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Lithic Metals and Energy Limited ('Lithic Metals' or the 'Company')

Final results for the year ended 31 March 2009

Lithic Metals and Energy (AIM:LMY), the African diversified commodity exploration and development company, today announces its final financial results for the year ended 31 March 2009.

The following extracts of the audited consolidated financial statements for the year ended 31 March 2009 are listed below. The full consolidated financial statements of the Company are available for download at www.lithicme.com

• Chairman's Statement

• Extracts from Directors' Report

• Consolidated Statement of Comprehensive Income

• Consolidated Statement of Cash Flows

• Consolidated Statement of Financial Position

• Consolidated Statement of Changes in Equity

• Accounting policies and notes

Enquiries:

Lithic Metals and Energy Limited	David Weill, Chairman	T: +44 20 7881 0180
Seymour Pierce	Nicola Marrin Catherine Leftley	T: +44 20 7107 8000

 

Chairman's Statement

The Chairman is pleased to present this year's annual report for Lithic Metals and Energy Limited ('the Company') together with the consolidated financial statements for the year ended 31 March 2009.

Revenue for the year ended 31 March 2009 was £310,082, with finance revenue totalling £122,434. Total expenses amounted to £2,912,720. Included within total expenses was an impairment charge in respect of capitalized exploration costs of £1,982,193. Share options expensed totalled £104,525. Retained loss for the period attributable to members of the parent Company totalled £2,602,638 equating to a loss of 1.8 pence per share.

During the year an impairment charge was taken against previously capitalised exploration costs in respect of the Mitaba Nickel project in Zambia. This decision was based on a number of factors, including but not limited to the isolated location of the project and the amount of Nickel found so far, and on balance it was felt that the additional cost of the intensive drilling program necessary to prove feasibility of the site could not be justified in the current economic climate. For this reason all of the costs to date have been expensed in the current year resulting in the charge of £1,982,000 referred to above.

The past year has been eventful for the Company with the signing of the Joint Venture Agreement with Zambezi Resources in April 2008 which has introduced the business to the associated uranium prospects in Zambia. However difficult decisions have had to be made, both by the former Board through the restructuring programme earlier in the year which resulted in redundancies throughout the Group, and also through shareholder pressure for a change of strategy which resulted in the new Board being appointed at the Special General Meeting in July this year.  

As announced recently your Board is continuing its strategic review of the business, including an independent assessment of the Company's assets, as well as considering the acquisition of new complementary projects. The review is progressing well and a further announcement will be made as soon as it is appropriate.  

We remain positive about the continuing prospects for the Company over the coming year.

George Greville Roach, on behalf of the Chairman

30 September 2009

Directors' Report 

The Directors of Lithic Metals and Energy Limited ('Lithic' or the 'Company') herewith submit their report together with the audited annual financial statements of the Lithic Group ('Group'), being Lithic and its subsidiaries, as indicated in Note 9 of the financial statements, for the year ended 31 March 2009.

Principal activities

The Group's principal activity during the financial year was the exploration of Nickel, Zinc and Uranium resources in Zambia, Togo and Mozambique.

Review of Operations

On 28 April 2008 Lithic signed a joint venture agreement with Zambezi Resources Limited in the search for uranium resources at its Mpande, Mulungushi, Chumbwe and Rufunsa projects in Zambia. In terms of the joint venture ('JV'), Lithic is required to spend equity finance of US$5 million, over 2.5 years, to earn a 51% interest in Southern African Resources Limited and Oryx Resources Limited, whose Zambian subsidiaries hold rights to explore the uranium projects. Lithic can increase its JV interest to 75% by completing a Definitive Feasibility Study ('DFS') over the Chumbwe licence and by completing a DFS over any one of the other prospects. The JV agreement also has a provision for Lithic to increase its ownership to 100% by sole funding mine development, assuming that Zambezi Resources Limited elects not to contribute at any stage. Should Lithic acquire a 100% interest, Zambezi Resources Limited will hold a 2.5% Net Smelter Royalty right over all uranium produced.

On 22 July 2008 Lithic announced that it had successfully negotiated with BHP Billiton for 100% unencumbered ownership of the Mavita licences in Mozambique. The Mavita Project comprises two prospecting licences, 1045L and 1046L, located in the Manica province of central western Mozambique. Prior to this successful outcome, BHP Billiton held an option to claw back 100% of the project anytime after the threshold of 200,000 tons of contained nickel equivalent metal at JORC inferred level was defined.

On 28 October 2008 Zambezi Resources Limited sold its shareholding of 26,633,621 shares in the Company in volatile market conditions. In order to stabilise the Company's shareholding and its Zambian investments, 26 million of these shares were acquired at short notice by Lithic Directors and management. On 31 December 2008 the Company announced a restructuring of the transaction as a buyback of the shares acquired by the Directors and management following the lapse of the close period restrictions.

As a consequence of the global economic crisis and the lack of investor confidence in world markets, the Board implemented a restructuring program to ensure the long term sustainability of the Company. The restructuring program unfortunately resulted in staff terminations throughout the Group which whilst regrettable was necessary for the long term survival of the Company. The cost to the Group for the restructuring was £166,569. The Group is now in a position whereby it can continue its business for some 1.5 years on current cash balances. 

During the financial year Lithic earned interest income of £122,434 and realised a loss of £2,602,638, after an impairment charge of £1,982,193 to the Mitaba project. 

No dividends were declared or paid during the financial year.

For further details of all the Company's assets and corporate activity please see the Company's website at www.lithicme.com.

  

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2009

	Notes	Group			Company
		31 March 2009	31 March 2008		31 March 2009	31 March  2008
		£	£		£	£
Total income Total expenses	3 3	310,082 (2,912,720)	150,380 (987,075)		307,681 (1,759,640)	150,254 (952,228)
Operating deficit		(2,602,638)	(836,695)		(1,451,959)	(801,974)
Income tax	4	-	-		-	-
Deficit after tax for the year		(2,602,638)	(836,695)		(1,451,959)	(801,974)
Loss per share
- Basic and diluted deficit per share (pence)	5	(1.78)	(1.78)		(0.88)	(0.88)
Other comprehensive income:
Exchange differences on translation of foreign operations		798,969	(11,856)		-	-
Total other comprehensive income		798,969	(11,856)		-	-
TOTAL COMPREHENSIVE DEFICIT		(1,803,669)	(848,551)		(1,451,959)	(801,974)
Deficit attributable to owners		(1,803,669)	(848,551)		(1,451,959)	(801,974)

Consolidated Statement of Cash Flows

As at 31 March 2009

	Group			Company
	31 March 2009	31 March  2008		31 March  2009	31 March  2008
	£	£		£	£
Cash flows from operating activities Payments to suppliers and employees Interest received	(744,431) 122,434	(487,249) 150,380		(577,389) 122,430	(516,807) 150,254
Net cash utilised by operating activities	(621,997)	(336,869)		(454,958)	(366,553)
Cash flows from investing activities Payments for mineral exploration activities Purchase of Regent Resources Capital Corporation  less cash acquired  Payments for investments in other entities Purchase of property, plant and equipment Proceeds received from insurers and on the sale of assets	(1,126,237) - (1,317,281) (142,988) 4,706	(325,495) (114,318) (205,742) (131,149) -		(421,583) - (1,387,816) (35,660) 1,339	(59,702) (114,318) (135,225) (17,352) -
Net cash utilised by investing activities	(2,581,800)	(776,704)		(1,843,720)	(326,597)
Cash flows from financing activities Proceeds from the issue of share capital Payment for share buy-back: -equity holders of the parent -share issue costs Advances to subsidiaries	- (153,100) - -	6,000,000 - (226,524) -		- (153,100) (863,270)	6,000,000 - - (226,524) (474,066)
Net cash (utilised by)/generated from/financing activities	(153,100)	5,773,476		(1,016,370)	5,299,410
Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of the year	(3,356,897) 4,920,809	4,659,903 260,906		(3,315,048) 4,823,489	4,606,260 217,229
Cash and cash equivalents at end of the year	1,563,912	4,920,809		1,508,441	4,823,489

Consolidated Statement of Financial Position

As at 31 March 2009

 

Consolidated Statement of Changes in Equity 

For the year ended 31 March 2009

	Group £	Company £
Issued Capital
Opening balance as at 1 April 2007	353,741	353,741
Issued during the year	1,169,231	1,169,231
Closing balance as at 31 March 2008	1,522,972	1,522,972
Share buy-back during the year	(130,000)	(130,000)
Closing balance as at 31 March 2009	1,392,972	1,392,972
Share Premium Account
Opening balance as at 1 April 2007	2,234,033	2,234,033
Premium on shares issued during the year	5,830,769	5,830,769
Less capital raising costs	(226,524)	(226,524)
Closing balance as at 31 March 2008	7,838,278	7,838,278
Premium reduced by share buy-back during the year	(23,100)	(23,100)
Closing balance as at 31 March 2009	7,815,178	7,815,178
Options & Warrants Reserve
Opening balance as at 1 April 2007	72,003	72,003
Recognition of share-based payments during the year	108,818	108,818
Closing balance as at 31 March 2008	180,821	180,821
Recognition of share-based payments during the year	104,525	104,525
Closing balance as at 31 March 2009	285,346	285,346
Accumulated Deficit
Opening balance as at 1 April 2007	(522,634)	(469,562)
Deficit for the year	(836,695)	(801,974)
Closing balance as at 31 March 2008	(1,359,329)	(1,271,536)
Deficit for the year	(2,602,638)	(1,451,959)
Closing balance as at 31 March 2009	(3,961,967)	(2,723,494)
Translation Reserve
Opening balance as at 1 April 2007	(28,960)	-
Exchange differences arising on translation of foreign operations	(11,856)	-
Closing balance as at 31 March 2008	(40,816)	-
Exchange differences arising on translation of foreign operations	798,969	-
Closing balance as at 31 March 2009	758,153	-
Total of shareholders' equity at 31 March 2009	6,289,682	6,770,002

Notes to the Consolidated Financial Statements

For the year ended 31 March 2009

1.    Accounting policies

Lithic Metals and Energy Limited (hereafter 'Lithic' or the 'Company') is a company registered and domiciled in Bermuda whose principal activities comprise minerals exploration and development for the benefit of shareholders.

 The Company's registered office is:

Canon's Court

22 Victoria Street

Hamilton HM 12

Bermuda

The financial statements incorporate the principal accounting policies set out below. Accounting policies of the subsidiaries are consistent with those of the holding company.

1.1     Statement of compliance

The Group financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB.

1.2    Basis of preparation

The Group financial statements are prepared on the historical cost basis. Cost is based on the fair value of the consideration given in exchange for assets. All amounts are presented in British Pounds, unless otherwise noted.

The preparation of IFRS financial statements requires the use of certain critical accounting estimates and requires management to exercise a higher degree of judgement in the process of applying the Group's accounting policies. Significant estimates used in the preparation of these consolidated financial statements include, amongst other things, plant and equipment (see Note 6), the expected economic lives of and the future operating results and net cash flows expected to result from the utilization of resource properties (see Note 7) and the estimated values of options (see Note 17). Actual results may differ from those estimates. 

Going concern

The financial statements have been prepared on the basis that the consolidated entity is a going concern, which contemplates the continuity of normal business activity, realisation of assets and the settlement of liabilities in the normal course of business. If the consolidated entity chooses to maintain its current high level of expenditure on specific projects, it will have to raise additional capital. If the consolidated entity does not raise additional capital in the short term it can continue as a going concern by substantially reducing exploration expenditure until funding is available, without jeopardising its commitment base on those specific projects. The consolidated entity always has the opportunity to enter into joint venture arrangements to fulfil ongoing exploration expenditure or apply for expenditure exemptions. 

The Directors are of the opinion that the basis upon which the financial statements are prepared is appropriate in the circumstances. However, if an event were to arise where the consolidated entity could not raise additional equity capital or reduce its current rate of exploration expenditure by entering into joint ventures in order to remain as a going concern, there is no certainty as to whether the consolidated entity could realise assets at the amounts as shown in the financial statements and extinguish liabilities in the normal course of business.

1.3    Principles of consolidation

(a)  Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of Lithic and its subsidiaries (hereafter the 'Group' or 'Consolidated Entity') as at 31 March 2009, and the results for the year then ended. Subsidiaries are those entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than fifty percent of the voting rights so as to obtain benefits from its activities. The existing and effect of potential voting rights which are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Minority interests (when relevant) in the results are shown separately in the consolidated statement of comprehensive income and statement of financial position respectively.

The Group financial statements incorporate the assets, liabilities and results of operations of the Company and its subsidiaries acquired and disposed of during a financial period. These assets, liabilities and results are included from the effective dates of acquisition to the effective dates of disposal. Where necessary, the accounting policies of subsidiaries are changed to ensure the consistency with the polices adopted by the Group.

(b)  Joint ventures

Joint venture operations, if any, are accounted for using the equity method and are carried at cost by the parent entity. Under the equity method, the share of the profits and losses of the joint venture is recognised in the statement of comprehensive income. Profits or losses on transactions establishing the joint venture are eliminated to the extent of the Group's ownership interest until such time as they are realized by the joint venture partnership on consumption or sale, unless they relate to an unrealized loss that provides evidence of the impairment of an asset transferred.

1.4    Property, plant and equipment

Property, plant and equipment is stated at historic cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the asset. Cost may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency property, plant and equipment purchases.

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be reliably measured. All other repairs and maintenance costs are charged to the statement of comprehensive income during the financial period in which they are incurred.

Depreciation on plant and equipment is calculated on the straight line method to allocate their cost or re-valued amounts, net of their residual values, over their estimated useful lives. The depreciation rates used are:

• Plant and field equipment  - 3 years

• Field motor vehicles - 3 years

• Office equipment - 3 to 5 years

• Office furniture - 3 to 10 years

The assets' residual values and useful lives are reviewed annually and adjusted if appropriate.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. 

Gains and losses on disposals are included in the income statement and determined by comparing proceeds with the carrying amount.

1.5    Impairment of assets

Assets which have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount in which case the impairment loss is treated as a revaluation decrease. For the purpose of assessing impairment, assets are grouped at the lowest cash generating unit for which there are separately identifiable cash flows. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimate of future cash flows have not been adjusted.

1.6    Mineral exploration and evaluation expenditure

Exploration and evaluation costs incurred by the Group are accumulated separately for each area of interest. Such costs comprise net direct costs and an appropriate portion of related overhead costs, but does not include general overheads or administrative costs that do not have a specific association with a particular area of interest. Exploration and evaluation costs are carried forward to the extent that:

 

a) such costs are expected to be recouped through the successful development and utilization of the area of interest, or alternatively by its sale; or

b) exploration and evaluation activities in the area of interest have not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves.

In the event that an area of interest is abandoned or if the Directors consider the costs incurred exceed the area of interest's recoverable amount, accumulated costs carried forward are written off in the year in which that assessment is made.

Exploration and evaluation costs are not carried forward in respect of any area of interest unless the Group's right of tenure to the property is current. Depletion is not charged on areas of interest under development until commercial production commences, at which time it will be recorded using a units of production basis which will be based on the mineral mined at each area of interest relative to the estimated resource relating of that area of interest.

1.7    Financial instruments

Financial assets and liabilities are recognised on the Group's statement of financial position when the Group becomes a party to the contractual provisions of the instrument. Financial instruments include:

a) Trade and other receivables

Trade and other receivables are recognised initially at fair value and are subsequently measured at amortised cost, less provision for doubtful debts. Trade receivables are reviewed for collectibility on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the statement of comprehensive income. 

b) Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less which are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

c) Offset

Financial assets and financial liabilities are offset with the net amount reported in the balance sheet when the Group has a legally enforceable right to offset the recognised amounts, and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

d) Trade and other payables

Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial year and which remain unpaid. The amounts are recognised at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. The amounts are unsecured and are usually settled within the trade terms agreed with suppliers, ranging from 7 to 30 days from initial recognition.

e) Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

1.8    Revenue recognition

Interest revenue is recorded on a time proportion basis, based on the effective yield of the asset. The effective yield of the asset is the rate of interest required to discount the stream of future cash receipts, expected over the life of the financial asset, to equate to its net carrying amount.

1.9    Taxation

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantially enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax is accounted for using the balance sheet liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the statement of financial position. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. 

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from the initial recognition of goodwill.

Deferred tax liabilities are recognised as taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint ventures except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company intends to settle its tax assets and liabilities on a net basis.

Current and deferred tax is recognised as an expense or income in the statement of comprehensive income, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

1.10    Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, for which it is probable that an outflow of economic benefits will occur, and where a reliable estimate can be made of the obligation amount. 

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

1.11    Foreign currency

The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in British Pounds, which is both the functional currency of the company and presentation currency for the consolidated financial statements.

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

Translation differences on non-monetary items, such as equities held at fair value through the profit and loss, are reported as part of the fair value gain or loss. 

The results and financial position of the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: 

• Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet.;

• Income and expenses for each income statement are translated at average rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction date, in which case income and expenses are translated at the dates of the transactions); and

• All resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities and borrowings are taken to shareholders equity. When a foreign operation is sold or borrowings repaid, a proportionate share of such exchange differences are recognised in the income statement as part of the gain or loss on sale.

1.12    Employee benefits

The cost of short-term employee benefits are recognised in the period in which services are rendered and when such cost can be reliably measured. Liabilities for salaries and wages, including non-monetary benefits and annual leave expected to be settled within twelve months of the reporting date are recognised in current liabilities in respect of employees services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-cumulative sick leave are recognised when the leave is taken and measured at the rates paid or payable.

The Group does not have any, nor is it a party to, any long-term employee benefits such as defined benefit schemes.

1.13    Share-based employee remuneration

Share-based compensation relating to equity options are measured at the grant date, based on the Black Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting period, the share price at the grant date, the volatility of the underlying share price, the risk free rate and the expected dividends receivable over the option term. The fair value measured at the grant date is expensed over the option vesting period during which the option holders have become unconditionally entitled to the options, with the corresponding increase in equity classified as Options and Warrants reserve based on the Group's estimate of the number of equity instruments expected to vest. 

At each balance sheet date, the Group reviews its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with a corresponding adjustment to the options and warrants reserve.

1.14    Leasing

Lease payments are apportioned between finance charges and the reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged against income, unless they are directly attributable to qualifying assets, in which case they are capitalised. Contingent rentals are recognised as expenses in the periods in which they are incurred.

Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where another systematic basis is more representative of the time pattern in which the economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight line basis, except where another systematic basis is more representative of the time pattern the economic benefits from the leased asset are consumed.

1.15     Earnings per share and dilutive earnings per share

Basic earnings per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after tax effect of interest and other finance charges associated with diluted potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

1.16    Early adoption of accounting standards

The Company has elected to early adopt IFRS 8 'Operating Segments' and the amendment to IAS 1 'Presentation of Financial Statements'. These standards are not required to be applied until annual reporting periods beginning on or after 1 January 2009.

IFRS 8 'Operating Segments' is a disclosure standard which has resulted in a re-designation of the Group's reportable segments (see Note 2), but has no impact on the reportable results or financial position of the Group. The operating segments are identified on the basis of internal reports about components of the Group that are reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. The disclosure note for the prior period has also been amended to comply with the early adoption of IFRS 8 'Operating Segments'.

The amendment to IAS 1 'Presentation of Financial Statements' requires all entities to disclose a Statement of Comprehensive Income for annual reporting periods beginning on or after 1 January 2009. The Statement of Comprehensive Income includes the profit and loss and other comprehensive income. Other comprehensive income items are those items of income and expenses which are not recognised in profit and loss but reflect those that were previously reflected in the Statement of Changes in Equity for:

• Changes in revaluation surpluses;

• Gains or losses arising from translating the financial statements of foreign operations;

• Gains or losses on remeasuring available-for-sale financial assets; and

• The effective portion of gains and losses on hedging instruments in a cash flow hedge.

The early adoption of the amendment to IAS 1 'Presentation of Financial Statements' has no impact on the reportable results or financial position of the Group. The prior period disclosure has also been amended to comply with the early adoption of the amendment to IAS 1 'Presentation of Financial Statements'.

1.17    Standards in issue not yet effective

At the date of authorisation of the financial report there are certain standards and interpretations which were in issue but not yet effective. The Directors do not expect the application of these standards and interpretations to have a material impact on the amounts recognised in the financial report or the disclosures thereof.

2.    Segmental information

Lithic operates in three reporting geological areas and reports to management on a project by project basis. During the financial year Lithic operated in:

• Zambia - exploring for Nickel and Uranium.

• Togo - exploring for Uranium, Nickel, Zinc and Chromite. 

• Mozambique - exploring for Nickel

Lithic has early adopted IFRS 8 'Operating Segments' and the comparative disclosures have accordingly been amended to reflect IFRS 8 'Operating Segments' disclosure. 

On 13 December 2007 Lithic completed the acquisition of RRCC Limited and Regent Resources Capital Corporation SAU (hereafter 'RRCC') incorporated in the British Virgin Islands and Togo respectively. These wholly owned subsidiaries were acquired for £1,246,566 and settled by the issuing of 15,384,615 Lithic shares at 6.5 pence per share and cash of £246,566, of which £131,327 (US$262,182) was paid in three equal tranches every four months, with the final tranche paid on 12 December 2008. RRCC holds 19 prospective licences in aggregate over the Haito, Pagala, Niamtougou and Kara projects. The Togo government has a 10% free carry in these projects and has rights to acquire a further 10% at market value. 

As the projects are all in exploration phase no segmental revenue or segment results are disclosed. Lithic's policy is to capitalise all exploration expenditure where it has legal tenure to the exploration licences and such expenditures are expected to be recouped through the successful development and utilization of the area of interest, or alternatively by its sale or the exploration and evaluation activities at each area of interest have not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. All exploration expenditure is accumulated on an area of interest basis and reflected in the balance sheet under 'Mineral Properties'.

Each project is a reportable segment where it comprises at least 10% of the capitalised exploration costs. Where the aggregate of reportable segments are not within 75% of total exploration costs capitalised, additional segments are sought and disclosed so that all reportable segments comprise at least 75% of total capitalised exploration costs. No reportable segment has been merged or aggregated together to meet the 10% rule mentioned above.

			Capitalised exploration costs
	Country	Mineral/Metals	Acquisition costs	Exploration costs	Total
			£	£	£
Asset reconciliation - March 2009
- Haito	Togo	Nickel/Chromite	309,093	571,627	880,720
- Pagala	Togo	Zinc	309,093	215,445	524,538
- Niamtougou	Togo	Uranium	309,093	184,448	493,541
- Kara	Togo	Uranium	309,092	64,916	374,008
- Mavita	Mozambique	Nickel	-	659,202	659,202
Segmental exploration assets			1,236,372	1,695,638	2,932,009
Segmental property, plant and equipment
- Zambia					109,285
- Togo					150,114
- Mozambique					563
Other assets in Bermuda (see Note 8)					1,522,120
Unallocated assets					1,786,538
Total assets					6,500,629

During the year Lithic impaired the Mitaba project in Zambia, and capitalised exploration costs associated with this project amounting to £1,982,193 were expensed as an impairment cost.

			Capitalised exploration costs
	Country	Mineral/Metals	Acquisition costs	Exploration costs	Total
			£	£	£
Asset reconciliation - March 2008
- Mitaba	Zambia	Nickel	688,700	810,427	1,499,127
- Haito	Togo	Nickel/Chromite	309,093	75,352	384,445
- Pagala	Togo	Zinc	309,093	30,293	339,386
- Niamtougou	Togo	Uranium	309,093	19,330	328,423
- Kara	Togo	Uranium	309,092	8,577	317,669
- Mavita	Mozambique	Nickel	-	225,110	225,110
Segmental exploration assets			1,925,071	1,169,089	3,094,160
Segmental property, plant and equipment
- Zambia					19,451
- Togo					87,548
- Mozambique					668
Other assets in Bermuda (see Note 8)					205,816
Unallocated assets					5,037,430
Total assets					8,445,073

 

Liabilities Reconciliation	Total Liabilities	Total Liabilities
	2009	2008
	£	£
Zambia	14,562	73,041
Togo	34,681	14,652
Mozambique	2,111	2,997
Total segmental liabilities	51,354	90,690
Unallocated liabilities	159,593	212,457
Total liabilities	210,947	303,147

3. Reconciliation of deficit

The deficit for the year (before and after tax) was after charging expenses and receiving income as follows:

	Group				Company
	31 March  2009	31 March  2008				31 March  2009	31 March  2008
	£	£				£	£
Interest income	122,434	150,380				122,430	150,254
Management fees	183,947	-				183,947	-
Gain on disposal of property plant and equipment	73	-				1	-
Foreign exchange gains	3,628	-				1,303	-
Total income	310,082	150,380				307,681	150,254
Auditors' remuneration
- audit services	(35,725)	(18,313)				(17,599)	(12,758)
Business development expenditure	(4,050)	-				(4,050)	-
Depreciation	(17,053)	(3,434)				(17,053)	(3,434)
Directors' fees	(77,976)	(43,908)				(61,250)	(42,083)
Exploration expenditure written off	-	(352,753)				-	(335,410)
Exploration expenditure impaired	(1,982,193)	-				(902,442)	-
Foreign exchange losses	(120,675)	(16,016)				(91,580)	(9,800)
Interest expense	(5,767)	(4,035)				(5,675)	(4,005)
Other costs	(286,847)	(228,185)				(277,557)	(224,307)
Personnel costs - defined contribution plan	(25,278)	(1,967)				(25,278)	(1,967)
Personnel costs - salaries	(252,631)	(209,646)				(252,631)	(209,646)
Share-based payments	(104,525)	(108,818)				(104,525)	(108,818)
Total expenses	(2,912,720)	(987,075)				(1,759,640)	(952,228)
Deficit for the year	(2,602,638)	(836,695)				(1,451,959)	(801,974)

4. Taxes

The provision for income tax differs from the effective tax charge reflected in the statement of comprehensive income and can be reconciled as follows:

	Group			Company
	31 March  2009	31 March  2008		31 March  2009	31 March  2008
	£	£		£	£
Deficit disclosed in the Statement of Comprehensive Income	(2,602,638)	(836,695)		(1,451,959)	(801,974)
Tax thereon at the statutory rate	-	-		-	-
Rate difference in Zambia	(18,758)	(7,534)		-	-
Rate difference in Togo	-	-		-	-
Rate difference in Mozambique	-	(1,145)		-	-
Tax effect of expenses not deductible in determining taxable profit	-	113		-	-
Tax effect on deferred tax assets not brought into account	18,758	8,566		-	-
Effective tax charge	-	-		-	-

At year-end Lithic had estimated carried forward tax losses of £217,461 (2008: £101,358) in Zambia and £7,457(2008: £5,313) in Mozambique. Tax losses, in both Zambia and Mozambique, can be carried forward for 5 years and are reset to zero if not utilised within the 5 year period. The following losses reset to zero in years:

	Zambia	Mozambique
2014	£75,214	-
2013	£30,209	£5,020
2012	£105,954	£2,437
2011	£6,084	-

At year end Lithic had the following deferred tax assets not recognised which can be offset against future taxable income:

• Zambia - £219,134 (2008: £40,151)

• Mozambique - £33,145 (2008: £2,262)

5. Loss per share

The calculation of the loss and diluted loss per share is based on the deficit for the financial period of £2,602,638 (2008 -£836,695) and on a weighted average of ordinary shares of 145,832,716 (2008 - 95,550,665 ordinary shares). Options of 10,900,000 (2008 - 10,900,000 options) have not been taken into account for calculating the diluted loss per share as the impact of these instruments are non-dilutive.

6.    Property, plant and equipment

    a) Group assets

	Plant and equipment	Motor vehicles	Office furniture and equipment	Total
	£	£	£	£
Cost
As at 1 April 2007	28,386	-	1,344	29,730
Foreign exchange on opening balance	(327)	-	-	(327)
Additions	37,567	34,484	57,902	129,953
As at 31 March 2008	65,626	34,484	59,246	159,356
Foreign exchange on opening balance	22,927	13,910	18,765	55,602
Additions	38,783	85,504	114,785	239,072
Disposals	(2,848)	-	(10,235)	(13,083)
As at 31 March 2009	124,488	133,898	182,561	440,947
Accumulated depreciation
As at 1 April 2007 Foreign exchange on opening balance	(12,152) 145	- -	(68) -	(12,220) 145
Current depreciation	(15,799)	(2,414)	(4,186)	(22,399)
As at 31 March 2008	(27,806)	(2,414)	(4,254)	(34,474)
Foreign exchange on opening balance	(10,263)	(973)	(933)	(12,169)
Current depreciation	(20,796)	(33,675)	(53,694)	(108,165)
Disposals	1,776	-	6,528	8,304
As at 31 March 2009	(57,089)	(37,062)	(52,353)	(146,504)
Net book value at 31 March 2009	67,399	96,836	130,208	294,443
Net book value at 31 March 2008	37,820	32,070	54,992	124,882

The Company is required by IAS 16 'Property, plant & equipment' to estimate the useful lives and the expected residual values of property, plant and equipment it utilises for its business activities. This estimate is required so that depreciation can be calculated and allocated to the profit and loss account over the assets useful life. Significant judgement is exercised in determining the useful lives and residual values of these assets, especially when these assets are used in the field and exposed to the elements; which may increase the wear and tear of normal usage. Additionally, as the field assets are used in remote areas in foreign jurisdictions, a readily available market for the estimation of residual values for these assets may not be available. Consequently actual results may differ from those estimated. 

b) Company assets

	Plant and equipment	Office furniture and equipment	Total
	£	£	£
Cost
As at 1 April 2007	2,818	1,344	4,162
Additions	5,972	11,383	17,355
As at 31 March 2008	8,790	12,727	21,517
Additions	-	35,660	35,660
Disposals	(2,534)	-	(2,534)
As at 31 March 2009	6,256	48,387	54,643
Accumulated depreciation
As at 1 April 2007	(801)	(68)	(869)
Current period charge	(1,563)	(1,871)	(3,434)
As at 31 March 2008	(2,364)	(1,939)	(4,303)
Current period charge	(2,415)	(14,638)	(17,053)
Disposals	1,194	-	1,194
As at 31 March 2009	(3,585)	(16,577)	(20,162)
Net book value at 31 March 2009	2,671	31,810	34,481
Net book value at 31 March 2008	6,426	10,788	17,214

7.    Mineral interests

a) Reconciliation

	Group			Company
	31 March  2009	31 March  2008		31 March  2009	31 March  2008
	£	£		£	£
Opening balance	3,094,160	1,867,079		1,044,871	1,320,579
Exploration costs capitalised for the period	1,334,658	350,271		417,533	59,702
Purchase of exploration licences	-	1,236,371		-	-
Exploration projects impaired	(1,982,193)	(352,753)		(902,442)	(335,410)
Foreign exchange movements	485,384	(6,808)		-	-
As at 31 March 2009	2,932,009	3,094,160		559,962	1,044,871

The Group's policy is to capitalise exploration expenditure, for each area of interest, in terms of IFRS 6 'Exploration for and evaluation of mineral resources'. These costs are expensed to the statement of comprehensive income when it is expected that the area of interest will not generate future economic benefits or alternatively where the amount of expected future economic benefits to be generated is less than the area of interests carrying value, the difference is treated as an impairment and expensed to the statement of comprehensive income. Significant judgement is applied by the Company in determining whether an area of interest will generate future economic benefits or future economic benefits in excess of its carrying value. Such judgement is based upon various technical criteria which include, amongst others, the geology; air-borne and ground survey results; soil, rock chip and drill sample assay results and metallurgical test work results.  

b) Exploration expenditure per project

	Group			Company
	31 March  2009	31 March  2008		31 March  2009	31 March  2008
	£	£		£	£
Group exploration projects
Mavita	659,202	225,110		120,723	120,723
Haito	880,720	384,445		219,835	8,700
Pagala	524,538	339,386		64,494	1,978
Niamtougou	493,541	328,423		123,729	10,360
Kara	374,008	317,669		31,181	1,400
Mitaba	-	1,499,127		-	901,710
	2,932,009	3,094,160		559,962	1,044,871

8.    Other assets

	Group			Company
	31 March  2009	31 March  2008		31 March  2009	31 March  2008
	£	£		£	£
Business development projects	1,522,120	205,816		1,522,120	134,304

   

Lithic is farming into a uranium joint venture with Zambezi Resources Limited. The costs associated with this farm-in are capitalised to business development projects and forms part of acquisition costs once the farm-in is earned. In the event that Lithic decides not to proceed with the joint venture, all costs capitalised to the joint venture will be expensed. As Lithic has not yet reached the minimum expenditure commitments, it does not have a legal interest in the joint venture entities and therefore the investment is not yet equity accounted for under IAS 31 - Interests in Joint Ventures.

 

9. Investment in subsidiaries

At 31 March 2009, the Company had interests in the following subsidiaries:

Company	Country of Incorporation	Holding Company	Class of Share Capital Held	% Held	Nature of Business	Investment Cost
						£
MR Nickel (Bermuda) Limited	Bermuda	Lithic Metals and Energy Limited	Ordinary	100	Exploration	7,500
MR Nickel Limited	Zambia	MR Nickel (Bermuda) Limited	Ordinary	100	Exploration	12
Zambezi Niquel Mozambique Limitada	Mozambique	MR Nickel (Bermuda) Limited	Ordinary	100	Exploration	420
RRCC Limited (BVI)	British Virgin Islands	Lithic Metals and Energy Limited	Ordinary	100	Exploration	1,246,566
Regent Resources Capital Corporation SAU	Togo	RRCC Limited (BVI)	Ordinary	100	Exploration	10,195

10.     Inter-company loans

		Company
		31 March  2009	31 March  2008
		£	£
Loans to subsidiaries		2,010,880	1,147,610

Loans by the company to its subsidiaries are unsecured, at call and non-interest bearing. The Company has no immediate plan, nor is it considering recalling the loans in the foreseeable future. The recoverability of these funds is subject to the successful development and exploitation of mineral properties or alternatively, the sale of the tenements. Repayment of the funds will not be called by the Company until this has taken place. The net asset position of the Group is lower than that of the Company. This position is a result of fees being charged to the subsidiary in prior periods through the inter-company account which are expensed within the subsidiary. Management believe that it would be misleading to impair the inter-company receivable and believe that the recovery of these amounts will satisfactorily be made through the exploitation of the project in due course.

11.    Trade and other receivables

	Group			Company
	31 March  2009	31 March  2008		31 March  2009	31 March  2008
	£	£		£	£
Debtors	137,547	51,671		19,089	36,083
Other	450	1,054		-	1,584
Total trade and other receivables	137,997	52,725		19,089	37,667

12.     Prepayments

	Group			Company
	31 March  2009	31 March  2008		31 March  2009	31 March  2008
	£	£		£	£
Prepayments	50,148	46,681		20,555	26,087

Prepayments are general in nature and relate to items such as office rent, insurance and subscriptions.

13.    Cash and cash equivalents

	Group			Company
	31 March  2009	31 March  2008		31 March  2009	31 March  2008
	£	£		£	£
Cash on hand and at bank	207,810	239,909		152,339	142,589
Cash on term deposits	1,356,102	4,680,900		1,356,102	4,680,900
Total cash and cash equivalents	1,563,912	4,920,809		1,508,441	4,823,489

14.    Trade and other payables

	Group			Company
	31 March  2009	31 March  2008		31 March  2009	31 March  2008
	£	£		£	£
Creditors	86,098	271,345		50,677	195,139
Accruals	83,601	12,589		72,340	876
Total trade and other payables	169,699	283,934		123,017	196,015

Trade creditors are at normal terms and are payable within a range of 7 to 30 days. No interest is included in respect of overdue payments on the basis that this would not be material.

15.    Provisions

	Group			Company
	31 March  2009	31 March  2008		31 March  2009	31 March  2008
	£	£		£	£
Leave provisions	41,248	19,213		36,575	18,758

The leave provisions reflect the expected amounts to be paid in aggregate to employees for accrued annual leave at the balance sheet date as well as associated employee benefit costs including superannuation and workers compensation. The timing of the expected payments depends on the timing of employees utilising their leave benefits. A reconciliation reflecting the movement between the opening and closing balances is shown below:

Reconciliation of leave provisions

	Group		Company
	£		£
Opening balance	19,213		18,758
Additions for the year	22,035		17,817
Closing balance	41,248		36,575

16.    Issued capital

	Number of Shares	Issued Capital	Share Premium
	#	£	£
Issued and fully paid
As at 1 April 2007	35,374,120	353,741	2,234,033
May 2007 Issue placement	40,000,000	400,000	1,600,000
November 2007 Issue placement	61,538,462	615,385	3,384,615
Issued for Regent Resources Capital Corporation acquisition	15,384,615	153,846	846,154
Capital raising costs	-	-	(226,524)
Balance at 31 March 2008	152,297,197	1,522,972	7,838,278
December 2008 share buy-back	(26,000,000)	(260,000)	(23,100)
Balance as at 31 March 2009	126,297,197	1,262,972	7,815,178

a.   The Company has an authorised share capital of £3,020,000 comprising 300 million ordinary par value shares at £0.01 each and 
      2,000,000 preferred shares of £0.01 each.

b.   The ordinary shares are fully paid ordinary shares. Each share carries the right to voting and to receive dividends. 

c.    The preferred shares, none of which have been issued carry the right to vote and to receive an 8 per cent. preferential 
       dividend.

b.    The share premium account reflects the amounts received for the issuance of shares over and above the par value of the 
        shares.

17. Reserves

	Share Premium Account	Accumulated deficit	Foreign currency translation reserve	Options and Warrants reserve
	£	£	£	£
As at 1 April 2007	2,234,033	(522,634)	(28,960)	72,003
Movement for the year	5,604,245	(836,695)	(11,856)	108,818
As at 1 April 2008	7,838,278	(1,359,329)	(40,816)	180,821
Movement for the year	(23,100)	(2,602,638)	798,969	104,525
As at 31 March 2009	7,815,178	(3,961,967)	758,153	285,346

• The share premium account records the amounts paid by shareholders for shares in excess of their nominal value, less any costs incurred in issuing shares.

• The accumulated deficit represents the Group's operational losses since incorporation.

• The Foreign currency translation reserve represents the foreign exchange movements on the translation of all foreign controlled entities. 

• The Options and Warrants reserve represents the value of all share based payments made to Directors, staff and other vendors. The respective amounts are transferred out of the reserve and into the share capital and share premium accounts upon exercise of the options and warrants.

• All options issued to Directors are subject to shareholder approval, whilst options issued to key employees are issued in terms of the Company's staff option plan that was approved at the Annual General Meeting of the Company held on the 7 September 2007.

• There were 10,900,000 share options outstanding at the beginning of the year.

• 2,000,000 share options were issued during the year.

• No options were exercised during the year.

• 2,000,000 options lapsed during the year.

• The total of share options issued and outstanding at the end of the year was 10,900,000.

• The weighted average price of the share options outstanding at the end of the year was £0.12. 

    

In determining the value of the options, the company uses the Black Scholes model. This model requires an estimate of possible future dividend payments and the expected future share price volatility over the period the options are granted. As the criteria are based upon future events, significant judgement is required to estimate these parameters. In determining the parameters to be used, the Company assesses the possible payment of future dividends based upon expected cash flow results; it also determines the existing share price volatility of the Company and estimates whether the result is relevant for the period of the options granted. Where necessary the volatility is adjusted to take into account the impact of extraneous causes of volatility, changes expected due to changes in the Company's activities and perceived projects values. The volatility used may differ from actual outcomes.

The parameters used to value the options issued during the year were:

• Number of options granted - 2,000,000

• Average option period - 4 years

• Average price volatility - 67.32%

• Average exercise price - £0.155

• Average share price at option grant date - £0.05

• Risk free rate - 5%

• Average expected dividends - nil

    Based on the parameters used, the issued options had an aggregate fair value of £21,107.

18.    Financial instruments

Exposure to currency, credit, capital, interest rate risk and liquidity risk arise in the normal course of the Company's business. The Group may from time to time use financial instruments to help manage these risks. The Directors regularly review the Company's financial instruments profile risk and determine policies for managing these said risks.

Currency risk

The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates. Notwithstanding the possible risk of foreign currency fluctuations, the Group has at present decided not to hedge its exposure to exchange rate fluctuations.

The Group has overseas subsidiaries operating in Africa, whose expenses are denominated in US dollars, Australian Dollars, Zambian Kwacha and Mozambique Meticais. Foreign exchange differences on the translation of these assets and liabilities and inter-company loans are charged to the Foreign currency translation reserve account. A one percent fluctuation in each of the applicable exchange rates would result in an aggregate change of £4,536 (2008: £1,186) to the Foreign currency translation reserve account.

At the end of the year the Group had £31,031 of cash assets held in US dollars, £20,733 in Australian Dollars, £6,103 in Zambian Kwacha, £18,102 in Togolese CFA and £1 in Mozambique Metical, the remainder being held by the Company in British Pounds. For every one percent fluctuation in the foreign exchange rate, the respective aggregate adjustment to the foreign exchange gain/(loss) in the statement of comprehensive income would be £552 (2008: £763)

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual arrangements resulting in a financial loss to the Group. As the Group is currently in the exploration phase, credit risk exposure primarily relates to non receipt of VAT input credits, rental security deposits and interest income. The Company believes that these transactions are with reputable counterparties and as the amounts involved are insignificant the Group has opted to self-insure the risks. Credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by International credit-rating agencies.

The carrying value of financial assets recorded in the financial statements net of any allowances for losses, represents the Group's maximum exposure to credit risk.

Capital risk 

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern whilst maximising returns to shareholders.

The Group's overall strategy has remained unchanged since 2008 although a strategic review is currently being undertaken by the new board. Due to the high risk nature of exploration, the Group relies solely on shareholder finance. This reliance is unlikely to change in the near future unless the Group discovers and develops payable resources.

The Group operates globally, primarily through subsidiary companies established in the markets where the Group operates. None of the Group entities are subject to externally imposed capital requirements.

Capital risk is considered to be low as the majority of the Company's movable assets are held in cash within reputable financial institutions. Additionally all assets acquired are fully paid with title vesting in the Group.

The Company does not have sovereign risk insurance; however it has comprehensively insured its tangible assets with reputable underwriters.

Interest rate risk

As the Group does not have any debt bearing liabilities, it does not have any interest rate derivatives.

The Company has £207,810 in various current accounts and £1,356,102 cash invested in term deposit accounts, ranging between 7 to 30 days. Interest received on the term deposit accounts is at market rates, approximately 0.3% per annum. A one per cent variation in the interest rate would result in a respective increase or decrease of interest income amounting to £41 (2008: £2,340).

Liquidity risk

Liquidity risk refers to the risk that the Group will not have sufficient liquid funds to meet its forecasted obligations as and when they fall due. The Group's liquidity position is reviewed on a monthly basis and includes the monitoring of future expenses to ensure that sufficient funds are released from its term deposits to effect timeous payment of debts. The Group has sufficient funds to meet its forecasted obligations for at least the next 12 months.

Categories of financial instruments

	Group				Company
	2009		2008		2009			2008
	£		£		£			£
Financial assets
Cash and cash equivalents	1,563,912		4,920,809		1,508,441			4,823,489
Loans and receivables	137,997		52,725		2,029,969			1,185,277
Other assets	1,522,120		205,816		1,522,120			134,304
Total assets at fair value	3,224,029		5,179,350		5,060,530			6,143,070
Financial liabilities
Amortised cost	(169,699)		(283,934)		(123,017)			(196,015)
Net fair value of financial instruments	1,691,819		4,895,416		4,937,513			5,947,055

The fair value of financial instruments equates to the balance sheet carrying value as stated above.

19.    Commitments

a) Joint venture agreement

On 28 April 2008 the Group signed a joint venture agreement with Zambezi Resources Limited (hereafter 'ZRL') in which Lithic has the right to explore for Uranium on certain of ZRL's mining licences. In terms of the agreement Lithic is required to contribute in aggregate US$5 million, over a period of 2.5 years, for a 51% equity participation in both Oryx Resources Limited and Southern African Resources Limited. The joint venture will be managed by Lithic and the funds contributed to the equity participation will be used to fund joint venture exploration costs.

b) Operating leases

At the end of the financial year the Group had the following operating lease commitments which have not been capitalised in the financial statements:

	Group			Company
	2009	2008		2009	2008
	£	£		£	£
Payable within one year	76,146	-		69,812	-
Payable between one and five years	77,955	-		77,955	-
Total	154,101	-		147,767	-

The above operating leases refer to the lease of business premises and office equipment. The business premises are leased for a fixed term of three years and include an option to renew. The lease is subject to an increase price adjustments being the maximum of 5% or current rental prices at that time. Office equipment operating leases are on fixed pricing terms with the outstanding lease periods ranging between 3 and 4 years.

20.    Post-balance sheet events 

At a special General Meeting convened on 1 July 2009, David Rawlinson, Julian Ford, James Kerr and David Lunt were replaced as directors by David de Jong Weill, George Greville Roach and Ozge Erdem. The new board is currently undertaking a strategic review of the business and further updates will be provided in due course.

21.     Related party transactions

On 28 October 2008 Zambezi Resources Limited sold its shareholding of 26,633,621 shares in the Company in volatile market conditions. In order to stabilise the Company's shareholding and its Zambian investments, 26 million of these shares were acquired at short notice by Lithic Directors and management. On 31 December 2008 the Company announced a restructuring of the transaction as a buyback of the shares acquired by the Directors and management following the lapse of the close period restrictions.

Payments to Key Management Personnel

	Group			Company
	2009	2008		2009	2008
	£	£		£	£
Short-term benefits	439,881	220,617		405,270	174,393
Share-based payments	45,258	36,484		45,258	36,484
Termination benefits	52,813	-		21,650	-
Total payments to key management personnel	537,952	257,101		472,178	210,877

22.     Approval of Financial Statements

    The financial statements were approved by the board of directors and authorised for issue on 29 September 2009.

ENDFR IIFLTASIIVIA