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					CONSOLIDATED FINANCIAL REPORT
for the half year ended 30 September 2011




                                 Zambezi Resources Limited
                                          and Subsidiaries
                                         ARBN 124 462 826
                                        Consolidated Financial Report   1




Table of Contents

                                                    Page

  Corporate Directory                                       2

  Directors & Operations Report                             3

  Independent Auditor’s Review Report                      18

  Financial Report                                         20

  Directors’ Declaration                                   33




                                                 30 September 2011
                                                                      Consolidated Financial Report   2




Corporate Directory

DIRECTORS                                        BERMUDA COUNSEL
David Vilensky          Non Executive Chairman   Appleby
Richard Procter         Non Executive Director   Canon’s Court
Simon Durack            Non Executive Director   22 Victoria Street
Emmanuel Heyndrickx     Non Executive Director   Hamilton HM 12
                                                 BERMUDA
SECRETARY
                                                 REGISTRAR
Allison Forte
                                                 Computershare Investor Services Pty Ltd
REGISTERED OFFICE                                Level 2, 45 St George’s Terrace
                                                 PERTH WA 6000
Canon’s Court                                    Telephone: (08) 9323 2000
22 Victoria Street                               Facsimile: (08) 9323 2033
Hamilton HM 12
BERMUDA                                          ZAMBEZI RESOURCES OFFICES

AUDITORS                                         Zambezi Resources Ltd
                                                 Canon’s Court
Deloitte Touche Tomatsu                          22 Victoria Street
Woodside Plaza                                   Hamilton HM 12
Level 14                                         BERMUDA
240 St George’s Terrace
PERTH WA 6000 Australia                          Mwembeshi Resources Ltd
                                                 Plot 5697
                                                 Beu Crescent Road
AUSTRALIAN SOLICITORS                            Kalundu, Lusaka
                                                 ZAMBIA
Gilbert & Tobin
1202 Hay Street
WEST PERTH WA 6005                               Zambezi Resources (Aust) Pty Ltd
Australia                                        17 Ord Street
                                                 WEST PERTH WA 6005
                                                 Australia
ZAMBIAN SOLICITORS                               Telephone: (08) 6555 1879
                                                 Facsimile: (08) 9398 4104
Corpus Legal Practitioners
The Globe Building
2386 Longolongo Road
                                                 WEBSITE
Lusaka                                           www.zambeziresources.com
ZAMBIA




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                                                                       Consolidated Financial Report        3




 Directors & Operations Report
The Directors present the Directors & Operations Report for Zambezi Resources Limited (“Zambezi”
or the “Company”) for the six months ended 30 September 2011.


1.     Corporate
       As the Project moves forward from early stage
       exploration and scoping studies towards a Bankable
       Feasibility Study, the skill set for the engineering
       development of the project now requires project
       development competency. To this end the Company
       appointed Mr Frank Vanspeybroeck as the new CEO
       of Zambezi and Mr Marinko Vidovich as the
       Executive Project Manager. Both personnel are
       experienced in infrastructure, logistics and project
       development and have already transitioned to take
       over the management of the project development,
       logistics and drilling.

       The Company has also appointed Dr. Geoffrey Booth
       as its Consultant Geologist. Dr. Booth is a geologist
       with over 30 years’ experience in base and precious
       metal exploration, resource planning and development. Most recently he has managed
       resource activities for the Citadel Group within the Middle East and feasibility studies for
       Anvil Mining Limited in Africa.

       On 17 August 2011 the Company in consultation with its advisers withdrew the rights issue
       as detailed in the offer booklet released to ASX on 8 August 2011.

       The Zambezi Board believed it to be in the best interest of the Company and its shareholders
       to withdraw the rights issue as a result of equity market volatility and instability at that time.

       On 25 July 2011 a secured A$10 million Convertible Note Facility was entered into with LinQ
       Capital Limited in two tranches of A$5 million each.

       On 28 September 2011, ZRL announced that it has drawn down A$5 million (Tranche A) of
       the A$10 million convertible note facility (Facility).

       The funds raised by the Facility will be applied by Zambezi towards exploration, project
       evaluation and working capital costs associated predominantly with its Kangaluwi Copper
       Project. This Facility provides the Company funding to undertake the following:

               Additional step out and infill drilling for resource expansion and definition at
               Chisawa, Kangaluwi and Kalulu deposits (Kangaluwi Copper Project);


                                                                                  30 September 2011
                                                                     Consolidated Financial Report     4


                  Deeper drilling of the structure for strategic control as well as to determine the
                  down dip and plunge extent of the mineralisation;
                  Testing additional oxide potential above the mineralised sulphide material with a
                  shallow drilling program;
                  Site capital equipment and infrastructure upgrade, e.g.: vehicles, communications,
                  site office and site accommodation; and
                  Feasibility study assessment work.


2.       Projects

2.1      Kangaluwi Copper Project

2.1.1    Project Background
         The Kangaluwi, Chisawa and Kalulu prospects are three high quality prospects within the
         100% owned Kangaluwi Copper Project. The Project is covered by a 245 km2 Mining Licence,
         180 km east of Lusaka, Zambia. Numerous geophysical targets in the Project area are yet to
         be evaluated, with only one quarter of the 28 km strike length drill tested to date.

         Current Mineral Resource estimates for the Project stands at 23.4 Mt grading 0.85% Cu for
         approximately 200 kt contained copper from the Kangaluwi and Chisawa prospects.
         Additional resource is anticipated from the Kalulu prospect.

         The current 22,000 m drilling program will form the basis of a revised Mineral Resource
         estimate for copper and gold, as a basis for a future Bankable Feasibility Study.




Figure 1: Project Location Map




                                                                               30 September 2011
                                                                    Consolidated Financial Report      5


2.1.2   Project Development
        From April 2011, diamond drilling at Chisawa, Kalulu and Kangaluwi prospects has been
        undertaken by Ox and Infraca Drilling Contractors. A total of 22,183m were reported from
        94 DD holes. Of the 94 holes, 66 holes comprised Phase I drilling at Kalulu and Chisawa, 26
        holes were deep holes from the Phase II drilling program in Kalulu, Kangaluwi and Chisawa,
        and two holes at Kalulu (KLUDD0040 and KLUDD0041) were shallow infill from a Phase III
        drilling program (Table 1, Table 2, Table 3).




Figure 2: Tenement Boundary

    Sampling of half diamond core from the 2011 resource development drilling continued through
    the period, samples were dispatched for assaying to A.H. Knight Laboratory in Kitwe.

    QAQC measures were also submitted and monitored in accordance to JORC compliance.

    A number of adverse issues resulted in delays to completion of activities which in turn impacted
    on timely reporting of assay results. The main issues:

        persistent mechanical issues with diamond core cutters and site infrastructure, resulted in
        lengthy delays in geological logging and submission of samples to A. Knights of Kitwe;
        delays with assay results and sample analysis of diamond core at A. Knights due to
        protracted replacement parts for the Atomic Absorption spectrometer (AAS);
        diamond core exhibiting favourable mineralogy having to be submitted for re-sampling,
        hence increased number of samples submitted for assaying;


                                                                              30 September 2011
                                                                        Consolidated Financial Report   6


      gold analysis being undertaken by A. Knights of Canada, turnaround time of results
      problematic.

   This resulted in operational measures being established and acted on in an endeavour to make
   up time lost.

   To date 1,417 assay results have been received for completed holes, with 2,687 assay results
   received for incomplete holes. Some 2,549 assay results are still outstanding; while a further
   7,000 samples are in the process of being re-sampled and dispatched to A. Knights laboratories
   of Kitwe for analytical analysis.

                                        Table 1: Kangaluwi

                                                                                                Total Metres
  BH ID      BH Locality     Easting      Northing           Drilling   Azimuth Inclination       ALL Rigs
                            ARC1950       ARC1950
                              UTM            UTM             Method
KNGDD0039    Kangaluwi      787,098       8,289,774           DD          320         -50          291.00
KNGDD0040    Kangaluwi      787,100       8,289,721           DD          360         -50          450.29
KNGDD0041    Kangaluwi      786,790       8,289,610           DD          360         -60          410.35
KNGDD0042    Kangaluwi      787,242       8,289,725           DD          360         -60          416.15
KNGDD0043    Kangaluwi      787,389       8,289,600           DD          360         -60          450.00
KNGDD0044    Kangaluwi      787,098       8,289,625           DD          360         -60          450.00
KNGDD0045    Kangaluwi      787,587       8,289,603           DD          360         -60          399.00
KNGDD0046    Kangaluwi      787,695       8,289,528           DD          360         -60          353.60
KNGDD0047    Kangaluwi      787,803       8,289,364           DD          360         -60          350.35
KNGDD0048    Kangaluwi      786,941       8,289,577           DD          360         -60          450.00
Total                                                                                             4,020.74

                                         Table 2: Chisawa

                                                                                                Total Metres
  BH ID      BH Locality     Easting       Northing          Drilling   Azimuth Inclination       ALL Rigs
                            ARC1950        ARC1950
                              UTM             UTM            Method
CHSDD0001     Chisawa       787,549        8,287,963          DD          42.5        -50          180.10
CHSDD0002     Chisawa       787,872        8,287,718          DD          42.5        -50          123.80
CHSDD0003     Chisawa       787,449        8,287,817          DD          42.5        -50          300.20
CHSDD0004     Chisawa       787,482        8,287,892          DD          42.5        -50          250.18
CHSDD0005     Chisawa       787,708        8,287,840          DD          42.5        -50          251.08
CHSDD0006     Chisawa       787,706        8,287,840          DD          42.5        -50          152.00
CHSDD0007     Chisawa       787,755        8,287,562          DD          42.5        -50          250.97
CHSDD0008     Chisawa       787,665        8,287,771          DD          42.5        -50          192.90
CHSDD0009     Chisawa       787,919        8,287,442          DD          42.5        -50          250.20
CHSDD0010     Chisawa       787,812        8,287,655          DD          42.5        -50          200.74
CHSDD0011     Chisawa       787,976        8,287,523          DD          42.5        -50          200.00
CHSDD0012     Chisawa       788,031        8,287,611          DD          42.5        -50          150.34
CHSDD0013     Chisawa       787,155        8,287,420          DD          42.5        -50          200.73
CHSDD0014     Chisawa       788,205        8,287,491          DD          42.5        -50          150.00


                                                                                 30 September 2011
                                                                  Consolidated Financial Report   7


                                                                                          Total Metres
  BH ID     BH Locality   Easting     Northing         Drilling   Azimuth Inclination       ALL Rigs
CHSDD0015    Chisawa      788,312     8,287,292          DD         42.5      -50            200.90
CHSDD0016    Chisawa      788,365     8,287,383          DD         42.5      -50            150.77
CHSDD0017    Chisawa      787,890     8,287,245          DD         42.5      -50            386.98
CHSDD0018    Chisawa      788,468     8,287,154          DD         42.5      -50            200.24
CHSDD0019    Chisawa      788,515     8,287,245          DD         42.5      -50            150.20
CHSDD0020    Chisawa      788,654     8,287,145          DD         42.5      -50            200.60
CHSDD0021    Chisawa      788,610     8,286,980          DD         85.0      -50            142.89
CHSDD0022    Chisawa      788,717     8,287,223          DD         42.5      -50             71.60
CHSDD0023    Chisawa      788,836     8,286,996          DD         85.0      -50            150.30
CHSDD0024    Chisawa      788,726     8,286,991          DD         85.0      -50            200.50
CHSDD0025    Chisawa      788,841     8,286,817          DD         55.0      -50            101.14
CHSDD0026    Chisawa      788,752     8,286,765          DD         55.0      -50            176.20
CHSDD0027    Chisawa      788,674     8,286,704          DD         55.0      -50            180.30
CHSDD0028    Chisawa      788,861     8,286,515          DD         42.5      -50            203.10
CHSDD0029    Chisawa      788,914     8,286,611          DD         42.5      -50            101.37
CHSDD0030    Chisawa      788,991     8,286,419          DD         42.5      -50            150.12
CHSDD0031    Chisawa      789,192     8,286,289          DD         42.5      -50            152.13
CHSDD0032    Chisawa      789,354     8,286,164          DD         42.5      -50            151.00
CHSDD0033    Chisawa      788,902     8,286,111          DD         42.5      -50            388.68
CHSDD0034    Chisawa      789,470     8,286,018          DD         42.5      -50            150.00
CHSDD0035    Chisawa      789,330     8,285,683          DD         42.5      -50            342.19
CHSDD0036    Chisawa      788,334     8,287,022          DD         42.5      -50            400.00
CHSDD0037    Chisawa      789,099     8,285,971          DD         43.0      -50            350.00
CHSDD0038    Chisawa      788,551     8,286,970          DD         85.0      -50            276.62
CHSDD0039    Chisawa      788,587     8,286,362          DD         43.0      -50            400.60
CHSDD0040    Chisawa      787,702     8,287,340          DD         43.0      -50            400.20
  TOTAL                                                                                     8,631.87

                                     Table 3: Kalulu

                                                                                         Total Metres
  BH ID     BH Locality    Easting    Northing         Drilling   Azimuth Inclination      ALL Rigs
                          ARC1950     ARC1950
                            UTM          UTM           Method
KLUDD0003      Kalulu     784,366     8,289,909         DD          320         -60         200.72
KLUDD0004      Kalulu     784,407     8,289,872         DD          320         -60         207.00
KLUDD0005      Kalulu     784,289     8,289,856         DD          320         -60         200.00
KLUDD0006      Kalulu     784,320     8,289,894         DD          320         -60         214.00
KLUDD0007      Kalulu     784,310     8,289,980         DD          320         -60         168.00
KLUDD0008      Kalulu     784,260     8,290,022         DD          320         -60         143.10
KLUDD0009      Kalulu     784,216     8,289,922         DD          320         -60         144.00
KLUDD0010      Kalulu     784,420     8,289,950         DD          320         -60         201.00
KLUDD0011      Kalulu     784,444     8,289,975         DD          320         -60         213.00
KLUDD0012      Kalulu     784,464     8,290,087         DD          320         -60         177.00
KLUDD0013      Kalulu     784,413     8,290,159         DD          320         -60         149.90
KLUDD0014      Kalulu     784,439     8,290,127         DD          320         -60         168.00
KLUDD0015      Kalulu     784,536     8,290,010         DD          320         -60         207.00
KLUDD0016      Kalulu     784,552     8,290,089         DD          320         -60         198.00
KLUDD0017      Kalulu     784,513     8,290,050         DD          320         -60         206.00


                                                                           30 September 2011
                                                                      Consolidated Financial Report     8


                                                                                              Total Metres
   BH ID       BH Locality     Easting       Northing      Drilling   Azimuth Inclination       ALL Rigs
KLUDD0018        Kalulu        784,628       8,290,150       DD         320       -60            193.90
KLUDD0019        Kalulu        784,591       8,290,118       DD         320       -60            209.80
KLUDD0020        Kalulu        784,696       8,290,154       DD         320       -60            225.00
KLUDD0021        Kalulu        784,660       8,290,179       DD         320       -60            201.00
KLUDD0022        Kalulu        784,700       8,290,221       DD         320       -60            192.00
KLUDD0023        Kalulu        784,592       8,290,258       DD         320       -60            162.00
KLUDD0024        Kalulu        784,705       8,290,297       DD         320       -60            171.00
KLUDD0025        Kalulu        784,744       8,290,303       DD         320       -60            201.00
KLUDD0026        Kalulu        784,747       8,290,392       DD         320       -60            156.00
KLUDD0027        Kalulu        784,845       8,290,292       DD         320       -60            248.50
KLUDD0028        Kalulu        784,815       8,290,331       DD         320       -60            204.00
KLUDD0029        Kalulu        784,851       8,290,356       DD         320       -60            200.50
KLUDD0030        Kalulu        784,884       8,290,383       DD         320       -60            204.00
KLUDD0031        Kalulu        784,927       8,290,423       DD         320       -60            201.00
KLUDD0032        Kalulu        784,999       8,290,429       DD         320       -60            242.90
KLUDD0033        Kalulu        784,968       8,290,461       DD         320       -60            200.80
KLUDD0034        Kalulu        784,896       8,290,494       DD         320       -60            160.00
KLUDD0035        Kalulu        784,950       8,290,493       DD         320       -60            179.80
KLUDD0036        Kalulu        785,030       8,290,206       DD         320       -60            401.70
KLUDD0037        Kalulu        784,430       8,289,717       DD         320       -60            261.00
KLUDD0038        Kalulu        784,573       8,289,832       DD         320       -60            400.00
KLUDD0039        Kalulu        784,144       8,289,740       DD         320       -60            400.00
KLUDD0040        Kalulu        784,662       8,290,114       DD         320       -60            231.00
KLUDD0041        Kalulu        784,740       8,290,254       DD         320       -60            231.80
KLUDD0042        Kalulu        784,729       8,290,184       DD         320       -60            234.00
KLUDD0043        Kalulu        784,969       8,290,392       DD         320       -60            240.00
KLUDD0044        Kalulu        784,826       8,290,249       DD         320       -60            300.00
KLUDD0045        Kalulu        784,881       8,290,323       DD         320       -60            231.00
KLUDD0046        Kalulu        784,782       8,290,299       DD         320       -60            250.00
                                                                                                9,530.42

2.2     Kalulu Prospect

2.2.1   Introduction
        A total of 44 Diamond holes for 9,530m were drilled for the period.

        Mineralisation at Kalulu has been interpreted to have a strike length in excess of 1.2km.
        Sulphide mineralisation is structurally controlled in a sheared, regional east-plunging
        syncline.

        Previous exploration drilling along strike of the geochemical anomaly, has been selectively
        in-filled between and along RC and DD drill sections, resulting in drill coverage required to
        advance the Kalulu prospect to a Mineral Resource Category (Figure 3).




                                                                               30 September 2011
                                                                       Consolidated Financial Report       9




Figure 3: Kalulu 2011 Drilled Holes


         Thus far significant intersections include 14m @ 1.0% TCu, 10m @ 1.2% TCu, 10m @ 1.1%
         TCu, 8m @ 1.3% TCu and 21m @ 0.8% TCu. Assay results to-date; confirm copper
         mineralisation is still open along and across strike with the potential to further increase the
         resource of the Kalulu prospect with future resource development drilling.

         It is encouraging to note that all 15 holes intercepted mineralisation at multiple depths,
         indicating the occurrence of multiple zones of mineralisation than previously interpreted,
         highlighting the significant undefined development potential of the Kalulu prospect.

2.2.2    Results
         Results received during the period are from 15 holes drilled along sections 10100E, 10150E,
         10200E, 10300E, 10400E, 10550E and 10600E, with significant intersections tabulated
         below.




                                                                                  30 September 2011
                                                                                        Consolidated Financial Report       10


                                       Table 4: Kalulu Prospect - DD Drilling Assay Results

                                         EOH
Hole ID     Easting   Northing    RL    Depth     Inclination   Azimuth   mFrom     mTo       mWidth   Cu%         Intercept
KLUDD0003   784362    8289900    683    200.72        -60         320      72.60    73.80       1.20   0.44    1.2m @ 0.44 % TCu
KLUDD0003   784362    8289900    683    200.72        -60         320      75.50    77.00       1.50   1.51    1.5m @ 1.51 % TCu
KLUDD0003   784362    8289900    683    200.72        -60         320     109.00   111.00       2.00   0.54    2.0m @ 0.54%TCu
KLUDD0003   784362    8289900    683    200.72        -60         320     157.00   159.00       2.00   0.78    2.0m @ 0.78%TCu
KLUDD0004   784406    8289873    687    207.00        -60         320      88.60    91.00       2.40   1.69    2.4m @ 1.69 % TCu
KLUDD0004   784406    8289873    687    207.00        -60         320     124.00   127.00       3.00   0.35    3.0m @ 0.35 % TCu
KLUDD0004   784406    8289873    687    207.00        -60         320     183.00   184.00       1.00   0.36    1.0m @ 0.36 % TCu
KLUDD0005   784290    8289850    682    200.00        -60         320      87.00   101.00      14.00   0.99   14.0m @ 0.99 % TCu
KLUDD0005   784290    8289850    682    200.00        -60         320     184.00   185.00       1.00   0.42    1.0m @ 0.42% TCu
KLUDD0005   784290    8289850    682    200.00        -60         320     187.00   188.00       1.00   0.35    1.0m @ 0.35% TCu
KLUDD0006   784320    8289894    687    214.00        -60         320      78.00    88.00      10.00   1.13   10.0m @ 1.13 % TCu
KLUDD0006   784320    8289894    687    214.00        -60         320      98.00    99.00       1.00   0.48    1.0m @ 0.48 %TCu
KLUDD0006   784320    8289894    687    214.00        -60         320     110.00   111.00       1.00   0.46    1.0m @ 0.46 %TCu
KLUDD0006   784320    8289894    687    214.00        -60         320     125.00   126.00       1.00   0.64    1.0m @ 0.64 %TCu
KLUDD0006   784320    8289894    687    214.00        -60         320     138.00   139.00       1.00   0.30    1.0m @ 0.30 %TCu
KLUDD0006   784320    8289894    687    214.00        -60         320     164.00   165.00       1.00   0.48    1.0m @ 0.48 %TCu
KLUDD0006   784320    8289894    687    214.00        -60         320     167.00   168.00       1.00   0.40    1.0m @ 0.40 %TCu
KLUDD0007   784310    8289981    687    168.00        -60         320      44.00    65.00      21.00   0.79   21.0m @ 0.79 % TCu
KLUDD0007   784310    8289981    687    168.00        -60         320      88.00    89.00       1.00   0.44    1.0m @ 0.44 %TCu
KLUDD0007   784310    8289981    687    168.00        -60         320      90.00    91.00       1.00   0.51    1.0m @ 0.51 %TCu
KLUDD0007   784310    8289981    687    168.00        -60         320      92.00    94.00       2.00   0.42    2.0m @ 0.42 %TCu
KLUDD0007   784310    8289981    687    168.00        -60         320     110.00   111.00       1.00   0.44    1.0m @ 0.44 %TCu
KLUDD0007   784310    8289981    687    168.00        -60         320     135.00   136.00       1.00   0.96    1.0m @ 0.96 %TCu
KLUDD0009   784216    8289922    654    144.00        -60         320      13.00    19.00       6.00   0.41    6.0m @ 0.39 % TCu
KLUDD0009   784216    8289922    654    144.00        -60         320      24.00    29.00       5.00   0.61    5.0m @ 0.61 % TCu
KLUDD0009   784216    8289922    654    144.00        -60         320      79.00    80.00       1.00   0.48    1.0m @ 0.48 % TCu
KLUDD0009   784216    8289922    654    144.00        -60         320      87.00    88.00       1.00   0.48    1.0m @ 0.48 % TCu
KLUDD0009   784216    8289922    654    144.00        -60         320      95.76    96.50       0.74   2.41    0.7m @ 2.41% TCu
KLUDD0009   784216    8289922    654    144.00        -60         320     103.00   104.00       1.00   1.04    1.0m @ 1.04 % TCu
KLUDD0011   784444    8289981    669    213.00        -60         320      13.00    17.00       4.00   0.62    4.0m @ 0.62 % TCu
KLUDD0011   784444    8289981    669    213.00        -60         320     133.00   139.00       6.00   0.83    6.0m @ 0.83 % TCu
KLUDD0011   784444    8289981    669    213.00        -60         320     145.60   148.46       2.86   0.57    2.9m @ 0.57 % TCu
KLUDD0011   784444    8289981    669    213.00        -60         320     188.80   191.00       2.20   0.55    2.2m @ 0.55 % TCu
KLUDD0011   784444    8289981    669    213.00        -60         320     194.00   203.87       9.87   1.20    9.9m @ 1.20 % TCu
KLUDD0012   784464    8290087    650    177.00        -60         320      56.00    59.70       3.70   0.70    3.7m @ 0.70 % TCu
KLUDD0012   784464    8290087    650    177.00        -60         320      82.00    83.35       1.35   1.54    1.3m @ 1.54 % TCu
KLUDD0012   784464    8290087    650    177.00        -60         320      84.00    85.00       1.00   0.57    1.0m @ 0.57 % TCu
KLUDD0013   784413    8290159    627    149.90        -60         320     125.00   127.00       2.00   0.43    2.0m @ 0.43 % TCu
KLUDD0015   784536    8290010    627    207.00        -60         320      84.00    86.00       2.00   0.48    2.0m @ 0.48 % TCu
KLUDD0015   784536    8290010    627    207.00        -60         320     108.00   108.80       0.80   3.96    0.8m @ 3.96 % TCu
KLUDD0015   784536    8290010    627    207.00        -60         320     113.00   121.00       8.00   1.28    8.0m @ 1.28 % TCu
KLUDD0016   784568    8290078    617    198.00        -60         320      75.00    76.00       1.00   0.57    1.0m @ 0.57 % TCu
KLUDD0016   784568    8290078    617    198.00        -60         320      79.00    85.00       6.00   0.66    6.0m @ 0.66 % TCu
KLUDD0017   784513    8290050    625    206.00        -60         320      82.00    89.00       7.00   0.77    7.0m @ 0.77 % TCu
KLUDD0017   784513    8290050    625    206.00        -60         320      94.00    99.00       5.00   1.07    5.0m @ 1.07 % TCu
KLUDD0017   784513    8290050    625    206.00        -60         320     197.00   198.00       1.00   0.45    1.0m @ 0.45 % TCu
KLUDD0018   784628    8290150    628    193.90        -60         320      67.80    77.00       9.20   0.88    9.2m @ 0.88 % TCu
KLUDD0018   784628    8290150    628    193.90        -60         320     163.00   165.00       2.00   0.89    2.0m @ 0.88 % TCu
KLUDD0020   784696    8290154    643    225.00        -60         320      48.00    50.00       2.00   0.75    2.0m @ 0.75% TCu
KLUDD0020   784696    8290154    643    225.00        -60         320      92.00    95.50       3.50   1.49    3.5m @ 1.49% TCu
KLUDD0020   784696    8290154    643    225.00        -60         320      97.00   100.00       3.00   0.51    3.0m @ 0.51% TCu
KLUDD0020   784696    8290154    643    225.00        -60         320     103.00   104.00       1.00   1.65    1.0m @ 1.65% TCu
KLUDD0020   784696    8290154    643    225.00        -60         320     165.00   166.00       1.00   0.39    1.0m @ 0.39% TCu
KLUDD0021    784660   8290179    636    201.00        -60         320      68.00    75.00       7.00   0.77    7.0m @ 0.77% TCu
KLUDD0021    784660   8290179    636    201.00        -60         320     143.00   145.00       2.00   0.82    7.0m @ 0.77% TCu




                                                                                                   30 September 2011
                                                                      Consolidated Financial Report      11



2.3     Chisawa Prospect

2.3.1   Introduction
        A total of 40 Diamond holes for 8,631m were drilled for the period.

        Mineralisation at Chisawa is interpreted to exceed greater than 3km in strike length,
        sulphide mineralisation to-date appears strongly associated with the limb of a major
        overturned SW dipping SE plunging synform structure.

        Assay results to-date from the resource development drilling has confirmed the potential for
        down dip and along strike extensions to the mineralisation, with a number of holes drilled
        failing to close off the mineralised system.

        Resource development drilling has also demonstrated increasing sulphide zonation with
        depth, with chalcopyrite transitioning to chalcopyrite-bornite mineralisation.

        Previous exploration drilling along strike of the geochemical anomaly has been selectively in-
        filled between and along RC and DD drill sections to a 100m x 100m grid.

        The principal aim of the in-fill resource drilling program was to increase the resource base
        and progress the current mineral classification in accordance to JORC guidelines (Figure 4).




                                                                                30 September 2011
                                                                   Consolidated Financial Report    12




Figure 4: Chisawa Drilled Holes

2.3.2    Results
         Results received during the reporting period are sourced from 14 DD holes along sections
         10200E, 10400E, 10600E, 10800E, 11000E and 11200E, with significant intersections
         tabulated below.




                                                                            30 September 2011
                                                                                       Consolidated Financial Report      13


                                     Table 5: Chisawa Prospect DD Drilling Assay Results

                                              EOH
  Hole_ID       Easting   Northing      RL   Depth    Inclination   Azimuth   mFrom      mTo     mWidth   Cu%         Intercept
 CHSDD0001     8287961    787550       707   180.00       -50        42.50    145.00    152.00     7.00   1.14    7.0m @ 1.14%TCu
 CHSDD0002     8287718    787872       702   123.80       -50        42.50     98.00    101.00     3.00   0.80    3.0m @ 0.80%TCu
 CHSDD0003     8287814    787444       703   300.20       -50        42.50    250.00    255.00     5.00   0.72    5.0m @ 0.72%TCu
 CHSDD0004     8287892    787482       692   251.00       -50        42.50    195.00    197.00     2.00   0.63    2.0m @ 0.63%TCu
 CHSDD0005     8287690    787607       697   251.00       -50        40.00    219.00    223.00     4.00   0.87    2.0m @ 0.87%TCu
 CHSDD0005     8287690    787607       697   251.00       -50        40.00    235.00    239.00     4.00   1.09    2.0m @ 1.09%TCu
 CHSDD0006     8287846    787711       697   152.00       -50        43.00    104.00    114.00    10.00   0.77   10.0m @ 0.77%TCu
 CHSDD0006     8287846    787711       697   152.00       -50        43.00    131.00    142.00    11.00   1.25   11.0m @ 1.25%TCu
 CHSDD0007     8287562    787755       690   250.97       -50        42.50    194.00    199.00     5.00   1.10    5.0m @ 1.10%TCu
 CHSDD0008     8287768    787665       706   192.90       -50        42.50    153.17    155.00     1.83   0.64    1.8m @ 0.64%TCu
 CHSDD0008     8287768    787665       706   192.90       -50        42.50    159.00    184.00    25.00   1.27   25.0m @ 1.27%TCu
 CHSDD0009     8287442    787919       697   250.20       -50        40.00     68.00     70.00     2.00   0.56    2.0m @ 0.56%TCu
 CHSDD0009     8287442    787919       697   250.20       -50        40.00    128.00    131.00     3.00   0.45    3.0m @ 0.45%TCu
 CHSDD0009     8287442    787919       697   250.20       -50        40.00    134.00    135.00     1.00   1.09    1.0m @ 1.09%TCu
 CHSDD0009     8287442    787919       697   250.20       -50        40.00    206.00    209.00     3.00   1.03    3.0m @ 1.03%TCu
 CHSDD0010     8287655    787812       689   200.74       -50        42.50     57.00     58.00     1.00   0.35    1.0m @ 0.35%TCu
 CHSDD0010     8287655    787812       689   200.74       -50        42.50     60.00     62.00     2.00   0.49    2.0m @ 0.49%TCu
 CHSDD0010     8287655    787812       689   200.74       -50        42.50    141.00    143.00     2.00   0.60    2.0m @ 0.60%TCu
 CHSDD0012     8287761    788031       682   150.34       -50        42.50     81.00     85.00     4.00   1.22    4.0m @ 1.22%TCu
 CHSDD0013     8287420    788155       675   200.73       -50        42.50     40.00     50.00    10.00   0.77   10.0m @ 0.77%TCu
 CHSDD0013     8287420    788155       675   200.73       -50        42.50    135.00    138.00     3.00   1.49    3.0m @ 1.49%TCu
 CHSDD0014     8287491    788207       677   150.00       -50        42.50     87.00     92.00     5.00   1.58    5.0m @ 1.58%TCu
 CHSDD0014     8287491    788207       677   150.00       -50        42.50    133.00    134.00     1.00   0.38    1.0m @ 0.38%TCu
 CHSDD0015     8287292    788312       685   200.90       -50        45.00     48.00     50.00     2.00   0.49   2.0m @ 0.49% TCu
 CHSDD0015     8287292    788312       685   200.90       -50        45.00    162.00    163.00    1.000   0.98   1.0m @ 0.98% TCu
NOTE: INTERCEPTS WERE CALCULATED @ 0.30% CU MINIMUM CUT OFF DOWNHOLE WIDTH



2.4      Kangaluwi Prospect

         The host rocks at the Kangaluwi Prospect are interpreted to consist of sheared and
         brecciated metasediments and metavolcanics of the Proterozoic-aged Muva group, striking
         northwest - southeast. Mineralisation dips moderately to the southwest at approximately
         30 – 40, within a sheared northern limb of an overturned, east-southeast plunging
         synform.

         Mineralisation at Kangaluwi consists of chalcopyrite, bornite, malachite and azurite.
         Chalcopyrite dominates in fresh rock, comprising disseminated - massive aggregates,
         spatially associated with cross cutting veins, breccias and shear zones. Mineralised zones
         average 10m in thickness, occasionally reaching 30m. Current interpretations suggest
         multiple mineralised zones may exist which broaden at depth and increase in grade, linked
         to the presence of bornite.

         During the period a deep hole drilling programme was undertaken consisting of 10 DD holes
         for 4,020m covering a strike length of 1,000m. The aim is to test the potential for down-dip
         extensions and to increase the resource base (Figure 5).




                                                                                                 30 September 2011
                                                                       Consolidated Financial Report       14




Figure 5: Kangaluwi Drilled Holes – Plan Section

3.       Chalimbana Resources Limited
         The Company intends to create a new company around its uranium prospects, held by its
         wholly owned subsidiary Chalimbana Resources Limited. This will form a new ASX listing and
         ZRL shareholders will, subject to regulatory requirements, get a preferential allocation of IPO
         subscription shares.

4.       Mpande Limestone Limited
         Mpande Limestone Limited, a wholly owned subsidiary of Mwembeshi Resources Limited
         (MRL) holds two tenements with a high quality limestone resource, close to the town of
         Chilanga, a well-known limestone and cement producing area.

         During the period a geological field reconnaissance survey has been undertaken by Caracle
         Creek International Consulting of Zambia (CCIC). The objective of the survey, to ascertain the
         geological resource potential of the tenement and to delineate future planned resource
         development drilling.

         The reconnaissance survey incorporated mapping of the limestone extents and gridded field
         rock chip sampling.

         Rock chip samples are to be dispatched to SGS of South Africa for analysis and a full report
         and results to be made available in January – February 2012.



                                                                                  30 September 2011
                                                                 Consolidated Financial Report      15


     Scoping studies will be undertaken once the final report has been received, with the aim to
     either develop the project exclusively or seek a farm-in arrangement with a suitable partner
     to quarry the limestone for the production of high quality metallurgical lime and other
     industrial commodity chemicals to supply Zambia’s Copperbelt and construction industry.

5.   Cheowa Resources Limited
     The Company has a 49% interest in Cheowa Resources Limited (Cheowa), a joint venture
     company with Glencore International AG (Glencore) who owns 51% (after spending $16
     million on the tenements). Cheowa has three prospects, Cheowa (6 Mt @ 1% Cu), Chayinda
     (3.3 Mt @ 2.1% Cu) and Chalimbana (5.3 Mt @ 0.8% Cu). Glencore is currently planning
     drilling programs and budgets to further the project development.

6.   Tenement Map




                                                                           30 September 2011
                                                                   Consolidated Financial Report   16



     7.      Tenement List



     MWEMBESHI                  CHALIMBANA             MPANDE LIMESTONE             CHEOWA RESOURCES
  RESOURCES LIMITED          RESOURCES LIMITED



 One (1) large scale         Five (5) Prospecting    Two (2) Prospecting         Three (3) Prospecting
  Mining Licence:              Licences:                Licences:                    Licences:
  - Kangaluwi                  - Sinjela                - Mpande A                   - Chalimbana
    15547-HQ-LML for a           13138-HQ-LPL             13172-HQ-LPL                 13170-HQ-LPL
    period of 25 years           (Exp. 11/03/13)          (Exp. 19/03/12)            - Chayinda
    (from 16.03.2011)                                                                  13171-HQ-LPL
                               - Mvula                 - Mpande B                    - Cheowa
 Three (3) Prospecting          13093-HQ-LPL            13173-HQ-LPL                  8573-HQ-LPL
  Licences:                      (Exp. 13/05/13)         (Exp 18/03/13)
  - Shamifwe
    13147-HQ-LPL               - Lwinba
    (Exp. 23/11/11)              13137-HQ-LPL
                                 (Exp. 11/03/13)
 - Mulungushi/Kamona
   8145-HQ-LPL                 - Chilanga
   (Exp. 09/03/12)               13094-HQ-LPL
                                 (Exp. 03/03/13)
 - Rufunsa
   8327-HQ-LPL                 - Mwomboshi
   (Exp. 30/01/13)               13140-HQ-LPL
                                 (Exp. 02/03/13)




                                                                              30 September 2011
                                                                                 Deloitte Touche Tohmatsu
                                                                                 ABN 74 490 121 060

                                                                                 Woodside Plaza
                                                                                 Level 14
                                                                                 240 St Georges Terrace
                                                                                 Perth WA 6000
                                                                                 GPO Box A46
                                                                                 Perth WA 6837 Australia

                                                                                 DX 206
                                                                                 Tel: +61 (0) 8 9365 7000
                                                                                 Fax: +61 (0) 8 9365 7001
                                                                                 www.deloitte.com.au
Independent Auditor’s Review Report
to the members of
Zambezi Resources Limited
We have reviewed the accompanying half-year financial report of Zambezi Resources Limited, which
comprises the condensed consolidated statement of financial position as at 30 September 2011, the
condensed consolidated income statement, condensed consolidated statement of comprehensive
income, the condensed consolidated statement of cash flows and the condensed consolidated
statement of changes in equity for the half-year ended on that date, notes comprising a summary of
significant accounting policies and other explanatory information, and the declaration of the directors
as set out on pages 21 to 33. The consolidated entity comprises the company Zambezi Resources
Limited and the entities it controlled at the end of the half year or from time to time during the half
year.

Directors’ Responsibility for the Half Year Financial Report

The directors of the company are responsible for the preparation and fair presentation of the half year
financial report in accordance with the International Financial Reporting Standard IAS 134 Interim
Financial Reporting and for such internal control as the directors determine is necessary for the
preparation of the half-year financial report that is free from material misstatement, whether due to
fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half year financial report based on our review. We
conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410
Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state
whether, on the basis of the procedures described, anything has come to our attention that causes us to
believe that the half year financial report is not presented fairly, in all material respects, in accordance
with the International Accounting Standard IAS 134 Interim Financial Reporting. As the auditor of
Zambezi Resources Limited, ASRE 2410 requires that we comply with the ethical requirements
relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical and other review procedures. A review
is substantially less in scope than an audit conducted in accordance with Australian Auditing
Standards and consequently does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do not express an audit
opinion.




Error! Not a valid filename.Member of Deloitte Touche Tohmatsu Limited
                                                             18
Conclusion

Based on our review, which is not an audit, nothing has come to our attention that causes us to believe
that the half year financial report of Zambezi Resources Limited does not present fairly, in all material
respects, the company’s financial position as at 30 September 2011 and of its financial performance
for the half-year ended on that date in accordance with International Accounting Standard IAS 134
Interim Financial Reporting as described in note 1.




DELOITTE TOUCHE TOHMATSU


Ross Jerrard
Partner
Chartered Accountants
Perth, 13 December 2011




                                                   19
                                                                    Consolidated Financial Report      20




Financial Report
Your directors submit the financial report of the Group for the half-year ended 30 September 2011.

Directors
The Directors who have held office during or since the end of the half-year are shown below
together with their holdings of ordinary fully-paid shares in which they have an interest, and share
options:

                          FULLY PAID ORDINARY SHARES
                                   HELD AS AT                        UNLISTED OPTIONS AT
       NAME                    30 SEPTEMBER 2011                      30 SEPTEMBER 2011
                              Direct          Indirect               Direct         Indirect
David Vilensky                   -            500,000                   -               -
Richard Procter                  -               -                      -               -
Simon Durack                     -               -                      -               -
Richard Procter                  -               -                      -               -


Review & Results of Operations
The net loss for the half-year ended 30 September 2011, after providing for income tax, amounted
to £1,029,178 (30 September 2010: loss of £950,120).

The principal activity of the economic entity during the half-year was the continued exploration for
commercially and economically viable mineral resources in Zambia.

Substantial Shareholders
The share register records the following interests for shares and options for holders with more than
3% of issued share capital as at 30 September 2011.

                   Shareholder                                Shares               Percentage %
RBC Dexia Investor Services Australia Nominees Pty
                                                           277,569,400                22.06%
Limited
Lando Pty Ltd                                               51,555,555                 4.10%




                                                                              30 September 2011
                                                                     Consolidated Financial Report    21



                  CONDENSED CONSOLIDATED INCOME STATEMENT
                   FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2011
                                                           SIX MONTHS              SIX MONTHS
                                               NOTES        30-Sep-11               30-Sep-10
                                                                £                       £

Investment Revenue
  Interest revenue                                                     46,309               19,456
Total Investment Revenue                                               46,309               19,456
Other Income
  Rental Income                                                        27,939               46,571
Total other income                                                     27,939               46,571

Other Expenses
  Auditors' remuneration                                              (14,309)             (12,258)
  Depreciation                                                         (9,677)                    -
  Lease costs                                                          (1,386)              (2,224)
  Travel                                                              (83,510)             (55,513)
  Consultants                                                        (287,324)            (127,444)
  Legal                                                               (39,218)             (27,168)
  Staff costs                                                        (110,589)            (110,327)
  Directors' fees                                                     (56,920)             (37,356)
  Share based payments                                                (10,187)            (216,541)
  Share registry costs                                                (23,561)              (5,533)
  Public relations                                                     (1,506)              (1,004)
  Contract accounting                                                  (2,500)              (4,005)
  Communications                                                       (9,826)             (10,301)
  Computing                                                            (4,724)              (5,655)
  Insurance                                                           (38,707)             (21,490)
  Printing & stationery                                                (4,872)                (693)
  Office Administration costs                                         (34,280)             (42,911)
  Hire costs                                                           (4,365)              (7,777)
  Regulatory & statutory costs                                         (3,913)              (9,696)
  Seminars & Conferences                                               (5,491)              (4,960)
  Exploration costs written off                                              -             (61,834)
  Other costs                                                        (356,561)            (251,457)
Total other expenses                                               (1,103,426)          (1,016,147)
Total expenses                                                     (1,103,426)          (1,016,147)

Loss before tax                                                    (1,029,178)            (950,120)
Income tax expense                                                           -                    -
Loss after taxation for the financial period                       (1,029,178)            (950,120)
Attributable to:
Equity holders of the Parent                                       (1,029,178)            (950,120)
Earnings per share
Basic and diluted loss per share                 4                     (0.001)              (0.001)

Notes to the Financial Statements are included on pages 26 to 32




                                                                                 30 September 2011
                                                                     Consolidated Financial Report    22



   CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
           FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2011


                                                           SIX MONTHS              SIX MONTHS
                                                            30-Sep-11               30-Sep-10
                                                                £                       £

Loss for the year                                                  (1,029,178)            (950,121)

Other comprehensive income
Exchange differences arising on translation of
foreign operations                                                    578,496              518,023

Total comprehensive loss for the year
attributable to owners of the Company                              (450,682)             (432,098)

Notes to the Financial Statements are included on pages 26 to 32




                                                                                 30 September 2011
                                                                     Consolidated Financial Report    23



         CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                        AS AT 30 SEPTEMBER 2011

                                                             30-Sep-11               31-Mar-11
                                            NOTES              £                       £
ASSETS

Current Assets
Cash and cash equivalents                                           3,336,649             3,358,242
Trade and other receivables                                            98,220                21,214
Prepayments                                                            12,792                 9,917
Total current assets                                                3,447,661             3,389,373

Non-current Assets
Property, plant and equipment                                          86,373                51,959
Investments in associates                                               5,021                 4,884
Exploration and evaluation                     7                    7,077,371             3,247,985
Total non-current assets                                            7,168,765             3,304,828
Total Assets                                                       10,616,426             6,694,201

LIABILITIES

Current Liabilities
Convertible Notes                              8                    3,150,367                     -
Trade and other payables                                            1,633,549               421,276
Provisions                                                              1,339                 1,259
Total current liabilities                                           4,785,255               422,535
Total liabilities                                                   4,785,255               422,535

Net assets                                                         5,831,171             6,271,666

Equity

Capital and reserves
Issued capital                                 6                  8,513,564               8,513,564
Reserves                                                         26,038,888              25,450,205
Accumulated loss                                               (28,721,281)            (27,692,103)
Equity attributable to owners of the
Company                                                             5,831,171             6,271,666

Total equity                                                       5,831,171             6,271,666



Notes to the Financial Statements are included on pages 26 to 32




                                                                                30 September 2011
                                                                     Consolidated Financial Report   24



       CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
             FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2011


                                              NOTES      SIX MONTHS             SIX MONTHS
                                                           30-Sep-11              30-Sep-10
                                                               £                      £
  Issued Capital
  Opening balance                                                   8,513,564           3,942,271
  Issued during the period                                                  -           4,358,852
  Closing balance                                6                  8,513,564           8,301,123
  Share Premium Reserve
  Opening balance                                                  21,132,263         21,132,263
  Premium on shares                                                         -                  -
  Less capital raising costs                                                -                  -
  Closing balance                                6                 21,132,263         21,132,263
  Options & Warrants Reserve
  Opening balance                                                   2,478,509           2,057,034
  Options issued during the period                                          -                   -
  Share based payments                                                 10,187             421,475
  Closing balance                                                   2,488,696           2,478,509
  Accumulated Losses
  Opening balance                                              (27,692,103)          (25,575,583)
  (Loss) for the period                                         (1,029,178)             (950,121)
  Closing balance                                              (28,721,281)          (26,525,704)
  Foreign Currency Translation Reserve
  Opening balance                                                   1,839,433           1,066,775
  Other comprehensive income for the year                             578,496             518,023
  Closing balance                                                   2,417,929           1,584,798
  Total Equity                                                      5,831,171           6,970,989

Notes to the Financial Statements are included on pages 26 to 32




                                                                                30 September 2011
                                                                     Consolidated Financial Report   25



             CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2011


                                                                   SIX MONTHS        SIX MONTHS
                                                                    30-Sep-11         30-Sep-10
                                                                        £                 £
Cash flows from operating activities
Receipts from customers                                                    27,939              46,571
Payments to suppliers and employees                                     (675,687)           (430,053)
Net cash (used in)operating activities                                  (647,748)           (383,482)

Cash flows from investing activities
Payments for mineral interests                                         (2,429,625)          (436,415)
Purchase of property, plant and equipment                                 (39,572)                  -
Interest received                                                           46,309             19,456
Net cash utilised by investing activities                              (2,422,888)          (416,959)

Cash flows from financing activities
Proceeds from issue of share capital                                            -           4,882,466
Proceeds from issue of converting notes                                 3,193,515                   -
Payment for convertible note issue costs                                 (44,858)           (305,895)
(Repayment) of borrowings                                                       -           (629,272)

Net cash used in financing activities                                   3,148,657           3,947,299


Net increase in cash and cash equivalents                                  78,021           3,146,858
Cash and Cash equivalents at beginning of the period                    3,358,242             863,162
Effects of exchange rate changes on the balance of cash held in
foreign currencies                                                       (99,614)                -
Cash and cash equivalents at the end of period                          3,336,649           4,010,020


Notes to the Financial Statements are included on pages 26 to 32




                                                                              30 September 2011
                                                                     Consolidated Financial Report       26



     NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2011


1.    Statement of compliance
      The Half Year report is a general purpose financial report prepared in accordance with
      International Financial Reporting Standard IAS 34 ‘Interim Financial Reporting’. The Half
      Year financial report does not include notes of the type normally included in an annual
      financial report and should be read in conjunction with the most recent annual financial
      report.


      Basis of preparation
      The financial report has been prepared on the going concern basis, which contemplates the
      continuity of normal business activity and the realisation of assets and the settlement of
      liabilities in the normal course of business.

      The Consolidated Entity has incurred a net loss after tax for the half year ended 30
      September 2011 of £1,029,178 (30 September 2010: loss of £950,120) and experienced net
      cash outflows from operating activities of £647,748 (2010: £383,482). As at 30 September
      2011 the Consolidated Entity had a net current asset deficit of £1,337,594 (31 March 2011:
      net current asset surplus of £2,966,838). The net current asset deficit position is as a result
      of the classification of Tranche A of the Convertible Note facility (described below) as a
      current liability.

      During the half year to 30 September 2011 and the period to date of this report, the
      Directors have taken steps to ensure the Consolidated Entity continues as a going concern as
      detailed below.

       The Company announced on 25 July 2011 that it had accepted an offer from LinQ Capital
      Limited as responsible entity of the LinQ Resources Fund (LRF) for the provision of a secured
      A$10 million convertible note facility, in two tranches of A$5 million each. On 28 September
      2011, the Company announced that it has drawn down A$5 million (Tranche A) of the A$10
      million convertible note facility (Facility). The key terms of the facility is set out in Note 8
      (“Convertible Notes”) of these financial statements.

      In order to qualify for Tranche B, the Company is to undertake a A$4 million Rights Issue
      before 31 December 2011. If there is a shortfall from this Rights Issue (Shortfall Proceeds),
      the Company will endeavour to raise the Shortfall Proceeds in equity before 30 June 2012. If
      the Company is unable to raise the shortfall as required by the Facility, then it may need to
      renegotiate the terms of the Facility with LRF. As such, Tranche A is therefore classified as a
      current liability and Tranche B is not available to be drawn down until the conditions of
      Tranche A are met.




                                                                               30 September 2011
                                                                   Consolidated Financial Report       27



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR
      THE HALF-YEAR ENDED 30 SEPTEMBER 2011 – CONTINUED

   On 1 December 2011, the Company announced the rights issue to raise the $A4 million. The
   Rights Issue would provide existing shareholders the opportunity to participate in the
   funding package and is expected to be closed by 29 December 2011.

   The funds raised by the Facility and the Rights Issue will be applied by Zambezi towards
   working capital and exploration and development costs associated predominantly with its
   Kangaluwi Copper Project. These facilities would provide the Company with valuable funding
   for the following:
        Additional step out and infill drilling for resource expansion and definition at Chisawa,
        Kangaluwi and Kalulu deposits (Kangaluwi Project);
        Deeper drilling of the structures for stratigraphic control as well as to determine the
        down dip extent of the mineralisation;
        Testing additional oxide potential above the mineralised sulphide material with as
        shallow drilling program;
        Finalising the feasibility study for the development of the Kangaluwi Project

   Zambezi anticipates that the funding will be sufficient to finalise the above activities over the
   ensuing 12-18 months.

   The ability of the Consolidated Entity to continue as a going concern and to pay its debts as
   and when they fall due is dependent on the following:

   (i)   ongoing and active management of the expenditure incurred by the Consolidated Entity
         to protect the current cash levels;
   (ii) successful completion of the Rights Issue described above by 31 December 2011, or
         alternatively the successful raising of any shortfall by 30 June 2012;
   (iii) the Directors’ ability to manage the quantum and timing of all discretionary
         expenditures including exploration and development costs, and wherever necessary,
         these costs will be minimised or deferred to suit the Consolidated Entity’s cash flow
         from operations; and
   (iv) continued ongoing support from the Company’s key shareholder – LRF

   The Directors have reviewed the Consolidated Entity’s overall position and outlook in
   respect of the matters identified above and are of the opinion that the use of the going
   concern basis is appropriate in the circumstances.

   Should the Consolidated Entity be unable to continue as a going concern, it may be required
   to realise its assets and extinguish its liabilities other than in the normal course of business
   and at amounts different from those stated in the financial report.

   The financial report does not include any adjustments relating to the recoverability and
   classification of recorded asset amounts or to the amounts and classification of liabilities
   that may be necessary should the Consolidated Entity be unable to continue as a going
   concern.


                                                                             30 September 2011
                                                                      Consolidated Financial Report      28



     NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR
           THE HALF-YEAR ENDED 30 SEPTEMBER 2011 – CONTINUED

2.      Significant accounting policies
        Zambezi Resources Limited is a company registered and domiciled in Bermuda. The
        condensed financial statements have been prepared under the historical cost convention.

        The same accounting policies and methods of computation are followed in these condensed
        financial statements as compared with the most recent annual financial statements for the
        year ended 31 March 2011. These accounting policies are consistent with the International
        Financial Reporting Standards.

        There were no new or revised Standards and Interpretations effective for the current
        reporting period.

3.      Segment Information
        The consolidated entity has adopted IFRS 8 Operating Segments with effect from 1 April
        2009. IFRS 8 requires operating segments to be identified on the basis of internal
        reports about components of the consolidated entity that are regularly reviewed by the
        Board of Directors in order to allocate resources to the segment and to assess its
        performance. In contrast, the predecessor Standard (IAS 14 Segment Reporting) required
        an entity to identify two sets of segments (business and geographical), using a risks and
        rewards approach, with the entity’s system of internal financial reporting to key
        management personnel’ serving only as the starting point for the identification of such
        segments.

        As a result, following the adoption of IFRS 8, the identification of the consolidated entity’s
        reportable segments has not materially changed.

        Information reported to the consolidated entity’s Board of Director’s for the purposes of
        resource allocation and assessment of performance is specifically focused on the
        development and commercialisation of the Kangaluwi Copper prospect as well as the
        assessment and evaluation of the Chingola Rock Dumps projects. The consolidated entity’s
        reportable segment under IFRS 8 is therefore as follows:

                Exploration and evaluation

        Exploration and evaluation expenditure relates mainly to the greater Kangaluwi Copper
        Project which consists of the Kangaluwi, Chisawa, and Kalulu prospects and a number of
        unnamed targets, and covers approx. 25% of the Zambezi licence area PL 214.

        Information regarding the segment is presented on the next page.




                                                                                30 September 2011
                                                                          Consolidated Financial Report        29



  NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR
        THE HALF-YEAR ENDED 30 SEPTEMBER 2011 – CONTINUED


The following is an analysis of the consolidated entity’s results by reportable operating segment
for the periods under review:

                                                                                SEGMENT LOSS
                                                                            30-Sep-11        31-Mar-11
                                                                             £                £

Continuing operations
Exploration and evaluation                                                   (1,029,178)            (2,116,520)

Consolidated segment loss for the period                                    (1,029,178)            (2,116,520)


The following is an analysis of the consolidated entity's liabilities by reportable operating segment:

                                                                               SEGMENT ASSETS
                                                                            30-Sep-11        31-Mar-11
                                                                             £                £

Continuing operations
Exploration and evaluation                                                   10,530,053              6,694,201
Unallocated corporate assets                                                     86,373                    -

Consolidated segment assets                                                10,616,426               6,694,201


The following is an analysis of the consolidated entity's liabilities by reportable operating segment:

                                                                             SEGMENT LIABILITIES
                                                                            30-Sep-11         31-Mar-11
                                                                             £                 £

Continuing operations
Exploration and evaluation                                                    1,634,888                  422,535

Consolidated segment liabilities                                             1,634,888                   422,535




                                                                                     30 September 2011
                                                                         Consolidated Financial Report          30



     NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR
           THE HALF-YEAR ENDED 30 SEPTEMBER 2011 – CONTINUED


4.       Loss Per Share

         The calculation of the basic and diluted loss per share is based on the following information:



EARNINGS                                                             SIX MONTHS            SIX MONTHS
                                                                     30 SEP 2011           30 SEP 2010
                                                                           £                     £
Earnings for the purpose of basic and diluted loss per share             (1,029,178)            (950,120)
(loss for the period attributed to equity holders of the Parent)


SHARES
Basic weighted average number of ordinary shares on issue                1,128,456,904         811,690,966
                                                                             £                    £
Basic (loss) per share                                                          (0.001)             (0.001)

The following potential ordinary shares are not dilutive and are therefore excluded from the weighted
average number of ordinary shares:
Listed Options                                                                     -                 -
Unlisted Options                                                        149,500,000       183,750,000
Staff & director options                                                 10,000,000          6,000,000
                                                                        159,500,000       189,750,000



5.       Dividends

         No dividends were paid or proposed during the financial period.


6.       Issued Capital

         Authorised 1,500 million ordinary shares of par £0.01 each, carrying one vote per share and
         rights to dividends:

                                           NUMBER                                   ISSUED           SHARE
                                         OF SHARES      PROCEEDS     COSTS         CAPITAL        PREMIUM
                                                           £         £               £              £
Issued and fully paid ordinary shares
As at 1 April 2011                      1,258,456,904                              8,513,564      21,132,263
Allotments                                          -      -         -                     -                -

 Balances as at 30 September 2011       1,258,456,904      -         -             8,513,564      21,132,263




                                                                                   30 September 2011
                                                                      Consolidated Financial Report        31



       NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
         FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2011 – CONTINUED

7.     Exploration and Evaluation

                                                                    SIX MONTHS
                                                                    30 SEP 2011      31 MARCH 2011
                                                                         £                 £
Costs
As at 1 April                                                           3,247,985           2,595,887
Additions                                                               4,211,353           1,055,602
Impairment loss recognised through profit and loss                              -           (370,156)
Foreign exchange translation                                            (381,967)             (33,348)
Closing balance                                                         7,077,371           3,247,985

       The ultimate recoupment of costs for areas of interest in the exploration and evaluation
       phases is dependent on the successful development and commercial exploitation, or
       alternatively, sale of the respective areas. The commercial exploitation of some areas of
       interest may require the satisfactory settlement of land title claims. The carrying value of the
       above exploration expenditure is dependent on the current ongoing title of tenure. The
       Directors have assessed the Company’s position and believe no adjustment to the
       capitalised costs above is necessary at the date of this report.

8.     Convertible Notes

       On 28 September 2011, the Company had drawn down A$5 million (Tranche A) of the A$10
       million convertible note facility.
       The key terms of the Facility are as follows:
            There are two Tranches of convertible notes of A$5 million each.
            Each Tranche have a term of 24 months and the notes carry a coupon of 10% p.a.
            Tranche A is convertible into ordinary shares at a 20% premium to the Rights Issue price
            and Tranche B at a 20% premium to the volume-weighted average price of Zambezi
            shares over the 5 trading days preceding the delivery by LRF of a conversion notice.
            Tranche A and B can alternatively at the election of LRF each be converted into a 12.5%
            joint venture interest in the Projects, or to convert part of Tranches A and B into shares
            and part into a pro rata joint venture interest in the Projects.
            If LRF elects to take up a joint venture interest in the Projects, then Zambezi and LRF will
            form a joint venture for the development of the Projects in the relevant proportions.
            Zambezi will be the Operator of the joint venture and will govern the operating
            committee as majority interest holder. LRF will be able to elect to contribute, sell or
            dilute its interest during the term of the joint venture.
            The terms of Tranche B of the Facility includes the condition that if the Rights Issue does
            not raise at least A$4 million, the Company will use best endeavors to raise any shortfall
            by 30 June 2012 through a further equity raising. If the Company is unable to raise the
            shortfall as required by the Facility, then it may need to renegotiate the terms of the




                                                                                 30 September 2011
                                                                        Consolidated Financial Report       32



     NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR
           THE HALF-YEAR ENDED 30 SEPTEMBER 2011 – CONTINUED

            Facility with LRF. This may also materially impact on its ability to implement its plans in
            the manner set out above and its ability to continue as a going concern.


9.      Commitments and Contingencies

        Operating leases: non-cancellable lease rentals are payable as follows:

                                                                     30 SEP 2011       31 MARCH 2011
                                                                          £                  £

 Less than one year:                                                         13,168              97,661
 Between one and five years:                                                 84,440               8,878
                                                                             97,608             106,539

        The Group leases its Australian offices under an operating lease. The current lease runs for
        another three year period. Lease payments are reviewed annually to reflect market rentals.



10.     Post-balance sheet events

        On 25 November 2011, Zambezi Resources Limited (Company) announced plans to
        undertake a Non-Renounceable Rights Issue to raise up to $A4.2 million.

        In terms of the Company’s A$10 million convertible note facility (Facility) with LinQ Capital
        Limited as responsible entity for the LinQ Resources Fund (LRF), announced on 25 July 2011,
        Zambezi committed to raise A$4 million under a Rights Issue offering by 31 December 2011.
        However, if the Rights Issue does not raise A$4 million, the Company will use best
        endeavours to conduct a further equity raising for any shortfall before 30 June 2012.

        Under the proposed Rights Issue, eligible shareholders will be invited to subscribe for 1 new
        ordinary Zambezi share for every 3 existing shares held on the record date at a price of 1
        cent per share to raise approximately A$4.2million.

        Other than the above, no item, transaction or event of a material and unusual nature has
        arisen that is likely, in the opinion of the Directors, to affect significantly the operations of
        the economic entity, the results of these operations, or the state of affairs of the entity, in
        future financial periods.

11.     Approval of Interim Financial Statements

        The interim financial statements were approved by the board of directors on 13 December
        2011.




                                                                                   30 September 2011

				
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