Half-yearly Report

30 June 2014 Sula Iron & Gold plc ("Sula" or the "Company") Interim Results for the six months to 31 March 2014 Sula Iron & Gold plc ("Sula" or the "Company"), the AIM listed exploration and development company focused on iron ore and gold in Sierra Leone, is pleased to announce its unaudited Interim Results for the six months ended 31 March 2014, for the Company and its wholly owned subsidiary, Blue Horizon (SL) Ltd, (together the "Group"). OPERATIONAL HIGHLIGHTS - Drilling programme to define a JORC Compliant Direct Shipping Ore ("DSO") Mineral Resource Estimate on the main BIF now completed; - Drilling programme to define a JORC Compliant Magnetite Mineral Resource Estimate expected to complete in July 2014; - Assay results received from Batches 1-5 demonstrate multiple intercepts greater than 55% Fe content; and - Gold geochemical study of over 6,000 samples and a geophysical survey over a 15 sq km area completed. FINANCIAL HIGHLIGHTS - Cash position in excess of £2.2 million at 31 March 2014 (30 September 2013: £0.01 million); - c£3.5 million successfully raised from equity placements and exercise of warrants; and - Loss for the period of £0.68 million (2013: £0.99 million loss), resulting in a loss per share of 0.37 pence (2013: 0.83 pence). Nick Warrell, Chief Executive Officer of Sula commented: "The Group remains in good health. We are focused on working towards delivering a defined iron ore resource and are on target to report both JORC Compliant DSO and JORC Compliant Magnetite Mineral Resource Estimates before the end of 2014. The Group is also confident about its gold prospectivity and continues its exploration activities to identify drill targets in the YDS region of the Ferensola Licence area. We are cautiously optimistic about the future." Enquiries: Sula Iron & Gold plc +44 (0) 20 7583 8304 Nick Warrell / Matt Wood www.sulairongold.com Cairn Financial Advisers LLP (nominated adviser) +44 (0) 20 7148 7900 James Caithie / Avi Robinson Daniel Stewart & Company Plc (broker) +44 (0) 20 7776 6550 Martin Lampshire / David Hart Yellow Jersey PR +44 (0) 7768 537 739 Dominic Barretto / Kelsey Traynor Notes to Editors: Sula Iron & Gold plc is a multi-commodity exploration company focused on West Africa. The Company's main objective is to explore and advance its Ferensola Projects, in Northern Sierra Leone, that are highly prospective for iron and gold. Sula is currently focused on defining a maiden JORC compliant iron ore resource estimate and evaluating the gold prospectivity. The 153 sq. km licence area is contiguous to African Minerals' operational Tonkolili Iron Mine, which has a JORC compliant resource of 12.8 billion tonnes iron mineralisation. Exploration work at the project has confirmed the presence of BIF at surface, which has a known strike length of 3.1km. The BIF is proven to extend NE from the Tonkolili licence and into Sula's licence area. A 2,000m scout drilling programme conducted over a 2.2km section of BIF, confirmed the licence area's prospectivity for high grade iron mineralisation. Significant Greenstone Belt-style gold mineralisation has also been identified at various prospects within the licence area. Five target areas for hard rock gold mineralisation have been identified based on the location of historic drill intercepts, the source areas for alluvial gold deposits, and the position of major structures as defined by airborne magnetic data and drainage orientation. The information in this release that relates to Exploration Results has been reviewed by Mr Andrew Dacey, Non-Executive Technical Director of Sula Iron & Gold plc. Mr Dacey is a Fellow of the Institute of Materials Minerals and Mining, a Registered Professional Geologist with the Australian Institute of Geoscientists and a Competent Person as defined in the Australasian Code for Reporting of exploration results and Mineral Resources and Ore Reserves. CHIEF EXECUTIVE OFFICER'S STATEMENT During the period 1 October 2013 to 31 March 2014 and subsequently, the Company has been focused on delivering its defined exploration programme, strengthening its management team, improving its cash position and enhancing the value of its assets. We have reported significant advances in terms of board structure, financing and exploration news. OPERATIONS SRK VALUATION In January 2014, mining consultants SRK Exploration Services Ltd ("SRK ES") published a valuation of Sula Iron and Gold plc, which is available in full on Sula's website at www.sulairongold.com/investors. Of particular note is the Technical Valuation, which was based upon the geological information available at that time and SRK ES's opinion regarding the status of the assets. I remain greatly enthused with the result of the valuation, and believe it to be testament to the value potential of Sula. IRON ORE Following the successful scout drilling programme carried out in 2013 on the main Banded Iron Formation ("BIF") unit within the licence, a key focus for us during the period under review was to ensure we had the necessary financial and technical resources to exploit this potential. In March we successfully raised approximately £2.1 million of new funds via an equity placing with the specific objective of carrying out a drill programme which would ultimately lead to a JORC Compliant Resource on the DSO by the end of 2014. I am pleased to report that we are well on the way to achieving this objective. In April 2014, we implemented a drilling programme of approximately 5,700 metres to establish a maiden JORC Compliant Resource for the DSO ("DSO Drill Programme"). Assay Batches 1 to 5 out of a total of 10 batches have already been successfully reported, with multiple intercepts in excess of 55% Fe. Batches 6, 7 & 8 have already been dispatched to ALS in Monrovia for sample preparation and will be sent subsequently to ALS in Ireland for assay results. The remaining two batches are currently being prepared for freighting to Monrovia for preparation ahead of being despatched to Ireland. Not only has the DSO Drill Programme been delivered on schedule and below budget, but whilst we had the capabilities on site, we designed and planned a further JORC Compliant Resource drill programme for the fresh magnetite that sits below the DSO within the main BIF unit. Drilling has commenced on this programme and, subject to favourable weather and other variables, the planned 1,550 metres of drilling is scheduled to complete in July 2014. Accordingly, I'm pleased to report that the Group is on target to report both JORC Compliant DSO and magnetite Mineral Resource Estimates before the end of 2014. GOLD In November 2013, the Group commenced an initial gold exploration programme at the Yanfarina-Lagunda-Send ("YDS") area of the Ferensola Licence. This exploration comprised a 15 sq km geophysical and a geochemical soil sampling programme and was completed in February 2014. A ground magnetic survey was conducted in order to delineate geological structures and over 150 line km of ground magnetic surveying was carried out on a 100m line spacing over the principal target areas. Additionally, more than 6,000 soil/regolith samples were collected on a 100m x 25m grid pattern. The results of this programme have enabled us to target hard rock gold mineralisation and potential drill targets. At the beginning of April 2014, our wholly owned subsidiary, Blue Horizon (SL) Limited, which holds the exploration licence, successfully obtained permission from the Sierra Leone Minerals Advisory Board ("MAB") to carry out trial mining within its licence area. This permission was sought to allow Blue Horizon to extract batch samples of alluvial gold for technical valuation and sale. I am pleased to report that Blue Horizon began the trial mining test work in April which proved that the gold is amenable to gravity separation by water without chemical use and is averaging a 92% purity. As a consequence, since April 2014, Blue Horizon has been able to generate small sales of its gold which, aside from the technical merit, has offset the cost of the trial mining programme. Sula intends for Blue Horizon to continue mining and selling batch samples of gold for the foreseeable future. FINANCIAL REVIEW I am pleased to report that at the period end, Sula had a healthy looking balance sheet, with net assets standing at approximately £6.7 million (30 September 2013: £4.1 million). During the period under review we raised almost £3.5 million of new money through the issue of new equity with institutional and private client investors, having begun the period with less than £0.01 million of cash. At the period end, the cash balance was more than £2.2 million. The loss for the period was £0.68 million (2013: £0.99 million), representing a loss per share of 0.37 pence (2013: 0.83 pence). A large proportion of the Group's expenditure in the period was in the gold geophysical and a geochemical soil sampling programme. In the period under review, exploration costs of £0.17 million in respect of the DSO Drill Programme were capitalised. EQUITY PLACING During the period under review the Group successfully raised an aggregate of £3.5 million, of which £0.8 million was raised in a placing of 40.0 million shares at 2.0 pence in October 2013 to advance the Company's Ferensola Project and for working capital purposes. A further £0.6 million was raised from the exercise of 19.2 million warrants at 3.0 pence in January 2014 and February 2014 with an additional £2.1 million raised via a placing at 2.25 pence in March 2014, specifically for the DSO Drill Programme. BOARD CHANGES In November 2013 and December 2013, we strengthened our Board with the appointments of Matt Wood and Andrew Dacey, respectively. Matt joined initially as a Non-Executive Director but I am pleased to say agreed to become the Group's part-time Finance Director in early March 2014. Matt is a chartered accountant and an experienced non-executive director of growth companies and a corporate financier with 15 years' City experience. Matt is also the Managing Director and founder of CMS Advisory Group ("CMS"), a City-based multi-disciplined advisory firm to AIM companies. Andrew joined as Non-Executive Technical Director on 31 December 2013 and has over 18 years' experience in the mining sector. He has a strong track record, having worked throughout the world for numerous junior resource companies and played a pivotal role in the Golden Hills 3.3Moz Au-equivalent discovery in Mongolia. I am totally confident that their respective financial and resources experience will be of great value to the Group as we anticipate increasing the intrinsic value of Ferensola. In October 2013 and December 2013, Non-Executive Director, Gavin Burnell, and Non-Executive Technical Director, Gareth O'Donovan, resigned from the board, respectively. We thank them both for their contributions and wish them well in their future endeavours. OUTLOOK The Group remains in good health. We are focused on working towards delivering a defined iron ore resource and are on target to report both JORC Compliant DSO and JORC Compliant Magnetite Mineral Resource Estimates before the end of 2014. The Group is also confident about its gold prospectivity and continues its exploration activities to identify drill targets in the YDS region of the Ferensola Licence area. We are cautiously optimistic about the future. SULA IRON AND GOLD PLC CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 31 MARCH 2014 6 months 6 months Year ended ended ended 31-Mar-14 31-Mar-13 30-Sep-13 (unaudited) (unaudited) (audited) Note £'000 £'000 £'000 Revenue - - - Cost of sales - - - Gross profit - - - Administrative expenses (568) (657) (1,691) Share based payment expense 11 (108) (331) (331) Results from operating (676) (988) (2,022) activities Loss before taxation (676) (988) (2,022) Taxation - - - Loss for the period (676) (988) (2,022) Other comprehensive (loss)/Income Exchange translation (51) - 7 Total other comprehensive loss for the period (727) (988) (2,015) Loss per share Basic and diluted loss per 12 (0.37) (0.83) (1.68) share (pence) SULA IRON AND GOLD PLC CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2014 31-Mar-14 31-Mar-13 30-Sep-13 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000 Assets Property, plant and 7 337 248 239 equipment Intangible assets 8 3,995 4,034 3,824 Non-current assets 4,332 4,282 4,063 Trade and other receivables 102 19 40 Cash and cash equivalents 2,242 605 14 Current assets 2,344 624 54 Total assets 6,676 4,906 4,117 Equity Share capital 9 2,815 1,220 1,220 Share premium 9 6,515 4,681 4,679 Share based payments 439 331 331 reserve Foreign exchange reserve (4) - 47 Retained deficit (3,301) (1,551) (2,625) 6,464 4,681 3,652 Liabilities Loans and borrowings - 94 66 Bank overdraft 1 - 14 Trade and other payables 211 131 385 Current liabilities 212 225 465 Total liabilities 212 225 465 Total equity and 6,676 4,906 4,117 liabilities SULA IRON AND GOLD PLC CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 MARCH 2014 Attributable to owners of the Company Share Share Share Exchange Retained Total capital premium based reserve deficit equity payment reserve £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 October 2013 1,220 4,679 331 47 (2,625) 3,652 (audited) Loss for the period - - - - (676) (676) Total other comprehensive - - - (51) (51) income Total comprehensive loss for - - - (51) (676) (727) the period Issue of ordinary shares 1,595 2,021 - - - 3,616 Issue costs - (185) - - - (185) Share based payment - - 108 - - 108 transactions 1,595 1,836 108 - - 3,539 Balance at 31 March 2014 2,815 6,515 439 (4) (3,301) 6,464 (unaudited) SULA IRON AND GOLD PLC CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 MARCH 2013 Attributable to owners of the Company Share Share Convertible Share Retained Total capital premium notes based deficit equity payment reserve £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 October 2012 820 3,226 520 - (563) 4,003 (audited) Loss for the period - - - - (988) (988) Total comprehensive loss for - - - - (988) (988) the period Issue of ordinary shares 400 1,738 (520) - - 1,618 Issue costs - (283) - - - (283) Share based payment - - - 331 - 331 transactions 400 1,455 (520) 331 - 1,666 Balance at 31 March 2013 1,220 4,681 - 331 (1,551) 4,681 (unaudited) SULA IRON AND GOLD PLC CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2013 Attributable to owners of the Company Share Share Convertible Exchange Retained Total capital premium notes reserve deficit equity £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 October 2012 820 3,226 520 - (563) 4,003 (audited) Loss for the period - - - (2,002) (2,002) Total other comprehensive income - 47 (40) 7 Total comprehensive loss for the - - - 47 (2,062) (2,015) period Issue of ordinary shares 270 1,348 - - - 1,618 Conversion of notes 130 390 (520) - - - Costs of share issue - (285) - - - (285) Share based payment - - - - 331 331 transactions 400 1,453 (520) - 331 1,664 Balance at 31 September 2013 1,220 4,679 - 47 (2,294) 3,652 (audited) SULA IRON AND GOLD PLC CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 31 MARCH 2014 6 months 6 months Year ended ended ended 31-Mar-14 31-Mar-13 30-Sep-13 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Cash flows from operating activities Results from operating activities: (676) (988) (2,022) - Depreciation 40 72 75 - Impairment 7 - - - Share based payment transaction 108 331 331 - Expenses financed by issue of 4 - 54 shares - Foreign exchange differences (26) - 14 (543) (585) (1,548) Changes in: - trade and other receivables (62) 9 (12) - trade and other payables (173) 29 271 Net cash from operating activities (235) (547) (1,289) Cash flows from investing activities Acquisition of property, plant and equipment (157) (50) (51) Exploration expenditure capitalised (171) (210) - Net cash used in investing (328) (260) (51) activities Cash flows from financing activities Proceeds from issue of share 3,616 1,618 1,618 capital Expenses financed by issue of (4) - (54) shares Issue costs (185) (283) (285) Loan repayments (80) - - Net cash flows from financing 3,347 1,335 1,279 activities Net increase in cash and cash equivalents 2,241 528 (61) Cash and cash equivalents at beginning of - 61 61 period Cash and cash equivalents at end of period 2,241 589 - SULA IRON AND GOLD PLC NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORT 1. Reporting entity Sula Iron & Gold plc (the "Company") is a company domiciled in the United Kingdom. The condensed consolidated interim financial report of the Company as at and for the period ended 31 March 2014 comprises of the Company and its subsidiary (together referred to as the "Group"). The Group primarily is involved in the exploration and exploitation of mineral resources in Sierra Leone. 2. Basis of preparation (a) Statement of compliance This condensed consolidated interim financial report has been prepared in accordance with IAS 34 Interim Financial Reporting. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial performance and position of the Group since the last annual consolidated financial statements as at and for the period ended 30 September 2013. This condensed consolidated interim financial report does not include all the information required for full annual financial statements prepared in accordance with International Financial Reporting Standards. This condensed consolidated interim financial report was approved by the Board of Directors on 30 June 2014. (b) Judgements and estimates Preparing the interim financial report requires Management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing this condensed consolidated interim financial report, significant judgements made by Management in applying the Group's accounting policies and key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the period ended 30 September 2013. 3. Significant accounting policies The accounting policies applied by the Group in this condensed consolidated interim financial report are the same as those applied by the Group in its consolidated financial statements as at and for the period ended 30 September 2013. 4. Financial instruments Financial risk management The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the period ended 30 September 2013. 5. Operating segments The Company acts primarily as a holding company of a group involved in mineral resources exploration and exploitation in Sierra-Leone and are therefore considered to operate in a single geographical and business segment. The expertise and management skills of the directors and staff of the Company are charged to the Company's subsidiary. 6. Seasonality of operations The Group is not considered to be subject to seasonal fluctuations. 7. Property, plant and equipment Acquisitions During the six months ended 31 March 2014 the Group acquired assets with a cost of £157,000 (period ended 31 March 2013: £50,000, period ended 30 September 2013: £333,000). 8. Intangible Assets During the six months ended 31 March 2014 the Group has capitalised exploration expenditure of £171,000 (period ended 31 March 2013: £210,000, period ended 30 September 2013: £3,824,000 (acquired with subsidiary). 9. Share capital and reserves As at 01 October 2013, the Company had 121,966,674 Ordinary Shares of 1 pence ("Ordinary Shares") in issue. On 10 October 2013, the Company issued a further 40,000,000 Ordinary Shares at a share price of 2 pence per Ordinary Share, together with 40,000,000 warrants to subscribe for one Ordinary Share at 3 pence each. On 12 December 2013, the Company issued 4,217,878 new Ordinary Shares in settlement of outstanding loans and fees totalling £84,357.56 owed by the Company at a share price of 2 pence per Ordinary Share. On 31 December 2013, the Company issued 2,807,134 new Ordinary Shares in settlement of all remaining outstanding loans and fees totalling £56,142.68 owed by the Company at a share price of 2 pence per Ordinary Share. Between 10 January 2014 and 12 February 2014, the Company issued an aggregate of 19,160,000 new Ordinary Shares pursuant to the exercise of 19,160,000 warrants granted in October 2013. On 7 March 2014, the Company issued an aggregate of 93,333,272 new Ordinary Shares at a share price of 2.25 pence, together with 23,333,318 warrants to subscribe for one Ordinary Share at 4 pence each. Issue costs of £185,875 were offset against the share premium account in the period ended 31 March 2014. Dividends No dividends were declared or paid in the six months ended 31 March 2014 (period ended 31 March 2013: £nil, period ended 30 September 2013: £nil). 10. Share-based payment arrangements 6 months 6 months Year ended ended ended 31-Mar-14 31-Mar-13 30-Sep-13 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Share based payment expense (108) (331) (331) Measurement of fair values The fair value of the share-based payments was measured based on the Black-Scholes formula. Expected volatility is estimated by considering historic average share price volatility for similar entities on AIM. Equity-settled share-based payment plans The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payment plans were as follows: Warrants Expected volatility 40% Expected life* 10 years Expected dividend yield 0% Risk free investment rate 1.87% Weighted average share price at grant 2.35 Weighted average exercise price 3.23 *The Company's share warrants have exercise periods of between one and ten years from the day of grant, predominately 10 years. Please see note 11 Share Warrant below for details. 11. Share warrants Reconciliation of outstanding share warrants Weighted average exercise price (pence) Number of warrants Outstanding at 1 October 2013 3,750,000 7.6 Granted during the period 73,157,009 3.2 Warrants exercised (19,160,000) 3.0 Forfeited (3,750,000) 7.6 Outstanding at 31 March 2014 53,997,009 3.3 Exercisable at 31 March 2014 44,173,318 4.0 Warrants were granted on the Company's admission to AIM on 9 October 2012 at 8 pence each on the basis of 1 warrant for each 2 Ordinary Shares subscribed for ("Admission Warrants"). The Admission Warrants lapsed on 9 October 2013. Please see details of warrants granted during the 6 month interim period to 31 March 2014, in the table below: Number of Exercise period Warrants Date of Grant Exercise price From To (P) 40,000,000 15/10/2013 3.0 15/10/2013 15/10/2013 3,323,691 24/12/2013 2.0 24/12/2013 24/12/2018 6,500,000 10/03/2014 2.5 10/03/2014 10/03/2019 23,333,318 24/03/2014 4.0 24/03/2014 24/03/2015 73,157,009 12. Loss per share Basic and diluted loss per share The calculation of basic and diluted loss per share is based on the loss attributable to ordinary shareholders of £676,000 and a weighted average number of ordinary shares in issue of 182,689,967.

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