STRATEGIC REPORT

STRATEGY AND OBJECTIVES

The principal activity of Orogen Gold plc ("Orogen" or the "Company") is the development of mineral exploration and production projects, with an emphasis on gold exploration and project development. Orogen's strategy is to acquire prospective early-stage growth opportunities at a low entry cost. The three steps in the Orogen strategy are to:

(1)  Identify and secure low entry cost gold projects,

(2)  Undertake an efficient cost controlled programme of project evaluation and appraisal,

(3)  Move to establish gold resources at an early stage and/or seek a mining partner to take the project forward towards production.

Orogen currently operates the Mutsk Gold Project ("Mutsk"), which is located in the Syunik Province in southern Armenia, 210km southeast of the capital city Yerevan.  Orogen has an exclusive Joint Venture agreement with Georaid CJSC ("Georaid"), an Armenia registered company, to earn an 80% interest in Mutsk by incurring a total of US$2.5m in exploration expenditure on the project by the end of August 2016. Orogen's work to date at Mutsk has delineated a gold deposit in two zones within a 2.5km x 1km area of hydrothermal alteration. Further drilling and follow-up work is required to bring the project to resource status.

In April 2016, the Company signed a term sheet with Galileo Resources plc to earn a minimum 51% interest in the Silverton gold-silver project in Nevada, USA ("Silverton"). Orogen will focus initially on drilling a shear zone that may contain high grade gold and silver deposits, while also reviewing the potential for large, lower grade gold and silver resources within the wider property area.  

REVIEW OF BUSINESS

Mutsk Gold Project

Orogen has discovered a new, low-sulphidation epithermal gold deposit through its exploration at Mutsk. The alteration and pyrite mineralisation 'footprint' is substantial, covering an area of at least 2.5km x 1km. This confirms that there has been a large hydrothermal system operating at Mutsk. Gold mineralisation discovered so far appears to be focussed on a north-south trending structure, which locally contains high grades up to 10g/t Au. However, the bulk of the gold occurs at lower grades within hydrothermally altered and brecciated andesitic volcanics peripheral to this structure.

So far two distinct gold-bearing zones have been identified covering a minimum strike length of 550m. The intervening area between the zones appears relatively unaltered and unmineralised, with probable cross-cutting faulting.

The occurrence of gold in several distinct zones within the overall target area is quite typical for such deposits and the nearby Amulsar deposit shows similar characteristics. Amulsar now has a total resource of 5Moz Au and targeted production of 200,000 ounces annually with an average grade of 0.78g/t Au. Lydian International plans to commence construction at Amulsar in Spring 2016 - this will represent the first new gold mine development in Armenia under the current mining regulations.

At Mutsk, gold grades within the wider mineralised sections generally range from 0.5-2.0g/t, averaging close to 1g/t Au, with some higher grade intervals - see examples from Table 1 below - including holes 46 and 47 from the 2015 drilling programme. Many of the intervals are from shallow depths.

The 2015 drilling programme succeeded in confirming potentially significant extensions to the previously discovered gold zones. In the northern zone, OG15-46 provided lateral dimension to the gold intercepts on profile 3950N, as well as intersecting higher than average grades. In the main zone, OG15-47 demonstrated that alteration and gold mineralisation continues to the south where it remains open. OG15-48 confirmed extension of the main zone to the east, beyond any hole previously drilled. While the intercepts in this hole were limited in scale and grade, this could represent an important continuation of the target zone to the east, beyond what had previously been understood to be a north-south trending boundary structure.

Encouragingly, an initial core sample tested by SGS Mineral Services for gold deportment in 2015 suggested that the gold is potentially recoverable by standard processes.

Deli Jovan Gold Project

It has been concluded that the individual gold-bearing veins at Deli Jovan, while high grade in places, are not sufficiently continuous to be amenable to economic evaluation and mining at current gold prices. The exploration data was reviewed by several interested parties during 2015 with a view to a farm-in or purchase arrangement, but no firm proposal was forthcoming. Orogen considers that it has better options available to it at Mutsk and elsewhere and therefore it has been decided to terminate the project and relinquish the exploration permit. 

Financial

The loss for the year amounted to £890,000 (2014: £1,859,000). The loss for the year comprises an impairment charge of £534,000 (2014: £1,318,000), general and administrative expenses of £356,000 (2014: £548,000), share based payment charge of £5,000 (2014: nil) and finance income of £5,000 (2014: £7,000). The impairment charge is as a result of a review performed on the carrying value of the exploration and evaluation assets related to the Deli Jovan Gold Project.

FUTURE DEVELOPMENTS

Silverton, Nevada

In April 2016, Orogen Gold, announced that it had signed an exclusive Term Sheet with Galileo Resources Plc, a UK AIM-listed company, covering a highly prospective epithermal gold-silver project at Silverton in Nevada, USA, which is one of the best-endowed gold districts in the world. 

Orogen will have an exclusive right to earn an initial 51% interest in the Silverton project over the 6km² claim area through exploration spend of US$400,000 over 18 months. Subsequently the Company can earn an additional 24% interest in the project through an additional exploration spend of US$1.5 million over a further 30 month period.

Based on analogy with other gold-silver deposits in the Nevada region, the project has potential for discovery of zones of high grade structurally-hosted gold-silver mineralisation and/or a large, low grade, open-pittable deposit.

The property is located in Nye County in the Basin and Range structural province of east-central Nevada, with ready access from the Ely-Tonopah highway. Mineralization and hydrothermal alteration at Silverton occurs in narrow, steep-to-shallow dipping veins and horizons, as well as disseminated in porous and permeable rhyolite tuffs. Surface rock chip sampling shows widespread low-order gold mineralisation over several square kilometres. Historic non-core drilling at Silverton also cut extensive low-grade gold intervals, much of it at shallow depths. However, several zones in excess of 1g/t Au were intersected, such as 15.24m @ 1.05g/t Au (hole 88-13), 7.62m @ 2.29g/t (hole S-3), 10.66m @ 1.10g/t Au (hole S-11) and 1.52m @ 5.97g/t Au (hole S-4).

In addition, in the south of the property, a one kilometre north-south zone along the Silverton Shear with a 0.1‐1.5g/t Au anomaly at surface remains untested by drilling. Vertical drill holes marginal to the shear reportedly returned several gold and silver-mineralized intervals, including 10.67m @ 1g/t Au (hole 81-10) from 79.2-89.9m depth. Shallow holes 81-12 and 81-13 also both bottomed in gold mineralisation. In addition, several strong silver intercepts are recorded up to 604g/t Ag over 1.52m from 18.29m to 19.81m depth in hole 81-12 and 280g/t Ag over 3.04m from 1.52m to 4.57m depth in hole 81-5. Small scale mining was carried out here from 1930 to 1937 and in 1953.  Total production for the district is reported as <100,000oz silver, <2,000oz gold and <1 ton of antimony. 

The Silverton Shear Zone represents a particular target of interest to Orogen. The Company plans to complete due diligence and to prepare a programme of drilling of angled holes to test the shear and vein system for high grade gold-silver beneath and along strike from the workings.

Mutsk Gold Project

Orogen will continue to advance the Mutsk project, with the aim of completing earn-in to an 80% interest in the property during 2016. The work plan proposed for 2016 includes further drilling to extend the footprint of the known mineralisation as a step towards building an initial mineral resource. Particular attention will focus on the southern and eastern margins of the main gold zone which currently remain open. Further drilling will also seek out pockets of higher grade gold, including extensions to the OG15-46 intercept in the northern zone. 

Deli Jovan Gold Project

It has been concluded that the individual gold-bearing veins at Deli Jovan, while high grade in places, are not sufficiently continuous to present an economic mining opportunity at current gold prices. The exploration data was reviewed by several interested parties during 2015 with a view to a farm-in or purchase arrangement, but no firm proposal was forthcoming. Orogen considers that it has better options available to it and therefore it has decided to terminate the project and relinquish the exploration permit. 

KEY PERFORMANCE INDICATORS

The key indicators of performance for the Group is its success in identifying, acquiring and developing and divesting of investment in exploration projects so as to create shareholder value. The Group carries out its operations by way of execution of operational plans that are approved and budgeted in advance by the Board. Operational progress is reviewed by the Board on a regular basis and actual costs are compared to budgets.

Control of bank and cash balances is a priority for the Group and these are budgeted and monitored closely to ensure that the Group maintains adequate liquidity to meet financial commitments as they arise. At 31 December 2015 the Group held £921,000 of cash resources.

The Company initially secured an exclusive option to earn-in the Mutsk Gold Project in January 2013 and has subsequently signed a full joint venture earn-in agreement in February 2014. During the current year the Company incurred £266,000 of exploration costs on Mutsk. The Company remains on track to complete the project earn-in by incurring US$2.5m of exploration expenditure on the project by 20 August 2016. At year-end 2015, approximately 89% of qualifying earn-in expenditure has been incurred.

PRINCIPAL RISKS AND UNCERTAINTIES

The Group considers that the principal risks to the achievement of its business plans are as follows:

Operational

In common with other businesses operating in gold exploration, the Group's activities are speculative and are inherently subject to a high degree of risk.

The Group's operational work involves geological exploration and the implementation of geological work programmes. Interpretation of the results of these programmes is dependent upon judgements and assessments that by their very nature are speculative; these interpretations are applied in designing further work programmes to which the Group can commit significant resources. Work programmes often involve excavation of former mine workings, drilling operations and other geological work that present significant engineering challenges which are subject to unexpected operational problems. The actual cost of programmed operations can vary significantly from planned levels as a result of unexpected issues arising.

Climate

The Group's activities take place in remote locations that can be subject to severe climate events, particularly during the winter season. Severe winter weather can cause delays in implementation of planned programmes and can have cost consequences in recovering from damage caused by climatic events.

Political, economic, legal, regulatory and social

The Group operates in different countries where political, economic, legal, regulatory and social uncertainties are potential risk factors.  The Group has restricted its activities to Europe and the USA where such risks could be considered to be less than in many developing countries in other parts of the world.

Tax risk

The Group endeavours to be fully tax compliant and to manage its tax affairs efficiently in every jurisdiction in which it operates. In a complex and ever changing taxation environment, some uncertainty is inherent in estimating the Group's liabilities. The Group is exposed to changes in legislation and interpretation of existing policies across the countries in which operations take place. The Company exercises judgement in assessing the required level of provision for taxes arising.

Organisational

The Group is dependent on the experience and skills of the Directors and senior management to successfully execute its strategy; the loss of such key contributors would present a risk to the business.  Staffing levels and development of business processes and policies are kept under regular review to ensure that they are appropriate and adequate for the scale and growth of the Group's business.

Financial

The Group's projects are at an early stage and currently do not generate any cash flow to support the exploration activities. The valuation and future earnings of the Company are exposed to movements in the market price of gold which is sold in US$. Orogen is also subject to exchange rate risk with the Company's accounts in GBP while the Company's projects require funding in US$. The operating entities of the projects to which Orogen has earn-in agreements incur substantial costs in Armenian Dram and in US$.

Insurance

The Group has in place insurance protection, including a directors and officers liability policy, to insure against risks of loss where management deems appropriate and cost effective; however in some cases risks cannot be effectively covered by insurance and the cover in place may not be sufficient to cover the extent of potential liabilities.

Health and safety

Health and safety of all those working in and visiting the Group's installations is a priority. The Group's operations can take place in dangerous environments particularly where underground mining and exploration activities are being pursued. The Group has in place a comprehensive health and safety policy alerting all concerned to the risks involved and to the required precautions that staff and visitors to the Group's operations must take. Staff and authorised visitors are only permitted access to underground facilities when safety inspection has been completed and certificates issued by the appropriate and competent authority.

Environment and community

The Company recognises its social responsibilities and seeks to adopt the best contemporary practice applicable to each country and region of operation.  To ensure this standard is met the Company aims to:

·     plan and conduct exploration activities in a manner that complies with legislation pertaining to the protection of the environment and employees;

·     in the absence of legislation, apply best contemporary practice relating to the  protection of the environment;

·     undertake internal environmental reviews associated with operational fieldwork;

·     train staff to apply best contemporary practices;

·     engage in research to study the impact of mining activities on the locality and implement technologies that are environmentally friendly;

·     participate in the development of environmental legislation to ensure a  balance is attained between protecting the environment and developing practical laws;

·     inform government, employees, local communities and other stakeholders of our activities, and encourage joint venture partners and suppliers to adopt the principles of this statement.

Ed Slowey                                                                                           Alan Mooney

Director                                                                                               Director

9 May 2016