Preliminary Results

Vane Minerals PLC 06 April 2006 VANE Minerals Plc (AIM: VML) ('VANE' or 'the Company') Financial Results for Period Ending December 2005 REPORT HIGHLIGHTS • Diablito mine now in production producing gross revenues of $420k per month • Investigations underway to secure milling facilities close to Diablito mine • Significant progress made in securing exploration rights for uranium properties in the USA • New drilling programme to be started shortly at Guadalcazar • Strong multiple vein system identified at Mina Charay • Mineral investigation permits granted in Paraguay Steven Van Nort, Chief Executive Officer of VANE, says '2005 was a transformational year for the Company as we made the move from being a pure exploration company to being a producer, with the successful development of our first gold and silver mine in Mexico. We are now in an enviable position, combining the cash flow of our producing operation with an exciting exploration portfolio, offering exposure to gold, silver, copper and uranium. We are proving our ability to deliver on our objectives and we look forward to further successful progress in 2006 with confidence.' Enquiries: VANE Minerals Plc Ambrian Partners Limited Matthew Idiens Richard Brown +44 (0) 20 7667 6322 +44 (0) 20 7776 6417 Parkgreen Communications Daniel Stewart & Co Justine Howarth / Cathy Malins Alex Davies +44 (0) 20 7493 3713 +44 (0)20 7776 6550 CHAIRMAN'S STATEMENT The stated objective of VANE Minerals plc ('VANE' or 'The Company'), announced at the time of listing in June 2004, was to become a self-funding mineral exploration group with the capability of evaluating a large number of attractive targets over an extended period of time in order to maximise the chances of a major mineral discovery. The initial step was to identify a project which could be brought rapidly into production to provide revenue towards funding the exploration necessary to identify, acquire and evaluate projects with high value potential. VANE is now well on its way to achieving this objective, as tunnelling commenced on 19 March 2005 at the Diablito silver-gold mine in the State of Nayarit, Mexico, and ore for the first mill test was shipped in July 2005. By year end the mine had produced and shipped over 6,600 tons of high grade ore to a custom mill in Cosala, State of Sinaloa, Mexico. Revenue generated through the sale of concentrates is now helping to fund development work across the Company's portfolio of gold, silver, copper, and most recently uranium, properties in Mexico, Paraguay and the US. Underpinning these initiatives, the Company confirmed in January 2005 a further 12-month extension (to 30 June 2006) of its agreement with Freeport McMoRan Copper and Gold Inc. providing exclusive access to the latter's international exploration database (excluding Indonesia). Potential targets continue to emerge from this invaluable source. DIABLITO Diablito is currently producing at a rate of approximately 1,500 tons per month to provide gross revenues of some $420,000 per month. Current indicated, measured and inferred resources are sufficient to sustain production at this rate for more than five years. A drilling campaign that will commence in the second quarter of 2006 is designed to expand the resource down dip to the south as well as exploring offset portions of the vein along strike to the east and west. Also being evaluated is the possibility of installing our own flotation mill at a location much closer to the Diablito mine than the Cosala facility. In addition to eliminating scheduling bottle necks at the custom mill, such a facility would greatly reduce overall costs, especially transportation costs. GUADALCAZAR A widely spaced 12-hole drilling programme was completed during the year in which anomalous gold values, averaging approximately 0.1 g/T gold, were consistently intersected in all 12 holes covering an area 4.5 km by 1.5 km. Due to the very large area, the resource thus defined by the widely spaced drilling amounts to some 4 million oz of gold; however, no intervals were encountered that could be mined profitably at current metal prices. We are encouraged by the unusual size and continuity of the mineral system and have scheduled four to six additional holes, to follow the additional drilling at Diablito, in an effort to locate the feeder zones or to define an area of more intense gold mineralisation within the volcanic tuff. The Guadalcazar agreement with Minera Apolo SA de CV has been renegotiated so that most of the $300,000 option payment due in October 2005 has been postponed until October 2006. MINA CHARAY The Mina Charay project in the State of Sinaloa, Mexico was initially acquired because of its potential for a large, low grade bulk mineable, heap leachable gold occurrence. A total of 27 drill holes have now been completed at Mina Charay as well as geophysical surveys. Although extensive bulk mineable mineralisation was not intersected, the initial drilling has indicated a strong, multiple vein system extending in a east-west direction for 250 metres between two low grade mineralised breccia zones. The veins are vertical to steeply dipping. The indicated grade, based on 19 vein intersections, all at depths of less than 50 metres, average 12.6 g/T gold and 101 g/T Ag offering good potential for the development of a second small, but profitable mine. The VANE team is currently re-negotiating the option to purchase agreement to reflect operation of a small underground vein mine versus a bulk tonnage deposit. A pre-feasibility study including bench scale flotation tests on drill core is underway, the results of which will determine whether the Charay ore should be leached on site or treated at a near-by custom mill, possibly VANE's own mill that would be located near Diablito. This study is expected to be completed early in the second quarter 2006. CHOIX COPPER PROJECT The Choix copper prospect in the State of Sinaloa, Mexico, was acquired in July 2005 following a prospect examination and a review of previous work undertaken by Cambior Corporation Limited. Despite strong surface indications of copper mineralisation, Choix had never been systematically evaluated. The prospect represented a very attractive, easily accessible undrilled copper target, which was inexpensively acquired and quickly tested, with overall expenditure of less than US$100,000. Following detailed geological field work, a six-hole drilling programme was carried out in the fourth quarter of 2005. The assay results from this drilling completed in December 2005 were disappointing. They indicated that the strongly mineralised porphyry outcrops at surface lacked 'roots' and were actually isolated xenoliths or blocks 'floating' upon the underlying batholithic rocks. In March 2006 the Company announced that it had discharged all obligations regarding this property and that it will cease its interest in Choix. PARAGUAY South-eastern Paraguay is geologically part of the mineral rich Brazilian Precambrian Shield but has seen only limited mineral exploration. Anomalous concentrations of gold in no less than 22 areas were recognised and delineated on a reconnaissance scale during a diamond exploration programme of stream sediment sampling carried out during the 1990's by Rex Diamond Corp ('Rex'). Rex found no evidence of diamond potential and declined to pursue the gold anomalies. Based on this earlier work, VANE Minerals Sucursal Paraguay applied for, and in July received, three Mineral Investigation Permits covering 3,800 km2 in south-eastern Paraguay. With the permits in hand, field work, primarily consisting of soil geochemistry, was initiated in the area, which is characterised by deep, soil profiles. Results to date have confirmed the earlier stream sediment work and outlined several very prospective areas, one of which measures 14 km by 6 km. In-fill sampling will continue to more accurately define the gold anomalies and identify targets for later drilling. Investigation permits are valid until 12 September 2006, at which time we will be required to reduce the size of our land holdings and annual rental fees will commence. URANIUM PROJECTS Based on the resurgence of the uranium market reflecting a growing supply-demand imbalance and long-term forecasts predicting a growing uranium supply shortage, VANE decided in 2004 to diversify its project portfolio by entering into the uranium exploration and development business. By the end of 2004 the company had acquired seven attractive properties in the breccia pipe district of northern Arizona. In January 2005 VANE Minerals (US) LLC was formed as a Delaware Limited Liability Company to carry forward the Company's uranium exploration and development business. Since November 2004 the price of uranium has risen steadily from US$19.50 per pound to US$40.50 per pound, or within US$3.10 of its all-time high of US$43.60 per pound in 1979. 2005 saw a rapid growth in our property portfolio which by the end of the year had grown to include 20 properties. Three additional properties have been added since January 2006 to bring the current total to 23. The Company has focused its efforts on the Colorado Plateau Uranium District, which, in addition to significant historic production, presently includes two permitted uranium mills both of which are now in restart phase. Highest priority is assigned to properties that are either at, or near, the resource stage or undrilled or partially drilled exploration targets exhibiting favourable geology. 4 of the 19 prospects held in northern Arizona are drill-confirmed breccia pipes, one of which, the Miller pipe, has been confirmed by deep drilling to contain an ore-grade intercept of 1.78% U3O8. The remaining 15 prospects exhibit pipe-like characteristics on the surface but will require drilling to assess their potential. Historically, breccia pipes in the Arizona district that contained economic uranium mineralisation produced from 1 million to 5 million pounds of U3O8. In central Arizona, VANE has acquired rights to an inactive tailings pond believed, on the basis of historic records, to contain 180,000 pounds of U3O8. An evaluation is underway to verify the uranium content of the tailings as well as the economics of transporting this material to one of the mills on the Colorado Plateau. In southeastern Utah our efforts have resulted in acquisition of three uranium properties in which uranium mineralisation is controlled by paleo stream channels rather than by breccia pipes. Deposits of this type are typically of lower grade than the breccia pipes but involve lower production costs and historically have proven to be very productive. The Happy Jack property produced a total of 3.1 million pounds of U3O8 and presently contains a drill indicated resource of 155,000 pounds of U3O8. VANE geologists believe the Happy Jack property has the potential for development of one million pounds of U3O8. The North Wash project has a drilled resource of 150,000 pounds of U3O8 and appears to carry a significant vanadium credit based on historical assays; core drilling and assaying will be required to accurately assess the value of the contained vanadium. 'Section 2' property is a Utah State lease of 876 acres, undrilled but situated along a favourable mineral trend. By the end of March 2006, VANE has assembled a portfolio of 23 projects having 305,000 pounds of U3O8 resources for a total cost of under $200,000. The Company is pleased with the progress to date and looks forward to evaluating the considerable upside potential of the property portfolio. During 2006, your Company will continue to seek promising projects at a reasonable cost and commence drilling programmes on several breccia pipe prospects. We also plan to complete core drilling on our North Wash project to define the vanadium resource and complete auger drilling on the Arizona tailings to verify the uranium content. Our acquisition efforts will continue to focus on properties in western United States having indicated or proven uranium resources as well as strong exploration potential. SUMMARY In common with many other AIM listed companies, VANE's share price over the period under review has reflected the general volatility in the junior mining sector. This has occurred against a backdrop of unbroken strength in commodity markets, fuelled by continuing growth in demand from China, India and other major developing economies. At the smaller-cap end of the mining market, however, this has triggered an unprecedented flow of new companies to the AIM market, placing undue pressure on funding sources. With established assets, cash flow generation at Diablito and a proven track record of delivering on its objectives, VANE Minerals can differentiate itself clearly from most other early stage exploration companies. We believe strongly that, with our determined exploration approach directed by a seasoned international team of geologists, cash flow from Diablito and potentially Mina Charay, and access to a unique portfolio of exploration opportunities, Vane Minerals has an enviable position among mineral exploration companies. We thank our fellow directors for their enthusiastic and energetic contributions and our shareholders for their continuing support for a Company which has demonstrated its ability to deliver its stated promises and which, we firmly believe, is now poised to deliver further exciting growth. Michael Spriggs Steven D. Van Nort Chairman Chief Executive Officer CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 December 2005 Notes Year ended 15 months ended 31 December 2005 31 December 2004 £ £ TURNOVER 2 286,075 - Cost of sales (236,612) - Gross profit 49,463 - Operating expenses (1,060,872) (637,663) OPERATING LOSS (1,011,409) (637,663) Interest receivable 83,302 41,041 Interest payable and similar charges - (2,071) LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (928,107) (598,693) Taxation 115,333 35,533 LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (812,774) (563,160) LOSS PER SHARE Basic and diluted 3 (0.56p) (0.52p) The operating loss for the period arises from the group's continuing operations. Statement of Total Recognised Gains and Losses Year 15 months ended ended 31 December 31 December 2005 2004 £ £ Loss for financial period (812,774) (563,160) Currency translation profit /(losses) on foreign currency 188,437 (67,404) net investments in Sterling Total recognised gains and losses for the year (624,337) (630,564) CONSOLIDATED BALANCE SHEET 31 December 2005 Notes 2005 2004 £ £ FIXED ASSETS Intangible assets 7,990,975 11,503,882 Tangible assets 4,171,297 - 12,162,272 11,503,882 CURRENT ASSETS Stocks 122,893 - Debtors 413,374 116,093 Cash at bank and in hand 731,932 2,344,253 1,268,199 2,460,346 CREDITORS: Amounts falling due within one year (156,658) (66,078) NET CURRENT ASSETS 1,111,541 2,394,268 NET ASSETS 13,273,813 13,898,150 CAPITAL AND RESERVES Called up share capital 14,614,382 14,614,382 Profit and loss account (1,340,569) (716,232) EQUITY SHAREHOLDERS' FUNDS 4 13,273,813 13,898,150 CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2005 Notes Year ended 15 months ended 31 December 31 December 2005 2004 £ £ Cash flow from operating activities 5a (1,054,002) (584,524) Returns on investments and servicing of finance 5b 83,302 38,970 Capital expenditure and financial investment 5b (830,058) (381,899) Acquisitions and disposals 5b - 56,594 CASH OUTFLOW BEFORE MANAGEMENT OF LIQUID RESOURCES AND FINANCING (1,800,758) (870,859) Management of liquid resources 5b 1,734,398 (2,285,791) Financing 5b - 3,282,514 (DECREASE)/INCREASE IN CASH IN THE PERIOD (66,360) 125,864 Reconciliation of Net Cash Flow to Movement in Net Funds Year ended 15 months ended 31 December 31 December 2005 2004 £ £ (Decrease) / increase in cash in the period (66,360) 125,864 Cash (inflow) / outflow from change in liquid resources (1,734,398) 2,285,791 Change in net funds resulting from cash flows (1,800,758) 2,411,655 Translation difference 188,437 (67,404) Movement in net funds in the period (1,612,321) 2,344,251 NET FUNDS AT 31 DECEMBER 2004 2,344,253 2 NET FUNDS AT 31 DECEMBER 2005 731,932 2,344,253 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2005 1 BASIS OF PREPARATION The financial information for the year ended 31 December 2005 has not been audited and does not constitute the Company's statutory financial statements within the meaning of S240 of the Companies Act 1985. This preliminary announcement was approved by the Board on 5 April 2006. The statutory financial statements for the year ended 31 December 2005 have not been filed with the Registrar of Companies nor reported on by the Company's auditors. They will be circulated to shareholders in April 2006 and the Annual General Meeting is arranged to take place on 15 May 2006. The comparative results for the year ended 31 December 2004 are an abridged version of the audited financial statements which have been filed with the UK Registrar of Companies and on which the auditors issued an unqualified audit report. 2 SEGMENTAL INFORMATION Net Assets Turnover Losses Year 15 months Year 15 months ended ended ended ended 31 December 31 December 31 December 31 December 2005 2004 2005 2004 2005 2004 £ £ £ £ £ £ UK 563,216 2,360,921 - - (472,750) (454,781) US 1,092,646 1,106,835 - - (545,657) (303,580) Mexico 11,617,951 10,430,394 286,075 - 205,633 195,201 Total 13,273,813 13,898,150 286,075 - (812,774) (563,160) The above table shows the geographic segmentation of the group. Activities in Mexico are currently concerned with gold and silver mining and exploration. Activities in the USA are split between research of the Freeport database and other sources for further gold and silver properties, and research and evaluation of potential uranium properties. Activities in the United Kingdom are concerned with administration and management of the group. 3 LOSS PER ORDINARY SHARE The calculation of basic and diluted loss per ordinary share is based on the following loss and number of shares. Year ended 15 months ended 31 December 31 December 2005 2004 £ £ Loss for the financial period (812,774) (563,160) 2005 2004 No. of shares No. of shares Weighted average number of shares 146,143,823 107,745,590 Due to the loss incurred in the year, there is no dilutive effect from subsisting share options. 4 RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS 2005 2004 £ £ Loss for the financial period (812,774) (563,160) Issue of shares during the period - 14,951,198 Share issue costs - (422,486) Exchange rate adjustments 188,437 (67,404) Net addition to shareholders' funds (624,337) 13,898,148 Opening shareholders' funds 13,898,150 2 Closing shareholders' funds 13,273,813 13,898,150 5 CASH FLOWS 2005 2004 £ £ a Reconciliation of operating loss to net cash outflow from operating activities Operating loss (1,011,409) (637,663) (Increase)/decrease in debtors (181,948) 143,063 Increase/(decrease) in creditors 90,580 (89,924) Increase in stock (122,893) - Depreciation 154,564 - Impairment of intangible fixed asset 17,104 - Net cash outflow from operating activities (1,054,002) (584,524) b Analysis of cash flows for headings netted in the cash flow 2005 2004 £ £ Returns on investments and servicing of finance Interest received 83,302 41,041 Interest paid - (2,071) Net cash inflow from returns on investments and servicing of finance 83,302 38,970 Capital expenditure and financial investment Expenditure on intangible fixed assets (815,152) (381,899) Purchase of tangible fixed assets (14,906) - Net cash outflow from capital expenditure and financial (830,058) (381,899) investment Acquisitions and disposals Cash acquired with subsidiary - 106,594 Acquisition of subsidiary - (50,000) Net cash inflow from acquisitions and disposals - 56,594 Management of liquid resources Cash withdrawn from / (deposited to) 7 day deposit 1,734,398 (2,285,791) Net cash inflow / (outflow) from management of liquid 1,734,398 (2,285,791) resources Financing Proceeds from issue of share capital - 3,705,000 Share issue costs - (422,486) Net cash inflow from financing - 3,282,514 At 31 At 31 December Cash- December c Analysis of net funds 2004 flow 2005 £ £ £ Cash at bank and in hand 58,462 122,077 180,539 Cash on deposit 2,285,791 (1,734,398) 551,393 2,344,253 (1,612,321) 731,932 d Analysis of the net inflow of cash in respect of the purchase of 2005 2004 subsidiary undertaking: £ £ Cash acquired with subsidiary - 106,594 Acquisition of subsidiary - (50,000) Net inflow of cash in respect of the purchase of subsidiary - 56,594 This information is provided by RNS The company news service from the London Stock Exchange

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