Consolidated statement of comprehensive Income
for year ended 31 December 2014

The loss for the year is attributable to the equity holders of the parent company.

The notes form an integral part of the financial statements.

Consolidated statement of changes in equity
for year ended 31 December 2014

The notes form an integral part of the financial statements.

Consolidated balance sheet

for year ended 31 December 2014

The notes form an integral part of the financial statements.

These financial statements were approved by the Board of Directors on 25 June 2015 and were signed on its behalf by:

Mr D Elzas

Director

Consolidated cash flow statement

for year ended 31 December 2014

The notes form an integral part of the financial statements.

Notes to the financial statements

1 Business information and going concern basis of preparation

Background

Zanaga Iron Ore Company Limited (the "Company"), was incorporated on 19 November 2009 under the name of Jumelles Holdings Limited. The Company changed its name on 1 October 2010. The Company is incorporated in the British Virgin Islands ("BVI") and the address of its registered office, is situated at Coastal Building, 2nd Floor, Wickham's Cay II, Road Town, Tortola, BVI. The Company's principal place of business as an investment holding vehicle is situated in Guernsey, Channel Islands.

At 31 December 2010 the Company held 100% of the share capital of Jumelles Limited ("Jumelles") subject to the then Xstrata Call Option (as defined below).

On 14 March 2011 the Company incorporated and acquired the entire share capital of Zanaga UK Services Limited for US$2, a company registered in England and Wales which provides investor management and administration services.

In 2007, Jumelles became the special purpose holding company for the interests of its then ultimate 50/50 founding shareholders, Garbet Limited ("Garbet") and Guava Minerals Limited ("Guava"), in Mining Project Development Congo SAU ("MPD Congo") which, owns and operates 100% of the Zanaga Project (the "Project") in the Republic of Congo (subject to a minimum 10% free carried interest in MPD Congo in favour of the Government of the Republic of Congo).

In December 2009 Garbet and Guava contributed their then respective 50/50 joint shareholding in Jumelles to the Company.

Garbet is majority owned by Strata Limited ("Strata"), a private investment holding company based in Guernsey, which specialises in the investment and development of early stage natural resource projects in emerging markets, predominately Africa. Garbet owns approximately 41.49% of the share capital of the Company.

Guava is majority owned by African Resource Holdings Limited ("ARH"), a BVI company that specialises in the investment and development of early stage natural resource projects in emerging markets. Guava owns approximately 31.83% of the share capital of the Company.

Jumelles has three subsidiary companies, namely Jumelles M Limited, Jumelles Technical Services (UK) Limited and MPD Congo.

Xstrata Transaction

On 16 October 2009, Garbet and Guava and Jumelles entered into a transaction with Xstrata (Schweiz) AG (on 3 December 2009, Xstrata (Schweiz) AG was substituted by Xstrata Projects (pty) Limited ("Xstrata Projects"), comprising of two principal transaction agreements (together the "Xstrata Transaction"):

·   a call option deed which gave Xstrata Projects an option to subscribe for 50% plus 1 share of the fully diluted and outstanding shares of Jumelles ("Majority Stake") in return for providing funding towards ongoing exploration of the Zanaga exploration licence area and a pre-feasibility study (the "PFS") subject to a minimum amount of US$50 million (the "Xstrata Call Option"). Under the terms of the Xstrata Call Option, the consideration payable by Xstrata Projects for the option shares that would be issued by Jumelles Limited would comprise (i) a commitment to fund all costs to be incurred by Jumelles Limited in completing a Feasibility Study on the Project (the "FS") (provided such amount shall be greater than US$100 million) or to carry out such a feasibility study at its own cost and (ii) payment of an amount (up to a maximum of US$25 million) equal to the amount that Jumelles Limited owes to Garbet and Guava as loans which would be used to repay the latter; and

·   a Joint Venture Agreement which regulated the respective rights of the Company, Jumelles and Xstrata Projects in relation to Jumelles following exercise of the Xstrata Call Option. Subsequently:

o Xstrata merged with Glencore on 2 May 2013 to form Glencore Xstrata which then took the role of JV partner in place of Xstrata, and has subsequently changed its name to Glencore plc.

o Under the terms of the Supplemental Agreement announced on 13 September 2013, the scope of the above mentioned FS was modified to a staged development basis, and the revised basis FS was completed in May 2014. The Supplemental Agreement also extended the work programme beyond the conclusion of the FS, up to December 2014 (towards which the Company contributed US$17m from existing resources), and the Glencore call option over the Company's remaining 50% less one share shareholding in Jumelles Ltd was deleted.

During 2010, the PFS progressed and following completion of Phase I of that study Xstrata Projects countersigned a further funding letter confirming in writing its agreement (subject to the provisions of the Xstrata Call Option) to contribute further funding and confirming its approval of the phase II work programme, budget and funding amount (up to US$56.49 million) as set out in that letter.

Xstrata Projects exercised the Xstrata Call Option on 11 February 2011 and the founding shareholder loans were repaid. The final elements of the call option price consideration were the completion of the Feasibility Study and costs thereof, and these were completed in April 2014.

Relationship between Jumelles and its shareholders after exercise of the Xstrata Call Option

The Company, Jumelles and Xstrata Projects agreed to regulate their respective rights in relation to the Project following exercise of the Call Option under the terms of the JVA. Under the terms of the JVA (as amended), all significant decisions regarding the conduct of Jumelles' business (other than certain protective rights which require the agreement of shareholders holding at least 95% of the voting rights in Jumelles) are made by the Board of Directors.

Glencore has the right to appoint three directors to the Board of Jumelles while ZIOC has a right to appoint two directors. At any Board meeting, the directors nominated by Glencore have between them such number of votes as represents Glencore's voting rights in the general meetings of Jumelles and the directors nominated by ZIOC have between them such number of votes as represents ZIOC's voting rights in the general meetings of Jumelles.

As a consequence of the provisions of the JVA (in its original version and as subsequently amended), following exercise of the Xstrata Call Option in February 2011, Xstrata's merger with Glencore to form Glencore Xstrata (May 2013) and the renaming of Glencore Xstrata to Glencore (May 2014), Glencore controls Jumelles at both a shareholder and director level and therefore controls what was the Company's sole mineral asset, the Zanaga Project. Going forward the Company has a strategic partnership in respect of the Project with Glencore.

Following exercise of the Xstrata Call Option, the principal business of the Company has been to manage its 50% less one share interest in the Project. Initially this involved the monitoring of both the finalisation of the pre-feasibility study and the preparation of the feasibility study. Going forward emphasis has been placed on progressing the key objectives of the Project team. These objectives include the establishment of port and power agreements with relevant developers, issue of the environmental permit, and ratification of the Zanaga Mining Convention by the Parliament of the Republic of Congo. These items form important milestones as the Project moves toward attracting the finance required for the implementation of Stage One.

Future funding requirements and going concern basis of preparation

In common with many exploration and development companies in the mining sector, the Company raises funding in phases as its project develops.

Pursuant to the JVA, as amended by the Supplemental Agreement, during 2014, the staged production FS prepared by Jumelles was completed, the Project's Mining Licence Application was issued and a Mining Convention was signed with the Government of the Republic of Congo.

Based on its management's own internal evaluation, Jumelles believes the proposed staged development of the Zanaga project (as set out in the FS) offers high grade ore at competitive cost, thereby offering an attractive rate of return, at an acceptable level of risk, although substantial capital expenditure will be required both at the prospective mine site and in respect of transportation and other associated infrastructure. Revenues from mining are not forecast to be earned for several years.

Jumelles has a preferred development plan. In relation to such development plan, discussions commenced with several parties regarding investment through the raising of debt or the introduction of additional investors. It is believed that, given the attractiveness of the proposed staged development of the Project, the raising of debt or additional investment can be secured. During the Funding Round initiative conducted jointly by ZIOC and Glencore, a number of entities expressed an interest in discussing an investment in the Project alongside the joint venture partners. Engagement with interested entities is expected to continue, however, it is believed that current iron ore market conditions need to stabilise before formal discussions can resume.

Current iron ore market conditions have also resulted in a scaled down work programme and a reduction in the cost base of the Project.

Similar to the Supplemental Agreement for 2014 project expenditure, Glencore and ZIOC have agreed a 2015 Project Work Programme and Budget for the Project of US$8.8m. ZIOC has agreed to contribute towards such work programme and budget an amount comprising a fixed sum of US$ 2.5m plus an amount equal to 50% of the Management Team costs (total Management Team costs are estimated to be $0.9m within such US$8.8m figure). In addition, where there are overall savings to the budgeted figure beyond US$0.5m, ZIOC is entitled to share 50/50 in any such savings. Ignoring any entitlement to savings, ZIOC's potential contribution to the Project in 2015 is US$2.95m in total. The levels of Jumelles' committed capital and other expenditure extending beyond this budgeted figure of $8.8m are very limited, with substantially all of any additional expenditure being discretionary.

In the light of iron ore market conditions, the Company has taken steps to further reduce its own cost base during 2015. At 31 December 2014 the Company had cash reserves of US$12.5m and therefore has sufficient cash resources to support both its own operating costs and the agreed contribution to the project set out above.

In the current circumstances, the Directors have a reasonable expectation that the Company has adequate financial resources to continue in operational existence for the foreseeable future. For these reasons, the financial statements of the Company have been prepared on a going concern basis.

In the event that a decision is taken to develop a mine at Zanaga, the Company and the Project will need to raise further funds.

2 Accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

Basis of preparation

These financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union ("Adopted IFRS"). Adopted IFRS comprises standards and interpretations approved by the International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee ("IFRIC") as adopted by the European Union.

The financial statements consolidate those of the Company and its subsidiary Zanaga UK Services Limited (together, the "Group") and the Company's investment in an associate which is accounted for using the equity method.

New standards, amendments and interpretations

The following Adopted IFRSs have been issued but have not been applied by the Group in these financial statements. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated:

·   IFRS 9 Financial Instruments (effective date to be confirmed).

·   IFRS 15 Revenue from Contract with Customers (effective date to be confirmed).

·   Defined Benefit Plans: Employee Contributions - Amendments to IAS 19 (effective date to be confirmed).

·   Accounting for Acquisitions of Interests in Joint Operations - Amendments to IFRS 11 (effective date to be confirmed).

·   Clarification of Acceptable Methods of Depreciation and Amortisation - Amendments to IAS 16 and IAS 38 (effective date to be confirmed).

·   Sale or Contribution of Assets between and Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28 (effective date to be confirmed)

·   Annual Improvements to IFRSs - 2010-2012 Cycle (effective date to be confirmed).

·   Annual Improvements to IFRSs - 2011-2013 Cycle (effective date to be confirmed).

·   Annual Improvements to IFRSs - 2012-2014 Cycle (effective date to be confirmed).

Measurement convention

These financial statements have been prepared on the historical cost basis of accounting.

The preparation of financial statements in conformity with Adopted IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the financial statements from the date that control commences until the date that control ceases.

Associates

Investments in associates are recorded using the equity method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition changes in the Group's share of the net assets of the associate. The Group profit or loss and other comprehensive income includes the Group's share of the associate's profit or loss and other comprehensive income. The investment is considered for impairment annually. The Board agreed to impair the asset to the level of the Company's shareholding in the Jumelles impaired asset valuation.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from the intra-group transactions, are eliminated in preparing the financial statements.

Foreign currency

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement.

Share-based payments

The Group makes equity-settled share-based payments to certain employees and similar persons as part of a long-term incentive plan ("LTIP"). The fair value of the equity-settled share-based payments is determined at the date of the grant and expensed, with a corresponding increase in equity, on a straight line basis over the vesting period, based on the Group estimate of the awards that will eventually vest, save for any changes resulting from any market-performance conditions.

Where awards were granted to employees of the Group's associate and similar persons, the equity-settled share-based payments were recognised by the Group as an increase in the cost of the investment with a corresponding increase in equity over the vesting period of the awards. In equity accounting for the Group's share of its associate, the Group has accounted for the cost of equity settled share-based payments as if it were a subsidiary.

The shares to be issued under the 2010 LTIP were acquired by an Employee Benefit Trust which has to date subscribed for the shares at zero value. These shares are held by the Employee Benefit Trust until the vesting conditions have been met and the share options are exercised.

Subsequent awards of share options have been structured as standard share options. Such awards made prior to 2014 have been waivered and replaced during the year.

Information on the share awards is provided in Note 11 to these financial statements.

Share-based payments to non-employees

Where the Group received goods or services from a third party in exchange for its own equity instruments and the amount of equity instruments is fixed, the equity instruments and related goods or services are measured at the fair value of the goods or services received and are recognised as the goods are obtained or the services rendered. Equity instruments issued under such arrangements for the receipt of services are only considered to be vested once provision of services is complete. Such awards are structured as standard share options. During 2014, share options issued in previous years were waivered and replaced.

Non-derivative financial instruments

Non-derivative financial instruments in the balance sheet comprise other receivables, cash and cash equivalents, and trade and other payables.

Other receivables

Other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses.

Trade and other payables

Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.

Ordinary shares issued to the Employee Benefit Trust under the LTIP or to non-employees for services provided to the Company, are included within Share Capital.

When share capital recognised as equity is repurchased, the amount of consideration paid, including directly attributable costs, is recognised as a change in equity. Repurchased shares are cancelled.

Impairment

The carrying amounts of the Group's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment; a financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. If any such indication exists, the asset's recoverable amount is estimated.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.

Calculation of recoverable amount

The recoverable amount of the Group's investments and receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e., the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted.

The recoverable amount of other assets is the greater of their fair values less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Reversals of impairment

An impairment loss in respect of a receivable carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.

In respect of other assets, an impairment loss is reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Expenses

Financing income and expenses

Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method.

Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.

Segmental Reporting

The Group has one operating segment, being its investment in the Project, held through Jumelles Limited. Financial information regarding this segment is provided in Note 6.

Subsequent events

Post year-end events that provide additional information about the Group's position at the balance sheet date (adjusting events) are reflected in the financial statements. Post year-end events that are not adjusting events are disclosed in the notes to financial statements when material.

3 Critical accounting estimates, assumptions and judgements

The Group makes estimates and assumptions concerning the future that are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.

Impairment of investment in associate

The value of the Group's investment in Jumelles depends very largely on the value of Jumelles' interest in the Project. Jumelles assesses at least annually whether or not its exploration projects may be impaired. This assessment can involve significant judgement as to the likelihood that a project will continue to show sufficient commercial promise to warrant the continuation of exploration and evaluation activities.

Accounting for the Company's interest in Jumelles Limited

Significant judgement has been applied in arriving at the accounting treatment of the Group's interest in Jumelles. Though the exercise of the Xstrata Call Option on 11 February 2011 gave Xstrata Projects a shareholding of 50% plus one share, and then effective director level control of Jumelles, those shares were not considered to have vested until the Feasibility study had been completed at the end of April 2014. Up until that point in time the Group continued to account for a 100% interest in Jumelles. Further details at December 2014 may be found under 'Investment in associate' Note 6b.

From 1 May 2014 the Company accounted for the reduction in its interest in Jumelles to 50% less one share.

4 Note to the comprehensive income statement

Operating loss before tax is stated after charging/(crediting):

Other than the Company Directors, the Group directly employed six staff in 2014 (2013: five). The six Directors received a total of US$611,000 remuneration for their services as Directors of the Group (2013: US$578,000). The amounts paid as Directors' fees are shown in the Directors' Remuneration Report in the 2014 Annual Report. The Directors' interests in the share capital of the Group are shown in the Directors' Remuneration Report in the 2014 Annual Report.

5 Taxation

The Group is exempt from most forms of taxation in the BVI, provided the Group does not trade in the BVI and does not have any employees working in the BVI. All dividends, interest, rents, royalties and other expense amounts paid by the Company, and capital gains are realised with respect to any shares, debt obligations or other securities of the Company, are exempt from taxation in the BVI.

The tax charge in the period relates to the Company's subsidiary, Zanaga UK Services Limited.

The effective tax rate for the Group is 0.03% (2013: 0.9%).

6a Property, Plant and Equipment

There are no assets held under finance leases or hire purchase contracts.

6b Investment in associate

At 31 December 2014, the investment represents a 50% less one share shareholding in Jumelles being 2,000,000 shares of the total share capital of 4,000,001 shares. The shares were acquired in exchange for shares in the Company. Originally recorded at fair value, the investment is now valued at the Company's share of the impaired value declared in the accounts of the associate.

The additions to the investment during the year were due to the additional US$7.0m of investment agreed in accordance with the Joint Venture Supplemental Agreement (2013 US$10.0m).

As the Company's investment in Jumelles did not represent an investment in a subsidiary due to the call option held by Glencore (previously Xstrata) described in Note 1 above, the Group's interest was, and continues to be, accounted for as an associate using the equity method of accounting. The Company accounted for 100% of post-acquisition comprehensive income up to the completion of the FS during H1 2014, and 50% less one share proportion thereafter. The completion of the Feasibility Study during H1 2014 also completed the consideration required from Glencore to conclude the share option agreement under which Glencore owns 50% plus 1 share shareholding in the Project. The consideration for 50% plus 1 share cost investment in the project of US$150.8m, compared to a US$105.3m 50% plus 1 share reduction in the Company's Zanaga Project asset value at 30 April 2014, realised a surplus of US$45.5m on the transaction.

The current low, and volatile,  iron ore price environment has impacted the Project's future financing which resulted in Jumelles assessing the recoverability of the carrying value of the Zanaga Project. A range of outcomes were considered, but based on iron prices at the end of 2014 and continuing price volatility, the Zanaga Project was impaired down to $100m, resulting in an impairment charge within Jumelles of $189.3m, the Company's share being $94.7m. A resulting impairment charge of $110m has therefore been recognised by ZIOC to bring the carrying value of its investment in the Project down to US$50m, which is 50% less 1 share of the carrying value in Jumelles accounts.

As at 31 December 2014, Jumelles had aggregated assets of US$108.4m (2013: US$299.2m) and aggregated liabilities of US$4.6m (2013: US$8.4m). For the year ended 31 December 2014 Jumelles incurred a loss before tax of US$189.4m (2013: US$1.2m) which included an impairment charge of $189.3m (2013: US$nil). Currency translation of the underlying Congolese asset generated a translation loss of US$14.5m (2013: Gain US$10.7m). A summarised consolidated balance sheet of Jumelles Limited for the year ended 31 December 2014, including adjustments made for equity accounting, is included below:

7 Other receivables

8 Cash

9 Trade and other payables

No amounts payable are due in more than 12 months (2013: US$nil).

10 Share capital

The Company is able to issue an unlimited number of no par value shares. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. No dividends have been paid or declared in the current year (2013: US$nil).

Share capital changes in 2014

There were no new shares issued in 2014, nor were there any share repurchases.

11 Share-based payments

Employees

As stated under Note 2 above the Group has implemented an LTIP in order to recruit and retain key officers and employees of the Group and the Group's associate. For all key management personnel, the 2010 LTIP is structured as a split interest scheme. On the date of the award, the employee and the Employee Trust enter into an agreement to acquire shares as joint owners with the employee's proportion of ownership of each share being 0.001% of the total value up to a given hurdle and 99.999% of the total value above the hurdle. The hurdle is determined on advice of the Remuneration Committee. The employee will pay the market value for his joint ownership of the shares. If the vesting conditions are not met, the employee forfeits joint ownership of the shares. If the award meets the vesting conditions, the employee has the right to exercise the option and become the sole owner of the shares. The Group also granted a number of awards of share options to middle management. Under these awards the employee was not required to pay an exercise price for the shares, which have all vested and the options exercised.

Three sets of separate awards were made on 18 November 2010, a fourth set of awards was made on 2 March 2012 and a fifth award was disclosed in 2013, applicable upon the appointment to the Board of Mr Alistair Franklin. All awards made after 2010 are issued as standard share options.

Replacing awards 3, 4 and 5, on 29 July 2014, the Board approved the grant of 9,027,274 share options to certain Directors, key employees and Consultants to the Company in recognition of the achievement of key corporate and project milestones since 2012, and to incentivise key employees and consultants to achieve certain new performance targets.

There are specific provisions that apply to all awards in respect of takeover and corporate transaction provisions and provisions relating to cessation of employment or ceasing to provide services.

Awards currently in operation are as follows:

Award 1 (fully vested)

These awards vested on the publication of the results of the VEE, which was achieved in October 2011.

Award 2 (fully vested)

These awards fully vested in 2012 on the expiry of two years following Admission.

Award 6 (partly vested)

These awards vest one third on the date of grant (July 2014), one third in February 2015, and one third in February 2016

Award 7 (partly vested)

These awards vest partly on the date of grant, partly upon the achievement of the signed Mining Licence and Mining Convention, and partly in December 2015 or earlier in the event of externally sourced incoming investment into Jumelles Ltd or a decision to proceed with Front End Engineering Phase (FEED) ahead of a potential investment and construction decision.

Award 8 (fully vested)

These awards vested on the date of grant in July 2014.

Award 9 (partly vested)

Theis award vests partly on the date of grant, partly upon the achievement of the signed Mining Licence and Mining Convention, and partly in December 2015 or earlier in the event of externally sourced incoming investment into Jumelles Ltd or a decision to proceed with Front End Engineering Phase (FEED) ahead of a potential investment and construction decision.

The application of the vesting criteria is subject to the discretion of the Board of Directors.

It is currently expected that the awards will vest in full. Details of current awards are as follows:

* Sterling amounts have been converted into US Dollars at the grant dates exchange rates of: Awards 1,2, US$1.547:£1.00, Subsequent awards US$ 1.6944:£1.00.

** Excepting 199,076 share options with expiry date 7 July 2023

The following information is relevant in the determination of the fair value of options granted during 2010 and 2014 which has applied option valuation principles during the year under the above equity-settled schemes:

* Sterling amounts have been converted into US Dollars at the grant dates exchange rates of: Awards 1,2, US$1.547:£1.00, Subsequent awards US$ 1.6944:£1.00.

The volatility assumption of awards 1 & 2 were measured by reference to the historic volatility of comparable companies based on the expected life of the option. Subsequent awards referenced the volatility of ZIOC's own history since the 2010 flotation.

Non-employees

Replacing awards made previously, or as new awards, on 29 July 2014 the Company also granted awards of share options in respect of consultancy services provided by Strata Capital UK LLP, Harris GeoConsult Ltd and Renroc International Ltd.

* Sterling amounts have been converted into US Dollars at the grant date  exchange rateUS$ 1.6944:£1.00.

The total equity-settled share-based payment expense recognised as an operating expense during the year was US$1,251,000 (2013: US$397,000), of which US$238,000 (2013: US$21,000) related to the Directors, US$875,000 related to employees of the group (2013: US$218,000), and US$138,000 (2013: US$158,000) related to consultancy services provided by consultants. Further details of share-based payments awarded to Directors of the Group can be found in the Remuneration Report in the 2014 Annual Report.

The total charge during the year for equity-settled share-based payments awarded to employees of companies in which the Group has a significant interest totals US$nil (2013: US$nil).

12 Profit/(Loss) per share

There are potential ordinary shares outstanding, refer to Notes 10 and 11 for details of these potential ordinary shares.

13 Financial instruments

Fair values of financial instruments

Other receivables

The fair value of other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material. The fair values approximate book values.

Trade and other payables

The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material. The fair values approximate book values.

Cash and cash equivalents

The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is not repayable on demand then the fair value is estimated at the present value of future cash flows, discounted at the market rate of interest at the balance sheet date.

Financial Risk Management

The Group's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (comprising currency risk and interest rate risk). The Group seeks to minimise potential adverse effects of these risks on the Group's financial performance. The Board has overall responsibility for managing the risks and the framework for monitoring and coordinating these risks. The Group's financial risk management policies are set out below:

(a) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group receivables related parties. The Group has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. At 31 December, the financial assets exposed to credit risk were as follows:

(b) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its obligations as they fall due. The Group evaluates and follows continuously the amount of liquid funds needed for business operations, in order to secure the funding needed for business activities and loan repayments. The availability and flexibility of the financing is needed to assure the Group's financial position. The Group funding requirements are detailed in Note 1.

Details of the maturity of financial liabilities are provided in Note 9.

(c) Market risk

(i) Foreign currency risk

The foreign currency denominated financial assets and liabilities are not hedged, thus the changes in fair value are charged or credited to profit and loss.

As at 31 December 2014 the foreign currency denominated assets include cash balances held in Sterling of US$12,313,000 (2013: US$16,699,000), other receivables denominated in Sterling of US$169,000 (2013: US$161,000), and payables of US$303,000 (2013: US$608,000) denominated in Sterling.

The following significant exchange rates applied during the year:

Sensitivity analysis

A 10% weakening of the following currencies against the US Dollar at 31 December 2014 would have increased/(decreased) equity and profit or loss by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date.

This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant.

A 10% strengthening of the above currencies against the US Dollar at 31 December would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor and market confidence. Capital consists of share capital and retained earnings.

The Directors do not intend to declare or pay a dividend in the foreseeable future but, subject to the availability of sufficient distributable profits, intend to commence the payment of dividends when it becomes commercially prudent to do so.

The Company has an LTIP which is administered by the Remuneration Committee. The LTIP is discretionary and the Remuneration Committee will decide whether to make share awards under the LTIP at any time. Either the Group Employee Benefit Trust buys the shares in the Company to be issued under the LTIP or, share options awards are made direct to individuals as appropriate.

14 Commitments

The Group had no capital commitments or off-balance sheet arrangements at 31 December 2014 (31 December 2013: nil) other than a replacement London office from 1 January 2015 having a minimum rental period of 6 months at a total rental of £45,000 (US$70,000). ZIOC has agreed to contribute towards the funding of a US$8.8m 2015 Project Work Programme and Budget an amount comprising a fixed sum of US$2.5m plus an amount equal to 50% of the Management Team costs (total Management Team costs are estimated to be $0.9m within such US$8.8m figure).

Related parties

The Group's relationships with Jumelles and Glencore are described in Note 1 above.

The following transactions occurred with related parties during the period:

In addition to the transactions above, during 2014, the Group also issued share options in respect of consultancy services provided by Strata Capital UK LLP (2010 & 2012 Share Options having been waivered) and Harris GeoConsult. Details of these options can be found in Note 11.

Transactions with key management personnel

* Harris GeoConsult Ltd, a company in which Colin Harris has a controlling interest, was paid a total of £105,000 (US$174,000) for consultancy services provided by Colin Harris during 2014 (2013: £146,000 US$228,000). In July 2014, 409,237 (2013: Nil) share options, vesting at the Date of Grant, 0.01 pence exercise price, fair value accounted £76,000 (US$128,000) were issued to Harris GeoConsult.

A total of £150,000 (US$245,000) for consultancy services provided by Michael Haworth during 2014 (2013: £314,000 US$493,000) was paid to a limited liability partnership in which Mr Haworth has a significant interest, previously known as Strata Capital UK LLP.

The Directors' have no material interest in any contract of significance subsisting during the financial year, to which the Group is a party.

Glossary