Interim Results

Kefi Minerals plc 26 March 2007 AIM: KEFI 26 March 2007 KEFI Minerals Plc ('KEFI Minerals' or 'the Company') Interim Results for the period ended 31 December 2006 KEFI Minerals, the gold and copper exploration company with projects in Turkey and Bulgaria, is pleased to announce interim results for the period ended 31 December 2006. HIGHLIGHTS â€¢KEFI Minerals now has four projects in Turkey (following the addition of Derenin Tepe and Karalar in February 2007), while it also has one project in Bulgaria; â€¢The Company owns an extensive exploration database which contains information regarding approximately 100 further prospective sites in Turkey; and â€¢Since admission to AIM in December 2006, the Company has established field offices in Turkey and exploration has begun. KEFI Minerals' Managing Director, Jeff Rayner, commented: 'The primary objective for 2007 is to rapidly assess the Company's current projects and to identify the most prospective areas in Turkey and Bulgaria for further evaluation. 'We will continue to monitor the exploration licence status of geologically prospective areas on an ongoing basis so that KEFI Minerals can acquire further exploration opportunities as soon as they become available. We look forward to further growing our portfolio and updating shareholders in due course.' Enquiries KEFI Minerals WH Ireland Bishopsgate Communications Jeffrey Rayner Laurie Beevers Maxine Barnes Katy Mitchell Nick Rome +905 36963 0111 +44 161 832 2174 +44 20 7562 3350 www.kefi-minerals.com CHAIRMAN'S STATEMENT I am pleased to present our first set of interim results for the period ended 31 December 2006. KEFI Minerals Plc was formed on 24 October 2006 and commenced trading on AIM (Code 'KEFI') on 18 December 2006 following the successful placing of 46,666,667 shares at 3p to raise Â£1.4 million. The Company has since made good progress, developing its portfolio and raising further funds which will be used by KEFI Minerals to continue to expand and progress its gold and copper exploration assets in Turkey and Bulgaria in 2007. Finance The Company acquired the interests of EMED Mining Public Limited's ('EMED Mining') in Turkey and Bulgaria. EMED Mining retains a 34% interest in KEFI Minerals and has agreed to provide technical and administrative systems and personnel on a cost-recovery basis. Since the end of the financial period, we are delighted to have raised a further Â£350,000 by way of a placement in February 2007 of 11,666,667 ordinary shares at 3p. In addition, trade debtors and trade creditors as at 31 December, principally associated with the admission to AIM on 18 December 2006, have been settled. The Company's accounting policy is conservative. All expenditure is written off until the Board decides to commence development of a project, from which point development costs would be capitalized. Exploration Strategy KEFI Minerals' exploration assets comprise exploration licences in Turkey and Bulgaria and the ownership of a database containing information about further prospective sites in Turkey. The growth strategy will focus on continuing to develop portfolios in those areas as the Company utilizes its exploration database and strong domestic relationships. In Turkey, KEFI Minerals now has four projects (following the addition of Derenin Tepe and Karalar in February 2007), while it also has one project in Bulgaria. Both Turkey and Bulgaria are well established mining countries with supportive governments. Moving forward we hope to continue to take advantage of recent changes to the Turkish Mining Law and the progressive development attitude of the Turkish Government, which have generated a current positive environment for exploration and mining activities. Recent progress on structural reforms in Bulgaria has led to an improved business environment since 2000 and an increase in foreign investment. It joined the European Union in January 2007. Our exploration strategy for operating in Turkey and Bulgaria is based on the following concepts: â€¢selecting areas within prospective stratigraphic and structural settings with a high potential for base metal or gold mineralisation; â€¢acquisition of exploration licences are inexpensive to acquire and explore; â€¢exploring projects as a package rather than individual isolated prospects; â€¢rapidly identifying, prioritising and assessing targets; â€¢rapidly progressing targets for further work or relinquish the licences; â€¢utilising existing contacts and knowledge developed by EMED Mining; â€¢creating new contacts and further developing knowledge using an established local team; and â€¢utilising technical, commercial and political support from EMED Mining as required. KEFI Minerals owns an extensive exploration database which contains information regarding approximately 100 further prospective sites in Turkey. This database provides a competitive advantage in identifying prospective areas for project generation in Turkey. Monitoring of the exploration licence status of geologically prospective areas will be carried out on an ongoing basis so that KEFI Minerals can acquire further exploration opportunities as soon as they become available. Exploration To Date Since admission to AIM in December 2006, the Company has established field offices in Turkey and exploration has begun. KEFI Minerals now has four exploration projects, having already added two new areas since admission to AIM: â€¢ At Artvin, areas of extensive hydrothermal alteration have been recognised in the project area, and there is evidence of historical workings indicating potential for economic mineralisation. â€¢ At Gumushane, areas of extensive hydrothermal alteration have been recognised in the project area, as well as coincident areas of interest identified through interpretation of Aster data. â€¢ At Derenin Tepe (granted February 2007) in the Western Anatolia Region, epithermal quartz veins have been identified with gold and silver mineralisation. This licence covers an area of 12 sq km and hosts a series of parallel quartz veins that trend northwest and extend for at least one kilometre. â€¢ At Karalar (granted February 2007) in Central Anatolia, highly anomalous gold in stream sediments, draining from an area of granite intrusion and in an area of historic base metal mines. In southern Bulgaria, reconnaissance work in the Lehovo Project area has identified a structural corridor with a strike length of approximately eight kilometres with the potential for gold and base metal mineralisation. KEFI Minerals is targeting large epithermal gold or porphyry gold-copper systems analogous to several +1 million ounce deposits recently discovered and developed in the Western Anatolia Region of Turkey. Outlook for 2007 The Company has established itself quickly. Since Admission to AIM it has opened a field office in Turkey, started field work and added two new exploration licences to its portfolio. The primary objective for 2007 is to rapidly assess the Company's current projects and to identify the most prospective areas in Turkey and Bulgaria for further evaluation. We will continue to monitor the exploration licence status of geologically prospective areas on an ongoing basis so that KEFI Minerals can acquire further exploration opportunities as soon as they become available. We look forward to further growing our portfolio and updating shareholders in due course. Harry Anagnostaras-Adams Chairman References in this report to exploration results and potential have been approved for release by Mr Jeff Rayner, B.Sc. (Honours). Mr Rayner is a geologist and has more than 20 years' relevant experience in the field of activity concerned. He is a member of The Australian Institute of Mining and Metallurgy (AUSIMM) and has consented to the inclusion of the material in the form and context in which it appears. KEFI MINERALS PLC BOARD OF DIRECTORS AND OTHER OFFICERS Board of Aristidis Eleftherios Anagnastoras-Adams Non executive - Directors: Chairman Jeffrey Guy Rayner Managing Director Ian Rutherford Plimer Non executive Director John Edward Leach Finance Director Company Secretary: Cargil Management Services Limited 22 Melton Street London NW1 2WB Registered Office: 27/28 Eastcastle Street London W1W 8DH Auditors: Moore Stephens Stylianou & Co Iris Tower, Office 602 58 Arch. Makarios III Avenue P. O. Box 24656 2132 Nicosia, Cyprus KEFI MINERALS PLC REPORT OF THE BOARD OF DIRECTORS The Board of Directors presents its report together with the condensed interim consolidated financial statements of KEFI Minerals plc (the 'Company') and its subsidiaries (the 'Group') for the period from 24 October 2006 to 31 December 2006. Principal activities The principal activities of the Group for the period are: â€¢ To explore for mineral deposits of precious and base metals and other minerals that appear capable of commercial exploitation, including topographical, geological, geochemical and geophysical studies and exploratory drilling. â€¢ To evaluate mineral deposits determining the technical feasibility and commercial viability of development, including the determination of the volume and grade of the deposit, examination of extraction methods, infrastructure requirements and market and finance studies. â€¢ To develop, operate mineral deposits and market the metals produced. Results The Group's results for the year are set out on page 7. The Group's future operational success depends, mainly, on the following factors: â€¢ The discovery of economically viable mineral deposits and the availability of subsequent funding to extract the resources. â€¢ The availability of subsequent funding to extend the Company's exploration activities. Share capital There were no changes in the share capital of the Company. Future developments The strategic objectives for 2007 are to select the best target areas in Turkey and Bulgaria for further exploration and drill as soon as targets are sufficiency defined. Subsequent events No events have arisen since the end of the financial period that have significantly affected the operations of the Group, other than the settlement of trade debtors and trade creditors principally associated with the admission to AIM on 18 December 2006. Board of Directors The Directors of the Company as at 31 December 2006 and at the date of this report are shown on page 5. The Directors were members of the Board throughout the period from 24 October 2006 to 31 December 2006. There were no significant changes in the responsibilities and remuneration of the Directors. By order of the Board, Nicosia, 21 March 2007 KEFI MINERALS PLC CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE PERIOD FROM 24 OCTOBER 2006 TO 31 DECEMBER 2006 Note 24.10.06- ------ ----------- 31.12.06 ---------- GBP'000 Exploration costs (122) Share-based benefits (79) ________ (Loss) before tax 4 (201) Taxation - ________ (Loss) after tax (201) ======= KEFI MINERALS PLC CONDENSED BALANCE SHEET 31 DECEMBER 2006 Notes The Group The Company ------- ----------- ------------- 2006 2006 ------ ------ GBP'000 GBP'000 ASSETS Non current assets Goodwill 13 366 - Investment in subsidiaries 7 - 2 ________ ________ 366 2 ________ ________ Current assets Trade and other receivables 8 1,420 1,892 Bank and cash balances 11 128 122 ________ ________ 1,548 2,014 ________ ________ Total assets 1,914 2,016 ======= ======= EQUITY AND LIABILITIES Capital and reserves Share capital 9 887 887 Other reserves 459 561 ________ ________ 1,346 1,448 ________ ________ Current liabilities Trade and other payables 10 568 568 ________ ________ Total liabilities 568 568 ________ ________ Total equity and liabilities 1,914 2,016 ======= ======= On 21 March 2007, the Board of Directors of KEFI Minerals plc authorised these financial statements for issue. KEFI MINERALS PLC CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD FROM 24 OCTOBER 2006 TO 31 DECEMBER 2006 Share Share Accumulated Share Exchange Total capital premium losses Options Difference Reserve Reserve GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Issue of share capital 887 969 - - 1,856 Share issue costs - (383) - - (383) Loss for the period - - (201) - (201) Exchange difference on translation of subsidiaries - - - (5) (5) Recognition of share-based payments 79 79 ________ _______ _______ _______ ________ _______ Balance at 31 December 2006 887 586 (201) 79 (5) 1,346 ======= ====== ====== ====== ======= ====== KEFI MINERALS PLC CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE PERIOD FROM 24 OCTOBER 2006 TO 31 DECEMBER 2006 Notes 24.10.06- ------- ----------- 31.12.06 ---------- GBP'000 Cash flows from operating activities (Loss) for the period (201) Share-based benefits 79 Exchange difference on translation of subsidiaries (5) _________ Operating loss before working capital changes (127) Changes in working capital: Trade and other receivables (1,420) Trade and other payables 532 _________ Net cash from operations (1,015) _________ Cash flows form investing activities: Acquisition of subsidiaries 13 (330) _________ Net cash used in investing activities (330) _________ Cash flows from financing activities: Proceeds from issue of share capital 1,856 Share issue and listing costs (383) _________ Net cash from financing activities 1,473 _________ Net decrease in cash 128 Cash at beginning of period - _________ Cash at end of period 128 ======== KEFI MINERALS PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD FROM 24 OCTOBER 2006 TO 31 DECEMBER 2006 1. General information Country of incorporation The Company was incorporated in United Kingdom as a public limited company on 24 October 2006. Its registered office is at 27/28 Eastcastle Street, London W1W 8DH. Principal activities The principal activities of the Group for the period are: â€¢ To explore for mineral deposits of precious and base metals and other minerals that appear capable of commercial exploitation, including topographical, geological, geochemical and geophysical studies and exploratory drilling. â€¢ To evaluate mineral deposits determining the technical feasibility and commercial viability of development, including the determination of the volume and grade of the deposit, examination of extraction methods, infrastructure requirements and market and finance studies. â€¢ To develop, operate mineral deposits and market the metals produced. 2. Summary of significant accounting policies The principal accounting policies applied in the preparation of these condensed interim consolidated financial statements are set out below. These policies have been consistently throughout the period presented in these financial statements unless otherwise stated. Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRs) as adopted by the EU and International Financial Reporting Standards (IFRs) as issued by the IASB. The financial statements comply with both these reporting frameworks because at the time of their preparation all applicable IFRs issued by the IASB have been adopted by the EU through the endorsement procedure established by the European. The financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with IFRs as adopted by the EU requires the use of certain critical accounting estimates and requires management to exercise its judgement in the process of applying the Company's accounting policies. It also requires the use of assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions, actual results ultimately may differ from those estimates. Adoption of new and revised IFRSs As from 24 October 2006, the Group adopted all the IFRSs and International Accounting Standards (IAS), which are relevant to its operations. The adoption of these standards did not have a material effect on the consolidated financial statements. At the date of authorisation of these financial statements some standards were in issue but not yet effective. The Board of Directors expects that the adoption of these standards in future periods will not have a material effect on the consolidated financial statements of the Group. Consolidation The Group consolidated financial statements comprise of the financial statements of the parent company KEFI Minerals plc and the financial statements of the following subsidiaries: Company name Date of Country of % of -------------- --------- ------------ ------ acquisition incorporation shareholding ------------- --------------- -------------- Mediterranean Minerals (Bulgaria) EOOD 8/11/06 Bulgaria 100%-Direct Dogu Akdeniz Mineralleri Ltd 8/11/06 Turkey 100%-Indirect The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of all the Group companies are prepared using uniform accounting policies. All intra-group transactions, balances, income and expenses are eliminated of consolidation. Business combinations The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFR 3 are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFS 5 Non-Current Assets held for sale and discontinued operations, which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss. The interest of minority shareholders in the acquiree is initially measured at the minority's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired undertaking at the date of acquisition. Goodwill on acquisition of subsidiaries is included in 'intangible assets'. Goodwill on acquisitions of associates is included in 'investments in associates'. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an undertaking include the carrying amount of goodwill relating to the undertaking sold. Goodwill is allocated to cash generating units for the purpose of impairment testing. Any excess of the interest in the net fair value of acquiree's identifiable assets, liabilities and contingent liabilities over cost is recognised immediately in the profit and loss. Revenue recognition Revenue comprises of the amounts receivable from exploration tenements, technical data, precious and base metals sold. The Group had no sales/revenue during the year under review. Exploration costs The Group adopted the provisions of IFRS6 'Exploration for and Evaluation of Mineral Resources'. The Group's stage of operations as at the year end and as at the date of approval of these financial statements have not yet met the criteria for capitalisation of exploration costs. Foreign currency translation (1) Measurement currency The financial statements are prepared in British Pounds (measurement currency) which is the currency that best reflects the economic substance of the underlying events and circumstances relevant to the Company. (2) Transactions and balances Foreign currency transactions are translated into the measurement currency using the exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Tax Income tax expense represents the sum of the tax currently payable and deferred tax. Current tax liabilities and assets for the current and prior periods are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates and laws that have been enacted, or subsequently enacted, by the balance sheet date. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Share capital Ordinary shares are classified as equity. Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise of cash in hand and balances with banks. 3. Financial risk management Financial risk factors The Company's activities expose it to currency risk arising from the financial instruments it holds. The risk management policies employed by the Company to manage the risk are discussed below: Currency risk Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Company's measurement currency. The Company is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the Euro, Bulgarian Lev and Turkish Lira. The Group's management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. Fair values The fair values of the Groups financial assets and liabilities approximate their carrying amounts at the balance sheet date. 4. Operating profit/(loss) The following items have been included in arriving at operating (loss): 2006 ------ GBP'000 Recognition of share-based benefits 79 Professional services 3 ======= 5. Tax Due to tax losses sustained in the period, no tax liability arises on the Group. Under current legislation, tax losses may be carried forward and be set off against taxable income of the following years. As at 31 December 2006, the balance of tax losses which is available for offset against future taxable profits amounts to GBP201,264. The Company is anticipated that it will be resident in Cyprus for tax purposes. Cyprus The corporation tax rate is 10%. Under certain conditions interest may be subject to defence contribution at the rate of 10%. In such cases 50% of the same interest will be exempt from corporation tax, thus having an effective tax rate burden of approximately 15%. In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 15%. Tax Loss Schedule Tax year Tax Losses Compensation Tax Losses Carried Forward ---------- ------------ -------------- --------------------- GBP GBP GBP 2006 25,761 - 25,761 Bulgaria Mediterranean Minerals (Bulgaria) EOOD, the 100% subsidiary of the Company, is resident in Bulgaria for tax purposes. The corporation tax rate is 15%. Due to tax losses sustained in the period, no tax liability arises on the Mediterranean Minerals (Bulgaria) EOOD. Under current legislation, tax losses may be carried forward and be set off against taxable income of the following five years. As at 31 December 2006, the balance of tax losses which is available for offset against future taxable profits amounts to GBP2,257. Tax Loss Schedule Tax year Tax Losses Compensation Tax Losses Carried Forward ---------- ------------- -------------- ---------------- GBP GBP GBP 2005 110,772 - 110,772 2006 39,734 - 39,734 Turkey Dogu Akdeniz Mineralleri Ltd, the 100% subsidiary of Mediterranean Minerals (Bulgaria) EOOD, and ultimately 100% subsidiary of the Company, is resident in Turkey for tax purposes. The corporation tax rate is 20%. Due to tax losses sustained in the period, no tax liability arises on the Dogu Akdeniz Mineralleri Ltd. Under current legislation, tax losses may be carried forward and be set off against taxable income of the following five years. As at 31 December 2006, the balance of tax losses which is available for offset against future taxable profits amounts to GPB24,882 (2005: GBP9,555). Tax Loss Schedule Tax year Tax Losses Compensation Tax Losses Carried Forward ---------- ------------ -------------- ---------------- GBP GBP GBP 2005 9,555 - 9,555 2006 15,327 - 15,327 6. Deferred tax No provision for deferred taxation has been made as there are no differences between the amounts attributed to assets and liabilities for tax purposes and their corresponding carrying amounts in the balance sheet. 7. Investment in subsidiaries On 8 November 2006, the Company entered into an agreement to acquire form EMED Mining Public Limited (formerly Eastern Mediterranean Resources Public Limited) the whole of the issued share capital of Mediterranean Minerals (Bulgaria) EOOD, a company incorporated in Bulgaria, in consideration for the issue of 29.999.998 ordinary shares in the Company. Mediterranean Minerals (Bulgaria) EOOD owns100% of the share capital of Dogu Akdeniz Mineralleri Limited, a private limited liability company incorporated in Turkey, engaging in activities for exploration and developing of natural resources. 2006 ------ The Company GBP'000 ------------- Cost of investment 2 ======= Company name Date of Country of % of -------------- --------- ------------ ------ acquisition incorporation shareholding ------------- --------------- -------------- Mediterranean Minerals (Bulgaria) EOOD 8/11/06 Bulgaria 100%-Direct Dogu Akdeniz Mineralleri Ltd 8/11/06 Turkey 100%-Indirect Significant aggregate amounts in respect of subsidiaries: 2006 ------ GBP'000 Net liabilities 1 January 2006 (156) Net loss for the period to 8 November 2006 (208) _______ Net liabilities at 8 November 2006 (364) Loss for the period to 31 December 2006 (91) _______ Net liabilities at 31 December 2006 (455) ====== The movement in the net assets of subsidiaries is based on their audited financial statements which have been prepared on the basis of International Financial Reporting Standards (IFRSs) as adopted by the EU and the IFRSs as issued by IASB. 8. Trade and other receivables 2006 ------ The Group GBP'000 ----------- Amounts receivable from stockbroker in relation to issue of share capital 1,400 Other amounts receivable 20 _______ 1,420 ====== The Company ------------- Amounts receivable from stockbroker in relation to issue of share capital 1,400 Other amounts receivable 20 Receivables from subsidiary undertakings 472 ______ 1,892 ====== 9. Share capital No. of Share Share Total -------- ------- ------- ------- shares capital premium -------- --------- --------- '000 '000 '000 '000 Authorised Ordinary shares of Â£0,01 each 200,000 2,000 - 2,000 ====== ====== ======= ======= Issued and fully paid Seed round 42,000 420 36 456 IPO round 46,667 467 933 1,400 Share issue costs - - (383) (383) _______ _______ ________ ________ 88,667 887 586 1,473 ======= ====== ======= ======= 10. Other payables 2006 ------ The Group and the Company GBP'000 --------------------------- Trade payables 277 Amounts due to EMED Mining Public Ltd 291 _______ 568 ====== 11. Cash and cash equivalents Cash included in the cash flow statement comprise the following balance sheet amounts: 2006 ------ The Group GBP'000 ----------- Bank balances and cash 128 ======= The Company ------------- Bank balances and cash 122 ======= 12. Share option plan Details of share options outstanding as at 31 December 2006: Grant date Expiry date Exercise price Number of shares ------------ ------------- ---------------- ------------------ GBP '000 18/12/2006 18/12/2012 0,03 16,000 No. of shares --------------- '000 Outstanding options at 1 January 2006 16,000 -granted - -cancelled - -exercised - _______ 16,000 ====== The Company has a share option scheme for employees and other parties of the Group. The options expire six years after grant date and are exercisable at the exercise price in whole or in part no more than one third form at grant date, two thirds after one year from the grant date and the balance after two years from the grant date. The option agreement contain provisions adjusting the exercise price in certain circumstances including the allotment of fully paid ordinary shares by way of a capitalisation of the Company's reserves, a sub division or consolidation of the ordinary shares, a reduction of share capital and offers or invitations (whether by way of rights issue or otherwise) to the holders of ordinary shares. 12. Share option plan-cont'd The estimated fair values of the options were calculated using the Black Scholes option pricing model. The inputs into the model and the results are as follows: 18 Dec. 2006 -------------- Closing share price at issue date 3.88p Weighted average exercise price 3.00p Average expected volatility 50% Expected life 6 yrs Risk free rate 5.97% Expected dividend yield Nil Discount factor 30% Estimated fair value 1.427p Expected volatility was estimated based on the likely range of volatility of the share price. 13. Acquisition of subsidiaries On 8 November 2006, the Company entered into an agreement to acquire from EMED Mining Public Limited (formerly Easter Mediterranean Resources Public Ltd) the whole of the issued share capital of Mediterranean Minerals (Bulgaria) EOOD, a company incorporated in Bulgaria, in consideration for the issue of 29.999.998 ordinary shares in the Company. This issue of shares was also partly in satisfaction of indebtedness due to EMED Mining Public Ltd. The consolidated net assets of Bulgaria and Turkey at the date of acquisition and at 31 December 2005 were as follows: 8.11.06 31.12.05 --------- ---------- GBP'000 GBP'000 Cost of investment 2 Less: Fair values of net liabilities acquired 364 -------- Goodwill 366 ======== The net liabilities acquired were as follows: Cash at bank and in hand 6 12 Payable to EMED Mining Public Ltd (334) (167) Payable to Kefi Minerals Plc (36) - -------- -------- (364) 155 ======== ======== Consideration - shares issued at premium 336 Cash and cash equivalents acquired (6) -------- Cash outflow on acquisition 330 ======== 14. Related party transactions The following transactions were carried out with related parties: 14.1 Compensation of key management personnel The total remuneration of the Directors and other key management personnel was as follows: 2006 ------ GBP'000 Amounts paid to directors for expertise services 40 Share-based benefits to directors 62 Other key management personnel fees 33 Share-based benefits to other key management personnel 17 ---- 152 ===== Share-based benefits The directors and key management personnel have been granted on 18 December 2006 ordinary share options that expire six years after grant date and are exercisable at the exercise price in whole or in part no more than one third at grant date, two thirds after one year from the grant date and the balance after two years from the grant date. No options have been exercised during the period from grant date to 31 December 2006. 15. Contingent liabilities During the six months ended 30 June 2006, EMED Mining Public Ltd acquired a proprietary geological database that covers extensive parts of Turkey and Greece. The cost of obtaining the database was shared equally by the Company and Eastern Mediterranean Resources A.E. (Greece) a wholly owned subsidiary of EMED. Under the terms of the original agreement, an additional contingent consideration of approximately â‚¬320.000 (Â£216.000) was to be settled by the issuance of 1.728.984 ordinary shares in EMED at 12.5p each if EMED secured at least four tenements in Turkey or Greece identified from the database. Under the revised agreement of 22 November 2006, EMED transferred to Dogu Akdeniz Minerally Ltd that part of the geological database that relates to areas in Turkey. Consequently, EMED has been discharged from the original contingent consideration in respect of Turkey. Under the agreement, Dogu Akdeniz Mineralleri Ltd has undertaken to make a payment of approximately â‚¬63.000 (AUD105.000) for each tenement it is subsequently awarded in Turkey and which was identified from the database. The maximum number of such payments required under the agreement is four, resulting in a contingent liability of up to â‚¬252.000. These payments are to be settled by issuing shares in KEFI Minerals plc. 16. Capital commitments The Group has no capital or other commitments as at 31 December 2006. 17. Relationship deed A Relationship Deed between EMED and the Company dated 7 November 2006, by which EMED agrees not to operate in Bulgaria and Turkey, and the Company agrees not to operate in Albania, Armenia, Azerbaijan, Cyprus, Greece, Hungary, Iran, Oman, Romania, Saudi Arabia, Serbia or Slovakia the 'EMED Area'. The Relationship Deed provides that EMED has the right to appoint one non-executive director of the Company. It also provides EMED with a right of first refusal in respect of funding any proposed mining or exploration project of the Company. The Relationship Deed provides that the Company shall refer any opportunity to conduct mining or exploration activity in the EMED Area to EMED, and EMED shall refer any such opportunity in Bulgaria or Turkey to the Company. 18. Post balance sheet events No events have arisen since the end of the financial period that have significantly affected the operations of the Group, other than the settlement of trade debtors and trade creditors principally associated with the admission to AIM on 18 December 2006. REVIEW REPORT TO THE MEMBERS KEFI MINERALS PLC We have reviewed the accompanying balance sheet of KEFI Minerals plc at 31 December 2006 and the related statements of income and cash flows for the period then ended. These financial statements are the responsibility of the company's management. Our responsibility is to issue a report on these financial statements based on our review. We conducted our review in accordance with the International Standard on Auditing applicable to review engagements. This standard requires that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatements. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Nicosia, 21 March 2007 MOORE STEPHENS STYLIANOU & CO CERTIFIED PUBLIC ACCOUNTANTS-CY This information is provided by RNS The company news service from the London Stock Exchange

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