DIRECTORS’ REPORT

The directors present their report and the audited financial statements of the Group for the year ended 31 December 2007.

REVIEW OF RESULTS

These are the first full year results since the Group's flotation on the Alternative Investment Market of the London Shock Exchange ("AIM") in March 2007. The consolidated income statement for the year ended 31 December 2007 and the consolidated balance sheet at that date are set out in this report. The Group reported a loss of $14.3 million (2006 : $13.6 million) for the financial year.

The result for the year reflects the operational difficulties experienced in ramping up production at the Marropino mine to targeted levels. These difficulties relate amongst others to (i) the variability of the quality of the run-of-mine ore (i.e. low grade and higher percent oversize material), (ii) poor efficiencies within the processing plant (i.e. recovery rates) and (iii) low plant availability. Due to these operating difficulties, the Company was not able to produce sufficient saleable product to sustain on-going operational and capital expenditure. As a result, the Company has had to rely on the proceeds from the listing and the private placement that was undertaken in May 2008 to fund on-going operational expenditure.

Although at the date of this report the Company has not achieved the targeted production levels significant progress has been made toward achieving key performance targets as a result of the various initiatives being implemented by the management team. A detailed review of these can be found in the Chairman's statement and operating review that forms part of the annual report.

While it is not unusual for a new start-up mining Group to experience operational difficulties in achieving its targeted production, if the Group is not able to achieve its projected production targets, the Group will need to secure additional external funding to finance its ongoing operational expenditure as well as the additional capital expenditure requirements. The Group will also be required to delay certain discretionary development expenditure until such time as these can either be funded from internally generated cash flows or the necessary external funding can be secured.

The Board's review of the accounts, budgets and forward plans, lead the directors to believe that the Company has sufficient resources to continue in operation for the foreseeable future and a reasonable expectation that targeted production levels will be reached. The financial statements are therefore prepared on a going concern basis. The financial information does not include any adjustments that would result from the basis of preparation being inappropriate. If the going concern assumption was not appropriate, certain assets (including property, plant and equipment, intangible assets and deferred taxation) would need to be written down and liabilities not recognised in the balance sheet may crystallise.