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Titanium Resources (SRX)

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Tuesday 09 May, 2006

Titanium Resources

Final Results

Titanium Resources Group Ltd
09 May 2006

           Preliminary results for the period ended 31 December 2005

0700 (London) 9 May, 2006: Titanium Resources Group Ltd ('the Group' or 'TRG')
announces its preliminary results for the 12 1/2 month period ended 31 December


o       Successful IPO in August and further capital raising in October 2005
o       Qualified for the second and last tranche of €24.75 million EU loan
o       Senior management team expanded to underpin future growth plan
o       Market outlook robust
o       Sales of US$337,000 principally from  stock pile reduction
o       Attributable losses for the period of US$ 13.7 million reflects lack of
        production in 2005, as expected
o       Cash reserves at year end of US$79.7 million
o       Subsequent to the year end both the Sierra Rutile mine and SML Bauxite
        mine were brought back into production, on time and on budget

Commenting on the year, Walter Kansteiner, Non-Executive Chairman said:

'Favourable market conditions, and the requirement for external capital, led to
the decision in 2005 to list TRG's shares on the London AIM market.  This marked
a major milestone for the Group after its many years as a private company. With
the funds raised from the IPO, and a subsequent private placement, the Group was
well positioned to complete restart of both the Sierra Rutile mine and the SML
Bauxite mine and the expansion projects.

'As we begin regular shipments from our operations, we note that sales
agreements for all of the Group's pigment grade rutile are in place while demand
for welding grade rutile is strong.  In the year ahead we expect demand for
titanium dioxide to increase and interest from buyers to remain strong.'

For further information:

Walter Kansteiner, Non-executive Chairman
Tel: +44 (0) 207 321 0000

Aura Financial
Michael Oke/Andy Mills
Tel: +44 (0) 207 321 0000


2005 was a pivotal year for TRG, with the successful completion of the Group's
transformation into a significant, publicly listed, producer of industrial
minerals with head room for future growth.  The Group's listing on the AIM
Market of the London Stock Exchange in August 2005 and the associated fund
raising provided TRG with the financial strength to complete the restart and
begin the expansion of the Group's mines in Sierra Leone, West Africa.

The financial results for the period are in line with the Board's expectations
at the time of the IPO. Sales of US$337,000 derive from stock pile reduction
principally. The Attributable losses for the period of US$ 13.7 million reflect
the lack of production during the period from either of the Company's mines in
2005, as expected.

The Company's Annual Report will be posted to shareholders on 29 May and copies
will be available for collection from the offices of Aura Financial, London,

AIM admission and financing

Favourable market conditions, and the requirement for external capital, led to
the decision in 2005 to list TRG's shares on the London AIM market.  This marked
a major milestone for the Group after its many years as a private company.

TRG successfully raised US$74 million (£41 million) through an institutional
placing of 87 million shares at 47 pence per share.  TRG's shares were admitted
to AIM for trading on 25 August.  The IPO has dramatically increased the Group's
financial resources, expanded its shareholder base and raised its profile in the
industrial minerals industry.  With the funds raised from the IPO, and a
subsequent private placement of US$17.5 million (£10 million) with London
institutions in October 2005, the Group is well positioned to complete its
ongoing expansion projects.

Group strategy

Following the successful restart of the rutile and bauxite mines, the Group
intends to undertake exploration on both of its properties to upgrade existing
resources to reserves and identify new reserves while also evaluating potential
opportunities for acquisition of further mineral properties in Africa.  As part
of the Group's growth strategy it acquired the Rotifunk mineral sands deposit in
January 2006 for further exploration and evaluation.

In the near term, the Group will be engaged in detailed engineering and
geological work in an effort to expand rutile production through the
reprocessing of tailings or dry mining of outlying ore bodies that do not fall
within the current dredge path.  The Group is also examining opportunities to
increase bauxite production from 1.2 to 1.8 million tonnes per annum from
existing reserves at the mine.

The Board

We announced on 2 May the appointment of Len Comerford as Chief Executive, Dr.
Alex MacDonald as Chief Operating Officer and Sahr Wonday as Deputy Chief
Operating Officer.  I would like to take this opportunity to thank Max McGarvie
for his hard work and commitment to the Group.  Max McGarvie remains on the
Board as a Non Executive Director and Special Advisor to the CEO. The Group will
continue to benefit from Max's extensive knowledge of mineral sands production
and mining in West Africa.


Full details of the Group's operations were published in the prospectus which
accompanied the Placing and Admission of the Group to the AIM market of the
London Stock Exchange in August 2005. In the remaining four months of the 2005
financial year since listing and the subsequent trading period of the current
year significant progress has been made across the operations in Sierra Leone.


In early 2005, TRG commenced refurbishment of Dredge D1 and associated
infrastructure at the Sierra Rutile mine. The refurbishment project was
successfully completed in March 2006 with the start of commercial scale
production. Dredge D1 will produce approximately 100,000 tonnes per annum of
natural rutile, representing approximately 14.5% of world rutile production.
Construction work on Dredge D2 commenced in May 2006 and when completed in the
third quarter of 2007 will double Sierra Rutile's annual production to 200,000
tonnes per annum, representing approximately 23.5% of world rutile production.
The first shipment of rutile will be made by the end of May 2006.


In January 2006, refurbishment of the SML Bauxite mine was completed and
commercial scale production commenced at the rate of 1.2 million tonnes per
annum of bauxite.  The restart of operations was completed on schedule and on
budget.  The first shipment of 38,500 tonnes of bauxite was made in February
2006.  TRG's bauxite production for the initial three years is being sold
forward under long term off-take contracts with Alcoa World Alumina LLC and
Glencore AG. The  is operated by P.W. Mining International Limited ('PW') under
the terms of an agreement whereby PW is responsible for the mining and
processing of the ore and maintenance of the infrastructure facilities.


As we begin regular shipments from our operations, we note that sales agreements
for all of the Group's pigment grade rutile are in place while demand for
welding grade rutile is strong.  In the year ahead we expect demand for titanium
dioxide to increase in line with forecast global GDP growth of approximately 3%
and interest from buyers to remain strong.

The high quality, low cost nature of our rutile operations will enable us to
compete effectively despite the growth in feedstock production as customers
increasingly demand higher grade titanium dioxide feedstocks.

All the Group's bauxite production is covered by long term off take agreements
with two major aluminium producers and we continue to evaluate ways to increase
the Group's bauxite production to take advantage of the continuing strong

The Group remains committed to playing an active role in the long term,
sustainable development of Sierra Leone and I believe that the example we have
set will encourage others to invest in what is an increasingly stable, secure
and prosperous nation.

Financial Statements

                                                             Notes                       2005
ASSETS                                                                                USD'000
Non-current assets
Property, plant and equipment                                  5                       61,279
Intangible assets                                              6                       12,985
Non-current receivables                                        8                        1,367
Deferred tax assets                                          9 (a)                     50,304

Current assets
Inventories                                                    10                       7,155
Trade and other receivables                                    11                       8,777
Cash and cash equivalents                                    25( c)                    79,682

Total assets                                                                          221,549

Capital and reserves
Share capital                                                  12                     194,951
Revenue deficit                                                                      (13,577)
Equity holders' interest                                                              181,374

Non-current liabilities
Borrowings                                                     13                      28,390
Provisions for liabilities and charges                         14                       2,150

Current liabilities
Trade and other payables                                       15                       9,625
Current tax liabilities                                      16 (d)                        10

Total liabilities                                                                      40,175

Total equity and liabilities                                                          221,549


                                                          Notes                          2005
Continuing operations                                                                 USD'000

Sales                                                     2 (o)                           337

Cost of sales                                              18                             (98)

Gross profit                                                                              239

Other income                                               20                           1,721

Operating expense                                          18                             (80)

Administrative and marketing expenses                      18                         (14,828)

Other expenses                                             18                          (4,124)

Operating loss                                                                        (17,072)

Finance costs                                              21                            (489)

Loss before taxation                                       17                         (17,561)

Income tax expense                                       16 (a)                         3,984

Loss for the period from continuing
operations                                                                            (13,577)

Loss attributable to equity holders of the group
/company                                                                              (13,577)

Loss per share (USD)

- basic                                                  23 (a)                         (0.16)


                                       Share                Revenue
                                      capital               deficit               Total
                                      USD'000               USD'000             USD'000

At May 16, 2005                             -                     -                   -
Issue of share capital                194,951                     -             194,951
Loss for the period                         -               (13,577)            (13,577)
At December 31, 2005                  194,951               (13,577)            181,374


                                                             Notes                       2005
Operating activities
Cash absorbed in operations                                  25(a)                    (26,974)
Interest received                                                                       1,277

Net cash used in operating activities                                                 (25,697)

Investing activities
Acquisition of subsidiaries net of cash
acquired                                                      24                       32,553
Purchase of property, plant and equipment                                             (23,604)
Loans and advance granted                                                                (640)

Net cash used in investing activities                                                   8,309

Financing activities
Issue of ordinary shares                                                               91,493
Proceeds from long term borrowings                                                      5,577
Net cash from financing activities                                                     97,070

Net increase in cash and cash equivalents                                              79,682

Movement in cash and cash equivalents
At December 14, 2004,                                                                       -
Increase                                                                               79,682

At December 31, 2005                                         25(c)                     79,682




      Titanium Resources Group Ltd is a limited liability company incorporated and domiciled in the British
      Virgin Islands.  The address of its registered office is at P.O.Box 173, Kingston Chambers, Road Town,
      British Virgin Islands.


      The principal accounting policies adopted in the preparation of these financial statements are set out

(a)   Basis of preparation

      The financial statements have been prepared in accordance with International Financial Reporting
      Standards (IFRS).  The financial statements are prepared under the historical cost convention.

      The preparation of financial statements in conformity with IFRS requires the use of certain critical
      accounting estimates.  It also requires management to exercise its 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

(b)   Investment in subsidiaries

      Consolidated financial statements
      The consolidated financial statements incorporate the financial statements of the company and
      enterprises controlled by the company (its subsidiaries) made up to December 31, each year. Control is
      achieved where the company has the power to govern the financial and operating policies of an investee
      enterprise so as to obtain benefits from its activities.  The results of subsidiaries acquired or
      disposed of during the year are included in the consolidated profit and loss account from the date of
      their acquisition or up to the date of their disposal.

      The consolidated financial statements have been prepared in accordance with the purchase method.  The
      excess of the cost of acquisition over the fair value of the Group's share of the identifiable net
      assets acquired  is recorded as goodwill.  If the cost of acquisition is less than the fair value of the
      net assets of the subsidiary acquired, the difference is recognised directly in the income statement in
      the year of acquisition.  The results of subsidiaries which are not consolidated are brought into the
      financial statements to the extent of dividends received.

      All significant intercompany transactions, balances and unrealised gains on transactions are
      eliminated. Unrealised losses are also eliminated unless cost cannot be recovered.

      Where necessary, adjustments are made to the financial statements of subsidiaries to bring the
      accounting policies used into line with those adopted by the Group

(c)   Property, plant and equipment

      Property, plant and equipment are stated at historical cost less accumulated depreciation.  The
      cost of self-constructed assets includes the cost of materials, direct labour and an appropriate
      proportion of production overheads.  Cost also includes environmental decommissioning costs that
      are recognised as a liability.

      Depreciation is provided on a straight line basis over the estimated useful lives of the assets.

      Where an item of property, plant and equipment comprises major components with different useful lives,
      the components are accounted for as separate items of property, plant and equipment.

      Subsequent expenditure relating to an item of property, plant or equipment is capitalised when it is
      probable that the future economic benefits from the use of the asset will increase by more than the
      expenditure incurred.  All other subsequent expenditure is recognised as an expense in the period in
      which it is incurred.

      Deposit, exploration, evaluation, mine development expenditure and deferred project expenditure

      In respect of deposit, minerals, exploration, evaluation, and deferred project, expenditure is
      charged to the profit and loss account as incurred except where:

      -  it is expected that the expenditure will be recouped by future exploitation or sale; or
      -  substantial exploration and evaluation activities have identified a mineral resource but these
         activities have not reached a stage which permits a reasonable assessment of the existence of
         commercially recoverable reserves in which case the expenditure is capitalised.

      Expenditure relating to both deposit and dam development and mine development are accumulated
      separately for each identifiable area of interest.  Such expenditure comprises net direct costs and an
      appropriate portion of related overhead expenditure.

      Expenditure is carried forward when incurred in areas where economic mineralisation is indicated, but
      activities have not yet reached a stage which permits reasonable assessment of the existence of
      economically recoverable reserves, and active and significant operations in relation to the area are
      continuing.  Each such project is regularly reviewed.  If the project is abandoned or it is considered
      unlikely that the project will proceed to development, accumulated costs to that point are written off

      Each area of interest is limited to a size related to a known or probable mineral resource capable of
      supporting a mining operation.  Projects are advanced to development status when it is expected that
      accumulated and future expenditure can be recouped through project development or sale.

      Expenditure relating to other expenses consists primarily of costs which provides benefit to the
      development of the Mine in general and is not specifically identifiable to a particular project.

      Mining leases

      The Group's mining leases are of sufficient duration (or convey a legal right to renew for sufficient
      duration) to enable all reserves on the leased properties to be mined in accordance with current
      production schedules.
(d)   Amortisation and depreciation

      Amortisation of deferred project expenditure is based on the estimated useful life of the asset to
      which the expenditure relates.

      Depreciation is provided on all fixed assets at rates calculated to write off the cost, less
      estimated residual value, of each asset evenly over its expected useful life as follows:

      Building                                          - 4%
      Infrastructure                                    - 4%
      Plant, machinery & equipment                      - 5% to 20%
      Vehicles                                          - 3 to 5 years
      Mineral rights                                    - Based on the estimated life of reserves
      Exploration, evaluation and mine development      - Based on the estimated life on proven and
      expenditure, and expenditure on mineral rights      probable reserves

      Changes in estimates are accounted for over the estimated remaining economic life of the remaining
      commercial reserves of each project as applicable.

(e)   Intangible assets

(i)   Goodwill
      Goodwill represents the excess of cost of acquisition over the Group's interest in the fair value
      of the net identifiable assets of the acquired subsidiaries at the date of acquisition.

      Goodwill on acquisitions of subsidiaries is included in intangible assets.  Any net excess of the
      Group's interest in the net fair value of acquiree's net identifiable assets over cost is recognised
      in the income statement.

      Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.  On
      disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the
      gains and losses on disposal.

      Goodwill is allocated to cash-generating units for the purpose of impairment testing.

(ii)  Computer software
      Acquired computer software licences are capitalised on the basis of costs incurred to acquire and bring
      to use the specific software and are amortised over their estimated useful lives estimated to be 5

(f)   Impairment of assets

      Asset that have an indefinite useful life are not subject to amortisation and are tested annually for
      impairment.  Assets that are subject to amortisation are reviewed for impairment whenever events or
      changes in circumstances indicate that the carrying amount may not be recoverable.  An impairment loss
      is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount.
      The recoverable amount is the higher of an asset's fair value less costs to sell and value in use.  For
      the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
      separately identifiable cash flows (cash-generating units).

(g)   Foreign currencies

(i)   Functional and presentation currency
      Items included in the financial statements are measured using United States Dollars, the currency of the
      primary economic environment in which the entity operates ('functional currency').  The consolidated
      financial statements are presented in United States Dollars, which is the group's functional and
      presentation currency.

(ii)  Transactions and balances
      Foreign currency transactions are translated into the functional currency using the exchange rates
      prevailing on the dates of the transactions.  Foreign exchange gains and losses resulting from the
      settlement of such transactions and from the translation at year-end exchange rates of monetary
      assets and liabilities denominated in foreign currencies are recognised in the income statement
      except when deferred in equity as qualifying cashflow hedges and qualifying net investment hedges.

      Non-monetary items that are measured at historical cost in a foreign currency are translated using the
      exchange rate at the date of the transaction.

      Non-monetary items that are measured at fair value in a foreign currency are translated using the
      exchange rates at the date the fair value was determined.

(h)   Financial instruments

      Financial assets and financial liabilities are recognised on the group's balance sheet when the
      group has become a party to the contractual provisions of the instrument.

      The group's accounting policies in respect of the main financial instruments are set out below.

(i)   Long term receivables
      Long term receivables with fixed maturity terms are measured at amortised cost using the
      effective interest rate method, less provision for impairment.  The carrying amount of the asset
      is reduced by the difference between the asset's carrying amount and the present value of
      estimated cash flows discounted using the effective interest rate.  The amount of loss is
      recognised in the income statement.  Long term receivables without fixed maturity terms are
      measured at cost.  If there is objective evidence that an impairment loss has been incurred, the
      amount of impairment loss is measured as the difference between the carrying amount of the asset
      and the present value (PV) of estimated cash flows discounted at the current market rate of
      return of similar financial assets.

(ii)   Trade receivables
       Trade receivables are recognised initially at fair value and subsequently measured at amortised
       cost using the effective interest method, less provision for impairment.  A provision for
       impairment of trade receivables is established when there is objective evidence that the Group
       will not be able to collect all amounts due according to the original terms of receivables.  The
       amount of the provision is the difference between the asset's carrying amount and the present
       value of estimated future cash flows, discounted at the effective interest rate.  The amount of
       provision is recognised in the income statement.

(iii)  Borrowings
       Borrowings are recognised initially at fair value being their issue proceeds net of transaction costs

       Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of
       transaction costs) and the redemption value is recognised in the income statement over the period of
       the borrowings using the effective interest method.

       Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities.
         The dividends on these preference shares are recognised in the income statement as interest expense.

       Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
       settlement of the liability for at least twelve months after balance sheet date.

(i)    Inventories

       Inventories are stated at the lower of cost or net realisable value where cost is defined as

       Titanium bearing minerals                 - Production cost and attributable overheads
       Concentrates                              - Production cost
       Washed bauxite                            - Production cost and attributable overheads
       Stockpiles                                - Production cost
       Materials                                 - Average cost
       Fuel and sundry expenses                  - Purchase cost
       Goods-in-transit                          - Invoice cost excluding freight

       Net realisable value is the estimate of the selling price in the ordinary course of business,
       less the costs of completion and selling expenses.

(j)   Deferred income taxes

      Deferred income tax is provided in full, using the liability method, on temporary differences arising
      between the tax bases of assets and liabilities and their carrying amounts in the financial
      statements.   However, if the deferred income tax arises from initial recognition of an asset or
      liability in a transaction, other than a business combination, that at the time of the transaction
      affects neither accounting nor taxable profit or loss, it is not accounted for.

      Deferred income tax is determined using tax rates that have been enacted by the balance sheet date
      and are expected to apply in the period when the related deferred income tax asset is realised or the
      deferred income tax liability is settled.

      Deferred tax assets are recognised to the extent that it is probable that future taxable profit
      will be available against which deductible temporary differences can be utilised.

(k)   Agricultural Development Fund

      The Group commits the higher of 0.1% (one tenth of one percent) of gross sales revenue in US dollars
      for each year (for rutile and ilmenite, it is based on gross sales free alongside ship at the Sierra
      Leone Port of Shipment) or USD75,000 and this shall be used exclusively for the development of
      agriculture in the areas affected by operations under the mining lease or in areas adjacent thereto
      within the same chiefdom.  The annual amounts are paid over to the separate fund set up and
      controlled by the GOSL, Chiefdom representatives, and the Company's representatives.

(l)   Borrowing costs

      Borrowing costs directly attributable to the acquisition, construction or production of
      qualifying assets are capitalised until such time as the assets are substantially ready for
      their intended use or sale.  Other borrowing costs are expensed.

(m)   Retirement benefit obligations

      Short-term employee benefits
      The cost of all short-term employee benefits is recognised during the period in which the employees
      render the related service.

      Long-term employee benefits
      The Group does not operate any retirement benefit plan for its employees.  For Sierra Leone based
      companies, the companies make a contribution of 10% of the employees basic salary to the National
      Social Security and Insurance Trust for payment of pension to staff on retirement. The employees also
      contribute 5% of their basic salary to the Trust.

      Share options scheme
      The Group operates a share option scheme.  The fair value of the employee services received in
      exchange for the grant of the options is recognised as an expense.  The total amount to be expensed
      over the vesting period is determined by reference to the fair value of the options granted.  At each
      balance sheet date, the entity revises its estimates of the number of options that are expected to
      become exercisable.  It recognises the impact of the revision of original estimates, if any, in the
      income statement, and a corresponding adjustment to equity over the remaining vesting period.

(n)   Provision for rehabilitation

      Costs of reclamation and rehabilitation are assessed on a regular basis and estimated costs are
      provided over the life of the Mine.  The expenditure and provisions include costs of labour,
      materials, and equipment required to rehabilitate disturbed areas, cost of reclamation, plant and
      infrastructure closure and subsequent environmental monitoring.  The estimates are not discounted and
      are based on current costs, legislature and community requirements and technology.  Expenditure
      relating to ongoing rehabilitation and restoration programmes is charged against the provisions made.

(o)   Revenue recognition

      Revenue comprises the fair value for the sale of goods and services, net of value-added tax,
      rebates and discounts and after eliminating sales within the Group.

      Sales of goods are recognised when goods are delivered and title has passed.  Sales of services are
      recognised in the accounting year in which the services are rendered (by reference to completion of
      the specific transaction assessed on the basis of the actual service provided as a proportion of
      total services to be provided).

      Other revenues earned by the Group are recognised on the following bases:

      •  Interest income - on a time-proportion basis using the effective interest method.  When a
         receivable is impaired, the Group reduces the carrying amount to its recoverable amount,
         being the estimated future cash flow discounted at original effective interest rate, and
         continues unwinding the discount as interest income.  Interest income on impaired loans is
         recognised either as cash is collected or on a cost-recovery basis as conditions warrant.
      •  Dividend income - when the shareholder's right to receive payment is established.

(p)   Provisions

      Provisions are recognised when: the Group has a present legal or constructive obligation as a result
      of past events; it is probable that an outflow of resources that can be reliably estimated will be
      required to settle the obligation.

      Provisions for restructuring costs are recognised when the Group has a detailed formal plan for the
      restructuring which has been notified to affected parties and comprise lease termination penalties
      and employee termination payments.  Provisions are not recognised for future operating losses.


3.1   Financial risks factors

      The Group's activities expose it to a variety of financial risks:
      (a) market risk (including currency risk, fair value interest risk and price
      (b) credit risk;
      (c ) liquidity risk; and
      (d) cash flow interest-rate risk.

      The Group's overall risk management programme focuses on the unpredictability of financial markets and
      seeks to minimise potential adverse effects on the Group's financial performance.

      A description of the significant risk factors is given below together with the risk management policies

 (a)  Market risk

      Currency risk
      The Group operates internationally and is exposed to foreign exchange risk arising from various
      currency exposures, primarily with respect to Euro and Sterling.  Foreign exchange risk arises from
      future commercial transactions, recognised assets and liabilities and net investments in foreign
      operations.  The Group places its excess of liquidity in stable currencies as a means to hedge its
      exposure to foreign currency risks.

 (b)  Credit risk
      The Group's credit risk is primarily attributable to its trade receivables.  The amounts presented in
      the balance sheet are net of allowances for doubtful receivables, estimated by the Group's management
      based on prior experience and the current economic environment.

      The Group has no significant credit risk for the time being, as the operating subsidiaries are not
      fully operational.  The Group has policies in place to ensure that sales of products and services
      are made to customers with an appropriate credit history.

 (c)  Liquidity risk
      Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding
      through an adequate amount of committed credit facilities.  The Group aims at maintaining flexibility in
      funding by keeping committed credit lines available.

 (d)  Cash flow and fair value interest rate risk
      As the Group has significant interest-bearing assets, its income and operating cash flows are
      substantially dependent of changes in market interest rates.  The Group's interest rate risk arises
      from long-term borrowings.  Borrowings issued at variable rates expose the Group to cash flow
      interest-rate risk.  Borrowings issued at fixed rates expose the Group to fair value interest-rate

      Group policy is to maintain all its borrowings in fixed rate instruments.  At year end, all
      borrowings were at fixed rates.

3.2   Fair value estimation

      The nominal value less estimated credit adjustments of trade receivables and payables are assumed
      to approximate their fair values.  The fair value of financial liabilities for disclosure purposes
      is estimated by discounting the future contractual cash flows at the current market interest rate
      that is available to the Group for similar financial instruments.


      Estimates and judgements are continuously evaluated and are based on historical experience and other
      factors, including expectations of future events that are believed to be reasonable under the

4.1   Critical accounting estimates and assumptions

      The Group makes estimates and assumptions concerning the future.  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 amounts of assets and liabilities
      within the next financial year are discussed below.

(a)    Estimated impairment of goodwill
       The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting
       policy stated in Note 2(e)(i).  These calculations require the use of estimates (note 6).

                                         Infrastructure         Plant,         Marine fleet        Mine development
                                             USD'000            USD'000           USD'000              USD'000
  (a)    COST
         At December 14, 2004                      -                  -                 -                    -
         Acquisition through business            
         combination                          14,057            105,944                 -               27,660

         Addition                                159              1,059               324                  103
         Write off                                 -               (105)                -                    -

         At December 31, 2005                 14,216            106,898               324               27,763


         At December 14, 2004                      -                  -                 -                    -
         Acquisition through business        
         combination                          13,589             96,984                 -               24,565
         Charge for the period                    79              1,362                                    159
         Write off                                 -               (105)                -                    -

         At December 31, 2005                 13,668             98,241                 -               24,724
         At December 31, 2005                    548              8,657               324                3,039


                                         Capital work        Other         Rehabilitation             Total
                                         in progress       expenses
                                           USD'000          USD'000           USD'000                USD'000
      At December 14, 2004                       -                -                 -                      -
      Acquisition through business                                                       
      combination                           26,920            3,912                 -                178,493
      Addition                               6,772                -            15,187                 23,604
      Write off                                  -           (3,912)                -                 (4,017)
      At December 31, 2005                  33,692                -            15,187                198,080

      At December 14, 2004                       -                -                 -                      -
      Acquisition through business                                                       
      combination                              168                -                 -                135,306
      Charge for the period                      -                -                 -                  1,600
      Write off                                  -                -                 -                   (105)
      At December 31, 2005                     168                -                 -                136,801

      At December 31, 2005                  33,524                -            15,187                 61,279

(b)   During the period under review, expenses relating to fulfilling the requirements of the Overseas Private
      Investment Corporation which were initially capitalised were written off as the loan facility was not

( c)  Expenditure capitalised in respect of the refurbishment of the mines amounted to USD 15m. As at 31
      December 2005, the refurbishment was still ongoing, therefore the cost was not depreciated.

      Similarly, depreciation has not been charged where the assets are presently not in the condition necessary
      to operate in the manner intended by management.

(d)   Borrowings costs of USD 1.314m (including its related exchange difference) arising on the refurbishment of
      the mines were capitalised during the period and are included in 'Additions'.  A capitalisation rate of 8%
      was used, representing the borrowing cost of the loan used to finance the refurbishment activity.

(e)   Depreciation charge of USD 1,600,000 has been charged in other operating expenses.


                                                              Goodwill           costs          Total
                                                              USD'000           USD'000        USD'000
(a)      COST
         At December 14, 2004                                       -                 -              -
         Addition during the period                            12,876               115         12,991
         At December 31, 2005                                  12,876               115         12,991
         At December 14, 2004                                       -                 -              -
         Charge for the period                                      -                 6              6
         At December 31, 2005                                       -                 6              6

         At December 31, 2005                                  12,876               109         12,985

(b)      Amortisation charge of USD 6,000 has been charged in other operating expenses.

(c)      Impairment tests for goodwill: goodwill is allocated to the group's cash-generating units
         identified according to country of operation and business activity.


(a) The list of the Company's significant subsidiaries
    is as follows:

    Name                          Class of               Proportion of      Country of   Main business
                                   shares                  ownership      incorporation
                                    held                   interest
    2005                                    Year end   Direct  Indirect

    Global Aluminium Limited     Ordinary    31/12/05  100%    -            BVI          Intermediate
                                                                                         holding company
    Bauxite Marketing Ltd        Ordinary   31/12/05   -       100%         BVI          Marketing of
    Sierra Mineral Holdings 1    Ordinary   31/12/05   -       100%         BVI          Extraction of
    Limited                                                                              Bauxite
    Titanium Fields Resources    Ordinary   31/12/05   100%    -            BVI          Intermediate
    Ltd                                                                                  holding company
    SRL Acquisition No.1 Limited 1 A share  31/12/05   -       100%         BVI          Intermediate
                                                                                         holding company
    SRL Acquisition No.3 Limited Ordinary   31/12/05   -       100%         BVI          Intermediate
                                                                                         holding company
    The Natural Rutile Company   Ordinary   31/12/05   -       100%         BVI          Marketing of
    Limited                                                                              Rutile
    Sierra Rutile Holdings       Ordinary   31/12/05   -       100%         BVI          Intermediate
    Limited                                                                              holding company
    Sierra Rutile Limited        Ordinary   31/12/05   -       100%         Sierra Leone Extraction,
                                                                                         and sale of
                                                                                         Rutile and
                                                                                         Ilmenite sands.

(b)  With the exception of Sierra Rutile Limited, all the subsidiaries are incorporated in the British Virgin Islands   
     (BVI) where there is no legal requirement for the preparation and filing of audited accounts.  Titanium Resources  
     Group Ltd is quoted on the AIM market of the London Stock Exchange which requires the publication of annual audited
     financial statements.


        Loan to the Government of Sierra Leone (see note (a) below)                                    727
        Other non-current receivables                                                                  640


(a)     This represents an amount loaned to Government of Sierra Leone (GOSL) to settle existing obligations
        to the International Finance Corporation.  The loan is unsecured and payment was due at the end of


        Deferred income tax is calculated on all temporary differences under the liability method at 30% /

(a)     There is a legally enforceable right to offset current tax assets against current tax liabilities and
        deferred income tax assets and liabilities when the deferred income taxes relate to the same fiscal

        The following amounts are shown in the balance sheet:

        Deferred tax assets                                                                         50,541
        Deferred tax liabilities                                                                      (237)

        At balance sheet date, the group had unused tax losses of USD 158,214,000 available for offset
        against future profits.  A deferred tax asset has been recognised in respect of the losses of USD

(b)     The movement on the deferred income tax account is as follows:

        At December 14, 2004                                                                             -
        Acquisition through business combination                                                    46,315
        Income statement credit (note 16(a))                                                         3,989
        At December 31, 2005                                                                        50,304

(c)     The movement in deferred tax assets and liabilities during the period, without taking into
        consideration the offsetting of balances within the same fiscal authority, is as follows:

(i)     Deferred tax liabilities:                                                            Accelerated tax

        At December 14, 2004                                                                           -
        Acquisition of subsidiary                                                                    (99)
        Charged to Income statement                                                                 (138)
        At December 31, 2005                                                                        (237)

(ii)    Deferred tax assets:                                                                   Tax losses

        At December 14, 2004                                                                           -
        Credited to Income statement                                                               4,127
        Acquisition of subsidiary                                                                 46,414
        At December 31, 2005                                                                      50,541



(a)     Washed Bauxite (see note (b) below)                                                           20
        Consumables (at cost)                                                                      7,499
        Less: provision for write down                                                              (364)


(b)     The cost of inventories recognised as expense and included in cost of sales amounted to USD 62,000.


        Advances and prepayments                                                                    8,647
        Receivable from related parties                                                                16
        Other receivables                                                                             114


        The carrying amount of trade and other receivables approximates their fair value.

(a)                                                                            Number of         Ordinary
                                                                                shares            shares
                                                                                 2005              2005
        At December 14, 2004                                                        -
        Issued in exchange for 100% holding in Global Aluminium Limited
        and Titanium Fields Resources Ltd                                 100,000,000             100,000
        Proceeds from other new issues                                    107,201,553              91,493
        Share option scheme:
           - Employee - Value of service provided                           2,989,985               2,634
           - Professional services                                            936,007                 824
        At December 31, 2005                                              211,127,545             194,951

(i)     The total authorised number of ordinary share is 500,000,000 shares with no par value.  All issued
        shares are fully paid.

(ii)    On incorporation, on December 14, 2004, 50,000 ordinary shares were issued at USD 1 each to the
        subscriber to the memorandum of association of the company.

        On May 16, 2005, 1,000,000 ordinary shares were issued at USD 1 each as part of total consideration
        to gain 100% holding in Global Aluminium Limited and Titanium Fields Resources Ltd.  On July 14,
        2005, another 99,000,000 ordinary shares of USD 1 each were issued as final part of total
        consideration to gain the 100% holding.

        On August 25, 2005, 87,151,553 ordinary shares were issued at 47 p each and were fully paid, on
        admission on the AIM market of the London Stock Exchange, for a total consideration of USD

        Another 20,000,000 ordinary shares were issued at 50 p each and were fully paid, on second placing
        equivalent to USD 17,680,000.

(b)     Share options - Employees
        Share options are granted to directors and to selected employees.  The exercise price of the granted
        option is equal to 47 p each, being the market price of the shares on the date of placement on the
        AIM market of the London Stock Exchange. One third of the option vests immediately, one third will
        vest on the first anniversary of the date of grant, that is on 25 August 2006 and the remaining
        third will vest on the second anniversary of the date of grant.  The option will lapse and may not
        in any event be exercised later than the day before the fifth anniversary of the date of grant.

        Exercise of the option is not subject to performance-related conditions.

( c)    Share options - Professional services
        In consideration of services given to the company by Nabarro Wells & Co Ltd, (NWCF LLP), the company
        granted to NWCF LLP an option to subscribe for 936,007 common shares of no par value at a
        subscription price of 47 p each.

(a)     Non-current :
        Government of Sierra Leone loan                                                             28,220
        Loans from related company                                                                     170

        Total borrowings                                                                            28,390

(i)     The rates of interest on the loans vary between 8% to 15%.

(ii)    Government of Sierra Leone borrowing is subject to interest of 8% per annum and is repayable on 15
        June and 15 December in each year commencing on the first payment date which is the earlier of 84
        months after date of first disbursement or June 15, 2012.  The interest is calculated on the basis
        of a 360 day year consisting twelve - thirty day months.

        The Group does not have any undertaking, nor is it contractually bound to create, any lien on or
        with respect to any of its rights or revenues.

        The interest is classified as non current as according to section 3.03 of the Loan Agreement between
        Sierra Rutile Limited and the Government of Sierra Leone, the first interest payment shall not be
        made by the company until the earliest of the interest payment date occurring thirty - six months
        after the date of first disbursement, or June 15, 2008. All interest accruing on the principal
        balance outstanding from time to time on the loan until the first interest payment is due shall be
        added to the principal balance of the loan and shall accrue interest on the same terms.

(b)     The exposure of the Group's borrowings to interest-rate changes and the contractual repricing dates
        are as follows:

                                   6 months          6 -12        1 - 5           Over
                                    or less         months        years         5 years              Total

        At December 31, 2005
        Total borrowings                  -              -         170           28,220             28,390

(c)     The maturity of non-current borrowings is as follows:                                        2005

        After one year and before two years                                                          170
        After two years and before five years                                                          -
        After five years                                                                          28,220


(d)     Non-current borrowings can be analysed as follows:                                           2005
        - After one year and before five years
           Loans from related company                                                                170

        - After two years and before five years                                                        -

        - After five years
           Government of Sierra Leone loan                                                        28,220

(e)     The effective interest rates at the balance sheet date were as follows:

                                                                                  Euro                USD
                                                                                   %                   %
        Government of Sierra Leone loan                                            8                   -
        Loans from related company                                                  -                 15

(f)     The carrying amounts of the group's borrowings are denominated in the following currencies:


        Euro                                                                                          28,220
        US Dollar                                                                                        170

(g)     The carrying amounts of non-current borrowings are not materially different from their fair value.


        At December 14, 2004                                                                               -

        Addition through business combination                                                           2,150
        At December 31, 2005                                                                            2,150


        The area to be rehabilitated remains the same since no mining activity was carried out since the
        closure of the mines.  The expenditure and provisions include costs of labour, materials, and
        equipment required to rehabilitate disturbed areas, cost of reclamation, plant and infrastructure
        closure and subsequent environmental monitoring.


        Trade payables                                                                               3,615
        Amounts due to related parties                                                               1,512
        Other payables and accrued expenses                                                          4,498


        The carrying amounts of trade and other payables approximate their fair value.


(a)     Current tax on the adjusted profit for the period at 0% - 30%                                    -

        Deferred income tax (Note 9)                                                                 3,989

        Minimum turnover tax                                                                            (5)

        Credit to Income statement                                                                   3,984

(b)     The tax on the group's loss before tax differs from the theoretical amount that would arise using the
        basic tax
        rate of the company as follows:


        Loss before tax                                                                             (17,561)

        Tax calculated at 0%                                                                              -
        Effect of different tax rates in different countries                                         (4,301)
        Investment allowance                                                                             (8)
        Income not subject to tax                                                                       (95)
        Expenses not deductible for tax purposes                                                        510
        Others                                                                                          (94)
        Minimum turnover tax                                                                              5

        Tax credit                                                                                   (3,984)

(c)     Under the provisions of the Sierra Rutile Agreement (Ratification) Act, 2002, tax is charged at an
        amount not less than 3.5%, of the turnover or more than 37.5%, of the profits of the business in any
        financial year.  A subsequent agreement was reached in June 2003 with the GOSL to reduce the rate to
        0.5% of the turnover of the business through the year 2014 and revert to the 3.5% rate in the year

        The group, through its subsidiaries Sierra Rutile Limited and Sierra Mineral Holdings 1 Limited, is
        entitled to unutilised tax losses brought forward and capital allowances in respect of fixed asset
        These amounts have yet to be agreed with the Commissioner of Income Tax of Sierra Leone.

(d)     Current tax liabilities

        At December 14, 2004                                                                              -
        Addition through business combination                                                             5
        Charged to the Income statement (see note 16(a) above)                                            5

        At December 31, 2005                                                                             10

        Loss before taxation is arrived at after:
        Depreciation on property, plant and equipment (note 5)
        - owned assets                                                                                1,600
        Amortisation of intangible assets (note 6)                                                        6
        Employee benefit expense (note 19)                                                            3,831


        Depreciation (note 5)                                                                         1,600
        Amortisation (note 6)                                                                             6
        Employee benefit expense (note 19)                                                            3,831
        Changes in inventories of finished goods
        and work in progress                                                                             62
        Transportation                                                                                    9
        Other expenses                                                                               13,623

        Total cost of sales, selling and marketing and administrative expenses                       19,131


        Wages and salaries, including termination benefits                                              926
        Social security costs                                                                           271
        Share options granted to directors and employees                                              2,634


        Interest income                                                                               1,721

        Interest expense:
        - Government of Sierra Leone loan                                                           (1,314)
        - Other loans not repayable by instalments                                                     (78)

        Total borrowing costs                                                                       (1,392)

        Less: amounts included in the cost of qualifying assets                                      1,314

        Net foreign exchange transaction losses (note 22)                                             (411)



        The exchange differences charged to the income
        statement are included as follows:
        Finance costs (note 21)                                                                       (411)



(a)     From continuing operations

        Basic loss per share

        Loss attributable to equity holders of the company
        from continuing operations (thousand)                                                    (13,577)

        Weighted average number of ordinary shares
        in issue                                                                              82,397,742
        Basic loss per share from continuing operations

(b)     As stated in note 12(b), 5,979,970 share options granted to directors and selected employees will
        vest after year end and will potentially affect the earnings per share (EPS).  Because there is a
        reduction in loss per share resulting from the assumption that the share options are exercised, the
        latter are anti dilutive and are ignored in the computation of diluted EPS.  As there are no other
        instruments that may have a potential dilutive effect, no diluted EPS is disclosed.


(a)     Acquisition

        On May 16, 2005 the Company acquired 100% of the share capital of Global Aluminium Ltd and Titanium
        Fields Resources Ltd, companies engaged in investment holding.  The acquired businesses contributed
        revenues of USD 337,000 and net profit of USD 9,242,000 to the Group for the period from May 16, 2005
        to December 31, 2005.

        If the acquisition had occurred on January 1, 2005, Group revenue would have been USD 579,000, and
        loss for the period would have been USD 16,021,000.

        Details of net assets acquired and goodwill are as follows:
        Purchase consideration:
        - Fair value of shares issued                                                               71,444

        Total purchase consideration                                                                71,444

        Fair value of net assets acquired                                                          (58,568)

        Goodwill (Note 6)                                                                           12,876

        The goodwill is attributable to prospects of high profitability of the acquired businesses
        significant synergies expected to arise after the Company's acquisition of subsidiaries.

        The book value of the assets and liabilities are assumed to be not materially different from their
        fair values.

(b)     The assets and liabilities arising from the acquisition are as follows:

                                                                                                  Fair value

        Fair value of net assets acquired **                                                        58,568

        Add: Goodwill                                                                               12,876
        Purchase consideration settled by shares issued                                            (71,444)

        Cash and cash equivalents in subsidiaries acquired                                         (32,553)

        Net cash inflow on acquisition                                                    USD'000  (32,553)

        ** The components of the net assets acquired (assets and liabilities) are not disclosed as it is
        impraticable to do so.

(a)    Cash used in operations                                                                     USD'000

       Loss for the period                                                                         (17,561)

       Adjustments for:
       Depreciation on Property, Plant and Equipment                                                 1,600
       Amortisation of Intangible assets                                                                 6
       Share option scheme - Employee                                                                2,634
       Share option scheme - Professional service                                                      824
       Interest income                                                                              (1,721)
       Interest expense                                                                                 78
       Exchange gains on borrowings                                                                 (2,210)

       Changes in working capital (excluding the effects of
       acquisition of subsidiaries)
       -inventories                                                                                    (96)
       -trade and other receivables                                                                (13,476)
       -trade and other payables                                                                     2,948

       Cash absorbed in operations                                                                 (26,974)

(b)    Non cash transactions

       The principal non cash transaction is the issue of shares as consideration for the acquisition of
       subsidiaries listed in note 7.  In order to gain 100% holding in Global Aluminium Limited (GAL) and
       Titanium Fields Resources Ltd (TFR), the company issued shares equivalent to USD 71,444,000 to the
       former owner of GAL and TFR.  This transaction did not involve any movement of cash.

(c)    Cash and cash equivalents

       Cash in hand and at bank                                                                     17,286
       Short term bank deposits                                                                     62,396
       Cash and cash equivalents                                                                    79,682


       Property, plant and equipment acquisition contracted for at the balance sheet
       date but not yet incurred:                                                                    12,619

(a)    Sierra Rutile Limited had capital commitments in respect of Dredge 1 Project amounting to  USD 8.3m.  It
       also entered into an agreement with OCI Engineering Limited to purchase the Mambang Dredge in Malaysia
       for an agreed amount of USD 3,750,000, out of which USD100,000 has already been paid.

(b)    At year ended December 31, 2005, Sierra Mineral Holdings 1 Limited had capital commitments which amount
       to USD 668,753. This relates to the balance outstanding (milestone payment) on the Engineering,
       Procurement, Construction and Commissioning Agreement signed with P.W Mining International Limited for
       the rehabilitation of the mines.


(a) Trading transactions     Interest      Loans or      Amount owed     Amount owed      Total
                                          advances to     to related     by related
                                            /(from)        parties         parties
                             USD'000        USD'000        USD'000         USD'000       USD'000

    Directors                      -            306              -               -          306

    Enterprises in which
    individual shareholders
    with significant
    influence have
    significant interest:
    - Mineral Holdings 1                                                 
    Limited                        -           (170)          (845)            -        (1,015)
    - Gondwana                                                                    
    (Investments) SA               -              -              -            16            16

    - Titanium Fields
    Resources Ltd                200                                                       200
    - Sierra Rutile
    Holdings Limited             101                                                       101
    - Sierra Mineral
    Holdings 1 Limited           243                                                       243
    - SRL Acquisition No.1
    Limited                      200                                                       200

                                 744            136           (845)           16            51

(b) Loans and advances are unsecured.  No provisions have been made for doubtful debts in respect of

    Amounts owed by related parties.

(c) Directors' transactions
(i) The Group has granted advances to Directors for which the balance outstanding at December 31,

    2005 was USD 306,000 and is included in receivables.

 (ii)     Key management personnel compensation                                                      USD'000

          Directors' fee                                                                                    365
          Salaries and short-term employee benefits                                                       2,366
          Post employment benefits                                                                          174
          Other long term benefits                                                                           85
          Termination benefits                                                                                3
          Share options - based payment                                                                   1,168


          According to the First Amendment Agreement dated February 4, 2004, entered by and between the
          Government of the Republic of Sierra Leone and Sierra Rutile Limited, the Government assigned to SRL
          A 3 all its right, title and interest in, to, and under the future PAYE taxes due from Sierra Rutile
          Limited to the Government in an amount not exceeding USD 37 m.  In consideration for the foregoing
          assignment, SRL A 3 agreed to transfer up to a 30% equity interest in Sierra Rutile Holdings Ltd to
          the Government, within 60 days of the end of the calendar year commencing on the ''Refurbishment
          Start Date'' (i.e April 1, 2005), equal in value to the PAYE amounts accrued during such calendar
          year.  As at December 31, 2005, the shares were not yet transferred and PAYE accrued at that date in
          Sierra Rutile Limited amounted to USD 497,000.


          Subsequent to the balance sheet date the group has commissioned the Dredge 1 Project and commercial
          production is expected to start in the first quarter of 2006.  Work has started on Dredge 2 Project.


          The financial statements are presented in thousands of United States Dollar (USD)


          Substantial individual shareholders and corporate investors own up to 65.8% of the company's shares.
          The remaining 34.2% of the shares is widely held.


                      This information is provided by RNS
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