year  ended  2009	Period ended 2008
	£000	£000
Operating profit/(loss) is stated after charging:
Depreciation of plant and equipment	28	12
Staff costs (see note 5)	583	324
Professional and regulatory fees	128	89
Impairment of intangible assets (see note 11)	1,787	-
Foreign exchange loss/(gain) on operating activities	44	(186)
Operating lease rentals:
Land and buildings	52	13
Auditor's remuneration:
Audit services
- fees payable to the Company auditor for the audit of the parent and consolidated accounts	30	30
Fees payable to Company auditor for other services
- auditing the accounts of subsidiaries pursuant to legislation	5	13

5.  STAFF COSTS

	Year  ended  2009	Period ended 2008
	Number	Number
The average monthly number of persons (including directors) employed by the Group during the year was:
Administration and management	19	12
	£000	£000
The aggregate remuneration comprised:
Wages and salaries	441	270
Social security costs	64	28
Pension contributions	12	3
Share based payments	66	23
	583	324
Directors remuneration included in the aggregate remuneration above comprised:
Emoluments for qualifying services	277	125

Included above are emoluments of £159,000 (2008:£60,000) in respect of the highest paid director.

No pension contributions were made on behalf of the Directors.

6. FINANCE INCOME

	Year  ended  2009	Period ended 2008
The Group	£000	£000
Bank interest receivable	14	207

7. FINANCE COSTS

	Year  ended  2009	Period ended 2008
The Group	£000	£000
Hire purchase interest payable	3	-

8.  TAXATION

	Year  ended  2009	Period ended 2008
The Group	£000	£000
Current tax:
UK corporation tax on profit/loss of year/period	488	16
UK - Adjustments in respect of prior period	55	-
Deferred tax:
Origination and reversal of temporary differences	934	-
Tax on profit/loss on ordinary activities	1,477	16
The Group
Factors affecting tax charge for the year/period
The tax assessed for the year/period varies from the standard rate of corporation tax as explained below:
Profit/(loss) on ordinary activities before tax	3,302	(199)
Profit/(loss) on ordinary activities multiplied by the average rate of corporation tax of 28% (2008: 29.6%)	925	(59)
Effects of:
Expenses not deductible for tax purposes	522	55
Utilised tax losses from prior year	(25)	-
Unutilised tax losses in subsidiaries	-	25
Adjustments in respect of prior period	55	-
Other items	-	(5)
Tax charge for the year/PERIOD	1,477	16

The Group has estimated losses of £97,000 (2008: £89,000) available for carry forward against future profit.  

The movement in the year in the Group's net deferred tax position was as follows:

	Year  ended  2009	Period ended 2008
Deferred tax liabilities	£000	£000
At 1 January	-	-
Charge to income for the year	934	-
At 31 December	934	-

The deferred tax liability relates to unrealised gains generated on the Company's investment in Kopane and will only become due when the gain on investment is realised.

9.  EARNINGS PER SHARE

Basic earnings/loss per share is based on the net profit for the year of £1,825,000 (2008: loss of £215,000) attributable to equity holders of the parent related to the weighted average number of ordinary shares in issue during the year of 188,540,107 (2008: 142,997,104). The exercise price of share options in issue was above the Company's market price for the year and the options are anti-dilutive. Therefore, fully diluted loss per shareis the same as basic loss per share.

10.  INVESTMENTS IN SUBSIDIARIES

	Shares	Loans	Total
The Company	£000	£000	£000
Cost at 31 December 2008	18,000	1,805	19,805
Additions	-	979	979
Cost at 31 December 2009	18,000	2,784	20,784

There has been no impairment loss to investments in subsidiaries in the year.

At 31 December 2009 the Company has investments in subsidiaries where it holds 50% or more of the issued ordinary share capital of the following companies:

Undertaking	Sector	Country of incorporation	% of issued ordinary  share capital and voting rights
Obtala Limited 1	Holding Company	England & Wales	100.0
Obtala Resources (T) Limited 2	Resources	Tanzania	100.0
Mindex Invest Ltd. 2	Resources	British Virgin Islands	100.0
Uragold Ltd. 2	Holding Company	England & Wales	100.0
Uragold (T) Ltd 4	Resources	Tanzania	75.0
Montara Continental Limited 3	Resources	Seychelles	60.0
Montara Mozambique Limitada 5	Dormant	Mozambique	58.5
Montara Forest Limited 5	Dormant	Mozambique	58.5
Renholn Holdings Inc3	Dormant	British Virgin Islands	75.0

¹ Held directly by the Company

² Held by Obtala Limited

³ Held by Mindex Invest Ltd

⁴ Held by Uragold Ltd.

⁵ Held by Montara Continental Limited

Obtala Limited and Uragold Ltd. operate wholly or mainly in England & Wales; Mindex Invest Ltd., Obtala Resources (T) Limited, Uragold (T) Ltd., Montara Continental Limited, Montara Forest Limited, Montara Mozambique Limitada and Renholn Holdings Inc operate wholly or mainly in Tanzania.

All of the subsidiaries are included in the consolidated financial statements.

11.  INTANGIBLE EXPLORATION AND EVALUATION ASSETS

The Group	Mindex licences	Uragold licences	Montara Licences	Total licences
	£000	£000	£000	£000
COST AND BOOK VALUE AT 1 AUGUST 2007	-	-	-	-
Purchase of mining licences	15,957	1,174	-	17,131
Expenditure on exploration and evaluation	840	22	-	862
Foreign exchange differences	6,700	474	-	7,174
Cost and book value at 31 DECEMBER 2008	23,497	1,670	-	25,167
Purchase of mining licences	113	-	104	217
Disposal of mining licences	(145)	-	-	(145)
Expenditure on exploration and evaluation	572	1	12	585
Impairment charge for the year	(1,113)	(674)	-	(1,787)
Foreign exchange differences	(2,237)	(174)	-	(2,411)
Cost and book value at 31 December 2009	20,687	823	116	21,626

The above values of intangible exploration assets acquired represent the cash and non-cash consideration paid by the Group at the time of their acquisition plus any subsequent expenditure, net of any effects of foreign exchange and impairment charges.

Purchase of mining licences

Mindex Licences

During the year the Group completed an Acquisition and Option Agreement with RSR (Tanzania) Limited, a private Tanzania registered company, for the Busolwa gold project. The Busolwa Gold project is located in the Lake Victoria Goldfields within the south-eastern part of the Geita District in Tanzania and currently has active owner-operated small scale mining on the property.

Under the terms of the agreement Obtala will receive an initial 50 per cent interest in the licences covering the project area for a payment of £113,000. Obtala will then spend 10 months evaluating the project after which it has an option to acquire a further 10 per cent interest in the project for an additional US$150,000, or allow the option to lapse.

The total number of Mindex licences now stands at 27 (2008: 25) all of which are located in Tanzania.

Montara licences

On 14 September 2009 the group acquired 60% of the issued share capital of Montara Continental Limited for cash consideration of £184,000 of which £80,000 relates to land and £104,000 relates to licences. Montara Continental Limited holds four coal exploration licences and has two dormant subsidiaries, as well as Montara Land Company Limited, an agriculture-focused company with a 70% interest in 20,000 hectares of agricultural farm land, in association with Lutukira Mixed Farms Limited in Tanzania.

The licences comprise the Manda North licence and Kate 1, 2 & 3, all of which expire in July 2010 but are renewable. The total area under licence is 647.02 km2, of which the Kate group of licences cover a contiguous area of 458.93km2 to the west of Lake Rukwa in south western Tanzania. These properties lie to the west of the Namwele-Mkomolo Coalfield, where a small resource has been identified by historical explorers. Manda North covers an area of 188.09 km2 and is located in the Ludewa District, also within south western Tanzania, near the Mchuchuma-Katewaka Coalfield. This licence lies immediately adjacent to the coal properties licenced to the National Development Corporation (NDC), an economic development organisation established by the Tanzania government.  

Disposal of mining licences

Mindex Licences

On 13 March 2009 the Group completed an agreement with the AIM quoted company, Gemstones of Africa Group plc ("GOA"), under which GOA purchased an initial gross 12.5 per cent. interest in the Group's six emerald gemstone mining licences in the Manyara area of Tanzania with a £1 option to increase their interest by a further gross 12.5 per cent. to 25.0 per cent. in total.

The purchase and option consideration were settled in exchange for issuing the Group with shares equivalent to 5.0 per cent. of GOA's issued share capital equating to a quoted market value of £450,000, which after deduction of the associated capitalised costs of £145,000 resulted in a profit on disposal of the interest in the licences of £305,000 calculated on the basis that the option over the further 12.5 per cent. interest is exercised (profit on disposal would increase by £72,500 if the option is not exercised). The shares in GOA are included in financial investment assets and measured at fair value through profit or loss.

In order to exercise their option, GOA are required to have incurred exploration expenditures on these licence interests of not less than US$75,000 within 24 months of the agreement completion date.

Impairment

The Directors have considered the following factors when undertaking their impairment review of the intangible assets:

a)    Geology and lithology on each licence as outlined in the most recent CPRs (independent Competent Person's Reports from the mining and earth resources consultancy company, Wardell Armstrong International Limited)

b)   The expected useful lives of the licenses and the ability to retain the license interests when they come up for renewal

c)    Comparable information for large mining and exploration companies in the vicinity of each of the licenses

d)   History of exploration success in the regions being explored

e)   Local infrastructure

f)    Climatic and logistical issues

g)    Geopolitical environment

After considering these factors the Directors have chosen to make the following adjustments to the carrying value of the intangible exploration and evaluation assets as at 31 December 2009:

· A charge of £83,000 in Mindex relating to the expiry of five unexercised options it held to acquire gold licences in Tanzania.

· A charge of £674,000 in Uragold relating to the full impairment of three Copper licences which the Directors do not intend to renew in 2010.

· A charge of £1,030,000 relating to four Gold licences held in Mindex which the Directors do not intend to renew in 2010.

As at 31 December 2009 applications to renew four licences with a carrying value of £1.7 million had been submitted to the Tanzanian government but at the date of issuance of this report these renewals had not been completed. The Directors however, have no reason to believe the renewals will be unsuccessful.

12. PROPERTY, plant and equipment

	Land &  buildings	Motor vehicles	Fixtures & equipment	Computer & IT equipment	Total
The Group	£000	£000	£000	£000	£000
Cost
AT 1 AUGUST 2007	-	-	-	-	-
Additions	-	47	11	20	78
AT 31 DECEMBER 2008	-	47	11	20	78
Additions	80	-	7	7	94
Effects of foreign exchange	8	(5)	-	-	3
At 31 December 2009	88	42	18	27	175
Depreciation
AT 1 AUGUST 2007	-	-	-	-	-
Charge for the period	-	6	2	4	12
AT 31 DECEMBER 2008	-	6	2	4	12
Charge for the year	-	15	5	8	28
At 31 December 2009	-	21	7	12	40
Net book value
At 31 December 2009	88	21	11	15	135
At 31 December 2008	-	41	9	16	66
AT 1 AUGUST 2007	-	-	-	-	-

			Fixtures & equipment	Computer equipment	Total
The Company			£000	£000	£000
Cost
AT 20 DECEMBER 2007			-	-	-
Additions			5	20	25
AT 31 DECEMBER 2008			5	20	25
Additions			-	7	7
At 31 December 2009			5	27	32
Depreciation
AT 20 DECEMBER 2007
Charge for the period			1	4	5
AT 31 DECEMBER 2008			1	4	5
Charge for the year			2	9	11
At 31 December 2009			3	13	16
Net book value
At 31 December 2009			2	14	16
At 31 December 2008			4	16	20
AT 20 DECEMBER 2007			-	-	-

13.  TRADE AND OTHER RECEIVABLES

	Group	Group	Company	Company
	2009	2008	2009	2008
	£000	£000	£000	£000
Other receivables	151	16	114	8
Prepayments and accrued income	22	21	6	7
	173	37	120	15

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

14. financial investment assets

	Group	Group	Company	Company
	Quoted investments	Quoted investments	Quoted investments	Quoted investments
	2009	2008	2009	2008
	£000	£000	£000	£000
Financial assets carried at fair value through profit or loss
Equity investments	3,837	15	3,208	15
Derivative assets	1,296	-	1,296	-
	5,133	15	4,504	15

The summary of equity investments is as follows:

	Group	Group	Company	Company
	Quoted investments	Quoted investments	Quoted investments	Quoted investments
	2009	2008	2009	2008
	£000	£000	£000	£000
Cost and fair value at beginning of period	15	-	15	-
Additions at cost	4,391	15	3,942	15
Disposals	(2,773)	-	(2,773)	-
Increase in fair value	2,204	-	2,024	-
	3,837	15	3,208	15

Equity investments

Equity investments represent short-term investments in listed equity securities in mining and exploration companies which are treated as fair value through profit or loss.

The main investments the Group holds are its 11.8 per cent direct equity interest in Kopane Diamond Development plc ("Kopane"), an AIM listed mining company, and its 5 per cent direct equity interest in Gemstones of Africa Limited, whose shares were suspended from trading on AIM on 29 September 2009.

The fair value of the Kopane interest is based on the quoted market price. The shares of Gemstones of Africa were suspended as at 31 December 2009 but were re-admitted to trading in March 2010. The latest available price as at 29 September 2009 has been used to derive the fair value of this investment.

The Group realised a gain of £2,398,000 on the disposals of equity investments during the year.

Derivative assets

The Group only trades in securities and derivative financial instruments that are quoted in active markets and the related financial assets and liabilities are stated at fair values based on the contracted actual costs and the quoted market prices of those instruments at the reporting date.  All the above financial assets and liabilities are due in less than one year.

The principal classes of derivative financial instruments in which the Group traded during the year are contracts for difference.

The Group is exposed to market price risk in respect of its portfolio investments and also its trading investments and derivative financial instruments. The Group mitigates this risk by having established investment appraisal processes and asset monitoring procedures which are subject to overall review by the Board.

The Group has in place procedures and levels of authority designed to control the level of commitment to such financial instruments, either in single investments or in aggregate.

15.   FINANCIAL INSTRUMENTS

Capital risk management

The Company manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders.  The overall strategy of the Company and Group is to minimise costs and liquidity risk.

The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in notes 18, 19 and 20 and in the Group Statement of Changes in Equity.

The Group is exposed to a number of risks through its normal operations, the most significant of which are exploration, credit, foreign exchange and liquidity risks. The management of these risks is vested in the Board of Directors.

Significant accounting policies

Details of the significant accounting policies and methods adopted (including the criteria for recognition, the bases of measurement, and the bases for recognition of income and expenses), for each class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements.

Categorisation of financial instruments

2009 Financial assets/liabilities		Held for trading	Loans and receivables	Financial liabilities at amortised cost	Total
		£000	£000	£000	£000
Trade and other receivables		-	151	-	151
Equity investments		3,837	-	-	3,837
Cash and cash equivalents		-	5,010	-	5,010
Derivative assets		1,296	-	-	1,296
Derivative liabilities		(160)	-	-	(160)
Trade and other payables		-	-	(101)	(101)
		4,973	5,161	(101)	10,033

2008 Financial assets/liabilities	Held for trading	Loans and receivables	Financial liabilities at amortised cost	Total
	£000	£000	£000	£000
Trade and other receivables	-	16	-	16
Equity investments	15	-	-	15
Cash and cash equivalents	-	3,184	-	3,184
Trade and other payables	-	-	(190)	(190)
	15	3,200	(190)	3,025

Fair value measurements recognised in the statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

·     Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

·     Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

·     Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs)

	Level 1	Level 2	Level 3	Total
	£000	£000	£000	£000
Financial assets at FVTPL*
Quoted equities whose shares have been suspended	-	629	-	629
Quoted equities	3,208	-	-	3,208
Derivative assets	1,296	-	-	1,296
	4,504	629	-	5,133
Financial liabilities at FVTPL*
Derivative liabilities	(160)	-	-	(160)
	(160)	-	-	(160)

*FVTPL - fair value through the profit and loss

Equity price Risk

The Group is exposed to equity price risks arising from equity investments. Equity investments are held for both strategic and trading purposes.

The sensitivity analyses below have been determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 5 per cent. higher/lower:

·     Unrealised profit for the year ended 31 December 2009 would have been £450,000 higher/lower;

·     Realised profit for the year ended 31 December 2009 would have been £324,000 higher/lower; and

The Group's sensitivity to equity prices has increased in the current year as the Group has expanded its investment portfolio.

Management of exploration risk

The Group is exposed to exploration risk in respect of its mineral licence projects. The Group mitigates this risk by having established mineral investment project appraisal processes and asset monitoring procedures which are subject to overall review by the Board.

Management of market risk

The most significant area of market risk to which the Group and Company are exposed is interest risk. 

As the Group has no significant borrowings its risk is limited to the reduction of interest received on cash surpluses held. This risk is mitigated by using fixed-rate deposit accounts. 

	2009	2008	2009	2008	2009	2008
	Fixed  rate	Fixed  rate	Floating rate	Floating  rate	Total	Total
Group	£000	£000	£000	£000	£000	£000
Cash and cash equivalents	504	2,353	4,506	831	5,010	3,184

The impact of a 10 per cent. increase/decrease in the average base rates would be £1,400 on the total cash and cash equivalents balances and on equity.

Management of credit risk

The principal financial assets of the Company and Group are bank balances and financial investment assets and liabilities. The Company and Group deposit surplus liquid funds with counterparty banks that have high credit ratings.

No aged analysis of financial assets is presented as no financial assets are past due at the reporting date.

Management of foreign exchange risk

The Company and Group have a limited level of exposure to foreign exchange rate risk through their foreign currency denominated cash balances.

				2009	2008
Group				£000	£000
Cash and cash equivalents
GBP				4,507	2,303
USD				503	874
TZS				-	7
Total				5,010	3,184

The table below summarises the impact of a 10 per cent. increase/decrease in the relevant foreign exchange rates versus the pound sterling rate, on the Group's pre tax profit for the year and on equity:

	2009	2008
Impact of 10% rate change	£000	£000
Cash and cash equivalents	46	98

Management of liquidity risk 

The Group and Company seek to manage liquidity risk by regularly reviewing cash flow budgets and forecasts to ensure that sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The Group deems there is sufficient liquidity for the foreseeable future.

The Group and the Company had cash and cash equivalents at 31 December 2009 as set out below.

Cash and cash equivalents	Group	Group	Company	Company
	2009	2008	2009	2008
	£000	£000	£000	£000
Cash at banks	2,330	3,184	1,004	1,371
Cash with institutions in support of trading	2,680	-	2,680	-
	5,010	3,184	3,684	1,371

At 31 December 2009 the group had pledged cash and cash equivalents of £2.7 million (2008: nil) to institutions as collateral for exposures to derivative trading assets and liabilities. 

16.  TRADE AND OTHER PAYABLES

	Group	Group	Company	Company
	2009	2008	2009	2008
	£000	£000	£000	£000
Trade payables	16	40	16	40
Other payables	40	27	36	9
Loans from subsidiary undertaking	-	-	638	175
Accruals	46	123	25	33
	102	190	715	257

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

17. FINANCIAL INVESTMENT LIABILITIES

	Group	Group	Company	Company
	2009	2008	2009	2008
	£000	£000	£000	£000
Derivative liabilities	160	-	160	-

The Company only trades in derivative financial instruments that are quoted in active markets and the related financial assets and liabilities are stated at fair value based on the contracted costs and quoted market price of those investments.

18.  SHARE CAPITAL                                                                                                                                                  

The GROUP AND THE Company		2009		2008
	Number	£000	Number	£000
Authorised:
Ordinary shares of £0.01 each	250,000,000	2,500	250,000,000	2,500
Allotted, issued and fully paid:
Issued in the year	15,172,223	152	177,500,000	1,775
Ordinary shares of £0.01 each	192,672,223	1,927	177,500,000	1,775

On 20 February 2009 the Company completed a placing of 9,450,000 new ordinary shares at 17p raising a gross amount of £1,606,500.

On 1 July 2009 the Company completed a placing of 5,722,223 new ordinary shares at 18p raising a gross amount of £1,030,000.

19.  SHARE PREMIUM ACCOUNT

The GROUP AND THE Company	2009	2008
	£000	£000
At beginning of period	2,828	-
Premium on issue of shares (see note 18)	2,485	3,325
Expenses on issue of shares	(23)	(497)
At 31 December	5,290	2,828

20.  MERGER RESERVE

The GROUP AND THE COMPANY	2009	2008
	£000	£000
At beginning of period	16,400	-
Arising on pooling of interests	-	16,400
At 31 December	16,400	16,400

The merger reserve arose under s131 of CA1985 on the shares issued by the Company to acquire Obtala Resources Limited on 29 February 2008 in a process that did not change the economics, operations or shareholder structure of the Group.

21.  CAPITAL AND OPERATING LEASE COMMITMENTS

The Group

The Group had total commitments under non-cancellable operating leases falling due as follows:

	Land & buildings	Land & buildings
	2009	2008
	£000	£000
Expiring within one year	40	28
Expiring in one to two years	5	12
Expiring in second to fifth year	-	-
	45	40

22. SHARE BASED PAYMENTS

The Group operates a share option plan, under which certain directors and employees have been granted options to subscribe for ordinary shares. All options are equity settled. The options have an exercise price of 37.6p which was based upon the average value of the Group's ordinary shares for the ten days prior to the date of grant. The vesting period was generally 1 or 2 years. If the options remain unexercised after a period of 10 years from the date of grant, the options expire. The Group has no legal or constructive obligation to repurchase or settle the options in cash.  The number and weighted average exercise prices of share options are as follows:

		2009		2008
	Number of share  options	Weighted average exercise price per share  (pence)	Number of share  options	Weighted average exercise price per share  (pence)
At beginning of period	2,000,000	37.6	-	-
Granted during the year	-	-	2,000,000	37.6
Lapsed during the year	-	-	-	-
Outstanding at 31 December	2,000,000	37.6	2,000,000	37.6

There were no share options outstanding at 31 December 2009 which were eligible to be exercised.  To date no share options have been exercised.  There are no market based vesting conditions attached to any of the share options outstanding at 31 December 2009.

The fair value of services received in return for share options granted is measured by reference to the fair value of the share options granted.  This is estimated based on the Black Scholes model which is considered most appropriate considering the effects of the vesting conditions, expected exercise price and the payment of the dividends by the Company. The weighted average fair value of each option is 5.14p (2008: 5.14p).  A charge has been recognised in the income statement of £66,000 (2008: £22,638) for the year.

23.  RELATED PARTY TRANSACTIONS

Trading transactions

During the year the Group companies entered into the following transactions with related parties: 

		2009		2008
	Transactions  in year	Balance at  31 December	Transactions  in period	Balance at  31 December
	£000	£000	£000	£000
Loans to subsidiary undertakings	901	2,706	1,805	1,805
Loans from subsidiary undertakings	463	638	175	175
Loans between subsidiary undertakings	1,199	1,242	43	43
		2009		2008
	Transactions  in year	Balance at  31 December	Transactions  in period	Balance at  31 December
	£000	£000	£000	£000
Transactions with other related parties:
Advisory fees	32	2	12	12
Property recharges	25	7	20	4
Placing fees	-	-	37	-

All of the loan amounts referred to above are unsecured and are repayable on demand.  The advisory fees and property recharges are from Ora Capital Limited (formerly Ora Capital Partners plc) a shareholder of the Company.  The placing fees were payable to Novum Securities Limited, a subsidiary of Ora Capital Limited in that period. Michael Bretherton is an Executive Director of Ora Capital Limited. 

During the year Obtala plc purchased a 60% interest in Montara Continental Limited from Grandinex International Corp, a company which Frank Scolaro holds a controlling interest. The consideration paid was £184,000.

Frank Scolaro is Non-executive Chairman of Kopane Diamond Developments plc in which the Group holds a direct equity investment with a carrying value at 31 December 2009 of £3.2million (2008:nil) and derivative financial instruments with a carrying value of £1.3 million (2008:nil). The Group has recognised realised gains during the year of £2.4 million (2008:nil) and unrealised gains of £3.3million (2008:nil) in respect of investments and derivative financial instruments of Kopane. The group had a receivable of £14,000 due from Kopane at 31 December 2009 (2008: nil) having made payments on behalf of Kopane of £14,000 in the year (2008: nil).

Kopane is not accounted for as an associate because the Group does not have significant influence over its financial and operating decisions.

Simon Rollason is an Executive Director of Edenville Energy plc (formerly Gemstones of Africa plc ("GOA")). The Group held an equity investment with a carrying value at 31 December 2009 of £0.6 million (2008:nil). The Group has recognised unrealised gains of £0.2 million (2008: nil) in respect of shares in GOA. The Group had a receivable balance of £95,000 due from GOA as at 31 December 2009 (2008:nil) having made payments on behalf of Edenville in the year of £95,000 (2008: nil). Transactions with key management personnel

The Group's key management personnel comprised only the Executive Directors of the Company.

2009	Short-term employment benefits
	Salaries & fees	Employer's national insurance contributions	Share based payments	Total cost to company
	£000	£000	£000	£000
Francesco Scolaro	53	6	-	59
Simon Rollason	155	19	40	214
Michael Bretherton	10	1	-	11
Nicholas Clarke	28	3	5	36
	246	29	45	320

2008	Short-term employment benefits
	Salaries & fees	Employer's national insurance contributions	Share based payments	Total cost to company
	£000	£000	£000	£000
Francesco Scolaro	21	2	-	23
Simon Rollason*	95	9	10	114
Michael Bretherton	8	1	-	9
	124	12	10	146

*Includes salary from date of joining the Company on 1 July 2008, (appointed to the Board on 22 September 2008).

24.  POST BALANCE SHEET EVENTS

In early January 2010 the Company disposed of 7,840,000 shares in Kopane Diamonds realising £1,040,264. Subsequent to this disposal the company held 16,495,000 shares and a contract for difference over 32,200,000 shares.

On 18 January 2010 Obtala Resources plc acquired the entire issued share capital of Sierra Leone Hard Rock Limited and its subsidiary Sierra Leone Hard Rock (SL) Limited from African Minerals Limited. The consideration for the acquisition was by way of issuing 21,170,422 new ordinary shares in Obtala Resources plc, equivalent to 9.9% of its enlarged issued share capital following completion. These shares were issued at 20.125 pence per share (being the closing mid market price on the 12 January 2010), which is equal to a total consideration value of £4,260,547.

This acquisition gives the Company access to the following:

·      four mining licences, covering an area of 162.40km2

·      seven exploration licences, covering an area of 2,590.75km2

·      plant, machinery and equipment

In February 2010 the Company completed a review and maintenance programme of both the plant and the earth moving equipment, repaired the site infrastructure and access appointed key senior on-site staff and commenced mining activities.

25.  ULTIMATE PARENT COMPANY

At 31 December 2009 the Directors do not believe that there was an ultimate controlling party.

 

END

 

 

FR SEEFMEFSSELL