Ratel Group Limited - Management's Discussion and Analysis and Interim Unaudited Financial Statements

PERTH, Western Australia, Nov. 14, 2011 /CNW/ -

MANAGEMENT DISCUSSION AND ANALYSIS ("MD&A") 
PERIOD ENDED SEPTEMBER 30, 2011

(All figures are in US dollars unless otherwise indicated and the effective date of this MD&A is November 7, 2011)

Introduction

Management's discussion and analysis provides a review of the performance of Ratel Group Limited's ("Ratel Group", "Company" or "the Group") operations and compares its performance with those of the preceding year and quarters. Ratel Group was incorporated on October 18, 2010, and formed a consolidated group December 17, 2010, hence there are no comparatives for the preceding year.  This discussion also provides an indication of future developments along with issues and risks that can be expected to impact future operations.  This report has been prepared on the basis of available information up to November 7, 2011 and should be read in conjunction with the interim unaudited financial statements of the Company for the period ended 30 September 2011 and the audited financial statements of the Company for the year ended 30 June 2011 and the related notes thereto, which have been prepared in accordance with International Financial Reporting Standards and the Annual Information Form dated 28 September 2011 for June 2011. All dollar amounts referred to in this discussion and analysis are expressed in United States dollars except where indicated otherwise.

Additional information relating to the Company, including the Company's Annual Information Form ("AIF") can be found on SEDAR at www.sedar.com.

Cautionary Note Regarding Forward Looking Statements

Certain statements contained in this MD&A constitute forward looking statements within the meaning of applicable securities laws including, among others, statements made or implied relating to the Company's objectives, strategies to achieve those objectives, the Company's beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts.  Forward looking statements generally can be identified by words such as "objective", "may", "will", "expect", "likely", "intend", "estimate", "anticipate", "believe", "should", "plans" or similar expressions suggesting future outcomes or events.  Such forward looking statements are not guarantees of future performance and reflect the Company's current beliefs based on information currently available to management.  Such statements involve estimates and assumptions that are subject to a number of known and unknown risks, uncertainties and other factors inherent in the business of the Company and the risk factors discussed in the Circular and other materials filed with the securities regulatory authorities from time to time which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements.  Those risks and uncertainties include, but are not limited to: the mining industry (including operational risks; risks in exploration, and development; the uncertainties involved in the discovery and delineation of mineral deposits, resources or reserves; and the uncertainty of mineral resource and mineral reserve estimates); the risk of gold, copper and other commodity price and foreign exchange rate fluctuations; the ability of the Company to fund the capital and operating expenses necessary to achieve the business objectives of the Company; the uncertainty associated with commercial negotiations and negotiating with foreign governments; the risks associated with international business activities; risks related to operating in Zambia and Nigeria; environmental risk; the dependence on key personnel; and the ability to access capital markets.

Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date the statements were made and readers are advised to consider such forward looking statements in light of the risks set forth above.  Except as required by applicable securities laws, the Company assumes no obligation to update or revise any forward looking statements to reflect new information or the occurrence of future events or circumstances.

Background and Review of Operations

Ratel Group was incorporated on October 18, 2010 and is domiciled in the British Virgin Islands. Both CGX Limited ("CGX") and Zambian Mining Limited ("Zambian Mining") were incorporated on August 22, 2006 and are also domiciled in the British Virgin Islands. On June 1, 2010, Ratel Gold Limited ("Ratel Gold") (now St Augustine Gold & Copper Limited, "SAU") agreed to acquire a 100% interest in Zambian Mining and CGX from CGA Mining Limited ("CGA").  Ratel Group, CGX and Zambian Mining were wholly owned subsidiaries of Ratel Gold (now SAU), a company incorporated and domiciled in the British Virgin Islands. On December 17, 2010, the shares held by Ratel Gold (now SAU) were transferred to Ratel Group who acquired a 100% interest in Zambian Mining and CGX.

Ratel Gold (now SAU) has been listed on the Toronto Stock Exchange ("TSX") since August 6, 2010, and Ratel Group was listed on the TSX on January 4, 2011.

Ratel Gold (now SAU) had agreed to provide funding as required to enable the Company and its controlled entities to operate and meet their respective obligations until the date of Ratel Group successfully completing its capital raising of C$10M (gross), and listing on the TSX.  The Company successfully completed its listing on January 4, 2011 and completed the capital raising on January 7, 2011. Concurrently with the closing of the acquisition, as more particularly described in the Management Information Circular of Ratel Gold (the "Circular"), Ratel Gold (now SAU) also completed the Spin-out Reorganization (as defined in the Circular) of its African property interests into Ratel Group.   Pursuant to the terms of the Spin-out Reorganization, each shareholder of Ratel Gold (now SAU) was issued five common shares in the capital of Ratel Group for every nine common shares of Ratel Gold (now SAU) held on the share distribution record date of January 6, 2011.  CGA, through a wholly owned subsidiary, held 17.5M shares in Ratel Gold (now SAU).  They then acquired 9,722,222 shares in Ratel Group pursuant to the Spin-out Reorganisation, and acquired a further 19M shares pursuant to the conversion of subscription receipts, taking their beneficial holding in Ratel Group to 28,722,222 shares, which represents 19.1% of the issued and outstanding share capital.

As part of the Spin-out Reorganization, Ratel Group also undertook a capital raising (the "Spin-out Financing") by way of subscription receipts to fund its future activities and to satisfy TSX original listing requirements. The subscription receipts issued in connection with the Spin-out Financing automatically converted to common shares of Ratel Group as part of the Spin-out Reorganization, and 100M common shares of Ratel Group have been issued in connection therewith at a price of C$0.10 per common share, for aggregate gross proceeds of C$10M.

CGX and Zambian Mining were incorporated to act as holding companies respectively for the interests in the Segilola Gold Project in Nigeria and the Mkushi Copper Project in Zambia. A joint venture was entered into with African Eagle Resources ("AFE") for the Mkushi Copper Project in Zambia whereby Seringa Mining Limited ("SML") acquired a 51% interest in the project, with AFE retaining a 49% interest.  SML was responsible for funding a bankable feasibility study, while AFE manages exploration initiatives outside the initial development zones, with funding proportional to the percentage interest held by each party in the project.  The joint venture agreement was finalised and executed on May 30, 2007. SML has prepared a detailed feasibility study.

Segilola Gold Limited ("SGL") entered into a joint venture with Tropical Mines Limited ("TML"), a private company based in Nigeria, to earn a 51% interest in the Segilola Gold Project in Nigeria, considered to be the most advanced gold exploration project in the country.  TML is a Nigerian company owned in joint venture by local investors and the Nigerian government. A joint venture agreement has been signed ("the JV Agreement") and drilling is ongoing at the project, with a maiden resource announced by CGA during the December 2009 quarter of an indicated resource of 3,620,386 tonnes at a grade of 4.5g/t for 521,814 ounces of gold and an inferred resource of 747,590 tonnes at a grade of 4g/t for 96,445 ounces of gold.

Under the terms off the JV Agreement, SGL was required to pay TML a signature bonus of US$650,000 with US$250,000 becoming due upon TML obtaining the necessary approvals to the farmin of SGL to the joint venture with the balance of the signature bonus to be paid prior to the exercise by SGL of the 3rd option whereby it would acquire the final 13% interest to give SGL a 51% interest in the Segilola Gold Project.  The balance of the signature bonus of US$400,000 was paid to TML on March 16, 2011 and in return TML agreed to extend the time through to 31 March 2012 during which SGL is required to exercise the 3rd option in order for SGL to complete further drilling at the Segilola Gold Project. Upon completion of the further drilling program and the execution of a development and production agreement, SGL will be in a position to acquire the final 13% interest in the project.

An interim feasibility study was commenced in November 2009 for the Segilola Gold Project and has been completed in line with the requirements set out in the JV Agreement. A preliminary program for additional drilling has been formulated to test the lateral and depth extent of the interpreted plunge to the south of the known limits of mineralisation.  In addition, SGL will drill test beneath a high grade geochemical anomaly determined to exist to the north of the known zone of mineralisation.  The Company has secured Government import permits for the drill rig and commenced a drilling campaign for a planned 3,000m to focus on an extension of mineralisation to depth in the South, and the surface resources to the North.

The drilling campaign at the Segilola Gold Project also continued during the September quarter, with 2,557 metres drilled as at 30 September 2011, comprising 26 holes in the southern portion of the project area. Following a review of the current drill progress it was decided to drill a number of deeper holes in the southern section of the project area, where a previously interpreted southerly plunge to the mineralisation is located.  It is anticipated that additional resources could be added to the previously reported resource inventory. To date, gold results reported  from the current drilling program within the south section  confirms that the mineralized zone remains open-ended both along strike and at depth. Recently compiled longitudinal projections indicate a gentle 5º southerly plunge.

Drilling has confirmed a steep dipping normal fault cutting acutely through the northern-most upper portions of the mineralized zone and the mineralisation has been intersected below the fault. The main mineralized zone has been intersected between 5 and 25 metres above the footwall lithological contact and shows that mineralization continues for a further 300 metres south of the previous drilling. The most southerly of the new boreholes intersected gold mineralization grading 32.79 g/t Au over 1.10 metres confirming significant gold mineralization potential in the southern section of the project area and within hole SGD138, an intersection of 2.32g/t Au over a width of 7.30 metres at a depth of 25 metres vertically below surface, further confirming the potential for significant gold mineralization in the southern section.

During the June 2011 quarter, SML commenced the construction of small scale heap leach development at the Mkushi Copper Project. The development is expected to cost in the order of $2.4M, to be funded by each of the joint venture partners in proportion to their interest and is expected to be finalised early in the 2012 calendar year. The Heap Leach Project at the Mkushi Copper Project continued in the September quarter with a several key items being sourced during the period. The key items secured included the import permits for the concentrate, liners and electrical transformers.

Subsequent to 30 September 2011, the Company announced the resignation of Geoffrey Jones as Chief Executive Officer and the appointment of Ron Clarke, to serve as Interim Chief Executive Officer.  Mr. Jones will continue to be available to the Ratel Group as a consultant.  The changeover is effective from 1 November 2011. On November 3, 2011 the Company also announced that the contract to acquire CAML Ghana Limited (the holder of the interest in the Obuasi Joint Venture) has been terminated due to Ghanaian Ministerial authorisation to a change of control not being obtained.

The business of the Company should be considered speculative given the volatility in world stock markets (particularly with respect to mining and exploration companies) and the uncertain nature of mining and exploration activities generally.  Amongst other things, some of the key risk factors faced by CGX, Zambian Mining and Ratel Group include:

  • foreign exchange movements;
  • movements in commodity prices (in particular the gold and copper price and costs of production);
  • access to new capital (both debt and equity) and meeting liquidity requirements;
  • the uncertain nature of exploration and development activities;
  • increases in capital expenditures necessary to advance the Company's projects;
  • the ability to profitably exploit new development projects;
  • political, security and sovereign risks of Zambia and Nigeria;
  • joint venture partner relationships;
  • permitting and local community support; and
  • environmental obligations.

For further information on these and other risks inherent in the Company's business, we direct readers to the Annual Information Form for June 2011 lodged on SEDAR at www.sedar.com .

There is no prior year comparative information as Ratel Group was incorporated on October 18, 2010. The net loss for the period is predominantly due to exploration expenses at its Segilola Gold Project and Mkushi Copper Project which were acquired by Ratel Group on December 17, 2010.   As previously mentioned, Ratel Group successfully closed the initial public offering of 100M common shares on January 7, 2011. As such, Ratel Group is no longer part of the Ratel Gold (now SAU) consolidated group and all amounts owing to Ratel Gold (now SAU) up until Ratel Group's listing date, January 7, 2011, were forgiven.

Consolidated Results
(US$000's, except per share information)

Profit and Loss

  Three month period ended
    September 30
2011
  June 30
2011
  Variance
Revenues   1   (1)   2
Group net profit/(loss) from continuing operations   (1,267)   (1,638)   371
Exploration and Drilling costs   440   590   (150)
Depreciation   8   8   -
Basic earnings per share   (1.13)   (1.49)   0.36

Consolidated Cash Flows from Operating Activities
(US$000's, except per share information)

  Three month period ended
    September 30
2011
  June 30
2011
Reconciliation of net loss after tax to net cash flows from
operations
       
Net profit/(loss) after related income tax   (1,267)   (1,638)
Adjustments for non-cash income and expense items        
Depreciation   8   8
Unrealised foreign exchange gain/(loss)   39   276
         
Changes in Assets & Liabilities        
Change in working capital   (310)   736
         
Net cash inflow/(outflow) from operating activities   (1,530)   (833)

Consolidated Balance Sheet
(US$000's, except per share information)

  For the period ended
    September 30
2011
  June 30
2011
  Variance
Cash and cash equivalent   4,594   6,628   (2,034)
Current Assets   4,808   6,784   (1,976)
Property, Plant & Equipment   1,067   611   456
Total Assets   5,876   7,396   (1,520)
             
Total Liabilities   86   339   (253)
Shareholders' Equity   5,789   7,056   (1,267)

Selected Quarterly Data
(US$000's, except per share information)

    Q1
Sep
2011
  2011
Annual
Total
  Q4
Jun
2011
  Q3
Mar
2011
  Q2
Dec
2010
  Q1
Sep
2010
  2010
Annual
Total
  Q4
Jun
2010
  Q3
Mar
2010
  Q2
Dec
2009
Total
revenues
  1   7   (1)   6   -   N/A   N/A   N/A   N/A   N/A
                                         
Net
profit/(loss)
  (1,267)   (4,360)   (1,638)   (2,556)   (166)   N/A   N/A   N/A   N/A   N/A
                                         
Per share
(undiluted
US$ cents
per share)
  (1.13)   (5.86)   (1.49)   (7.27)   (0.08)   N/A   N/A   N/A   N/A   N/A
Per share
(diluted US$
cents per
share)
  (1.13)   (5.86)   (1.49)   (7.27)   (0.08)   N/A   N/A   N/A   N/A   N/A

Ratel Group was incorporated on October 18, 2010. On December 17, 2010, Ratel Group acquired 100% of CGX and Zambian Mining, and thereby acquired their interests in the Segilola Gold Project and Mkushi Copper Project, respectively. As the Group was only formed during the current financial year, there is no comparative information prior to the December 2010 quarter.

Quarterly and Year to Date Results

Three Months Ended September 30, 2011 as Compared to the Three Months Ended June 30, 2011

The Company's result for the three months to September 30, 2011 was a net loss of $1.267M, as compared to a net loss of $1.638M for the previous quarter, a decrease of $0.371M, which is largely attributable to the $0.427M decrease in administrative expenses, as discussed further below. The Company's activities are mineral exploration and development. It currently has no assets in production, hence earns only minimal revenues.

Revenues and Foreign Exchange Gains/Losses

As discussed above, the Company does not have any producing assets hence earns only minimal revenue.  The Company earned interest revenue of $1k for the September quarter as compared to ($1k) for the June 2011 quarter. A foreign exchange loss of $0.039M was recorded in the September quarter, as compared to foreign exchange gain of $0.012M in the June quarter. This September quarter loss relates mainly to the strengthening of the US dollar during the quarter and the impact on expenses recorded in local currencies Australian Dollar, Zambian Kwacha and Nigerian Cedi, as compared to the June quarter which related largely to expenses recorded on local Zambian Kwacha.

Expenses

Expenses for the period to September 30, 2011 amounted to $1.268M as compared to $1.638M for the June quarter. The Company expenses all of it exploration costs to the profit and loss. Expenditure on the heap leach development at the Mkushi Copper Project has been capitalised to the balance sheet, in accordance with the Company's accounting policies, with $0.456M capitalised in the September 2011 quarter.

Specific items discussed below:

Exploration costs written off
The Company incurred exploration costs of $0.965M during the current quarter as compared to $0.837M in the prior quarter. During the previous quarter, the drill rig for the Segilola Gold Project was mobilized, with drilling commencing at the project in June 2011 after delays with the importation of the rig and bad weather.  Drilling was undertaken throughout the September quarter, with $0.439M being incurred on drilling costs in the September quarter. The programme is expected to be completed in the second quarter of financial year 2011/2012 for a total cost of approximately $1.4M. Salaries and wages directly related to exploration projects were $0.243M for the September quarter, largely in line with the $0.239M expense incurred in the previous quarter. Salaries and wages for local staff are paid in the local currency and are therefore subject to foreign exchange fluctuations.

Administrative expenses
The Company incurred administrative costs of $0.250M during the period as compared to $0.713M in the prior period, a decrease of $0.463M or 65%.  The current quarter costs related largely to the payment of Ratel Group's quarterly serviced office and accounting fee ($0.099M for Sept 2011 quarter compared to $0.107M for the June quarter 2011), loans made to CAML Ghana in relation to its dispute with its joint venture partner ($0.078M for Sept 2011 quarter, $0.115M for June 2011 quarter), staff resourcing costs ($0.030M for Sept 2011 compared to $0.055M for June 2011), and interim audit and accounting fees for the period, both locally and in Africa ($0.009M for Sept 2011 compared to $0.055M for June 2011). A share option expense of $0.276M was incurred during the June 2011 quarter, with no expense incurred during the Sept 2011 quarter, as the options were expensed in full in the prior quarter.

Liquidity and Capital Resources 

As at September 30 2011, the Company had cash and cash equivalents of $4.595M.  Ratel Group was incorporated on October 18 2010, and formed a consolidated group with Zambian Mining and CGX on December 17 2010, therefore there is no available comparative information prior to the December 2010 quarter.

On December 17, 2010 the Company issued 49,999,998 shares at an issue price of C$0.10 per share to acquire the interest in the African assets held by Ratel Gold (now SAU).

The Company successfully closed its initial public offering on January 7, 2011, issuing 100M common shares at a price of C$0.10 per common share, receiving proceeds of $9.5 million net of the 5% brokers' fees, not including other raising costs.   The funds provided Ratel Group and its subsidiaries with sufficient cash to meet their current planned activities and working capital requirements.  Ratel Gold (now SAU) distributed its total holding of 50 million shares in Ratel Group to its shareholders, pursuant to the terms of the Spin-out Reorganization.  Each shareholder of Ratel Gold (now SAU) was issued five common shares in the capital of Ratel Group for every nine common shares of Ratel Gold (now SAU) held on the share distribution record date of January 6, 2011.  Accordingly, post January 7, 2011 Ratel Group is no longer controlled by Ratel Gold (now SAU).

The Company manages liquidity risk through maintaining sufficient cash or credit terms with its suppliers to meet the operating requirements of the business and investing excess funds in highly liquid short term cash deposits.  The Company's liquidity needs can likely be met through existing cash on hand, subject to current budgeted working capital and expenditure parameters being met.

The Company currently has in place an active program of financial forecasting and budgeting both at a corporate and project level to manage both the application of funds and planning for future financial needs to ensure that any shortfall in revenue funds is adequately covered by cash reserves or planned new sources being either debt or equity based on the then most cost effective weighted average cost of capital. Expenditure to date for the Company has been largely in line with the overall initial budget forecasts, except for expenditure relating to the heap leach development at the Mkushi Copper Project and the drilling campaign at the Segilola Gold Project, due to delays in the start of both of these activities, hence actual  expenditure in these areas is currently behind the original budgeted schedule.

Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. The Group's maximum exposures to credit risk at the reporting date in relation to each class of financial asset is the carrying amounts of those assets as indicated in the Balance Sheet.

Contractual obligations

  Payments due by period
Contractual
obligations
  Total   Less than 1 year   1-3 years   4-5 years   More than 5
years
Joint venture
obligations1
  1,096,341   1,096,341   -   -   -
Management
services
contract2
  403,000   403,000   -   -   -
Total contractual
obligations
  1,499,341   1,499,341   -   -   -

1 The joint venture obligations represent a contracted drilling program which commenced in the current quarter, a payment to TML for community relations costs at the Company's Segilola Project and commitment to a small scale development at the Company's Mkushi Copper Project in Zambia.
2 The management services contractual obligation is for the provision of, serviced office, company secretarial, administrative, accounting and management services by CGA Mining Limited that came into effect on the Company listing on the TSX, which was January 4, 2011.

Transactions between the group and its related entities

During the quarter ended September 30, 2011, the Company entered into transactions with related parties in the wholly-owned group:

  • loans were advanced on short term inter-company accounts between;
    • CGX and its wholly owned subsidiary SGL for the purpose of funding a feasibility study on the Segilola Gold Project and the funding of the day to day operating costs of SGL. The total amount loaned for the period was $900,571;

    • between Zambian Mining and its wholly owned subsidiary SML for the purpose of funding the day to day operating costs of SML. The total amount loaned for the period was $734,394; and

    • between Ratel Group and CAML Ghana for the purpose of funding the day to day operating costs.  The total amount loaned for the period was $46,212.

These transactions were undertaken on commercial terms and conditions except that:

  • loans are repayable at call; and

  • no interest is payable on the loans at present.

Transactions between the group and other related parties

During the financial year, the Company entered into the following transaction with a related party:

  • Office accommodation and administrative support were provided to the consolidated entity at commercial rates from CGA, who is holder of 19.1% of the outstanding share capital of the Company.  In the current quarter CGA charged $99,634 (excluding GST) in relation to the provision of these services.

Outstanding Share Data

As at November 7, 2011, the Company had 150,000,000 common shares outstanding and 12,000,000 options, exercisable at C$0.25 per share.

Subsequent Events

Subsequent to 30 September 2011, the Company announced that the contract to acquire CAML Ghana Limited (the holder of the interest in the Obuasi Joint Venture) was terminated due to Ghanaian Ministerial authorisation to a change of control not being obtained. Subsequent to 30 September 2011, the Company announced the resignation of Geoffrey Jones as Chief Executive Officer and the appointment of Ron Clarke, to serve as Interim Chief Executive Officer.  Mr. Jones will continue to be available to the Ratel Group as a consultant.  The changeover is effective from 1 November 2011.

Critical Accounting Estimates

The significant accounting policies used by Ratel Group are disclosed in Note 2 to the annual financial statements for the year ended June 30, 2011. Certain accounting policies require that management make appropriate decisions with respect to the formulation of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.  Management reviews its estimates on a regular basis. The emergence of new information and changed circumstances may result in actual results or changes to estimated amounts that differ materially from current estimates.

Accounting Policies

The Group's current financial report complies with International Financial Reporting Standards ("IFRS"). The accounting policies of the Group are set out in Note 2 to the June 30, 2011 Annual Financial Statements, available on www.sedar.com.

Income Taxes 

The determination of income and other tax liabilities requires interpretation of complex laws and regulations.  All tax filings are subject to audit and potential reassessment after the lapse of considerable time.  Accordingly, the actual income tax liability may differ from that estimated and recorded by management.

Internal Controls and Disclosure Controls

The Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") are responsible for the design and effectiveness of internal controls over financial reporting (as such term is defined in National Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52- 109")), to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements in accordance with International Financial Reporting Standards. The Company maintains an effective control environment and has used the Internal Control -- Integrated Framework (COSO Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission to design the Company's internal controls over financial reporting. The Company's CEO and CFO believe that the Company's internal controls and procedures are effective in providing reasonable assurance that financial information is recorded, processed, summarized and reported in a timely manner.

During the quarter ended September, 2011, there have been no changes in the Company's polices and procedures and other processes that comprise its internal control over financial reporting, that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

The Company's CEO and CFO are also responsible for the design and effectiveness of disclosure controls and procedures (as such term is defined in NI 52-109) to provide reasonable assurance that material information related to the Company, including its consolidated subsidiaries, is made known to the Company's certifying officers. The Company's CEO and CFO believe that the Company's disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed under applicable securities legislation is recorded, processed, summarized and reported in a timely manner.

The Company's CEO and CFO have each evaluated the effectiveness of the Company's internal controls over financial reporting and disclosure controls and procedures as of September 30, 2011 and have concluded that these controls and procedures are effective in reasonably assuring the reliability of financial reporting and that material information relating to the Company is made known to them by others within the Company and that such controls and procedures have no material weaknesses and no limits on the scope of their design.

Future Outlook

During the next quarter, the Company's activities will primarily focus on:

  • the continuation of the drilling program at the Company's Segilola Gold Project by the Joint Venture partners, which commenced in June 2011 and is expected to be completed in the December quarter; and
  • working towards the completion of the Heap Leach development at the Company's Mkushi Copper Project.


Interim Financial Statements

For the period
1 July 2011 to 30 September 2011

RATEL GROUP LIMITED
Level 5, The BGC Centre, 28 The Esplanade, Perth WA 6000
Phone: +61 8 9263 4000 Fax: +61 8 9263 4020.
Website: www.ratelgroup.com

NOTICE OF NO AUDITOR REVIEW OF
INTERIM FINANCIAL STATEMENTS

The accompanying interim consolidated financial statements for Ratel Group Limited ("Ratel Group" or the "Company") have been prepared by management in accordance with the International Accounting Standards, which include International Financial Reporting Standards ("IFRS"). These financial statements are the responsibility of management and have not been reviewed by the auditors.  The most significant accounting principles have been set out in the audited financial statements and Annual Information Form dated 28 September 2011 for the period ended 30 June 2011 and the related notes thereto. These financial statements have been prepared on a historical cost basis of accounting.  A precise determination of many assets and liabilities is dependent on future events.  Therefore, estimates and approximations have been made using careful judgment. Recognizing that the Company is responsible for both the integrity and objectivity of the financial statements, management is satisfied that these financial statements have been fairly presented.

For further information please contact:

Hannah Hudson
Chief Financial Officer and Company Secretary

Telephone: +61 8 9263 4000
Fax: +61 8 9263 4020

CORPORATE DIRECTORY

DIRECTORS:
Mark S Savage
Michael J Carrick
Ronald F J Clarke
Ian C Fisher

SECRETARY:

Hannah C Hudson

PRINCIPAL OFFICE:
Level 5
BGC Centre
28 The Esplanade
Perth WA 6000

TELEPHONE: +61 8 9263 4000
FACSIMILE: +61 8 9263 4020

BANKERS:
Australia and New Zealand Banking Group Limited
77 St Georges Terrace
Perth  WA  6000

STOCK EXCHANGE:
Toronto Stock Exchange Inc
Exchange Code:
RTG - Fully paid ordinary shares
SHARE REGISTER:
Canadian Register
Computershare Investor Services Inc
100 University Ave, 11th Floor
Toronto Ontario M5J2Y1
Canada

Telephone: +1 416 263 9449
Facsimile: +1 416 981 9800

LAWYERS
Middletons
Level 2
6 Kings Park Road
West Perth WA 6005

Blake, Cassels & Graydon
Suite 2600
3 Bentall Centre
59 Burrard Street
Vancouver, B.C. Canada
V7X 1L3

NORTH AMERICAN CONTACT:
Mark S Savage
1703 Edwardo y Juanita Ct
Albuquerque, New Mexico, 87107, USA

Telephone: +1 505 344 2822
Facsimile: +1 505 344 2922
Email: marksavage@comcast.net

RATEL GROUP LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 
Unaudited - Prepared By Management
 
For the three months ended 30 September 2011
        Consolidated
Three months
ended
Sept 30,
    Note   2011
        US$
Continuing Operations        
Revenue   3   1,001
Exploration and evaluation expenditure   4   (965,376)
Business Development       (13,157)
Foreign exchange gains/(losses)       (39,321)
Administrative expenses   5   (250,296)
         
Loss from continuing operations       (1,267,149)
Income tax benefit       -
Loss for the period       (1,267,149)
Other comprehensive income/(loss)        
Other comprehensive income/(loss) for the period       -
Total comprehensive income/(loss)
for the period
      (1,267,149)
         
Loss attributable to:        
Owners of the Company       (1,267,149)
         
Total comprehensive loss attributable to:        
Owners of the Company       (1,267,149)
         
Earnings per share for loss
attributable to the ordinary equity
holders of the company
       
Basic loss per share (cents)       (1.13)
Diluted loss per share (cents)       (1.13)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.  Please note the Company was incorporated on October 18, 2010, hence there are no prior year comparative figures.

RATEL GROUP LIMITED
INTERIM CONSOLIDATED BALANCE SHEET
Unaudited - Prepared By Management
             
        Consolidated   Consolidated
    Note   30 September 2011   30 June 2011
        US$   US$
ASSETS            
Current Assets            
Cash and cash equivalents   7   4,594,874   6,628,366
Trade and other receivables       195,107   128,251
Prepayments       18,597   27,895
Total Current Assets       4,808,578   6,784,512
             
Non-Current Assets            
Property, plant and equipment       192,680   611,203
Construction in Progress       874,585   -
Total Non-Current Assets       1,067,264   611,203
             
TOTAL ASSETS       5,875,842   7,395,715
             
LIABILITIES            
Current Liabilities            
Trade and other payables   8   86,534   339,259
Total Current Liabilities       86,534   339,259
             
TOTAL LIABILITIES       86,534   339,259
             
NET ASSETS       5,789,308   7,056,456
             
SHAREHOLDER'S DEFICIT            
Issued Capital   6   14,493,355   14,493,353
Reserve   9   (3,076,157)   (3,076,157)
Accumulated losses       (5,627,890)   (4,360,740)
TOTAL SHAREHOLDER'S
EQUITY
      5,789,308   7,056,740

The above consolidated statement of financial position should be read in conjunction with the accompanying notes

RATEL GROUP LIMITED
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited - Prepared By Management
         
For the three months ended 30 September 2011
        Consolidated
Three months
ended
Sept 30,
    Note   2011
        US$
Cash flows from operating activities        
Payments to suppliers and employees       (316,429)
Exploration costs       (1,213,800)
Interest received       1,001
Net cash outflow from operating activities       (1,529,228)
         
Cash flows from investing activities        
Payments for property, plant & equipment       (464,408)
Net cash inflow/(outflow) from
investing activities
      (464,408)
         
Cash flows from financing activities        
Loans funds received       -
Proceeds from issue of shares       -
Share issue costs       -
Net cash inflow from financing
activities
      -
         
Net increase / (decrease) in cash and
cash equivalents
      (1,993,636)
         
Cash and cash equivalents at beginning
of the period
      6,627,831
         
Effects of exchange rate fluctuations on
the balances of cash held in foreign
currencies
      (39,321)
Cash and cash equivalents at end of
the financial period
  7   4,594,874

The above consolidated statement of cash flow should be read in conjunction with the accompanying notes. Please note that the Company was incorporated on October 18, 2010, hence there are no prior year comparative figures.

RATEL GROUP LIMITED
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited - Prepared By Management
             
For the three months ended 30 September 2011
             
    Issued capital
US$
Acquisition
reserve
US$
Share based
payment reserve
   US$
Accumulated
losses
US$
Total
US$
At 1 July 2011   14,493,355 (4,300,157) 1,224,000 (4,360,741) 7,056,457
Loss for the period   - - - (1,267,149) (1,267,149)
Total comprehensive
income/(loss) for the
period
  - - - (1,267,149) (1,267,149)
At 30 September 2011   14,493,355 (4,300,157) 1,224,000 (5,627,890) (5,789,308)

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.  Please note that the Company was incorporated on October 18, 2010, hence there are no prior year comparative figures.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the period 1 July 2011 to 30 September 2011
Unaudited - Prepared By Management

1. CORPORATE INFORMATION

The financial report of Ratel Group Limited ("the Company", "Ratel", "the Group" or "the Entity") as at 30 September 2011 and for the period from 1 July 2011 to 30 September 2011 ("the period") .

The Company was incorporated on 18 October 2010 in the British Virgin Islands. Its registered address is Jayla Place, Wickhams Cay I, Road Town, Tortola, VG1110 British Virgin Islands.  The Entity's ultimate parent company is Ratel Group Limited.

The principal activity of the Group during the period consisted of mineral exploration.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)      Basis of Accounting

The interim financial report is a general purpose condensed financial report which has been prepared in accordance with the requirements of the International Financial Reporting Standards ('IFRS") as issued by the International Accounting Standards Board.

The consolidated financial statements have also been prepared on a historical cost basis and are presented in United States Dollars (US$).

The Company was incorporated on 18 October 2010 and accordingly there are no comparatives for the Statement of Comprehensive Income and Statement of Cash Flows.

For the purposes of preparing the interim financial report, the interim has been treated as a discrete reporting period.

(b)      Significant accounting policies

The interim consolidated financial statements have been prepared using the same accounting policies as used in the financial statements for the period ended 30 June 2011 contained in the audited financial statements for Ratel Group Limited dated 28 September 2011.

         
        Consolidated
3 months ended
September 30,
2011
3. REVENUES       US$
         
         
         
Interest Income       1,001
        1,001
         
         
4. EXPLORATION AND EVALUATION EXPENSES
         
        Consolidated
3 months ended
September 30,
2011
        US$
Employee Benefits                  243,469
Consultants fees                   20,162
Motor vehicle expenses                   10,669
Travel expenses                  101,950
Exploration and drilling costs                  440,425
Depreciation expense                     8,407
Rental Expense                   12,594
Other                  127,700
                   965,376
         
5. ADMINISTRATIVE EXPENSES
         
Audit & accounting fees                  9,145
Legal fees                78,113
Management fees                99,634
Share registry costs                  8,034
Other                55,368
        250,296

6. CONTRIBUTED EQUITY

          Consolidated
September 30,
2011
Number
        Consolidated
June 30,
2011
Number
(a)  Issued and paid up capital:                  
Issued and fully paid shares       150,000,000         150,000,000
                   
Movements in contributed equity during the past three months were as follows:
                   
Ordinary Shares       Number         US$
Opening balance at 1 July 2011       150,000,000         14,493,353
Total shares on issue at 30 September 2011       150,000,000         14,493,353

On 17 December 2010 the Company issued 49,999,998 shares at an issue price of C$0.10 per share to acquire the interest in the African assets held by Ratel Gold (now SAU). The Company successfully closed its initial public offering on 7 January 2011, issuing 100 million common shares and Ratel Gold (now SAU) distributed its 50 million shares to shareholders, pursuant to the terms of the Spin-out Reorganization.  Each shareholder of Ratel Gold (now SAU) was issued five common shares in the capital of Ratel Group for every nine common shares of Ratel Gold (now SAU) held on the share distribution record date of 6 January 2011, reducing Ratel Gold's ownership to 0%, with CGA Mining Limited holding a 19.1% interest.

As part of the Spin-out Reorganisation, Ratel Group also undertook a capital raising (the "Spin-out Financing") by way of subscription receipts to fund its future activities and to satisfy TSX original listing requirements.   The subscription receipts issued in connection with the Spin-out Financing automatically converted to common shares of Ratel Group as part of the Spin-out Reorganization on 7 January 2011, and 100,000,000 common shares of Ratel Group have been issued in connection therewith raising gross proceeds of C$10,000,000.

7. CASH AND CASH EQUIVALENTS

      September 30,       June 30,
      2011       2011
      US$       US$
Cash at bank and on hand     4,594,874       6,628,366
      4,594,874       6,628,366
               
8. TRADE AND OTHER PAYABLES
               
      September 30,       June 30,
      2011       2011
      US$       US$
Trade Creditors     86,534       169,121
Accrued Expenses     -       170,138
      86,534       339,259
               
9. RESERVES
               
      September 30,       June 30,
      2011       2011
      US$       US$
Acquisition reserve     (4,300,157)       (4,300,157)
Share based payment reserve     1,224,000       1,224,000
      (3,076,157)       (3,076,157)

Acquisition reserve

The acquisition reserve is used to record the difference between the consideration transferred and the equity acquired for common control business combinations.

Share based payment reserve

The share based payment reserve is used to record the value of share based payments provided to employees, including key management personnel and directors as part of remuneration.

10. SEGMENT INFORMATION

The following table presents the revenue and result information regarding operating segments for the period ended September 30, 2011.

    Nigeria   Zambia   Eliminations/
Unallocated
  Consolidated
                 
    September 30,
2011
  September 30,
2011
  September 30,
2011
  September 30,
2011
    US$   US$   US$   US$
Revenue                
Other income   52   -   949   1,001
                 
Results                
Segment
Profit/(Loss)
  (860,416)   (165,341)   (241,392)   (1,267,149)

11. EVENTS SUBSEQUENT TO BALANCE DATE

Subsequent to 30 September 2011, the Company has announced that the contract to acquire CAML Ghana Limited (the holder of the interest in the Obuasi Joint Venture) has been terminated due to the Ghanaian Ministerial authorisation to a change of control not being obtained. Subsequent to 30 September 2011, the Company announced the resignation of Geoffrey Jones as Chief Executive Officer and the appointment of Ron Clarke, to serve as Interim Chief Executive Officer.  Mr. Jones will continue to be available to the Ratel Group as a consultant.  The changeover is effective from 1 November 2011.

SOURCE Ratel Group Limited

For further information:

Ratel Group Limited
Level 5, BGC Centre
28 The Esplanade
Perth Western Australia 6000

Tel:  +61 8 9263 4000
Fax: +61 8 9263 4020
Email: info@ratelgroup.com
www.ratelgroup.com

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Ratel Group Limited

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