Business Review

The Zanaga Project is currently benefiting from multiple improvements in conditions for the Project. The positive impact of high iron ore prices, and significant price premiums for high quality products in particular, provides a strong foundation for the Project to progress through its technical milestones in 2019.

The Project Team's work in evaluating the potential for an early production project that would produce 1Mtpa of high quality iron ore product at a capital cost of less than US$110m is potentially capable of constituting a major improvement. If the early production project is judged viable and is successfully proceeded with, it potentially provides a low cost platform for the Zanaga Project to enter into production. It could also lead to the evaluation of a number of alternative options for the development of the larger 30Mtpa staged development project.

The Project Team have worked to assess options for the initial development of the EPP Project, and critical to this work has been determining the viability of the smaller scale plant that would produce high quality iron ore product even at the reduced scale.

In addition, the Project Team are currently evaluating the potential for a small scale DSO project to commence production of a product similar to industry benchmark 62% Fe. This evaluation processes leverages the extensive study work done by the Project Team in ascertaining current mining and logistics costs for the EPP Project. Further updates will be provided in H2 2019.

Early Production Project

The EPP Project is envisaged as an initial development stage for the Zanaga Project, targeting an operating scale of 1Mtpa of pellet feed iron ore concentrate and/or iron ore pellets with transportation of the product via existing logistics infrastructure. The objective would then be to leverage the operating skills gained through this initial phase to develop and partly fund the larger 30Mtpa (12+18Mtpa) staged development project which would require substantially greater capital investment, newly built bulk logistics infrastructure, and a four year construction period.

The Project Team has adopted a strategy towards the EPP Project of engaging experienced third party contractors for mining and for all logistical aspects of the EPP Project such as the trucking, rail and port solutions. As a result, Zanaga's operating company would only be required to undertake the EPP Project's processing activities. Through this approach, it is believed capital expenditure can be minimised and limited predominantly to the processing plant solution required for the beneficiation of Zanaga iron ore into a high grade iron ore product pellet feed/pellet product.

A comprehensive update on the EPP Project's evaluation process as well as recent developments on the 30Mtpa staged development project was provided to shareholders on 28 March 2019. Key elements of that update are provided below with some additions to incorporate the potential DSO stage.

1) Mining Contract

The Project Team has made significant progress in refining the cost estimate associated with the mining contract. The third party mining contractor would be expected to source all capital equipment for the operation, which would result in Jumelles not being required to finance the capital costs associated with establishing the mining operation. The estimated operating costs associated with the mining contract have been provided and are in the process of negotiation.

2) Pellet Feed Concentrate Plant

An Engineering Procurement and Construction company ("EPC") has been selected as the preferred provider of the process plant facilities. In order to refine and confirm the costs associated with the EPC's initial proposal, three tons of Zanaga's iron ore, representative of the orebody's upper layers, were sent for testing with the equipment providers selected by the EPC.

As a primary step, it was deemed important to evaluate the capabilities of the EPC's proposed milling solution which was expected to provide significant benefits, specifically through lower capital costs, operating costs, and power consumption rates in comparison to the ball milling solution previously selected as part of the milling solution in the 2014 FS. The Project Team is pleased to report that this new milling solution for the pellet feed concentrate plant performed well and Zanaga's test material was successfully milled to desired levels in multiple tests.

A number of samples were selected from the milled material for the subsequent beneficiation test work programme. The milled material was delivered to beneficiation test facilities in Brazil and South Africa and underwent a competitive evaluation process to ascertain the optimal beneficiation solution based on capital and operating costs, as well as product grade and material recoveries achieved. The beneficiation test work process is now complete and the costs associated with the optimal solution have been assembled into a revised cost estimate.

The Project Team has received, from the EPC responsible for the cost estimate of the pellet feed concentrate plant, an indicative detailed cost estimate which is summarised below:

Capital cost US$38m

Operating cost US$3.75/t Run of Mine (excluding power)

Schedule 22 months (fully installed on site)

Target product grade Greater than 65% Fe with combined Silica plus Alumina less than 5%

3) Pellet Plant

The Project Team are investigating the possibility of pelletising Zanaga's pellet feed concentrate product into a higher value product, which would be expected to secure higher revenue per ton.

The Project Team has received a high-level preliminary indicative cost estimate from Outotec, a well-regarded pelletisation plant manufacturer for the installation of a 1Mtpa pelletisation plant at the mine site. This estimate includes a high-level indicative capital cost estimate of US$50-$60 million for a pellet plant, with a power consumption estimate of 4.0 to 4.5MW. The operating costs are in the process of being defined through technical conversations between the pelletisation plant manufacturer and the Project Team. The estimated timetable for full installation of the pellet plant is 24 to 28 months.

Further to the Project update provided on 28 March 2019, Outotec has now commenced the process of integrating the pellet plant into the pellet feed concentrate plant design. This is being done with the objective of seeking to secure synergies in construction timing with the project's South African EPC contractor while simultaneously maximising South African content within the two plants in order to enhance the option of securing larger Export Credit Agency financing from South African financing institutions.

In addition, as previously announced, the Zanaga Project is currently investigating a new technology pelletisation solution. A memorandum of understanding has been signed between Jumelles and Binding Solutions Ltd ("BSL") to investigate the potential of BSL's polymer binder technology. The Project Team and BSL are working together to ascertain the commercial viability of this technology and it should be noted that there can be no guarantee that the results will be successful, despite the positive results achieved to date in testing the cold pelletisation of Zanaga iron ore samples at a laboratory scale. At the moment, if a pelletisation option were to be pursued by the Zanaga Project, the conventional pelletisation solution should be regarded as the EPP Project's preferred option versus the cold pelletisation opportunity.

4) Road Infrastructure and Trucking Contract

The Project Team is evaluating the optimal solution for the export of the EPP Project's iron ore via either Gabon or RoC. In order to export the material it needs to be trucked to a railway siding in either RoC or Gabon. Two potential rail sidings are currently under consideration, either (a) Franceville in Gabon, which is approximately 173km from the Zanaga Project, or (b) Mossendjo in RoC, which is approximately 160kms from the Zanaga mine site.

The Project Team have received proposals for the cost of upgrading both road options under consideration. The condition of the road to Franceville in Gabon is significantly better than the road to Mossendjo in RoC.

As regards a trucking contract, the Project Team have entered into discussions with multiple third party trucking companies to secure cost estimates for the trucking of material to the rail siding alternatives. These discussions are progressing well and a number of cost estimates have been received and are in the process of being evaluated and refined.

5) Rail and Port contract

The Project Team are discussing a potential solution for the rail and port logistics solutions with the relevant service providers in Gabon and RoC. However, the Gabonese route is currently the preferred route due to a lower expected capital cost associated with upgrading the road to the rail siding in Franceville as well as the Gabon rail and port infrastructure being a more technically advanced solution operationally, due to the current level of operations on the Transgabonais railway line today as well as the significant port expansion under way in Libreville.

6) Power

A significant cost driver associated with the viability of the EPP Project is the power requirement. The power requirement on the mine site is expected to be between 5.9MW and 10.4MW depending on whether a pellet plant is included and whether it is located on the mine site or located closer to the logistics infrastructure in Gabon or RoC. The option of potentially connecting the more energy intensive pellet plant to existing grid power infrastructure and avoiding capital costs associated with a larger power solution on the mine site is under consideration.

The Project Team is investigating multiple power solutions for providing power to the mine site. The simplest solution is to install diesel generator sets for the 5.9MW of mine site activities and target connection of the potential pellet plant to grid power infrastructure. The indicative high-level preliminary estimated cost of this power solution is well understood now and is expected to be approximately U$c20/kwh.

The Project Team is also investigating, amongst other solutions, the potential for the inclusion of small scale hydro power into the EPP Project which would increase capital costs but could provide very low cost power as regards operating costs.

7) Potential DSO stage

Due to high prices for benchmark 62% Fe product the board of Jumelles has approved a process to evaluate the potential for the production of up to 1Mtpa of DSO iron ore product. While the process has only just commenced, the evaluation of this option leverages the extensive study work already completed on the EPP Project.

The intention is to consider this interim production phase as a viable solution during the construction of the EPP Project; however the board of Jumelles is not ruling out the possibility of this option being a standalone project albeit with a shorter expected life of production.

Depending on how this initiative proceeds, it is the intention to provide further information in due course alongside information provided on the progress of the assessment of the EPP Project.

8) Conclusion and Next Steps

It is the Project Team's intention to secure fixed price cost estimates for key aspects of the proposed EPP Project as part of the process of determining its viability and economic feasibility. Many of the key indicative cost estimates contained in proposals so far submitted by the entities approached by the Project Team are now better understood. Once cost estimates have been fully received and refined and sufficient information has been received to enable the proposed EPP to be fully assessed as to its viability, the outcomes will be assembled into a report for the Board of Jumelles. Depending on the achievement of a positive outcome and authorisation from the Jumelles Board, the Zanaga Project would then be seeking to move towards securing regulatory permits and consents, the negotiation of contracts and seeking financing for construction and operation.

The Project Team intend on concluding the evaluation process for the EPP Project during H2 2019.

The intention of the work underway on the Project is to establish whether the EPP Project is a viable proposition. If the Jumelles Board and the shareholders of Jumelles (ZIOC and Glencore) conclude that the EPP is a viable proposition, and support taking the EPP initiative forward, that would enable the Project Team to then engage with governmental bodies, regulators and contractors as to the permitting process and contractual structures. Concurrently with the above process, discussions have already commenced with various parties on potential financing solutions for both debt and equity required for the development of the EPP Project.

30Mtpa Staged Development Project

The Project Team's ultimate objective remains to develop the larger 30Mtpa staged development mining project. As a reminder, the Stage One project plans to produce 12Mtpa of premium quality 66% Fe content iron ore pellet feed product at bottom quartile operating costs for more than 30 years on a standalone basis. The capital cost associated with this Stage One phase was estimated at US$2.2bn, including contingency, on completion of the 2014 FS.

The Stage Two expansion of 18Mtpa is nominally scheduled to suit the project mine development, construction timing and forecast cash flow generation, and would increase the Project's total production capacity to 30Mtpa. The product grade would increase to an even higher premium quality 67.5% Fe content iron ore pellet feed at even lower operating cost. The US$2.5bn capital expenditure for the additional 18Mtpa production, including contingency, could potentially be financed from the cash flows from the Stage One phase.

1) Economic evaluation exercise

In view of changes in the pricing of iron ore products in the market and the emergence of a high grade pricing index which has been developed in recent years (referred to below), the Company has carried out the exercise of inputting new figures into the economic model produced as part of the 2014 FS in two specific areas focussed entirely on freight and iron ore pricing. This exercise has been carried out for illustrative purposes as a high level evaluation exercise.

As part of the 2014 FS on the 30Mtpa (12+18Mtpa) staged development Project, the potential economic outcomes of the Project were reviewed across a range of prices based on a long term 62% Fe benchmark index structure. However, in recent years the 65% concentrate index has become established and this should be seen as a more appropriate index on which to benchmark pellet feed concentrate products such as that which would be produced by the 12+18Mtpa staged development project.

Earlier this year, as reported to shareholders on 28 March 2019, the Company re-ran the 2014 FS model with a new range of prices from US$70/dmt to US$110/dmt for the 65% concentrate index. A summary of the outcomes of this exercise is presented below for illustrative purposes.

Stage One

Iron Ore Price (65% IODEX)	US$/dmt	70	80	90	100	110
Internal Rate of Return	%	5.6%	11.0%	15.4%	19.2%	22.7%
Net Present Value	US$m	-531	137	797	1,447	2,085
Net Free Cash Flow (5 year average post capex)	US$m/year	261	388	503	617	730
EBITDA (5 year average, post capex)	US$m/year	296	425	553	681	810

Stage One and Two

Iron Ore Price (65% IODEX)	US$/dmt	70	80	90	100	110
Internal Rate of Return	%	8.9%	13.4%	17.4%	20.6%	23.7%
Net Present Value	US$m	-254	867	1,983	2,952	3,943
Net Free Cash Flow (5 year average post capex)	US$m/year	614	849	1,082	1,254	1,450
EBITDA (5 year average, post expansion)	US$m/year	799	1,082	1,366	1,649	1,932

Notes to tables above: Management estimates based on the 2014 FS financial model. Capex and opex figures contained in the 2014 FS have not been updated. Iron ore product pricing in the 2014 FS has been altered to a pricing formula based on the 65% Fe concentrate index, with a pro-rata adjustment for the Zanaga Project's higher iron ore content product. The Net Present Value is based on a discounted cash flow model at a 10% real discount rate and the Internal Rate of Return (IRR) is calculated on a 'real' basis, unlevered.

New Mineral Port in Pointe-Indienne

In March 2013, the RoC signed a Memorandum of Understanding with CCCC, and its subsidiary CRBC, for the development of a new multi-user port facility 9km north of the existing port of Pointe-Noire at Pointe Indienne, including a deepwater bulk export facility for the iron ore industry. CRBC has conducted a significant amount of work on this major project, including a feasibility study on the port development.

ZIOC notes that there is still discussion between the RoC Government, China EXIM Bank and CRBC on the financing and development plan for the new bulk materials port development north of Pointe Noire.

ZIOC confirms that a non-binding LOI has been provided to CRBC by Jumelles' subsidiary, MPD Congo, and four other mining companies to support the development of this port; this LOI outlines the need to hold discussions with CBRC to determine an economically and technical viable development of the new port in alignment with the needs of the mining companies.

Power

The Project Team are engaging on a variety of solutions for off-grid power suitable for the EPP Project. The EPP Project requires up to 10.4 megawatts of power and a number of entities have expressed an interest in providing this power solution. The Project Team are evaluating the option of sourcing third party power with Independent Power Producers ("IPPs"), as well as the option of incorporating an owned power solution into the project.

As regards the staged 30Mtpa staged development project the strategy is to connect the Project to the national network. The Project's 100MW power requirement would be supplied by existing and planned power generation capacity in the country, particularly the Sounda dam project and the different dam projects in the Louessé valley (close to Mossendjo - Mourala Dam projects).

Power would be delivered to the mine site through two connection points to the current 220kV transmission network within 160km and 200km of a proposed new transmission line to the east and south of the mine site respectively. The Project team has been engaging with potential IPPs and Government departments in order to develop a power supply for the Project. The team will be conducting further work during the remainder of 2019 on the potential for a power solution to be defined.

The Project's Stage Two ramp up to 30Mtpa is expected to increase power demand to approximately 230MW at the mine site and 16MW for the Project's facilities at the proposed new port. The increased mine site demand is sufficient to support independent power generation from locally available energy sources and we will plan this development in coordination with other planned regional power infrastructure developments.

The Project Team have also been working with a number of third parties to investigate the potential for optimisation of the power solution designed for the staged 30Mtpoa Project outlined the 2014 FS. A number of projects in the RoC are under investigation and could form part of the power solution for the Project. In addition, a number of areas of optimisation of the initial design are under investigation today.

In addition, the Project Team have been working with Sinohydro, a subsidiary of Power China on the development of a hydro power plant capable of providing up to 45MW of power for the EPP Project.

Permitting

It is recognised by the Project Team that the current permitting regime which applies to the development of the Zanaga Project would need to be supplemented in the event of an early stage production process proceeding. Initial consideration has already been given to the supplemental regime which would need to be put in place.

Next Steps

The Project Team remains encouraged by improving iron ore market conditions for premium products and the support this provides to advancing the Zanaga Project.

During H2 2019, the Project Team will continue to advance the EPP Project to final economic evaluation that will allow the Project to be presented to the Jumelles Board (and to the Jumelles shareholders) for consideration. As part of that process, contact is being made with potential third party debt and equity funding providers. Furthermore, the Project Team will be progressing opportunities to optimise the costs of the 30Mtpa staged development project as well as potential infrastructure funding structures with the potential to reduce the upfront capital cost of developing this larger production scenario.

Financial Review

Results from operations

The financial statements contain the results for the Group's eighth full year of operations following its incorporation on 19 November 2009. The Group made a total comprehensive loss in the year of US$1.8m (2017: total comprehensive loss US$1.4m). The total comprehensive income for the year comprised:

	2018 US$000	2017 US$000
General expenses	(919)	(943)
Net foreign exchange (loss)/gain	(152)	366
Share of loss of associate (including impairment by associate)	(795)	(824)
Interest income	9	8
Loss before tax	(1,857)	(1,393)
Currency translation	(8)	52
Share of other comprehensive income of associate -foreign exchange	-	(48)
Total comprehensive income / (loss)	(1,865)	(1,389)

General expenses of US$0.9m (2017: US$0.9m) consists of US$0.4m professional fees (2017: US$0.4m), US$0.2m Directors' fees (2017: US$0.3m) and US$0.2m (2017: US$0.2m) of other general operating expenses.

The share of loss of associate reflected above relates to ZIOC's investment in the Project, through Jumelles, which, generated a loss of US$1.6m in the year to 31 December 2018 (2017: loss US$1.6m). During the year Jumelles spent a net US$1.6m (2017 US$1.7m) on exploration, net of a currency translation loss of US$nil (2017: loss US$0.1m).

Financial Position

ZIOC's Net Asset Value ("NAV") of US$39.4m (2017: US$41.3m) comprises of US$37.4m (2017: US$37.6m) investment in Jumelles, US$1.9m (2017: US$3.7m) of cash balances and US$0.1m (2017: US$0.3m net current liabilities) of other net current liabilities.

	2018	2017
	US$000	US$000
Investment in Associate	37,450	37,589
Fixed Assets	-	-
Cash	1,955	3,721
Net current assets/(liabilities)	14	(27)
Net assets	39,419	41,283

Cost of investment

The Investment in Associate relates to the carrying value of the investment in Jumelles which as at 31 December 2018 continued to own 100% of the Project. During 2018, under the existing 2018 Funding Agreement between the Company and Glencore, the Company contributed a further US$0.7m (2017: US$0.6m). Though a long term project, in the light of currently forecast market conditions, the carrying value of the exploration asset continues to be held in Jumelles at US$80m (2017: US$80m). The Company accounts for 50% less one share of Jumelles.

As at 31 December 2018, Jumelles had aggregated assets of US$81.6m (2017: US$81.9m) and aggregated liabilities of US$0.8m (2017: US$0.8m). Assets consisted of US$80m (2017: US$80m) of capitalised exploration assets, US$1.27m (2017: US$1.52m) of other fixed assets, US$0.3m cash (2017: US$0.3m) and US$0.1m other assets (2017: US$0.1m). Net of a currency translation loss of US$nil (2017: loss US$0.1m) a net total of US$1.3m (2017: US$1.6m) of exploration costs were capitalised during the year.

Cash flow

Cash balances decreased by US$1.7m during 2018 (2017: decrease of US$1.1m), net of interest income US$0.01m (2017: US$0.01m) and a foreign exchange loss of US$0.16m (2017: gain of US$0.36m) on bank balances held in UK Sterling. Additional investment in Jumelles required under the 2018 Funding Agreement (outline details in Note 1 to the financial statements) utilised US$0.7m (2017: US$0.6m) and operating activities utilised US$0.9m (2017: US$0.5m).

Fundraising activities

There were no fundraising activities during 2018 (2017: nil).

Reserves & Resource Statement

The Zanaga Project has defined a 6.9bn tonne Mineral Resource and a 2.1bn tonne Ore Reserve, reported in accordance with the JORC Code (2012), and defined from only 25km of the 47km orebody identified.

Ore Reserve Statement

The Ore Reserve estimate (announced by the Company on 30 September 2014) was prepared by independent consultants, SRK Consulting (UK) Ltd ("SRK") and is based on the 30Mtpa Feasibility Study and the 6,900Mt Mineral Resource (announced by the Company on 8 May 2014).

As stipulated by the JORC Code, Proven and Probable Ore Reserves are of sufficient quality to serve as the basis for a decision on the development of the deposit. Based on the studies performed, a mine plan was determined in 2014 to be technically achievable and economically viable.

Ore Reserve Category	Tonnes (Mt_Dry)	Fe (%)	SiO₂ (%)	Al₂O₃ (%)	P (%)
Proved	770	37.3	35.1	4.7	0.04
Probable	1,300	31.8	44.7	2.3	0.05
Total	2,070	33.9	41.1	3.2	0.05

Notes:

Long term price assumptions are based on a CFR IODEX 62% Fe forecast of 60 US$/dmt (97 US¢/dmtu at 62% Fe) with adjustments for quality, deleterious elements, moisture and freight.

Discount Rate 10% applied on an ungeared 100% equity basis

Mining dilution ranging between 5% and 6%

Mining losses ranging between 1% and 5%

Note: The full Ore Reserve Statement is available on the Company's website (www.zanagairon.com)

Mineral Resource

Classification	Tonnes (Mt)	Fe (%)	SiO₂ (%)	Al₂O₃ (%)	P (%)	Mn (%)	LOI (%)
Measured	2,330	33.7	43.1	3.4	0.05	0.11	1.46
Indicated	2,460	30.4	46.8	3.2	0.05	0.11	0.75
Inferred	2,100	31	46	3	0.1	0.1	0.9
Total	6,900	32	45	3	0.05	0.11	1.05

Reported at a 0% Fe cut-off grade within an optimised Whittle shell representing a metal price of 130 USc/dmtu. Mineral Resources are inclusive of Reserves. A revised Mineral Resource, prepared in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code, 2012 Edition) was announced on 8 May 2014 and is available on the Company's website (www.zanagairon.com).

Note: The figures shown are rounded; they may not sum to the subtotals shown due to the rounding used.

The Mineral Resource was estimated as a block model within constraining wireframes based upon logged geological boundaries. Tonnages and grades have been rounded to reflect appropriate confidence levels and for this reason may not sum to totals stated.

Geological Summary

The Zanaga iron ore deposit is located within a North-South oriented (metamorphic) Precambrian greenstone belt in the eastern part of the Chaillu Massif in South Western Congo. From airborne geophysical survey work, and morphologically, the mineralised trend constitutes a complex elongation in the North-South direction, of about 48 km length and 0.5 to 3 km width.

The ferruginous beds are part of a metamorphosed, volcano-sedimentary Itabirite/banded iron formation ("BIF") and are inter-bedded with amphibolites and mafic schists. It exhibits faulted and sheared contacts with the crystalline basement. As a result of prolonged tropical weathering the BIF has developed a distinctive supergene iron enrichment profile.

At surface there is sometimes present a high grade (+60% Fe) canga of apparently limited thickness (<5m) capping a discontinuous, soft, high grade, iron supergene zone of structure-less hematite/goethite of limited thickness (<7m). The base of the high-grade supergene iron zone grades quickly at depth into a relatively thick, leached, well-weathered to moderately weathered friable hematite Itabirite with an average thickness of approximately 25 metres and grading 45-55% Fe.

The base of the friable Itabirite zone appears to correlate with the moderately weathered/weakly weathered BIF boundary, and fresh BIF comprises bands of chert and magnetite/grunerite layers.

Competent Persons

The statement in this announcement relating to Ore Reserves is based on information compiled by Mr Gabor Bacsfalusi who is a Chartered Professional Member of the Australasian Institute of Mining and Metallurgy. He is a mining engineer and Principal Consultant of SRK Consulting (Canada) Inc. He has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person as defined in the JORC Code (2012). The Competent Person, Mr Gabor Bacsfalusi, confirms that the historical (2014) Ore Reserve Estimate is accurately reproduced in this Annual Report and given his consent to the inclusion in the report of the matters based on his information in the form and context within which it appears. For the avoidance of doubt, SRK confirms that it has not undertaken any further additional technical work subsequent to publication of the 2016 Annual Report.

The information in the announcement that relates to Mineral Resources is based on information compiled by Malcolm Titley, BSc MAusIMM MAIG, of CSA Global (UK) Ltd. Malcolm Titley takes overall responsibility for the report as Competent Person. He is a Member of the Australasian Institute of Mining and Metallurgy ("AUSIMM") and has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking, to qualify as a Competent Person in terms of the JORC Code. The Competent Person, Mr Malcolm Titley, has reviewed this Mineral Resource statement and given his permission for the publication of this information in the form and context within which it appears.

Definition of JORC Code

The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2012) as published by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia.

Principal Risks & Uncertainties

The principal business of ZIOC currently comprises managing ZIOC's interest in the Zanaga Project, including the Jumelles group, and monitoring the development of the Project and engaging in discussions with potential investors. The principal risks facing ZIOC are set out below. Risk assessment and evaluation is an essential part of the Group's planning and an important aspect of the Group's internal control system.

Risks relating to the agreement with Glencore and development of the Zanaga Project

The Zanaga Project is majority controlled at both a shareholder and director level by Glencore. The ability of the Company to control the Zanaga Project and its operations and activities, including the future development of the Project (including any variant such as an EPP development) and the future funding requirements of Jumelles, is therefore limited.

The future development of the mine and related infrastructure (including any variant such as an EPP development) will be determined by the Jumelles Board. There can be no certainty that the Jumelles board will approve the construction of the mine and related infrastructure or any variant thereof such as an EPP development, including the taking of preparatory steps associated with the construction of the mine and related infrastructure, such as front end engineering and design, or the undertaking of work needed to assess the viability of an EPP development or any component part of an EPP development.

Risks relating to future funding of the Zanaga Project

Under the Joint Venture Agreement between the Company, Glencore and Jumelles of 3 December 2009, as amended (the "JVA"), there is no obligation on the Company or Glencore to provide further funding to Jumelles. The Company and Glencore have reached agreement on a work programme and funding of the Zanaga Project for 2019. As such agreement relates to 2019, there is a risk that after 31 December 2019 Jumelles may be subjected to funding constraints and this could have an adverse impact upon the Project. Moreover, discretionary amounts are contained in the 2019 work programme and budget; these require the joint approval of ZIOC and Glencore. It is possible that as regards certain items, joint approval would not be forthcoming.

Risks relating to iron ore prices, markets and products

The ability to raise finance for the Project is largely dependent on movements in the price of iron ore. Iron ore prices have historically been volatile and are primarily affected by the demand for and price of steel and the level of supply of iron ore. Such prices are also affected by numerous other factors beyond the Company's and the Jumelles group's control, including the relative exchange rate of the U.S. dollar with other major currencies, global and regional demand, political and economic conditions, production levels and costs and transportation costs in major iron ore producing regions.

While it is anticipated that there will be a stabilisation of iron ore prices in the global market for iron ore, the timing of such stabilisation and the level of iron ore prices which eventually emerges is uncertain. Although the 2014 FS identifies the product from the Project and the potential demand for such product within a range of iron ore prices, there are no assurances that the demand for the Project's product will be sufficient in quantity or in price to ensure the economic viability of the Project or to enable finance for the development of the Project to be raised. Furthermore, the range of iron ore prices in the 2014 FS will need to be reviewed so as to reflect changed market conditions and changed expectations relating to the supply and demand for iron ore.

Risks relating to an EPP

For some considerable period, an initiative has been and is being carried out to investigate the possibility of a low-cost small scale start-up, using existing infrastructure, focussing on a standard 62% Fe benchmark iron ore product or a high grade 65% Fe pellet feed iron ore product that would involve simple 'processing' applications. In conjunction with this, the possibility of a low-cost small scale start-up involving the production of a pellet feed concentrate and conventional pelletisation continues to be investigated. This initiative also involves the assessment of methods of providing the necessary power requirements as well as logistical support to enable the product to be transported to an available exit port. There will also be the need to put in place the appropriate contractual and permitting arrangements. There is a risk that such kind of start-up is found not to be viable or is not proceeded with for other reasons or is delayed.

Cold Pelletising Test Results and confirmatory testing

Additionally, a 'cold pelletisation' process, based on new and relatively untested cold pelletisation technology, has also been the subject of investigation. The purpose of the pelletising test work in relation to such process carried out was to test sizing and processing techniques to produce a client defined target concentrate, which, with the application of novel cold binding technologies, would be capable of producing transportable pellets or briquettes with the potential to conform to international marketplace accepted chemical and physical parameters.

During 2018, various processing techniques were tested to achieve the target grade stipulated by the client. As part of the test work, pellets with varying binder compositions were tested for their reduction degradation index ("RDI") characteristics partly at a European steel mill and partly at a certified laboratory in Germany. The results of such tests were encouraging.

The steel industry is notoriously cautious in adopting new technologies so further work will be required for the full acceptance of this product. The Project Team are working with a leading British Institute to evaluate the technology with the objective of ascertaining steel industry acceptance of the product.

Risks relating to financing the Zanaga Project

Any decision of the Jumelles board to proceed with construction of the mine and related infrastructure (or any variant such as a low capital cost, small scale start-up EPP Project) is itself dependent upon the ability of Jumelles to raise the necessary debt and equity to finance such construction and the initial operation of the mine (or any variant such as a low-cost small scale start-up). Jumelles may be unable to obtain debt and/or equity financing in the amounts required, in a timely manner, on favourable terms or at all and should this occur, it is highly likely to pose challenges to the proposed development of the Zanaga Project and the proposed timeline for its development. Moreover, the global credit environment may pose additional challenges to the ability of Jumelles to secure debt finance or to secure debt finance on acceptable terms, including as to rates of interest.

Risks relating to financing of the Company

The Company will not generate any material income until the an operating stage of the Project has been constructed and mining and export of the iron ore has successfully commenced at commercial volumes. In the meantime the Company will continue to expend its cash reserves. Should the Company seek to raise additional finance, it may be unable to obtain debt and/or equity financing in the amounts required, in a timely manner, on favourable terms or at all.

If construction of the mine and related infrastructure proceeds (including any preparatory steps associated with the construction of the mine and related infrastructure) or any small scale start-up proceeds, and ZIOC elects to fund its pro rata equity share of construction capital expenditure, there is no certainty as to its ability to raise the required finance or the terms on which such finance may be available.

If ZIOC raises additional funds (including for the purpose of funding the construction of the Project or any part of the Project, including any small-scale start-up) through further issuances of securities, the holders of ordinary shares could suffer significant dilution, and any new securities that ZIOC issues could have rights, preferences and privileges superior to those of the holders of the ordinary shares.

If the Company fails to generate or obtain sufficient financial resources to develop and operate its business, this could materially and adversely affect the Company's business, results of operations, financial condition and prospects.

Risk relating to Ore Reserves estimation

Ore Reserves estimates include diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified. Ore Reserve estimates are by their nature imprecise and depend, to a certain extent, upon statistical inferences and assumptions which may ultimately prove unreliable. Estimated mineral reserves or mineral resources may also have to be recalculated based on changes in iron ore or other commodity prices, further exploration or assessment or development activity and/or actual production experience.

Host country related risks

The operations of the Zanaga Project are located mainly in the RoC. These operations will be exposed to various levels of political, regulatory, economic, taxation, environmental and other risks and uncertainties. As in many other countries, these (varying) risks and uncertainties can include, but are not limited to: political, military or civil unrest; fluctuations in global economic and market conditions impacting on the economy; terrorism; hostage taking; extreme fluctuations in currency exchange rates; high rates of inflation; labour unrest; nationalisation; changes in taxation; illegal mining; restrictions on foreign exchange and repatriation. In addition, the RoC is an emerging market and, as a result, is generally subject to greater risks than in the case of more developed markets.

HIV/AIDS, malaria and other diseases are prevalent in the RoC and, accordingly, the workforce of the ZIOC group and of the Jumelles group will be exposed to the health risks associated with the country. The operating and financial results of such entities could be materially adversely affected by the loss of productivity and increased costs arising from any effect of HIV/AIDS, malaria and other diseases on such workforce and the population at large.

Weather conditions in the RoC can fluctuate severely. Rain storms, flooding and other adverse weather conditions are common and can severely disrupt transport in the region where the Jumelles group operates and other logistics on which the Jumelles group is dependent.

The host country related risks described above could be relevant both as regards day-to-day operations and the raising of debt and equity finance for the Project. The occurrence of such risks could have a material adverse effect on the business, prospects, financial condition and results of operations of the Company and/or the Jumelles group.

Risks relating to the Project's licences and the regulatory regime

The Project's Mining Licence was granted in August 2014 and a Mining Convention has been entered into. With effect from 20 May 2016, the Zanaga Mining Convention has been promulgated as a law of the RoC, following ratification by the Parliament of the RoC and publication in the Official Gazette.

The holder of a mining licence is required to incorporate a Congolese company to be the operating entity and the Congolese Government is entitled to a free participatory interest in projects which are at the production phase. This participation cannot be less than 10%. Under the terms of the Mining Convention, there is a contingent statutory 10% free participatory interest in favour of the Government of the RoC as regards the mine operating company and a contingent option for the Government of the RoC to buy an additional 5% stake at market price.

The granting of required approvals, permits and consents may be withheld for lengthy periods, not given at all, or granted subject to conditions which the Jumelles group may not be able to meet or which may be costly to meet. As a result, the Jumelles group may incur additional costs, losses or lose revenue and its business, result of operations, financial condition and/or growth prospects may be materially adversely affected. Failure to obtain, renew, enforce or comply with one or more required approvals, permits and consents could have a material adverse effect on the business, prospects, financial condition and results of operations of the Company and/or the Jumelles group. Mitigation of such risks is in part dependent upon the terms of the Mining Convention and compliance with its terms.

Transportation and other infrastructure

The successful development of the Project (including any low-cost small scale start-up) depends on the existence of adequate infrastructure and the terms on which the Project can own, use or access such infrastructure. The region in which the Project is located is sparsely populated and difficult to access. Central to the Zanaga Project becoming a commercial mining operation is access to a transportation system through which it can transport future iron ore product to a port for onward export by sea. In order to achieve this it will be necessary to access a port at Pointe-Indienne, which is still to be constructed, or some other exit port in the case of a low-cost small scale start-up.

The nature and timing of construction of the proposed new port are still under discussion with the government of the RoC and other interested parties. In relation to the pipeline and Project facilities at the proposed new port and (to the extent needed) other infrastructure, the necessary permits, authorisations and access, usage or ownership rights have not yet been obtained.

Failure to construct the proposed pipeline and/or facilities at the proposed new port and/or other needed infrastructure or a failure to obtain access to and use of the proposed new port and/or other needed infrastructure or a failure to do this in an economically viable manner or in the required timescale could have a material adverse effect on the Project.

In the case of a low-cost small scale start-up, failure to put in place the necessary logistical requirements (including trucking, rail transportation and port facilities) and/or other needed infrastructure or a failure to obtain access to and use of the proposed logistical requirements or a failure to do this in an economically viable manner or in the required timescale could have a material adverse effect on the Project.

The availability of reliable and continuous delivery of sufficient quantity of power to the Project at an affordable price will also be a significant factor on the costs at which iron ore can be produced and transported to any proposed exit port and will impact on the economic viability of the Project.

Reliable and adequate infrastructure (including an outlet port, roads, bridges, power sources and water supplies) are important determinants which affect capital and operating costs and the ability of the Jumelles group to develop the Project, including any low-cost small scale start-up. Failure or delay in putting in place or accessing infrastructure needed for the development of the Zanaga Project could have a material adverse effect on the business, prospects, financial condition and results of operations of the Company and/or the Jumelles group.

Risks associated with access to land

Pursuant to the laws of the RoC, mineral deposits are the property of the government with the ability to purchase surface rights. Generally speaking, the RoC has not had a history of native land claims being made against the state's title to land. There is no guarantee, however, that such claims will not occur in the future and, if made, such claims could have a deleterious effect on the progress of development of the Project and future production.

The Mining Convention envisages that the RoC will carry out a process to expropriate the land required by the Zanaga Project and place such land at the disposal of the holder of the Mining Licence in order to build the mine and the infrastructure, including the pipeline, required for the realisation of the Zanaga Project. This means that the rights of the Jumelles company which holds the Mining Licence to the relevant land will be subject to negotiation between the Congolese government and such company. Alternatively, if the land is not declared DUP (i.e. is expropriated by the State under its sovereign powers) then the Jumelles group will have to reach agreement with the local land owners which may be a more time consuming and costly process.

Risks relating to timing

Any delays in (i) obtaining rights over and access to land and infrastructure; (ii) obtaining the necessary permits and authorisations; (iii) the construction or commissioning of the mine, the pipeline or facilities at an exit port or power transmission lines or other infrastructure; or (iv) negotiating the terms of access to the exit port and supply of power and other infrastructure; or (v) raising finance to fund the development of the mine and associated infrastructure, could prevent altogether or impede the development of the Zanaga Project, including the ability of the Zanaga Project to export its future iron ore products whether on the anticipated timelines or at projected volumes and costs or otherwise. Such delays or a failure to complete the proposed infrastructure or the terms of access to infrastructure or to do this in an economically viable manner, could have a material adverse effect on the business, results of operations, financial condition and prospects of the Company and/or the Jumelles group.

Environmental risks

The operations and activities of the Zanaga Project are subject to potential risks and liabilities associated with the pollution of the environment and the disposal of waste products that may occur as a result of its mineral exploration, development and production, including damage to preservation areas, over-exploitation and accidental spills and leakages. Such potential liabilities include not only the obligation to remediate environmental damage and indemnify affected third parties, but also the imposition of court judgments, administrative penalties and criminal sanctions against the relevant entity and its employees and executive officers. Awareness of the need to comply with and enforcement of environmental laws and regulations continues to increase. Notwithstanding precautions taken by entities involved in the development of the Project, breaches of applicable environmental laws and regulations (whether inadvertent or not) or environmental pollution could materially and adversely affect the financial condition, business, prospects and results of operations of the Company and/or the Jumelles group.

Health and safety risks

The Jumelles group is required to comply with a range of health and safety laws and regulations in connection with its business activities and will be required to comply with further laws and regulations if and when construction of the Project commences and the mine goes into operation. A violation of health and safety laws relating to the Project's operations, or a failure to comply with the instructions of the relevant health and safety authorities, could lead to, amongst other things, a temporary shutdown of all or a portion of the Project's operations or the imposition of costly compliance measures. If health and safety authorities require the Project to shut down all or a portion of its operations or to implement costly compliance measures, whether pursuant to applicable health and safety laws and regulations, or the more stringent enforcement of such laws and regulations, such measures could have a material adverse effect on the financial condition, business, prospects, reputation and results of operations of the Company and/or the Jumelles group.

Risks relating to third party claims

Due to the nature of the operations to be undertaken in respect of the development of the Zanaga Project, there is a risk that substantial damage to property or injury to persons could be sustained during such development. Any such damage or injury could have a material adverse effect on the financial condition, business, prospects, reputation and results of operations of the Company and/or the Jumelles group.

Risks relating to outsourcing

The 2014 FS envisages that certain aspects of the Zanaga Project will be carried out by third parties pursuant to contracts to be negotiated with such third parties. Any low-cost small scale start-up is also likely to involve the undertaking of various key elements of the Project by third parties. There is a risk that agreement might not be reached with such third parties or that the terms of any such agreement are more stringent than currently anticipated; this could adversely impact upon the Project and/or the proposed timescale for carrying out the Project.

Fluctuation in exchange rates

The Jumelles group's functional and reporting currency is the U.S. dollar, and most of its in country costs are and will be denominated in CFA francs and Euros. Consequently, the Jumelles group must translate the CFA franc and Euro denominated assets and liabilities into U.S. dollars. To do so, non-U.S. dollar denominated monetary assets and liabilities are translated into U.S. dollars using the closing exchange rate at the reporting period end date. Consequently, increases or decreases in the value of the U.S. dollar versus the Euro (and consequently the CFA franc) and other foreign currencies may affect the Jumelles group's financial results, including its assets and liabilities in the Jumelles group's balance sheets. These factors will affect the financial results of the Company. In addition, ZIOC holds the majority of its funds in Pounds Sterling, and incurs the majority of its corporate costs in Pounds Sterling, but its contributions to funding the Jumelles group in 2018 and 2019 are calculated in U.S. dollars. Consequently, any fluctuation in exchange rates between Pounds Sterling versus the U.S. dollar or the Euro, could also adversely affect the financial results of the Company.

Cash resources

The Company has limited cash resources. Although the Company has taken steps to conserve its cash resources, there is a risk that depletion of such cash resources will adversely affect the Company. Such depletion could result in further expenditure cuts being introduced by the Company, both in its internal and its external operations. Continuing volatile and uncertain economic conditions in the global iron ore market means that there can be no certainty as to when the Zanaga resource is likely to be developed. The difficult prevailing economic conditions as well as difficulties of monetising this resource given its location impact upon the ability of the Jumelles group to raise new finance for the Project as well as on the Company's ability to raise new finance for itself. The Company's existing cash resources will continue to come under increasing pressure unless a more benign investment and trading climate materialises in the foreseeable future which benefits the Project and the Company can take steps which result in an improvement of its financial position.

Financial Statements

Consolidated statement of comprehensive Income

for year ended 31 December 2018

		2018	2017
	Note	US$000	US$000
Administrative expenses		(1,071)	(577)
Share of loss of associate	6b	(795)	(824)
Operating loss		(1,866)	(1,401)
Interest income		9	8
Loss before tax		(1,857)	(1,393)
Taxation	5	-	-
Loss for the year		(1,857)	(1,393)
Items that will not be reclassified subsequently to profit or loss: Share of other comprehensive income of associate - foreign exchange translation		-	(48)
Items that may be reclassified subsequently to profit or loss: Foreign exchange translation - foreign operations	6b	(8)	52
Other comprehensive income/(loss)		(8)	4
Total comprehensive loss		(1,865)	(1,389)
(Loss) per share
Basic (Cents)	12	(0.6)	(0.5)
Diluted (Cents)	12	(0.6)	(0.5)

Loss and total comprehensive loss for the year is attributable to the equity holders of the Parent Company.

The notes form an integral part of the financial statements.

Consolidated statement of financial position

for year ended 31 December 2018

		2018	2017
	Note	US$000	US$000
Non-current assets
Property, plant and equipment	6a	-	-
Investment in Associate	6b	37,450	37,589
		37,450	37,589
Current assets
Other receivables	7	89	49
Cash and cash equivalents	8	1,955	3,721
		2,044	3,770
Total Assets		39,494	41,359
Current liabilities
Trade and other payables	9	(75)	(75)
Net assets		39,419	41,284
Equity attributable to equity holders of the Parent Company
Share capital	10	267,012	267,012
Accumulated deficit		(230,912)	(229,055)
Foreign currency translation reserve		3,319	3,327
Total equity		39,419	41,284

The notes form an integral part of the financial statements.

These financial statements were approved by the Board of Directors on 26 June 2019 and were signed on its behalf by:

Mr Clifford Elphick

Director

Consolidated statement of changes in equity

for year ended 31 December 2018

			Foreign
			currency
	Share	Accumulated	translation	Total
	capital	deficit	reserve	equity
	US$000	US$000	US$000	US$000
Balance at 1 January 2017	267,012	(227,662)	3,322	42,672
Consideration for share-based payments	-	-	-	-
Loss for the year	-	(1,393)	-	(1,393)
Other comprehensive income	-	-	4	4
Total comprehensive loss	-	(1,393)	4	(1,389)
Balance at 31 December 2017	267,012	(229,055)	3,327	41,284
Balance at 1 January 2018	267,012	(229,055)	3,327	41,284
Consideration for share-based payments	-	-	-	-
Loss for the year	-	(1,857)	-	(1,857)
Other comprehensive income / (loss)	-	-	(8)	(8)
Total comprehensive loss	-	(1,857)	(8)	(1,865)
Balance at 31 December 2018	267,012	(230,912)	3,319	39,419

Consolidated cash flow statement

for year ended 31 December 2018

		2018	2017
	Note	US$000	US$000
Cash flows used in operating activities
Loss for the year		(1,857)	(1,393)
Adjustments for:
Interest receivable		(9)	(8)
Decrease/(Increase) in other receivables		(40)	11
(Decrease)/Increase in trade and other payables		-	(38)
Net exchange gain/(loss)		144	(313)
Share of Loss in associate		795	824
Net cash used in operating activities		(967)	(917)
Cash flows used in financing activities
Cash flows used in investing activities
Interest received		9	8
Investment in Associate		(656)	(588)
Net cash used in investing activities		(647)	(580)
Net decrease in cash and cash equivalents		(1,614)	(1,497)
Cash and cash equivalents at beginning of year		3,721	4,852
Effect of exchange rate difference		(152)	366
Cash and cash equivalents at end of year	8	1,955	3,721

The notes form an integral part of the financial statements.

Notes to the financial statements

1 Business information and going concern basis of preparation

Background

Zanaga Iron Ore Company Limited (the "Company"), was incorporated on 19 November 2009 under the name of Jumelles Holdings Limited. The Company changed its name on 1 October 2010. The Company is incorporated in the British Virgin Islands ("BVI") and the address of its registered office, is situated at Ground Floor, Coastal Building Wickham's Cay II, Road Town P.O. Box 2136, Carrot Bay VG1130 Tortola, British Virgin Islands. On 18 November 2010, the Company's share capital was admitted to trading on the AIM Market ("AIM") of the London Stock Exchange ("Admission"). The Company's principal place of business as an investment holding vehicle is situated in Guernsey, Channel Islands.

At 31 December 2010 the Company held 100% of the share capital of Jumelles Limited subject to the then Call Option.

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

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

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

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

At the time that Garbet was a shareholder in the Company, it was majority owned by Strata Limited ("Strata"), a private investment holding company based in Guernsey, which specialises in the investment and development of early stage natural resource projects in emerging markets, predominately Africa. Until 3 April 2017 Garbet owned approximately 41.49% of the share capital of the Company. Pursuant to a transaction effected on 2 April 2017 Garbet ceased to hold any shares in the Company. As part of such transaction the shares in the Company which were held by Garbet were transferred directly or indirectly to Garbet's shareholders and the shareholders of Garbet's holding company, Strata.

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

Xstrata Transaction

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

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

· an agreement which regulated the respective rights of the Company, Jumelles and Xstrata Projects in relation to Jumelles following exercise of the Call Option. Subsequently:

o Xstrata merged with the Glencore group on 2 May 2013 to form Glencore Xstrata and the holding company of the merged group subsequently changed its name to Glencore.

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

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

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

Relationship between Jumelles and its shareholders after exercise of the Call Option (Post February 2011)

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

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

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

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

Future funding requirements and going concern basis of preparation

The Directors have prepared the accounts on a going concern basis. At 31 December 2018 the Company had cash reserves of US$2.0m.

Similar to the Funding Agreement for 2018 project expenditure, Glencore and ZIOC have agreed a Funding Agreement to fund the 2019 Project Work Programme and Budget for the Project of US$1.3m plus US$0.13m of discretionary spend dependent on certain workstreams requiring capital. After taking in savings arising from previous years, ZIOC has agreed to contribute towards such work programme and budget an amount comprising US$0.65m plus 49.99% of all discretionary items approved jointly with Glencore. Ignoring any entitlement to savings, ZIOC's potential contribution to the Project in 2019 under the 2019 Funding Agreement is US$0.73m in total. In the event that a decision is taken to allocate capital to more extensive product tests or study work additional funding may be required.

The Company's current cash reserves are sufficient to support both the Company's own operating costs for the next 12 months and the agreed contribution to the Project under the Funding Agreement for 2019 referred to in the previous paragraph.

The Company continues to review the costs of its operational activities with a view to conserving its cash resources. As part of such ongoing review, the Directors and management have indicated to the Company that they will assist the cash preservation activities of the Company, by re-negotiating contractual arrangements so as to provide for payments of fees in shares and/or options in lieu of cash. If this course of action is determined to be necessary, It is expected that this will take effect from the beginning of Q4 2019.

In common with many exploration and development companies in the mining sector, the Company raises funding in phases as its project develops. As the Zanaga Project is still in the development stage and the cash resources of the Company are diminishing, the Company recognises that steps will need to be taken to raise additional investment either at the corporate level or at the Zanaga Project level, or a combination of the two. The raising of additional funds is linked to the progress that is made in relation to the development of the Zanaga Project. The initiatives that are being undertaken in relation to the development of the Zanaga Project have been described earlier in this report. There are a range of options for raising funds which the Company is pursuing. It is recognised that there is a risk that the Company may be unable to obtain debt and/or equity financing in the amounts required, in a timely manner, on favourable terms or at all and should this occur, it is highly likely to pose challenges for the Company and could adversely have an impact upon the proposed development of the Zanaga Project and the proposed timeline for its development.

If construction of the mine and related infrastructure proceeds (including any preparatory steps associated with the construction of the mine and related infrastructure), and the Company elects to fund its pro rata equity share of construction capital expenditure, it will need to raise further funds. There is no certainty as to the Company's ability to raise the required finance or the terms on which such finance may be available.

In addition, any decision of the Jumelles Board to proceed with construction of the mine and related infrastructure (or any variant such as a low-cost small scale start-up) is itself dependent upon the ability of Jumelles to raise the necessary debt and equity to finance such construction and the initial operation of the mine. Jumelles itself may be unable to obtain debt and/or equity financing in the amounts required, in a timely manner, on favourable terms or at all and should this occur, it is highly likely to pose challenges to the proposed development of the Zanaga Project and the proposed timeline for its development.

The Company still believes that once the proposed staged development of the Zanaga Project occurs, the Project offers high grade ore at competitive cost, thereby offering an attractive rate of return, at an acceptable level of risk. However, in order to carry out such staged development, it is still the case that substantial capital expenditure will be required both at the prospective mine site and in respect of transportation and other associated infrastructure and for working capital. Revenues from mining are dependent upon such development being financed and taking place. Despite the positive current state of the global iron ore market there can be no certainty as to when Jumelles and the Company are able to raise new finance for the staged development of the Project or any small-scale start-up.

At a time when the staged development of the Project takes place (or, if viable, a small-scale start-up takes place) the Company will need to obtain additional funding should it decide to elect to fund its share of any such development of the mine. If such staged development continues to be deferred due to unfavourable market conditions, the Company will need at the appropriate time to explore options to raise additional funding, pending the staged development (or, if viable, a small-scale start-up) taking place.

At present, taking into account the judgments, estimates and other matters discussed above, the Company has sufficient financial resources to continue in operational existence for the foreseeable future. For these reasons, the financial statements of the Company have been prepared on a going concern basis.

Brexit

The Brexit process has resulted in increased volatility in currency rates applicable to Pounds Sterling. Such volatility is likely to continue. As the Company's cash resources are held in Pounds Sterling, such volatility could adversely affect the Company's financial position and results where it is obliged to make payments of sums denominated in other currencies. This particularly applies to contributions made by the Company to funding the Jumelles group as these amounts are calculated in United States dollars.

2 Accounting policies

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

Basis of preparation

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

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

The company's presentation currency and functional currency is US dollars.

New standards, amendments and interpretations

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

· IFRS 16 Leases (effective date 1 January 2019)

As at the reporting period end date, the Group has no material operating lease commitments and therefore no significant changes in accounting policies or to the financial statements are expected upon adoption of the new standard.

Adoption of new standards effective 1 January 2018

(i) IFRS 9 Financial Instruments

IFRS 9 supersedes IAS 39 "Financial Instruments: Recognition and Measurement" and covers classification and measurement of financial assets and financial liabilities, impairment of financial assets and hedge accounting. IFRS 9 modifies the classification and measurement of certain classes of financial assets and liabilities and required the Group to reassess classification of its financial assets from four to three primary categories (amortised cost, fair value through profit and loss, fair value through other comprehensive income). Financial liabilities continue to be measured at either fair value through profit and loss or amortised cost. In addition, IFRS 9 introduced an expected credit loss ("ECL") impairment model, which requires a loss allowance to be recognised on the basis of future anticipated credit losses rather than incurred credit losses.

The table below summarises the change in classification and measurement of financial assets and liabilities recognised previously under IAS 39 and the revised measurement categories following adoption of IFRS 9 as of 1 January 2018.

$'000	Note	Original measurement category under IAS 39	New measurement category under IFRS 9	Original carrying amounts under IAS 39	Effect of IFRS 9 adoption	New carrying amount under IFRS 9
Financial assets
Cash and cash equivalents	8	Fair value through profit or loss	Amortised cost	1,955	-	3,721
Other receivables	7	Loans and receivables	Amortised cost	49	-	49
Financial liabilities
Trade and other payables	9	Amortised cost	Amortised cost	(75)	-	(75)

Note that both cash and cash equivalents and other receivables are held within a business model whose objective is to collect the contractual cashflows and those contractual cashflows comprise solely payments of principal and interest.

Changes in accounting policies resulting from IFRS 9 have been applied as of 1 January 2018, with no restatement of comparative information of the prior year. There were no changes to carrying values of financial assets or liabilities upon the initial adoption of IFRS 9.

(ii) IFRS 15 Revenue from contracts with customers

IFRS 15 was adopted on the mandatory application date of 1 January 2018. Whilst the Group has applied IFRS 15 from 1 January 2018, this application has no impact on the Group's financial statements as it does not have any revenues given the development stage of its investment in the Project.

Measurement convention

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

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

Basis of consolidation

Subsidiaries

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

Associates

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

Transactions eliminated on consolidation

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

Foreign currency

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

Share-based payments

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

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

The shares issued under the 2010 LTIP were acquired by an Employee Benefit Trust which subscribed for the shares at zero value. These shares are held by the Employee Benefit Trust until the vesting conditions have been met and the share options are exercised. During Q4 2017, all the outstanding share options were exercised and a small number of surplus shares held by the Employee Benefit Trust were distributed to beneficiaries of the Trusts. The Employee Benefit Trust has now been discontinued.

Subsequent awards of share options have been structured as standard share options and did not involve the use of an employee benefit trust.

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

Share-based payments to non-employees

Where the Group received goods or services from a third party in exchange for its own equity instruments and the amount of equity instruments is fixed, the equity instruments and related goods or services are measured at the fair value of the goods or services received and are recognised as the goods are obtained or the services rendered. Equity instruments issued under such arrangements for the receipt of services are only considered to be vested once provision of services is complete. Such awards are structured as standard share options. No awards were issued in 2017 or 2018.

Non-derivative financial instruments

Financial assets and financial liabilities are recognised in the Group's consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument in accordance with IFRS 9.

Financial assets are initially recognised at their fair value, including, in the case of instruments not recorded at fair value through profit or loss, directly attributable transaction costs. Financial assets are subsequently measured at amortised cost, at fair value through other comprehensive income (FVTOCI) or at fair value through profit or loss (FVTPL) depending upon the business model for managing the financial assets and the nature of the contractual cash flow characteristics of the instrument.

Financial liabilities, other than derivatives, are initially recognised at fair value of consideration received net of transaction costs as appropriate and subsequently carried at amortised cost.

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

(i) Impairment of financial assets

A loss allowance for expected credit losses is determined for all financial assets, other than those at FVTPL, at the end of each reporting period. The expected credit loss recognised represents a probability-weighted estimate of credit losses over the expected life of the financial instrument.

The expected credit loss allowance is determined on the basis of twelve month expected credit losses and where there has been a significant increase in credit risk, lifetime expected credit losses. Financial assets are credit impaired when there is no realistic likelihood of recovery.

(ii) Derecognition of financial assets and financial liabilities

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

The Group derecognises financial liabilities when the Group's obligations are discharged, cancelled or have expired.

On derecognition of a financial asset/financial liability in its entirety, the difference between the carrying amount of the financial asset/financial liability and the sum of the consideration received and receivable/paid and payable is recognised in profit and loss.

Other receivables

Other receivables comprise prepayment and receivables from related parties. Where financial assets are included within this line item, these are managed within a business model to collect the contract cashflows, which represent solely payments of principal and interest. Other receivables are subsequently measured at amortised cost.

Trade and other payables

Trade and other payables are initially recognised at the fair value of consideration received net of transaction costs as appropriate and subsequently measured at amortised cost.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. These are managed within a business model to collect the contract cashflows, which represent solely payments of principal and interest These are subsequently measured at amortised cost and are determined to have a low credit risk due to being held with highly credit rated financial institutions. As such, these balances are not assessed to determine whether there has been a significant increase in credit risk.

Share capital

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

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

Impairment of investment in associate

The carrying amounts of the Group's investment in associate are reviewed at each reporting period end to determine whether there is any indication of impairment. The investment is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that investment. If any such indication exists, the investment's recoverable amount is estimated.

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

(i) Calculation of recoverable amount

The recoverable amount of the Group's investments carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial assets).

(ii) Reversals of impairment

An impairment loss is reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount.

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

Financing income and expenses

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

Taxation

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

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

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

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

Segmental Reporting

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

Subsequent events

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

3 Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, which are described in note 2, the directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Carrying value of Investment in Associate

The value of the Group's investment in Jumelles depends very largely on the value of Jumelles' interest in the Project. Jumelles assesses at least annually whether or not its exploration projects may be impaired. This assessment can involve significant estimation uncertainty as to the likelihood that a project will continue to show sufficient commercial promise to warrant the continuation of exploration and evaluation activities. Key assumptions on valuing the project include long term price assumptions on a CFR IODEX 62% Fe forecast 57US/dmt with adjustments for quality, deleterious elements, moisture and freight. It is reasonably possible, on the basis of existing knowledge, that outcomes within the next financial year that are different from assumptions above could require a material adjustment to the carrying amount of the Investment in Associate.

4 Note to the comprehensive income statement

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

	2018	2017
	US$000	US$000
Share-based payments (see Note 11)	-	-
Net foreign exchange loss/(gain)	(152)	(313)
Directors' fees	234	258
Auditor's remuneration	62	64

Other than the Company Directors, the Group did not directly employ any staff in 2018 (2017: nil). The Directors received a total of US$234,003 remuneration for their services as Directors of the Group (2017: US$258,000). The amounts paid as Directors' fees are shown in the Directors' Remuneration Report in the 2018 Annual Report. The Directors' interests in the share capital of the Group are shown in the Directors' Remuneration Report in the 2018 Annual Report.

5 Taxation

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

The effective tax rate for the Group is Nil % (2017: Nil %).

6a Property, Plant and Equipment

	Fixtures	Total
	and fittings
	US$000	US$000
Cost
Balance at 1 January 2018	43	43
Additions	-	-
Disposals	-	-
Balance at 31 December 2018	43	43
Depreciation
Balance at 1 January 2018	43	43
Charge for period	-	-
Balance at 31 December 2018	43	43
Net book value
Balance at 31 December 2018	0	0
Balance at 31 December 2017	0	0

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

6b Investment in Associate

	US$000
Balance at 1 January 2017	37,873
Additions	588
Share of post-acquisition comprehensive loss	(824)
Share of post-acquisition currency translation reserve	(48)
Balance at 31 December 2017	37,589
Balance at 1 January 2018	37,589
Additions	656
Share of post-acquisition comprehensive loss	(795)
Share of post-acquisition currency translation reserve	-
Balance at 31 December 2018	37,450

At 31 December 2018, the investment represents a 50% less one share shareholding in Jumelles being 2,000,000 shares of the total share capital of 4,000,001 shares. Originally recorded at cost, the investment has been adjusted for changes in the Company's share of the net assets of the associate, less impairment. The investment has been impaired down to the Company's share of the impaired value of the project declared in the accounts of the associate.

The additions to the investment during the year were due to the additional US$0.66m of investment agreed in accordance with the 2018 Funding Agreement (2017 US$0.59m).

The Company's investment in Jumelles continues to be, accounted for as an associate using the equity method of accounting as Glencore has control of the business as described in note 1.

As at 31 December 2018, Jumelles had aggregated assets of US$81.6m (2017: US$81.8m) and aggregated liabilities of US$0.8m (2017: US$0.8m). For the year ended 31 December 2018 there was no impairment charge (2017: US$nil) and incurred a loss before tax of US$1.6m (2017: US$1.4m). There was no tax charge for 2018 (2017: US$nil). Currency translation of the underlying Congolese asset generated a translation loss of US$nil (2017: US$0.1m). A summarised consolidated balance sheet of Jumelles for the year ended 31 December 2018, including adjustments made for equity accounting, is included below. The adjustments include US$9.074m decrease to share capital and a corresponding US$9.074m increase to the accumulated deficit for the LTIP settled at Jumelles level by shares in the parent entity in 2014.

Summarised financial information in respect of the Group's associate, reflecting 100% of the underlying associate's relevant figures is set out below.

	2018	2017
	US$000	US$000
Non-current Assets:
Property, plant and equipment	1,270	1,519
Exploration and other evaluation assets	80,000	80,000
Total non-current assets	81,270	81,519
Current Assets	323	356
Current Liabilities	(768)	(772)
Net current liabilities	(444)	(417)
Net assets	80,825	81,103
Share capital	293,103	293,103
Translation reserve	37,326	36,014
Translation reserve	(4,824)	(4,823)
Accumulated deficit	(244,780)	(243,191)
	80,825	81,103

7 Other receivables

	2018	2017
	US$000	US$000
Prepayments and receivables	14	15
Amounts receivable from the Jumelles group	75	34
Other receivables	89	49

8 Cash and cash equivalents

	2018	2017
	US$000	US$000
Cash and cash equivalents	1,955	3,721

9 Trade and other payables

	2018	2017
	US$000	US$000
Accounts payable	75	75
	75	75

No amounts payable are due in more than 12 months (2017: US$nil due in more than 12 months).

10 Share capital

In thousands of shares	Ordinary Shares	Ordinary Shares
	2018	2017
On issue at 1 January - fully paid	278,777	278,777
Shares issued	4,424	-
Shares repurchased and cancelled	-	-
On issue at 31 December - fully paid	283,201	278,777

The Company is able to issue an unlimited number of no par value shares. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. No dividends have been paid or declared in 2018 or in the current year (2017: US$nil).

Share capital changes in 2018

4,424,503 shares were issued in 2018. There were no share repurchases.

11 Share-based payments

Employees

No awards were issued in 2018.

Awards currently in operation are as follows:

Award 1 (fully vested)

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

Award 2 (fully vested)

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

Award 6 (fully vested)

These awards have fully vested.

Award 7 (fully vested)

These awards have fully vested.

Award 8 (fully vested)

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

Award 9 (fully vested)

These awards have fully vested.

Details of current awards are as follows:

Award 1 (2010)

Award 2 (2010)

Award 6 (2014)

Award 8 (2014)

Award 9 (2014)

Total

Weighted

Average

Exercise Price

(£)

Number

(£)

Number

(£)

Number

(£)

Number

(£)

Number

(£)

Number

At 1 January 2017 *

£0.02

2,727,345

£0.02

995,382

0.01

1,204,619

0.01

1,013,418

0.01

4,000,000

£0.01

9,940,764

(US$0.04)

Granted

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

Forfeited

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

Exercised

N/A

Nil

N/A

Nil

0.01

Nil

0.01

Nil

0.1

Nil

N/A

NilNil

Lapsed

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

At 31 December 2017 *

0.02

2,727,345

0.02

995,382

0.01

1,204,619

N/A

1,013,418

0.01

2,000,000

£0.01

9,940,764

At 1 January 2018 *

£0.02

2,727,345l

£0.02

995,382

0.01

1,204,619

0.01

1,013,418

0.01

4,000,000

£0.01

9,940,764

(US$0.04)

Granted

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

Forfeited

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

Exercised

0.02

2,727,345

0.02

995,382

0.01

201,848

0.01

1,013,418

0.1

2,000,000

0.1

6,937,993

Lapsed

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

N/A

Nil

At 31 December 2018 *

N/A

Nil

N/A

Nil

0.01

1,002,771

N/A

Nil

0.01

2,000,000

£0.01

3,002,771

Award 1 (2010)

Award 2 (2010)

Award 6 (2014)

Award 8 (2014)

Award 9 (2014)

Total

Range of exercise prices *

£0.00-£0.02
(US$0.00-US$0.04)

£0.02
(US$0.04)

£0.00-£0.01
(US$0.00-US$0.02)

£0.01

(US$0.02)

£0.01

(US$0.02)

£0.00 - £0.02
(US$0.00-US$0.04)

Weighted average fair value of share awards granted in the period *

N/A

N/A)

N/A

Weighted average share price at date of exercise (£)

N/A

Total share awards vested

2,727,345

995,382

1,137,338

1,013,418

4,000,000

8,337,685

Weighted average remaining contractual life (Days)

Nil

N/A

Expiry date

18 May 2021

29 July 2024**

29 July 2024

N/A

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

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

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

	Award 1 (2010)	Award 2 (2010)	Award 6 (2014)	Award 8 (2014)	Award 9 (2014)
Option pricing model used	Black-Scholes	Black-Scholes	Black-Scholes	Black-Scholes	Black-Scholes

Weighted average share price at date of grant	£1.56 (US$2.41)	£1.56 (US$2.41)	£0.19 (US$$0.31)	£0.19 (US$$0.31)	£0.19 (US$$0.31)
Weighted average expected option life	0.7 years	1.0 years	5.0 years	4.0 years	4.6 years
Expected volatility (%)	50%	50% for less than	91%	91%	91%
		1 year expected life,
		55% for more than
		1 year expected life
Dividend growth rate (%)	Zero	Zero	Zero	Zero	Zero
Risk-free interest rate (%)	0.51% for	0.69% for	1.75% for	1.75% for	1.75% for
	6 month expected life	12 month expected life	12 month expected life	12 month expected life	12 month expected life
	0.69% for	1.12% for	2.25% in excess	2.25% in excess	2.25% in excess
	12 month expected life	24 month expected life	24 month expected life	24 month expected life	24 month expected life

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

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

Non-employees

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

Consultancy	Weighted average share price at date of grant *	Weighted average fair value of share awards *	Weighted average expected life of option	Expiry date	Other LTIP terms, valuation model and assumptions applicable
Strata Capital	£0.19 (US$0.31)	£0.12 (US$0.20)	4 years	29 July 2024	Award 8 above
Harris GeoConsult	£0.19 (US$0.31)	£0.18 (US$0.31)	4 years	29 July 2024	Award 8 above
Renroc International	£0.19 (US$0.31)	£0.18 (US$0.31)	4 years	29 July 2024	Award 7 above

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

The total equity-settled share-based payment expense recognised as an operating expense during the year was US$nil, (2017: US$nil). Further details of share-based payments awarded to Directors of the Group can be found in the Remuneration Report in the 2018 Annual Report.

The total charge during the year for equity-settled share-based payments awarded to employees of companies in which the Group has a significant interest totals US$nil (2017: US$nil).

12 Loss per share

	2018		2017
Profit (Loss) (Basic and diluted) (US$,000)		(1,857)		(1,393)
Weighted average number of shares (thousands)
Basic
Issued shares at beginning of period		278,777		278,777
Effect of shares issued		4,424		-
Effect of share repurchase and cancellation		-		-
Effect of own shares		-		(3,842)
Effect of share split		-		-
Weighted average number of shares at 31 December - basic		283,201		274,935
Loss per share
Basic (Cents)		(0.6)		(0.5)
Diluted (Cents)	(0.6)		(0.5)

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

13 Financial instruments

Financial Risk Management

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

(a) Credit risk

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

	2018	2017
	US$000	US$000
Cash and cash equivalents	1,955	3,721
Amounts receivable from Jumelles Group	75	34

Significant concentrations of credit risk manifest with the Group's banking counterparties with which the cash and cash equivalents are held, and accounts receivable from Jumelles.

(b) Liquidity risk

Liquidity risk is the risk that the Group is unable to meet its payment obligations when due, or that it is unable, on an ongoing basis, to borrow funds in the market on an unsecured or secured basis at an acceptable price to fund actual or proposed commitments. Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and availability of adequate committed funding facilities.

The Group evaluates and follows continuously the amount of liquid funds needed for business operations, in order to secure the funding needed for business activities and loan repayments. The availability and flexibility of the financing is needed to ensure the Group's financial position, as detailed in Note 1.

The maturity profile of the Group's financial liabilities based on the contractual terms is as follows:

$'000	Less than 1 months	1 month to 6 months	Greater than 6 months	Total
2018
Accounts payable	75	-	-	75
2017
Accounts payable	75	-	-	75

(i) Foreign currency risk

The functional currency of the Group is the US dollar. Currency risk is the risk of loss from movements in exchange rates related to transactions and balances in currencies other than the U.S. dollar. The foreign currency denominated financial assets and liabilities are not hedged, thus the changes in fair value are charged or credited to profit and loss.

As at 31 December 2018 the foreign currency denominated assets include cash balances held in Sterling of US$1,954,425 (2017: US$3,720,990), other receivables denominated in Sterling of US$89,380 (2017: US$48,548), and payables of US$74,723 (2017: US$75,923) denominated in Sterling.

The following significant exchange rates applied during the year:

		Reporting date		Reporting date
	Average rate	spot rate	Average rate	spot rate
	2018	2018	2017	2017
Against US Dollars	US$	US$	US$	US$
Pounds Sterling	1.3348	1.2769	1.3404	1.3513

(ii) Sensitivity analysis

A 10% weakening of the following currencies against the US Dollar at 31 December 2018 would have increased/(decreased) equity and profit or loss by the amounts shown below. This calculation assumes that the change occurred at the end of each reporting period and had been applied to risk exposures existing at that date. This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant.

	Equity	Profit or loss	Equity	Profit or loss
	2018	2018	2017	2017
	US$000	US$000	US$000	US$000
Pounds Sterling	(195)	(195)	(372)	(372)

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

(iii) Capital management

The Board's policy is to maintain a stable capital base so as to maintain investor and market confidence. Capital consists of share capital and retained earnings.The Directors do not intend to declare or pay a dividend in the foreseeable future but, subject to the availability of sufficient distributable profits, intend to commence the payment of dividends when it becomes commercially prudent to do so.

The Company has a share incentive programme which is now administered by the Board. The share incentive programme is discretionary and the Board will decide whether to make share awards under the share incentive programme at any time. In Q4 2017 all then outstanding share options over already issued shares in the LTIP split interest scheme were exercised, a small number of surplus shares were distributed to beneficiaries of the Employee Benefit Trust involved in the scheme and the LTIP split interest scheme was then discontinued.

14 Commitments for expenditure

The Group had no capital commitments or off-balance sheet arrangements at 31 December 2018 (31 December 2017: nil). Subsequently, in January 2019 Glencore and ZIOC signed a Funding Agreement to fund the 2019 Project Work Programme and Budget for the Project of US$1.3m plus US$0.13m of discretionary spend dependent on certain workstreams requiring capital. Under its terms, the Company agreed to contribute towards such work programme and budget an amount comprising US$0.65m plus 49.99% of all discretionary items approved jointly with Glencore. Ignoring any entitlement to savings, ZIOC's potential contribution to the Project in 2019 under the 2019 Funding Agreement is US$0.73m in total.

15 Related parties

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

The following transactions occurred with related parties during the period:

	Transactions for the period		Closing balance (payable)/receivable
	2018	2017	2018	2017
	US$000	US$000	US$000	US$000
Funding:
Due from Jumelles	656	588	75	34

16 Transactions with key management personnel

	2018	2017
	US$000	US$000

Directors' fees	234	258
Total	234	258

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

*** End of Financial Statements ***

Glossary

AL₂O₃	Alumina (Aluminium Oxide)
Fe	Total Iron
JORC Code	The 2004 or 2012 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves as published by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia.
LOI	Loss on ignition
LOM	Life of mine
Mineral Resource	A concentration or occurrence of material of intrinsic economic interest in or on the Earth's crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.
Mn	Manganese
Ore Reserve	The economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified. Ore Reserves are sub-divided in order of increasing confidence into Probable Ore Reserves and Proved Ore Reserves. A Probable Ore Reserve has a lower level of confidence than a Proved Ore Reserve but is of sufficient quality to serve as the basis for a decision on the development of the deposit.
P	Phosphorus
PFS	Pre-feasibility Study
SiO2	Silica

Advisors
Nominated Advisor and Corporate Broker   Liberum Capital Limited  Ropemaker Place, Level 12  25 Ropemaker Street  London, EC2Y 9LY  United Kingdom
Company Secretary Elysium Fund Management Limited  PO Box 650, 1st Floor, Royal Chambers  St Julian's Avenue  Guernsey, GY1 3JX Channel Islands	Legal Bryan Cave Leighton Paisner LLP  Adelaide House  London Bridge  London, EC4R 9HA  United Kingdom
Auditors and Reporting Accountants  Deloitte LLP 1 New Street Square London, EC4A 3HQ United Kingdom
Registrars   Computershare Investor Services (BVI) Ltd Woodbourne Hall PO Box 3162  Road Town  Tortola British Virgin Islands

Zanaga Iron Ore Company Audited Results for the Year to 31 December 2018

2018 Highlights and post reporting period end events to June 2019

Chairman's Statemnt

Financial Review

Reserves & Resource Statement

Financial Statements

Glossary

Advisors