Cluff Gold plc - Preliminary Results for the Year Ended December 31st, 2008



    
    /NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED
    STATES OR TO US PERSONS (AS DEFINED IN REGULATION S UNDER THE US
    SECURITIES ACT OF 1933, AS AMENDED)/
    

    LONDON, England, May 27 /CNW/ - Cluff Gold plc (AIM: CLF; TSX: CFG)
("Cluff" or the "Company"), announces the preliminary results for the year
ended December 31, 2008.

    
    Highlights

    For the year ended 31 December 2008 (the period under review) and the
period ended 26 May 2009

    Kalsaka, Burkina Faso (78% ownership)

        -  Completed development of gold mine in Q3, 08
        -  First gold poured in October 08
        -  Official mine opening in October 08
    -   During 2009:
        -  New mining contractor commenced work in January 09
        -  Gold plant commissioned in March 09

    Angovia, Cote d'Ivoire (90% ownership)
        -  Completed development of gold mine in Q1, 08
        -  First gold poured in March 08
    -   During 2009:
        -  Larger mining fleet deployed in January 09
        -  Upgrade to agglomeration drum completed in April 09
        -  Significant improvement in mining production in April 09

    Baomahun, Sierra Leone (100% ownership)
        -  Pre-Feasibility drilling continues with excellent results received
           in Q1, 08
        -  Seven fold increase in Measured and Indicated resource announced
           in June 08
        -  Acquisition of remaining 40% interest in Baomahun completed in
           August 08
        -  25 year Mining Lease issued from September 08
    -   During 2009:
        -  Pre-Feasibility drilling at depth and along strike commences in
           April 09

    Finance
        -  Successful placing raises gross proceeds of US$25.4 million in
           March 2008
        -  US$10 million Loan Facility arranged in September 08
        -  Cash of US$5.2 million at 31 December 08
    -   During 2009:
        -  Listing on the Toronto Stock Exchange ("CFG") in February 09
        -  Successful placing raises gross proceeds of US$11.4 million in
           March 09
    

    Comment

    Algy Cluff, Chairman and Chief Executive, said today "2008 has been a
pivotal year for the Company in that this was the year which saw us emerge
from an explorer to a producer. To bring two mines onto production in two
countries, neither of which has a strong mining support framework, was a
formidable task but with a good team, hard work and a little luck, we won
through. I am pleased to report that production this year has improved month
on month and I expect both operations to be out of commissioning by mid-year
with indications supporting combined production of 100,000 ounces of gold for
2009.
    I am also pleased to report that for the fourth year running our Group
resource position has increased and is now over 2 million ounces of Measured
and Indicated resources of gold with an additional Inferred resource of over
600,000 ounces of gold. Most of this increase came from Baomahun, our flagship
Gold Project located in Sierra Leone, where we acquired the remaining 40%
interest in August 2008.
    Financially, the Company raised just over US$25 million at the beginning
of 2008 in order to complete the construction of the two Gold Mines at Kalsaka
and Angovia and thought it prudent to arrange a Loan Facility of US$10 million
in September of last year to ensure adequate working capital throughout the
commissioning phase of both mines. This year, an amount of just over US$11
million was raised principally to accelerate the drilling programme at
Baomahun before the onset of rains. I am hopeful that results from this
drilling will provide support for an enlarged mining operation including both
open pit and underground workings.
    With a resilient gold price, forecast production from operations and good
results from our drilling programme, I am confident that we shall build upon
the efforts of 2008 and end this year in a strong position to take advantage
of opportunities within our area of West Africa."

    Results

    The consolidated net loss after taxation of the Group in respect of the
year ended 31 December 2008 amounted to US$945,005 (2007: loss of US$4.8
million); loss per share 1.08 cents (2007: 7.47 cents). The result for the
year includes a credit in respect of the acquisition of the remaining 40%
interest in the Baomahun Gold Project which has arisen as a consequence of the
fair value rules which underpin IFRS. Also, it should be noted that whilst
operations are in the commissioning phase, operating results are not reflected
on the income statement but are instead included within mining development
costs on the balance sheet.
    The assets of the Group at 31 December 2008 amounted to US$128.5 million
(2007: US$69.6 million) which include intangible assets amounting to
approximately US$43.1 million (2007: US$10.7 million) and tangible assets
amounting to approximately US$77.4 million (2007: US$41.4 million). Intangible
assets include accumulated deferred exploration and evaluation costs mainly on
the Baomahun Gold Project; the acquisition cost of the remaining interest in
Baomahun and the assigned value of the mining licences granted by the
governments of Burkina Faso and Cote d'Ivoire.
    Cash balances held by the Group at year end amounted to approximately
US$5.2 million (2007: US$13.9 million). In March 2008, the Company raised
approximately US$25.4 million before expenses through a private placement of
14,570,000 shares at 88 pence per share. These funds were used principally to
complete the construction of the Angovia and Kalsaka Gold Mines. In September
2008, in order to ensure adequate working capital through the commissioning
phase of both operations, the Company arranged a US$10 million Loan Facility
with RMB Australia Holdings Limited, of which US$6 million has been drawn
down.

    Post Balance Sheet Events

    In February 2009, the Company listed on the Toronto Stock Exchange and in
March 2009, the Company successfully raised gross proceeds of US$11.4 million
through the placement of 20,285,000 shares at 40 pence per share. These funds
will be used principally to accelerate the drilling programme designed to test
the down dip and along strike extensions at the Baomahun Gold Project in
Sierra Leone and to increase production at the Kalsaka Gold Mine by further
investment in the on-site plant and equipment and through additional ore
reserve drilling.

    Dividend policy

    The Directors do not recommend the payment of a dividend.

    Annual Report

    The Annual Report and Accounts will be available on our website
www.cluffgold.com and will be posted to shareholders on 3 June, 2009.

    Annual General Meeting (AGM)

    The AGM will be held on 26 June 2009 at 10am at the offices of Maclay
Murray & Spens LLP, One London Wall, London, EC2Y 5AB.

    Competent Person

    Douglas D. Chikohora has reviewed and approved the information contained
in this announcement. Mr Chikohora (MSc, MIMMM, CEng) is Technical Director of
the Company. Further information regarding Group resources may be found in
tabular form on the Company's website and in the Annual Report.

    This News Release includes certain "forward-looking information" within
the meaning of applicable Canadian securities legislation. All statements
other than statements of historical fact, included in this release, including,
without limitation, the positioning of the Company for future success,
statements regarding potential future production at Angovia and Kalsaka,
exploration and drilling results at Baomahun, and future capital plans and
objectives of Cluff Gold, are forward-looking information that involve various
risks and uncertainties. There can be no assurance that such statements will
prove to be accurate and actual results and future events could differ
materially from those anticipated in such statements. Important factors that
could cause actual results to differ materially from Cluff Gold's expectations
include, among others, risks related to international operations, the actual
results of current exploration and drilling activities, changes in project
parameters as plans continue to be refined as well as future price of gold.
Although Cluff Gold has attempted to identify important factors that could
cause actual results to differ materially, there may be other factors that
cause results not to be as anticipated, estimated or intended. There can be no
assurance that such statements will prove to be accurate as actual results and
future events could differ materially from those anticipated in such
statements. Accordingly, readers should not place undue reliance on
forward-looking statements. Cluff Gold does not undertake to update any
forward-looking statements that are included herein, except in accordance with
applicable securities laws.

    
    NO REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE CONTENT OF THIS
    PRESS RELEASE.


    Chairman and Chief Executive's Statement

    Dear Shareholder,
    

    2008 has been a pivotal year in the development of your Company. It was
the year which saw us emerge from "explorer" to "producer". Two mines were
brought into production and our flagship exploration project continued to
improve. I will not deny that, at times, operational challenges have been
tough, but with a good team, hard work and a little luck we have ended the
year in much better shape than when we began. I believe that 2009 will see the
fruition of our past efforts, with production from both the Kalsaka and
Angovia Gold Mines improving on a monthly basis. I am also pleased to report
that drilling has restarted at Baomahun where the resource will be tested at
depth and along strike, the results of which could expand that resource
significantly.

    Operations

    Angovia Gold Mine poured its first gold in March 2008. The development
timetable for this mine had experienced some delays from inclement weather and
late delivery of equipment and continued to face challenges throughout 2008
with poor performance from the reconditioned plant and equipment and low
production rates from the mining contractor due to poor levels of equipment
availability. In order to overcome these problems, certain plant and equipment
were replaced or upgraded and the mining contractor increased the size of the
mining fleet in January 2009. The results so far this year have been
encouraging, with mining performance currently close to budget. However, as
with most heap leach projects, it takes time for this increase in mining
performance to translate into gold production. That said, I am confident that
the tide has turned at Angovia and that the mine will be fully commissioned by
mid year.
    Kalsaka Gold Mine poured its first gold in October 2008 and although this
was later than expected, the ramp up of production has been as scheduled. Gold
production in the first quarter of 2009 was 12,890 ounces and the gold plant
has now been successfully commissioned. The mining contractor was replaced at
the year end and a newer, larger mining fleet has now been deployed. All in
all, I am pleased to report that operations are on track to achieve our
forecast gold production of 60,000 ounces for 2009.
    To bring two gold mines into production in the same year in two
countries, neither of which has a strong mining support framework, has been a
formidable task and I applaud our personnel in Cote d'Ivoire, Burkina Faso and
London for achieving this feat.

    Exploration

    During the year, results from our exploration work have significantly
increased the potential of the Baomahun Gold Project. Our Measured and
Indicated resources categories for Baomahun increased sevenfold during this
period to over 1.0 million ounces of gold and results from deeper drilled
holes indicate the possibility of the original open pit resource being
supplemented by an underground deposit. Work has started to test this
potential with a 15,000 metre drilling programme already underway.
    Exploration elsewhere during 2008 was put on hold as the Group focused
its attention and funds on bringing the two new gold mines into production.

    Acquisition

    In February 2008, your Company successfully negotiated the acquisition of
the remaining 40% of the Baomahun Gold Project for the sum of US$21.8 million,
which was to be satisfied by the issue of 12.4 million shares in your Company,
subject to the completion of various conditions precedent. In August of 2008,
the last remaining condition, being the Government approval of the Mining
Lease, had been achieved and the shares were duly issued. However, during the
period from February to August 2008, the share price of your Company had
fallen in line with world markets thus creating an unrealisable gain of US$9
million which has been credited to this year's income statement.
    I am very pleased that we acquired 100% ownership of the Baomahun Gold
Project as I believe this project has major potential.

    Financing

    In March 2008, your Company successfully completed a placing of
14,570,000 ordinary shares at a price of 88 pence per share and raised
approximately US$25.4 million before expenses. The funds were raised with the
support of BMO Capital Markets, W H Ireland Limited and Smith's Corporate
Advisory Limited. The funds raised were used to complete the construction and
development of both the Angovia and Kalsaka Gold Mines and to complete the
exploration drilling at the Baomahun Gold Project.
    In September 2008, a US$10 million Loan Facility was arranged with RMB
Australia Holdings Limited to ensure adequate working capital during the
commissioning phase of both gold mines. Currently, US$6 million has been drawn
down from this facility.
    A further fundraising was completed in March 2009 which is described
below in "Post balance Sheet Events".

    Market

    Gold remains an enigma - notwithstanding its relatively robust
performance it continues to disappoint its more evangelical supporters by
failing to erupt though the US$1,000 per ounce barrier. This may not
altogether be a bad thing as I fear that if it does stage a sustained rally
the law of diminishing returns could apply with Governments introducing excess
profit taxes and workers demanding higher wages. It must also be recognised
that, although the intellectual case for holding and investing in gold is very
compelling in this uncertain economic environment, gold has its enemies -
notably the civil servants and politicians. A high gold price suggests they
are failing to do their job properly and through Central Banks, they have the
power to hold back the price. At some point, of course, even they could be
overwhelmed by the inflation which they seem to deliberately foster. In the
meanwhile if gold moves in a band between US$850 and US$1,000 per ounce our
gold mines should provide highly satisfactory returns.

    Post balance sheet events

    In February 2009, the Toronto Stock Exchange granted approval for the
listing of your Company's shares on that Exchange under the symbol "CFG". Our
shares will continue to be quoted and traded on AIM but I hope that this
secondary listing will enhance investor choice, improve liquidity for
shareholders and provide greater access for investors in our stock.
    In March 2009, your Company successfully completed a placing of
20,285,000 ordinary shares at a price of 40 pence per share and raised
approximately US$11.4 million before expenses. The funds were raised with the
support of BMO Capital Markets, Thomas Weisel Partners and Smith's Corporate
Advisory Limited, all of whom I would like to thank especially as raising
money in this current economic climate is not without its challenges. The
funds raised have enabled your Company to commence further exploration
drilling at the Baomahun Gold Project prior to the onset of rains in Sierra
Leone and will also allow for additional drilling at and around the Kalsaka
Gold Mine in order to increase the mineral resource thereby supporting
increased throughput at that gold mine.

    Board

    I would like to welcome Ronald Winston and Geoffrey Stanley to our Board
of Directors, both of whom joined at the beginning of October. Ronald, best
known as Chairman of Harry Winston Inc., brings with him a wealth of
experience of doing business in Africa while Geoffrey has many years'
experience worldwide not only on the technical side but also on the corporate
side of mining. Both directors are based in North America and will be most
helpful in supporting our Toronto listing. I am very pleased that your Company
continues to attract such high calibre members to the Board.

    Conclusion

    It is the judgement of some that we operate in a politically volatile
part of the world. This argument could be construed as a criticism of
virtually anywhere in the developing world at the moment. However, in West
Africa we are involved in countries which we believe boast excellent geology
and which is complemented by sensible mining investment codes. In addition,
the law to which they adhere is based on the English and French systems. We
have, in the countries in which we operate, established sensible and practical
partnerships with the governments with whom we work and, whilst there is no
denying the complexity of operating mines in Africa, I am confident that we
have the capacity to do so. I would like to thank our country teams for their
hard work and dedication; my fellow board members for their support; and you
the shareholder for staying with us during one of the most tumultuous times in
living memory.

    
    J.G.Cluff
    Chairman and Chief Executive
    26 May, 2009



    Cluff Gold plc and subsidiary undertakings
    CONSOLIDATED INCOME STATEMENT
    For the year ended 31 December 2008
    -------------------------------------------------------------------------

                                                          2008          2007
                                                           US$           US$
    OPERATING COSTS
    General and administrative                      (8,422,750)   (5,629,533)
    Exploration costs written off                     (781,256)            -
    Negative goodwill arising on acquisition of
     subsidiary                                      8,956,273             -
                                                  ------------- -------------
    OPERATING LOSS                                    (247,733)   (5,629,533)
    Interest payable and similar charges            (1,099,839)     (742,933)
    Interest receivable and similar income             402,567     1,591,507
                                                  ------------- -------------
    LOSS BEFORE TAXATION                              (945,005)   (4,780,959)
    Taxation                                                 -             -
                                                  ------------- -------------
    LOSS AFTER TAXATION                               (945,005)   (4,780,959)
                                                  ------------- -------------
    LOSS PER SHARE (CENTS)
    - Basic and diluted                                  (1.08)        (7.47)
                                                  ------------- -------------
                                                  ------------- -------------




    Cluff Gold plc and subsidiary undertakings
    CONSOLIDATED BALANCE SHEET
    As at 31 December 2008
    -------------------------------------------------------------------------

                                                          2008          2007
                                                           US$           US$
    ASSETS
    NON-CURRENT ASSETS
    Intangible assets
    - Exploration costs and exploration
      and mining rights                             43,071,310    10,693,223
    Property, plant and equipment
    - Mine development costs                        77,372,771    41,395,030
    - Other                                            879,254     1,275,479

                                                  ------------- -------------
    TOTAL NON-CURRENT ASSETS                       121,323,335    53,363,732

                                                  ------------- -------------
    CURRENT ASSETS
    Trade and other receivables                      1,956,427     2,174,099
    Inventories of mined ore and consumables                 -       103,575
    Cash at bank                                     5,171,404    13,921,966

                                                  ------------- -------------
    TOTAL CURRENT ASSETS                             7,127,831    16,199,640
                                                  ------------- -------------

    TOTAL ASSETS                                   128,451,166    69,563,372

                                                  ------------- -------------
                                                  ------------- -------------

    CAPITAL AND RESERVES
    Share capital                                    1,840,697     1,288,558
    Share premium                                   89,407,388    64,990,510
    Share option reserve                             3,151,989     1,611,500
    Merger reserve                                  15,107,298     2,500,366
    Accumulated losses                              (5,375,963)  (12,845,955)
    Currency translation reserve                       699,715     6,715,029

                                                  ------------- -------------
    TOTAL EQUITY                                   104,831,124    64,260,008

                                                  ------------- -------------
                                                  ------------- -------------

    NON-CURRENT LIABILITIES
    Provisions for other liabilities and charges     4,102,653     1,250,620

                                                  ------------- -------------
    TOTAL NON-CURRENT LIABILITIES                    4,102,653     1,250,620

                                                  ------------- -------------
    CURRENT LIABILITIES
    Trade and other payables                        19,517,389     4,052,744

                                                  ------------- -------------
    TOTAL CURRENT LIABILITIES                       19,517,389     4,052,744

                                                  ------------- -------------

    TOTAL LIABILITIES                               23,620,042     5,303,364

                                                  ------------- -------------
    TOTAL EQUITY AND LIABILITIES                   128,451,166    69,563,372

                                                  ------------- -------------
                                                  ------------- -------------



    Cluff Gold plc and subsidiary undertakings
    CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
    For the year ended 31 December 2008
    -------------------------------------------------------------------------

                             Share         Share  Share option        Merger
                           capital       premium       reserve       reserve
                               US$           US$           US$           US$
    BALANCE AT
     1 JANUARY 2008      1,288,558    64,990,510     1,611,500     2,500,366
    Loss for the period          -             -             -             -
    Profit on partial
     disposal of
     subsidiaries                -             -             -             -
    Exchange
     translation
     differences on
     consolidation               -             -             -             -
                      ------------- ------------- ------------- -------------
    Total recognised
     income and
     expenses                    -             -             -             -
                      ------------- ------------- ------------- -------------
    Issue of ordinary
     share capital         552,139    26,295,077             -    12,606,932
    Issue costs                       (1,878,199)            -             -

    Share option charge          -             -     1,540,489             -

                      ------------- ------------- ------------- -------------
    BALANCE AT
     31 DECEMBER 2008    1,840,697    89,407,388     3,151,989    15,107,298

                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------
    BALANCE AT
     1 JANUARY 2007        844,104    37,282,361     1,326,884     2,500,366
    Loss for the period          -             -             -             -
    Exchange translation
     differences on
     consolidation               -             -             -             -
                      ------------- ------------- ------------- -------------
    Total recognised
     income and
     expenses                    -             -             -             -
                      ------------- ------------- ------------- -------------
    Issue of ordinary
     share capital         444,454    29,735,227             -             -
    Issue costs                  -    (2,027,078)            -             -
    Share option charge          -             -       284,616             -
                      ------------- ------------- ------------- -------------
    BALANCE AT
     31 DECEMBER 2007    1,288,558    64,990,510     1,611,500     2,500,366

                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------


                          Currency
                       translation   Accumulated         Total
                           reserve        losses        equity
                               US$           US$           US$
    BALANCE AT
     1 JANUARY 2008      6,715,029   (12,845,955)   64,260,008
    Loss for the period          -      (945,005)     (945,005)
    Profit on partial
     disposal of
     subsidiaries                -     8,414,997     8,414,997
    Exchange translation
     differences on
     consolidation      (6,015,314)            -    (6,015,314)

                      ------------- ------------- -------------
    Total recognised
     income and
     expenses           (6,015,314)    7,469,992     1,454,678

                      ------------- ------------- -------------
    Issue of ordinary
     share capital               -             -    39,454,148
    Issue costs                  -             -    (1,878,199)

    Share option charge          -             -     1,540,489

                      ------------- ------------- -------------
    BALANCE AT
     31 DECEMBER 2008      699,715    (5,375,963)  104,831,124

                      ------------- ------------- -------------
                      ------------- ------------- -------------

    BALANCE AT
     1 JANUARY 2007      2,568,705    (8,064,996)   36,457,424
    Loss for the
     period                      -    (4,780,959)   (4,780,959)
    Exchange
     translation
     differences on
     consolidation       4,146,324             -     4,146,324

                      ------------- ------------- -------------
    Total recognised
     income and
     expenses            4,146,324    (4,780,959)     (634,635)

                      ------------- ------------- -------------
    Issue of ordinary
     share capital               -             -    30,179,681
    Issue costs                  -             -    (2,027,078)
    Share option charge          -             -       284,616

                      ------------- ------------- -------------
    BALANCE AT
     31 DECEMBER 2007    6,715,029   (12,845,955)   64,260,008

                      ------------- ------------- -------------
                      ------------- ------------- -------------



    Cluff Gold plc and subsidiary undertakings
    CONSOLIDATED CASH FLOW STATEMENT
    For the year ended 31 December 2008
    -------------------------------------------------------------------------

                                                          2008          2007
                                                           US$           US$
    CASH FLOWS USED IN OPERATING ACTIVITIES
    Operating loss for the period                     (247,733)   (5,629,533)
    Depreciation                                        79,056        58,191
    (Decrease)/increase in
     trade and other payables                          (39,706)    4,354,850
    Decrease/(increase) in
     trade and other receivables                       217,672      (463,524)
    Increase in stock and work in progress                   -      (103,575)
    Share option charge                                766,494       284,616
    Exploration costs written off                      781,256             -
    Negative goodwill on acquisition                (8,956,273)            -
    Exchange loss                                      718,079             -
                                                  ------------- -------------

    NET CASH FLOWS USED IN OPERATING ACTIVITIES     (6,681,155)   (1,498,975)

                                                  ------------- -------------
    CASH FLOWS USED IN INVESTING ACTIVITIES
    Interest receivable                                397,409     1,499,725
    Interest payable                                   (73,232)         (662)
    Purchase of property, plant and equipment      (25,703,554)  (22,537,283)
    Purchase of intangible assets                   (6,658,766)  (10,801,495)

                                                  ------------- -------------
    NET CASH FLOWS USED IN INVESTING ACTIVITIES    (32,038,143)  (31,839,715)

                                                  ------------- -------------
    CASH FLOWS FROM FINANCING ACTIVITIES
    Proceeds from the issue of share capital        26,602,422    30,179,681
    Issue costs paid                                (1,878,199)   (2,027,078)
    Net proceeds from, loan                          5,929,042             -
    Amounts funded on behalf of joint venture party          -    (1,170,000)

                                                  ------------- -------------
    NET CASH FLOWS FROM FINANCING ACTIVITIES        30,653,265    26,982,603

                                                  ------------- -------------

    NET DECREASE IN CASH AND CASH EQUIVALENTS       (8,066,033)   (6,356,087)
    Cash and cash equivalents at start of period    13,921,966    21,180,012
    Exchange losses on cash and cash equivalents    (1,440,222)     (901,959)

                                                  ------------- -------------
    CASH AND CASH EQUIVALENTS AT END OF PERIOD       4,415,711    13,921,966

                                                  ------------- -------------
                                                  ------------- -------------

    CASH AND CASH EQUIVALENT COMPRISE
    Cash at bank                                     3,151,512       622,504
    Short term deposits                              2,019,892    13,299,462
                                                  ------------- -------------
                                                     5,171,404    13,921,966
    Bank overdraft                                    (755,693)            -
                                                  ------------- -------------
    Cash and cash equivalents                        4,415,711    13,921,966
                                                  ------------- -------------
                                                  ------------- -------------
    

    The financial information set out in this preliminary statement does not
constitute the group's statutory financial statements for the year ended 31
December 2008, but is derived from those financial statements. The financial
statements for 2008 have not been delivered to the Registrar of Companies and
will be distributed to shareholders prior to the Company's Annual General
Meeting. The auditors have reported on these financial statements and have
issued an unqualified report which does not contain statements under the UK
Companies Act 1985, s237 (2) or (3). An emphasis of matter paragraph is
included in their audit report regarding the carrying value of the Angovia
Gold Mine. The financial statements for 2007 have been delivered to the
Registrar of Companies.

    
    1.  Summary of significant accounting policies

    a)  Basis of Preparation
    
    The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts in the financial statements.
    The financial information is presented in US Dollars. The functional
currency of the parent Company is currently Sterling. Operations denominated
in other currencies are included in this financial information in accordance
with the policies set out below. The group has chosen to present its financial
statements in US dollars as it is the currency most relevant to our investors.

    
    b)  Nature of business and going concern
    
    The Company is a public company incorporated and domiciled in England.
The address of the registered office is 24 Queen Anne's Gate, London, SW1H 9AA
    The Group is involved in the acquisition, exploration and development and
operation of gold deposits in West Africa.
    The Group has raised equity funds in discrete tranches in order to fund
both its exploration and development activities. The Company raised gross
proceeds of approximately US$25.4 million in March 2008 by way of a placement
in order to fund the completion of construction of the Angovia and Kalsaka
Gold Mines and to fund the requirements for working capital during the
commissioning phase of both operations. Due to the delay in start up of both
mines, the Company arranged a US$10 million facility with RMB Australia
Holdings Limited in September 2008 in order to ensure adequate working capital
cover. At the date of this report, US$6 million of this facility had been
drawn down. In March 2009, the Company raised gross proceeds of US$11.4
million in order to accelerate definition drilling on the Baomahun Gold
Project; to increase the resource at Kalsaka by additional drilling and to
upgrade the plant at the Kalsaka Gold Mine in order to increase throughput.
The cash balance at the end of April stood at US$11.6 million.
    As stated elsewhere in this report, the Kalsaka Gold Mine is performing
to expectations and mining performance at the Angovia Gold Mine has
significantly improved since the beginning of 2009. The gold price remains
strong and indications are that this will continue.
    Given these financial resources, the current and anticipated performance
of the Group's operations and the strong gold price, the Directors consider it
appropriate to prepare these financial statements on the going concern basis.
The use of that basis assumes that the Company meets its commitments as they
fall due.

    
    c)  Mining and development costs
    
    Exploration costs are capitalised as intangible fixed assets until a
decision is made to proceed to development. Related costs are then transferred
to mining assets. Before reclassification, exploration costs are assessed for
impairment and any impairment loss is recognised in the income statement.
Subsequent development costs are capitalised under mining assets, together
with any amounts transferred from intangible exploration assets. During the
commissioning of each project, all costs directly related to that operation
are capitalised. Any revenues generated during this period are treated as a
contribution against those costs and credited against mining and development
costs. At the end of the commissioning phase, when the mine is capable of
substantially operating in the manner intended by management, capitalisation
ceases and the mining assets are amortised over the estimated life of the
commercial ore reserves on a unit of production basis.

    
    d)  Intangible fixed assets - deferred exploration and evaluation costs
    
    All costs incurred prior to obtaining the legal right to undertake
exploration and evaluation activities on a project are written off as
incurred.
    All costs associated with mineral exploration and investments are
capitalised on a project by project basis, pending determination of the
feasibility of the project. Costs incurred include appropriate technical and
administrative expenses. If an exploration project is successful, the related
costs will be transferred to mining assets and amortised over the estimated
life of the commercial ore reserves on a unit of production basis. Where a
project is relinquished, abandoned, or is considered to be of no further
commercial value to the group, the related costs are written off.
    The recoverability of deferred exploration costs is dependent upon the
discovery of economically recoverable ore reserves, the ability of the group
to obtain necessary financing to complete the development of the ore reserves
and future profitable production or proceeds from the disposal thereof.

    
    2.  LOSS PER SHARE                                    2008          2007

        The calculation of the basic and diluted
         earnings per share is based on
         the following data:                               US$           US$

        Losses for the purposes of earnings per
         share (net loss for the year attributable
         to equity holders of the parent)             (945,005)   (4,780,959)

        Number of shares
        Weighted average number of ordinary shares
         for the purposes of earnings per share     87,230,853    64,037,103

                                                  ------------- -------------
                                                  ------------- -------------
    

    There is no difference between the diluted loss per share and the basic
loss per share presented. Due to the loss incurred in the period the effect of
the share options in issue is anti-dilutive.
    At 31 December 2008 there were 9,710,100 (31 December 2007: 4,454,793)
share options in issue which would have a potentially dilutive effect on the
basic earnings per share in the future.

    
    3.  PROPERTY, PLANT AND EQUIPMENT

                                                       Motor
                                      Mining,       vehicles,
                                 development          office
                              and associated       equipment,
                         property, plant and      fixtures &
                              equipment cost       computers           Total
                                         US$             US$             US$
    COST

    At 1 January 2007             10,032,390         514,548      10,546,938
    Additions                     21,684,923       1,134,425      22,819,348
    Transfer from
     intangible assets             5,870,435               -       5,870,435
    Exchange difference
     on retranslation              3,807,282         149,680       3,956,962

                                -------------   -------------   -------------
    At 31 December 2007           41,395,030       1,798,653      43,193,683

                                -------------   -------------   -------------

    At 1 January 2008             41,395,030       1,798,653      43,193,683
    Additions                     37,743,658         509,116      38,252,774
    Transfer from
     intangible assets               446,329               -         446,329
    Exchange difference
     on retranslation             (2,212,246)       (245,286)     (2,457,532)

                                -------------   -------------   -------------
    At 31 December 2008           77,372,771       2,062,483      79,435,254

                                -------------   -------------   -------------
    DEPRECIATION
    At 1 January 2007                      -         164,164         164,164
    Charge for the year                    -         340,256         340,256
    Exchange difference
     on retranslation                      -          18,754          18,754

                                -------------   -------------   -------------
    At 31 December 2007                    -         523,174         523,174

                                -------------   -------------   -------------

    At 1 January 2008                      -         523,174         523,174
    Charge for the year                    -         821,892         821,892
    Exchange difference
     on retranslation                      -        (161,837)       (161,837)

                                -------------   -------------   -------------
    At 31 December 2008                    -       1,183,229       1,183,229

                                -------------   -------------   -------------
    NET BOOK VALUE
    At 31 December 2008           77,372,771         879,254      78,252,025

                                -------------   -------------   -------------
                                -------------   -------------   -------------

    At 31 December 2007           41,395,030       1,275,479      42,670,509

                                -------------   -------------   -------------
                                -------------   -------------   -------------
    

    In accordance with industry practice all costs and revenues incurred
during the commissioning phase of operations are capitalised.

    Carrying value of the Angovia Gold Mine

    Included within the mine development and associated costs are amounts of
US$35.4 million in respect of the Angovia Gold Mine. Due to the
underperformance of the Angovia Gold Mine in 2008, a detailed impairment
review of the operation was undertaken which considered not only 2008
performance but also the actions taken by management to rectify the various
operational shortfalls and preparation of an updated detailed economic model.
This model does not indicate any impairment. Since the beginning of 2009, a
larger mining fleet, deployed to site by the mining contractor, has led to an
increase in equipment availability and hence an increase in operational
performance. The replacement of second hand plant equipment with newer, better
designed plant equipment has increased the plant capacity and performance.
With these actions the mine performance is now moving towards budget and the
Angovia Gold Mine is expected to exit commissioning by mid year. Because of
this an impairment charge is not considered appropriate at this time. However,
should the increase in performance not continue or should the production of
gold not increase, then this decision will be revisited and an impairment
provision may be required.

    
    4.  INTANGIBLE ASSETS

                                                    Deferred
                                                 exploration
                                                         and
                             Exploration and      evaluation
                               Mining Rights           costs           Total
                                         US$             US$             US$
    COST
    At 1 January 2007                      -       5,302,577       5,302,577
    Additions                              -      10,801,495      10,801,495
    Transfer to property,
     plant and equipment                   -      (5,870,435)     (5,870,435)
    Exchange difference
     on retranslation                      -         459,586         459,586

                                -------------   -------------   -------------
    At 31 December 2007                    -      10,693,223      10,693,223

                                -------------   -------------   -------------
    At 1 January 2008                             10,693,223      10,693,223
    Additions                     30,222,997       7,401,459      37,624,456
    Transfer to property,
     plant and equipment                   -        (446,329)       (446,329)
    Exploration costs
     written off                           -        (781,256)       (781,256)
    Exchange difference
     on retranslation                      -      (4,018,784)     (4,018,784)

                                -------------   -------------   -------------
    At 31 December 2008           30,222,997      12,848,313      43,071,310

                                -------------   -------------   -------------

    AMORTISATION
    At 1 January 2007                      -               -               -
    Charge for the year                    -               -               -
                                -------------   -------------   -------------

    At 31 December 2007                    -               -               -

                                -------------   -------------   -------------
    At 1 January 2008                      -               -               -
    Charge for the year                    -               -               -

                                -------------   -------------   -------------

    At 31 December 2008                    -               -               -
                                -------------   -------------   -------------

    CARRYING AMOUNT
    At 31 December 2008           30,222,997      12,848,313      43,071,310

                                -------------   -------------   -------------
                                -------------   -------------   -------------

    At 31 December 2007                    -      10,693,223      10,693,223

                                -------------   -------------   -------------
                                -------------   -------------   -------------
    

    Included within Exploration and Mining rights is an amount of US$21.8
million in relation to the acquisition of the remaining 40% in Baomahun Gold
Project. In addition, the Group holds two mining licences relating to the
Kalsaka and Angovia Gold Mines. The value assigned to these two licences
amount to US$6 million and US$ 2.4 million respectively.
    These amounts are recoverable through the exploitation of the projects.
    On 4 August 2008, Cluff Gold plc issued 12,390,909 shares at a price of
52.5p to acquire 100% of Winston Mining Limited, a company which held the
Baomahun exploration licence on behalf of Mr R Winston in which the Group had
already earned 60% interest. Winston Mining Limited had no further assets or
liabilities at the acquisition date.
    The fair value of the remaining 40% interest in the licence, based on a
valuation of the underlying resource, was US$21.8m. When the acquisition was
negotiated the Cluff Gold plc share price was 88p but by the time all the
conditions relating to the sale had been fulfilled the share price had fallen
to 52.5p. This fall in the share price has reduced the consideration to (pnds
stlg)6.5m and a negative goodwill balance US$ 8.95 million has accordingly
been released to the income statement.
    This company has not traded since the acquisition date and therefore
there are no amounts attributable to this entity in the income statement.

    
    5.  Post balance sheet events

    i) In February 2009, the Company announced that approval had been granted
    by the Toronto Stock Exchange for the listing of its entire share
    capital.

    ii) In March 2009, the Company raised US$11.4 million before expenses by
    placing 20,285,000 new ordinary shares of 1 pence each in the Company at
    a placing price of 40 pence per share. The Shares were admitted to trade
    on AIM on 31 March 2009.

    ENDS:
    





For further information:

For further information: Cluff Gold plc, J.G. Cluff, Chairman, Tel: +44
(0) 20 7340 9790; Nominated Adviser, WH Ireland Limited, David Youngman, Katy
Mitchell, Tel: +44 161 832 2174; Joanna Longo, Investor Relations (Canada),
The Equicom Group, (416) 815-0700 ext 233, jlongo@equicomgroup.com; Simon
Robinson, Investor Relations (U.K.), Farm Street Communications Ltd, +44 (0)
207 099 2212, simon.robinson@farmstreetmedia.com

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CLUFF GOLD PLC

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