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Financial & Risk Review

Financial Review The results for the Company are set out in detail on page 15. The Company has made a loss of £227,563 during the year (2008: £634,880). This includes treasury interest of £8,572, foreign exchange gains of £8,759 and loss on disposal of subsidiary of £21,113. It also includes administration costs of £161,652 and expensed pre-licence and reconnaissance exploration costs of £53,025 and deferred exploration cost impairments of £9,104.

The Company is expected to continue to make losses for the foreseeable future and this is normal for exploration companies in the period leading up to the development of commercial mining operations. Losses may increase in future if certain exploration projects are abandoned or impaired and the associated deferred exploration costs are written-off.

Intangible assets in the financial statements total £783,050 at year end.

Administration costs include non-cash costs under IFRS 2 whereby a cost is assigned to the value of certain options and warrants in issue.

Administration overhead costs have been shared with Tertiary Minerals plc, to the benefit of both companies. This cost sharing is continuing.

Equity Issues The Company’s exploration activities continue to be funded from working capital. During the year 3,388,704 shares were issued to directors in lieu of directors’ fees and 100,000 shares were issued to Nordic Diamonds Ltd pursuant to an agreement to acquire exploration rights in Finland.

Non Current Assets Details of intangible assets, property, plant & equipment and investments are set out in notes 8, 9, and 10 of the financial statements.

Risks The Board regularly reviews the risks to which the Company is exposed and ensures through its meetings and regular reporting that these risks are minimised as far as possible.

The principal risks and uncertainties facing the Company at this stage in its development are:

Annual Report 2009

Exploration Risk The Company’s business is mineral exploration and evaluation which are speculative activities and whilst the directors are satisfied that good progress is being made, there is no certainty that the Company will

be successful in the definition of economic mineral deposits, or that it will proceed to the development of any of its projects or otherwise realise their value.

Resource Risk All mineral projects have risk associated with defined grade and continuity. Mineral Reserves and Resources are calculated by the Company in accordance with accepted industry standards and codes but are always subject to uncertainties in the underlying assumptions which include geological projection and metal price assumptions.

Development Risk Delays in permitting, financing and commissioning a

project may result in delays to the Company meeting production targets. Changes in commodity prices can affect the economic viability of mining projects and affect decisions on continuing exploration activity.

Mining and Processing Technical Risk Notwithstanding the completion of metallurgical testwork, test mining and pilot studies indicating the

technical viability of a mining operation, variations in mineralogy, mineral continuity, ground stability, ground water conditions and other geological conditions may still render a mining and processing operation economically or technically non viable.

Environmental Risk Exploration and development of a project can be adversely affected by environmental legislation and the unforeseen results of environmental studies carried out during evaluation of a project. Once a project is in production unforeseen events can give rise to environmental liabilities.

Financing & Liquidity Risk The Company has an ongoing requirement to fund its activities through the equity markets and in future to obtain finance for project development. There is no certainty such funds will be available when needed.

Political Risk All countries carry political risk that can lead to interruption of activity. Politically stable countries can



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