Interim Results

Celtic Resources Holdings PLC 12 September 2006 Embargoed for 07:00 12th September 2006 Celtic Resources Holdings Plc ("Celtic", "Celtic Resources", or "the Company") Interim Results for the six months ended 30 June 2006 FIRST HALF HIGHLIGHTS • Profit after tax for the half year US$38.697 million or 84 cents per share • US$80 million received for the sale of our interest in the South Verkhoyansk Mining Company (SVMC) in Russia, owner of the Nezhdaninskoye gold mine • Celtic holding cash of US$70.8 million at the end of June • Suzdal group gold production (Kazakhstan) rose 180% in the first half of the year to 24,793 ounces (8,859 ounces first half production 2005) • Suzdal returns to profit- US$5.32 million ($2.92 million loss first half 2005). • Optimization of Suzdal gold production continues • Ongoing assessment of mining opportunities in the FSU- Projects within Kazakhstan particularly attractive to complement existing portfolio The Company's interim accounts will be distributed to shareholders and will available shortly on our website. For further information please contact: Kevin Foo / Kate Dexter Smith Leesa Peters/Laurence Read Celtic Resources Holdings Plc Conduit PR Tel: + 44 (0)207 921 8800 Tel: + 44 (0) 7429 6666 Investors@celticresources.com leesa@conduitpr.com www.celticresources.com Celtic Resources Holdings Plc The board of Celtic Resources are pleased to announce the Company's results for the half year to 30 June 2006 which are attached. I should like to comment briefly on the figures and on developments in the period since my last letter to you in the annual report and accounts released in mid June. On a group basis, profit after tax for the half year was an outstanding US$38.697 million or 84 cents per share, primarily due to the sale of our interest in the Nezhdaninskoye gold mine in Russia. Following commissioning of the sulphide treatment plant at Suzdal group gold production rose 180% in the first half of the year to 24,793 ounces compared to 8,859 ounces in the first half of 2005. With this increase in production and the higher gold price, we returned to profit at the operating level with US$5.32 million compared to a loss of $2.92 million at the first half last year. At Suzdal, the sulphide treatment plant with annual capacity of 300,000 tonnes of ore, treated 123,857 tonnes to end June, at an average grade of 9.20g/t gold. The underground mine, currently being further developed contributed 63,455 tonnes of ore at 15.7g/t Au and additional ore came from open pits and stockpiles. The first gold pour from the Suzdal Sulphide Plant, incorporating BIOX(R) technology which is the only one of its kind in the region, was in May 2005. Several design faults in plant air supply and equipment and flotation plant configuration which had reduced gold recovery were identified and have now been corrected. Monthly gold production has been steadily increasing, with 5,141 ounces produced in July. In the first half of the year, gold production from Suzdal was 22,115 ounces compared to 5,401 ounces in H1 2005. We are pleased with this result, especially the performance of the BIOX(R) plant, which has now completed an annual cycle, which in Kazakhstan entails temperatures ranging from -40C to + 40C. Improvements in plant throughput and gold recovery are still being addressed. Consideration is being given to expand the capacity of the plant as the opportunity has arisen to treat concentrates from other sources and as mines in our region will increasingly move into refractory sulphide ores similar to Suzdal. The total cash operating cost in the first half of the year was $483 per ounce due to high fuel costs, allocation of the costs of pre-stripping open pits and the plant problems mentioned above. We expect this figure to fall in the second half of the year and to fall further in 2007. Forecast gold production for Suzdal this year is now 60,000 ounces. At Zherek (75% owned by the Company), an open pit heap leach operation, gold production of 3,571 ounces was down from 4,611 ounces in the same period of 2005 as a result of a late winter and the mining operation encountering transitional ores which do not leach as well as the oxides. Forecast production for Zherek for 2006 is now 14,000 ounces. The oxide ore will be exhausted next year and preliminary technical and economic studies suggest that sulphide ore could be mined and trucked to Suzdal. In May, we received US$80 million for the sale of our interest in the South Verkhoyansk Mining Company (SVMC) in Russia, owner of the Nezhdaninskoye gold mine which accounts for Celtic holding cash of US$70.8 million at the end of June. We continue to seek repayment of amounts advanced to SVMC. Against this, bank debt in Kazakhstan totals US$30 million. With this strongly liquid balance sheet and investments in Eureka Mining and Victoria Oil & Gas, we continue to review mining opportunities, primarily in the FSU and Eastern Europe. Kazakhstan remains an attractive country for us to operate in. We will continue to optimise operations at Suzdal to increase gold production and look for new opportunities to substantially grow your company. Peter Hannen Chairman September 2006 Unaudited Consolidated Profit & Loss Statement For the half year ended 30 June 2006 Notes 2006 2005 US$000 US$000 Turnover 17,335 2,577 Cost of sales (11,949) (1,905) ---------------------- Gross Profit 5,386 672 Administrative expenses (7,833) (1,646) Realised foreign exchange gains/(losses) 7,806 (1,948) ---------------------- Operating profit/(loss) 5,359 (2,922) Profit on disposal of investments 36,666 - Interest payable (2,374) (2) Interest receivable 452 249 ---------------------- Profit on ordinary activities before taxation 40,103 (2,675) Taxation 2 1,406 132 ---------------------- Profit on ordinary activities after taxation 38,697 (2,543) Minority interests 106 190 ---------------------- Retained profit for the half year 38,591 (2,353) ---------------------- cents Cents Group earnings/(loss) per share (in cents) 3 84.84 (5.69) ====================== Fully diluted earnings/(loss) per share (in cents) 74.37 (5.69) ====================== Unaudited Consolidated Statement of Total Recognised Gains and Losses Retained profit/(loss) for the half year 38,591 (2,353) Foreign currency adjustments (5,348) 871 ----------------------- Total recognised profit/(losse for the financial half year 33,243 (1,482) ----------------------- Reconciliation of Movements in Shareholders' Funds Total recognised profit/(loss) for the financial half year 33,243 (1,482) Issue of ordinary share capital 5,059 59 ----------------------- 38,302 (1,423) Shareholders' funds at 1 January 111,474 94,831 ----------------------- Shareholders' funds at 30 June 149,776 93,408 ----------------------- Unaudited Consolidated Balance Sheet At 30 June 2006 Notes 2006 2005 US$000 US$000 Fixed assets Intangible assets 4 20,932 22,324 Tangible assets 53,969 37,614 Financial assets 5 11,423 50,650 ------------------------ 86,324 110,588 ------------------------ Current assets Stocks 5,936 7,859 Debtors 28,254 8,757 Cash at bank and in hand 70,816 8,820 ------------------------ 105,006 25,436 Creditors Amounts falling due within one year (18,200) (13,154) ------------------------ Net current assets 86,806 12,282 ------------------------ Creditors - amounts falling due after more than one year 6 (21,785) (28,308) Provision for liabilities and charges Deferred tax (994) (871) ------------------------ Net assets 150,351 93,691 ======================== Capital and reserves Called up share capital - equity 12,941 11,312 - non equity - 3,184 Capital conversion reserve 61 61 Share premium account - equity 105,162 86,433 Profit and loss account - equity 45,174 5,925 Employee Benefit Trust Reserve - equity (13,562) (13,507) ------------------------ Shareholders' funds 149,776 93,408 Minority interests - equity 575 283 ------------------------ 150,351 93,691 ======================== Unaudited Consolidated Cash flow For the half year ended 30 June 2006 Notes 2006 2005 US$000 US$000 Cash flow from operating activities Operating profit/(loss) 5,359 (2,922) Depreciation 13,089 881 Stocks increase (90) (788) Debtors increase (4,702) (2,808) Creditors increase 1,930 1,313 Exchange movements (5,348) 871 Minority interest increase (140) - --------------------- 10,098 (3,453) --------------------- Returns on investments and debt service costs Interest received 452 249 Interest paid (2,374) (2) --------------------- (1,922) 247 --------------------- Tax paid (2,178) (601) --------------------- Capital expenditure and financial investment Acquisition of intangible fixed assets (6,611) (2,776) Acquisition of tangible fixed assets (12,380) (9,841) Sale of/(investment in) Associated 76,289 (3,512) company Secured loan to Victoria Oil & Gas Plc (6,000) - --------------------- 51,298 (16,129) --------------------- Net Cash Flow before Financing 57,296 (19,936) --------------------- Financing Issue of ordinary shares 5,059 59 Net reduction in loans (2,071) (1,797) --------------------- 2,988 (1,738) --------------------- Increase/(Decrease) in cash 60,284 (21,674) --------------------- Cash balance 1 January 10,532 30,494 --------------------- Cash balance 30 June 70,816 8,820 --------------------- Celtic Resources Holdings Plc Notes to the Unaudited Accounts at 30 June 2006 1. Basis of Preparation The consolidated accounts include the unaudited accounts of the company and each of its subsidiaries and have been prepared using accounting policies consistent with those adopted for the preparation of the annual audited Financial Statements. They are stated in thousands of US Dollars which is the reporting currency of the group. 2. Taxation The tax charge for the half year is higher than standard UK Corporation Tax on group profits because the profit earned by the subsidiary in Kazakhstan is taxed in that country with no deduction available for costs incurred in managing the Group's world wide activities. 3. Profit per share The calculation is based on the profit attributable to ordinary shareholders of $38,591,000 (2005 loss - $2,353,000) and the weighted average number of ordinary shares of 45,486,720 - (2005 - 41,388,340) in issue in the half year. The weighted average number of ordinary shares used for the fully diluted calculation was 51,890.183 (2005 - 41,388,340). 4. Intangible assets The Group's activities include prospecting for and production of gold and other minerals in Kazakhstan and are therefore subject to a number of significant potential risks including - price fluctuations - uncertainties over development and operational costs - operational and environmental risks - political and legal risks, including arrangements with the governments for licences, profit sharing and taxation - funding developments The value of these assets is dependent on the development of mineral reserves, which is affected by these and other risks. 5. Financial assets 30 June 30 June 2006 2005 US$000 US$000 Listed investments, at cost 11,423 11,423 Associated company - 39,227 --------------------- 11,423 50,650 ===================== Market value of listed investments 19,249 15,381 ===================== 6. Creditors due in more than one year 30 June 30 June 2006 2005 $000 $000 Bank loans 18,182 24,324 Historical costs reimbursable to the Republic of Kazakhstan 3,603 3,984 ---------------- 21,785 28,308 ================ 7. Contingent liabilities The arbitration proceedings brought by Arduina Holdings BV (Arduina) in the London Court of International Arbitration was heard during 2005 and resulted in a finding, with an award of costs, in favour of the Company. Arduina are appealing the awards but the Company is confident that it is without merit and will be dismissed; accordingly no provision has been made in the Financial Statements in respect of this case. This information is provided by RNS The company news service from the London Stock Exchange

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