AVOCET MINING PLC - annualreports.co.uk · Avocet Mining PLC Annual Report and Accounts 2008 1 PROFITABLE PRODUCER, CLEAR GROWTH STRATEGY PENJOM MALAYSIA INDONESIA GOLD MINING OPERATION

Avocet Mining PLC

7th Floor

9 Berkeley Street

London W1J 8DW

Tel +44 (0) 20 7907 9000

Fax +44 (0) 20 7907 9019

E-mail [email protected]

www.avocet.co.uk

GROWTH AND OPERATIONAL EXCELLENCE

Annual Report and Accounts for the year ended 31 March 2008

AV

OC

ET M

ININ

G PLC

AN

NU

AL REPO

RT AN

D A

CC

OU

NTS 2008

AVM_AR_2008_cover-AWK-final:AVM_AR_cover_2004_prf3 4/8/08 14:42 Page 1

HIGHLIGHTS FOR THE YEAR ENDED 31 MARCH 2008

Avocet Mining PLC Annual Report and Accounts 2008

CONTENTS2 Gold mines in production

6 Chairman’s statement

8 Chief Executive Officer’s statement

10 The gold market

12 Operating review

28 Resources and reserves

30 Health, safety and environment

34 Community relations

38 Financial review

42 Current board of directors and senior management

44 Report of the directors

46 Report on corporate governance

49 Report on directors’ remuneration

53 Report of the independent auditor (Group)

54 Consolidated income statement

55 Consolidated balance sheet

56 Consolidated statement of changes in equity

57 Consolidated cash flow statement

58 Notes to the financial statements

87 Report of the independent auditor (Company)

88 Company balance sheet

96 Shareholder information

97 Annual general meeting

99 Notice of meeting

101 Directors and advisers

101Avocet Mining PLC Annual Report and Accounts 2008

DIRECTORS AND ADVISERS

EXECUTIVE DIRECTORS

J G Henry – Chief Executive Officer

A M Norris – Finance Director

NON-EXECUTIVE DIRECTORS

N G McNair Scott – Chairman

Sir Richard Brooke Bt.

M J Donoghue

J F Newman

R A Pilkington

R S Robertson

COMPANY SECRETARY AND REGISTERED OFFICE

A P McFarlane

7th Floor, 9 Berkeley Street

London W1J 8DW

REGISTRARS AND TRANSFER OFFICE

Equiniti Registrars

Aspect House

Spencer Road

Lancing

West Sussex BN99 6DA

BANKERS

Barclays Bank PLC

Macquarie Bank Limited

Standard Chartered Bank

NOMINATED ADVISER

Ambrian Partners Limited

STOCKBROKERS

JPMorgan Cazenove Limited


AUDITORS

Grant Thornton UK LLP

SOLICITORS

Field Fisher Waterhouse

Design Mustbethebest Printing Dexter Graphics

+161%operating cash flow at US$61.3 million

+10%production from continuingoperations at 157,907oz

-10%cash costs from continuing operations down at US$316/oz

US$122millioncash at year end and no debt

+126%profit before tax and exceptionals at US$52.4 million



PROFITABLE PRODUCER, CLEAR GROWTH STRATEGY

PENJOM MALAYSIA

INDONESIA

GOLD MINING OPERATION

EXPLORATION PROJECTS

NORTH LANUT

THAILAND

CAMBODIA

VIETNAM

BRUNEI

PHILIPPINES

LAOS

PAPUA NEW GUINEA

Avocet is a successful, profitable gold mining company with

existing strengths in Indonesia and Malaysia and a focus

on expansion.

The Company has two operating gold mines generating strong

cash flow, a new mine in the making, a pipeline of exciting

exploration projects, and excellent management teams.

Within five years, Avocet intends to become a mid-tier

gold producer with a ten year reserve base.

Avocet AR-1-37_AWK_final:Layout 1 4/8/08 15:43 Page 1

2 Avocet Mining PLC Annual Report and Accounts 2008

GOLD MINES IN PRODUCTION – MALAYSIA

Gold mining in the area of Penjom dates back to the

19th century

PENJOM GOLD MINEThe Penjom gold mine is Malaysia's largest gold producer and

was developed by Avocet after applying modern technology to

grass roots exploration in an area of historic mining. The mine

was commissioned in December 1996 with reserves of 223,000

ounces. Successful resource development, particularly over the

last five years, means Penjom has produced over one million

ounces of gold to date and still has nearly one million ounces of

resource. This resource is expected to grow further following a

drilling programme expected to total 70,000 metres over the

next year which includes deep drilling to help assess the

potential for underground mining in the near future, where areas

of high grade ore are known to exist. In November 2005, the

Company announced a significant increase in Penjom’s life of

mine plan to over half a million ounces, which resulted in the

design of a much larger pit to allow the additional ounces to be

mined. Over the last year Penjom has expanded its mining and

plant capacity accordingly.

Avocet was able to overcome initial problems of highly

carbonaceous ore at Penjom by developing unique processing

systems including complex gravity circuits and resin-in-leach

(RIL) technology. These processes have potential applications at

other carbonaceous orebodies.

Penjom is Malaysia’s largest gold producer and was developed byAvocet from grass roots exploration



longer mine lives...

1million ozof gold produced – one millionstill in resource

12yearsof mining, many more to come



NORTH LANUT GOLD MINEThe North Lanut gold mine in North Sulawesi, Indonesia, was

developed by Avocet from the exploration stage and has

produced nearly 200,000 ounces since it was commissioned in

2004, including record production in the year ended 31 March

2008 of 74,183 ounces. Recent high grade exploration drilling

results indicate the potential for a significant increase in resources

and extension in the mine’s life. In 2002 Avocet purchased its

80 per cent interest in PT Avocet Bolaang Mongondow (PT ABM),

an Indonesian company holding a 6th generation Contract of

Work (CoW), from Newmont Mining Corporation.

The North Lanut gold mine is located within the CoW, which

includes exploration and mining rights over approximately 50,000

hectares in an area highly prospective for gold. An Indonesian

company, PT Lebong Tandai, owns the remaining 20 per cent.

Recent high grade explorationdrilling results indicate thepotential for a significant increasein resources and extension in the mine’s life

Nearly

200,000ozproduced since commisioning in 2004

GOLD MINES IN PRODUCTION – INDONESIA



...increased resources

+15g/tintercepts in deep sulphide drilling

20%growth in resource ounces atNorth Lanut before depletion

AVOCET AT A GLANCE (CONTINUED)



I am pleased to report on a year that has seen significant and

successful changes for your Company. Following the disposal

of the loss making ZGC operation in Tajikistan last year, the board

and management have been able to concentrate on growth

while also improving operational performance, which has

allowed for an increase in production from the Company’s two

operating assets. Unit costs have been reduced to levels below

those of the previous year and lower than the industry average.

In Malaysia, the Penjom mine completed the commissioning

of a new mining fleet and a higher capacity mill as part of the

expansion announced last year to maintain gold production

levels despite an anticipated decline in grades. In Indonesia,

North Lanut mine in North Sulawesi achieved record gold

production, benefiting from significantly higher than expected

grades. Both operations announced upgrades to their resources

and reserves during the year and resource development

drilling is in progress to extend the lives of both mines. The

Company has now assembled a comprehensive pipeline of

exploration properties which, together with continued

exploration at both mine sites, is forecast to add significant

resources over the coming year.

THE WAY FORWARDThe Company has a clear strategy of growth underpinned by

operational excellence at its existing mines and future projects

in order to maximise their combined value to shareholders.

Avocet’s goal is to develop from a producer of approximately

160,000 ounces to a mid-tier producer of 300,000 – 500,000

ounces over the next five years, through both internal growth

and growth by acquisition. Avocet’s central and operational

management teams have been enhanced during the last year to

ensure the strength in depth required to meet these objectives.

Resource development at Penjom and North Lanut will be an

important part of the Company’s growth, recognising the

significant potential at both operations and the lower risk

attached to expanding existing operations. The development of

Bakan in Indonesia as the Company’s third mine is also an area

“Both operations announcedupgrades to their resources and reserves during the year”

• Clear strategy of growth andoperational excellence

• Management strength in depth

• Acquisitions only where there is a clear and compelling case for increased long term shareholder value

CHAIRMAN’S STATEMENT



of focus over the next two years. For new projects, priority will

be given to those capable of producing over 100,000 ounces per

annum and to those with resources of one million or more

ounces. Avocet’s strong pipeline of exploration properties

means that such mines may come from internal development as

well as through acquisition. However, the lead time of two to

four years required before internal developments can be

commissioned means that in the short term new mines will

need to come through acquisition. As noted at the half year,

acquisitions will only be contemplated where there is a clear and

compelling case for increased long term shareholder value, and

a number of possible targets have been rejected during the year

where this case was not apparent.

GOLD MARKETHigh gold prices continued throughout the year, driven by

US dollar weakness, increasing oil prices and strong speculative

inflows especially to the exchange traded gold funds or ETFs.

Spot prices peaked at an intraday high of over US$1,030/oz

in mid-March 2008 and averaged US$766/oz for the year,

22 per cent above the previous year. Following a restructuring of

the Company’s gold collar in October 2007, all of Avocet’s sales

have been at spot prices, 26 per cent higher than in the previous

year, and will continue at spot for the next year.

OUTLOOKGold prices remain robust and most industry commentators

are forecasting further price rises in the short to medium term.

The mining industry is experiencing significant cost inflation,

driven by higher fuel prices and the indirect impact on delivered

prices for most of the raw materials consumed. With higher

input costs, maximising gold production and operational

efficiencies will be critical to reducing unit costs and increasing

profitability. Strong cost control will continue to be a top priority

in order to maintain the Company’s position as a low cost gold

producer. Avocet will continue to invest in equipment and

infrastructure at Penjom and North Lanut in order to address the

key challenges of grade and recovery respectively. Continued

exploration success is likely to add significant value, with our

exploration portfolio including a number of projects that have the

potential to be future mines for the Company.

I thank all our employees for the successful year just ended and

look forward to our continued growth.

Nigel McNair Scott

8 July 2008

“All of Avocet’s sales have been at spot prices, 26 per cent higherthan in the previous year, andwill continue at spot for thenext year”



The first year of my tenure as Chief Executive identified a

number of initiatives that needed to be implemented in order to

improve operations and divest non-core assets. The past year

has seen this implementation. This has not been without its

challenges and more hard work will be required in the year ahead

as we strive to deliver shareholder value in a challenging market

environment. Operational highlights include a 10 per cent growth

in continuing operations gold production to 157,907 ounces, at a

cash cost of US$316/oz which was well below average industry

costs and placed the Company in the lower quartile of cash costs

for gold producers globally. The work undertaken, and ongoing,

at both Penjom and North Lanut ensures the Company’s mines

are well positioned to face future challenges and exploit

opportunities. This includes the expansion at Penjom to offset

the impact of lower grades, and initiatives at North Lanut

to optimise gold recovery as we encounter higher grades than

previously modelled and the transition to more sulphidic ore.

The sale of ZGC in Tajikistan has allowed the Company to pursue

a clear strategy of growth and operational excellence.

GROWING AMBITIONSAvocet will continue to invest in its existing operations to expand

resources and mine lives, and by leveraging off its expert

employees and the infrastructure already in place. Investment in

the Company’s existing operations also provides a firm platform

for greenfield exploration and acquisitions in the region. The

Company has invested US$20.0 million in equipment and

infrastructure for Penjom’s expansion, and resource

development programmes are ongoing at both mines. These

have already generated good results. At the end of the year the

Company announced an increase in Penjom resources following

over 27,000 metres of predominantly infill drilling to November

2007. Over the next year a programme of step out drilling will

take place at Penjom of more than 70,000 metres, including deep

drilling to assess the potential for deeper extensions to the

orebody that may allow for underground mining. In December

2007 North Lanut announced an increase in resources from the

comparatively modest 5,500 metres drilled. In the next year

some 30,000 metres will be drilled in the North Lanut area of

interest. Encouraging results have already been announced in

May 2008, indicating that the trend of higher grades than in the

current resource model is likely to continue at North Lanut albeit

with a trend towards more sulphidic material.

In April 2008 the Company announced its decision to re-scope

the Bakan project in order to enhance the value of the new mine,

as the higher grades experienced this year at North Lanut are

expected to have implications for the Bakan resource. Given the

similar diamond drilling method applied in previous resource

• Unit costs below industryaverage

• Continued investment inexisting operations to extendmine lives

• Several exploration prospectseach with potential for over one million ounces of resource

• Record profits and cash generation

CHIEF EXECUTIVE OFFICER’S STATEMENT

“Deep drilling at Penjom to assesspotential underground mining”



definition drilling at Bakan and the similar metallurgy to

North Lanut, management believes that the grades at Bakan also

have the potential to be understated. The re-scoping will involve

reassessing ore grades, further drilling to add resources, especially

in prospective areas with limited or no drilling, optimising

the mine’s infrastructure, equipment and processes, including

crushing to enhance recoveries, and obtaining all permitting

approvals required for the re-scoped project.

Greenfield exploration during the year focused principally in

Indonesia and more particularly on the Banda properties

announced last year. Management believes that several of these

prospects have potential for over a million ounces of resource,

with initial positive results being announced in December 2007

at the most advanced project, Doup, and more recently at the

Tanoyan prospect. The portfolio of greenfield exploration projects

continues to be enhanced, with the most recent addition,

Seruyung in north east Kalimantan, soon to be drilled following

agreement of an earn-in on this highly prospective property with

potential for low cost dump leaching. Within its strong pipeline

of prospects, the Company intends to concentrate its efforts on

those with the potential to become mines producing +100,000

ounces per annum and/or with a million ounces of resource.

Smaller exploration properties are likely to be disposed for value,

as occurred with the Buffalo Reef prospect sold during the year for

a US$8.0 million profit, unless synergies with our other operations

justify a lower production threshold.

Avocet intends to generate growth both organically and through

acquisition. In accordance with this strategy, the Company has

reviewed acquisition opportunities from time to time and will

continue to do so.

FINANCIAL RESULTSThe combination of a 10 per cent increase in ounces produced,

lower cash costs and average gold prices received 26 per cent

higher than in the year to 31 March 2007 resulted in profit

before tax and exceptionals of US$52.4 million, an increase of

126 per cent compared with the previous year. These figures

exclude profits on disposals totaling US$21.2 million which the

Group made in the first half of the year on the sale of ZGC and

the Buffalo Reef prospect in Malaysia. They also exclude an

unrealised, non-cash mark to market loss of US$36.0 million on

the Company’s gold collar as required by IFRS. Cash generated

from operating activities of US$61.4 million was 161 per cent

higher than the previous year, while net assets at 31 March 2008

of US$168.2 million were 22 per cent higher than at 31 March

2007. At the year end the Group had US$122.6 million of cash

and no debt.

Gold production from continuing operations grew by 13,771 ounces

to 157,907 ounces, a rise of 10 per cent. This increase reflects a

reduction of 12,242 ounces (13 per cent) at Penjom, more than

compensated for by an increase of 26,013 ounces (54 per cent)

at North Lanut, with both variances being heavily influenced by

fluctuations in grade. As anticipated, Penjom’s milled grade fell in

the year as the mine transitions from a high grade operation to a

larger mine at lower grades: the grade dropped 15 per cent from

5.67 g/t to 4.84 g/t. Although the nature of Penjom’s orebody

means that grades will continue to fluctuate, production in the

next year will be underpinned by a full year’s availability of the

expanded mining fleet and larger milling capacity. At North Lanut

analysis indicates that the +50 per cent positive variance in grades

compared with the resource model reflects gold being washed

out of the sample during past diamond drilling. The positive

variance is expected to continue although at a lower percentage

above the model. However, production in the next year will be

reduced by longer leach times required as the ore becomes

increasingly sulphidic. Crushing of ore, separate processing of

each type of ore, and a plant upgrade are initiatives under way to

mitigate the threat of lower recovery.

Cash costs of continuing operations fell from US$352/oz to

US$316/oz. Significant upward pressure on costs, especially fuel,

was offset by higher production and by deferral of US$6.9 million

of excess stripping costs associated with the pit expansion at

Penjom, which reduced the overall cash cost of continuing

operations by US$42/oz. Importantly, Penjom’s mining cost of

US$1.16 per tonne was kept below last year’s cost of US$1.17

per tonne. With oil prices at record levels, the Group’s unit costs,

like those of its peers, are expected to rise. However, the Group

intends to continue producing gold at costs below the industry

average, which some analysts estimate could be in excess of

US$450/oz for 2008.

PEOPLEAvocet has strong management teams with a proven track

record of finding resources at low cost, building mines and

operating them efficiently. The Company continued to

strengthen its operational management during the year in order

to meet challenges at existing operations and enable the Group

to manage the growth it aspires to, both organic and by

acquisition. This has been achieved at a time of increased

competition for skilled mining personnel and rising labour costs,

and Avocet’s success in attracting talent is a testament to its

appeal as an ambitious, opportunity driven company; the fact that

the majority of our managers are shareholders is particularly

pleasing. The Company will continue to enhance its processes

and structures in order to support its management in addressing

the challenges of the future. I am especially proud of the teams

we have assembled and thank all of them for their continued

hard work and dedication.

Jonathan Henry

8 July 2008



The price of gold hit record levels during the year, reaching an

intra-day high of US$1,033/oz in mid-March 2008. Gold prices

have broadly followed their traditional inverse relationship with

the value of the US dollar, and therefore benefited from the key

drivers of the dollar’s weakness, notably the crisis in financial

markets and record oil prices. In the face of these events and

of interest rate cuts by the US Federal Reserve, gold has been

an attractive alternative investment for both equity and fixed

income investors.

This attraction is reflected in the recent growth of exchange

traded funds (ETFs) which allow individual investors to hold

a direct interest in gold. Despite significant growth in the

number of listed ETFs and in their gold holdings, ETFs currently

represent a small proportion of overall global investments.

This means there is potential for further expansion in this type

of gold investment vehicle.

In addition to strong appetite for gold for investment purposes,

supply and demand fundamentals have also buoyed gold prices.

Although several years of increasing prices have encouraged

new project development, gold production declined by 0.4 per

cent in 2007, reflecting delays in commissioning new projects,

lower mine productivity and safety related closures in South

Africa. By contrast worldwide demand for gold jewellery, which

represents about 80 per cent of total gold fabrication, grew by

5 per cent in 2007, while industrial consumption of gold, which

represents one fifth of global consumption, was also higher. In

the first half of 2008 a surge in Chinese demand has

compensated for a decline in Indian purchasing as consumers

have held back during times of peak gold prices.

Many analysts forecast continued high gold prices over the next

year and beyond, driven by a continuation of weakness in the US

economy, high oil prices, ongoing growth in Chinese demand,

and investment inflows seeking safe haven amid continuing

turmoil in the financial sector. Following a restructuring of the

Company’s gold collar in October 2007, details of which are set

out in note 22 to the financial statements, all of Avocet’s sales

have been at spot prices, 26 per cent higher than in the previous

year, and will continue at spot for the next year.

Gold prices are buoyed by stronginvestment demand and favourablefundamentals

5% growth in worldwide demand for gold jewellery

Record intra-day price of

US$1,033/oz

Years ended 31 March 2004 2005 2006 2007 2008

Spot gold price(1)

High 426 454 584 725 1,011

Low 320 375 414 587 642

Average 378 414 477 629 766

Realised price(2) 379 414 437 607 767

(1) London AM fix (US$/oz)

(2) Includes impact of hedged sales in 2006 and 2007

THE GOLD MARKET





TWO MILLION OUNCES AND GROWINGPenjom reached the historic milestone in April 2007 of

producing its one millionth ounce of gold. This is especially

rewarding for all involved given the mine was built in 1996 on

a reserve base of less than 250,000 ounces of gold. With close

to one million ounces of gold still in the resource category and

further resource potential along strike and at depth, Penjom has

developed into a much larger deposit than initially thought.

EXPANSION AND RESOURCEDEVELOPMENTDuring the year Penjom completed the commissioning of a new

owner operated mining fleet, following a decision to transition

from smaller contractor trucks to larger more fuel efficient

equipment capable of supporting a higher mining rate. The

operation also successfully commissioned a larger SAG mill to

increase the plant’s capacity by 25 per cent. Other work

associated with the expansion, such as a tailings dam raise and

stream diversion, continues as planned. These developments

are part of a drive to increase mining and plant throughput in

order to allow the economic exploitation of resources and

OPERATING REVIEW – PENJOM

The operation successfullycommissioned a larger SAG mill to increase the plant’s capacity by 25 per cent

223,000ozreserve on commissioning in 1996, now a

2millionozoperation

PENJOM PRODUCTION STATISTICS

(1) Net of US$80/oz deferred stripping adjustment

Years ended 31 March 2004 2005 2006 2007 2008

Ore mined (tonnes) 826,000 832,000 629,000 443,000 561,000

Waste mined (tonnes) 12,464,000 13,244,000 18,927,000 16,941,000 16,697,000

Ore and waste mined (tonnes) 13,290,000 14,076,000 19,556,000 17,384,000 17,258,000

Ore processed (tonnes) 559,200 527,500 573,700 570,100 596,100

Average ore head grade (g/t) 7.73 7.92 7.10 5.67 4.84

Process recovery rate 90% 89% 91% 92% 91%

Gold produced (oz) 124,430 119,850 117,680 95,966 83,724

Cash costs (US$/oz)

– mining 106 109 141 212 159(1)

– processing 52 57 60 80 97

– royalties and overheads 34 37 41 59 78

Total cash cost 192 203 242 351 334





reserves that continue to grow to the north and south of the

main pit but at lower grade, as announced in December 2006.

Resource development at Penjom in the last year focused

primarily on infill drilling in order to upgrade the confidence in the

resource and facilitate improved life of mine planning. Penjom’s

resources were further upgraded during the year, with the

addition of 47,500 ounces, before depletion, from 31,270 metres

drilled in the year. This upgrade means that nearly one million

ounces of gold resources and close to 600,000 ounces of gold

reserves have been added at Penjom since 2002.

MINING AND PROCESSINGMining activity in the year focused on expanding Penjom’s main

Kalampong pit through cut backs on the east and west walls,

as well as mining of ore from the bottom of the pit. Work

also commenced on the Manik and Janik areas adjoining the

Kalampong pit to the south, including a temporary diversion

of a small creek currently running between the Kalampong and

Manik pits.

Total tonnes mined at 17.3 million were in line with the prior

year. The new mining fleet was available for only part of the

year as it ramped up, and this benefit was offset by mining

deeper in the Kalampong pit. Ore mined increased 27 per cent.

As previously anticipated, Penjom’s mined ore grade was lower

than the previous year, as the operation transitions to being

a larger mine but at lower grades. In addition the grade of ore

at the bottom of the pit continued to be variable. The ore grade

mined was therefore 21 per cent lower at 4.18 g/t. Penjom,

with its complex geology and carbonaceous ore, has always

been a challenging orebody to mine and process. Although the

management team have been able to generate a much better

understanding of the geological controls of the orebody, the last

year was no exception to the challenge of getting the most

efficient mining and processing techniques employed.

Tonnes milled in the year of 596,000 were 5 per cent above the

previous year, reflecting a partial year benefit of the larger mill

which was commissioned at the end of January 2008. Mill feed

grade of 4.84 g/t was higher than the grade of ore mined due to

processing of a proportion of higher grade stockpile material, but

was 15 per cent lower than the mill feed grade of 5.67 g/t in the

Nearly one million ounces of goldresource and 600,000 ounces of gold reserves have been added since 2002

Ore mined up 27%

OPERATING REVIEW – PENJOM (CONTINUED)


15

OPERATIING REVIEW – PENJOM (CONTINUED)

previous year when higher grade material was available from

the pit and from stockpiles. Recovery was maintained above

90 per cent despite the lower grade of ore milled.

GOLD PRODUCTION AND CASH COSTSPenjom’s gold production of 83,724 ounces was 13 per cent

below the previous year. The full mining fleet and the 25%

increase in milling capacity were only available towards the end

of the year and therefore only partially compensated for lower

grades throughout the year.

The mining cost in the year of US$1.16/t was kept below last

year’s cost of US$1.17/t despite year on year price rises for diesel

and other consumables of over 20 per cent. This has been

possible as the new mining fleet has operated with great

efficiency at a time of increasing diesel prices. Full year cash

cost per ounce was US$334/oz, after deferring US$6.9 million

of excess stripping costs, equivalent to US$80/oz. This compares

with US$351/oz in the previous year when no costs were

deferred; if deferred stripping cost accounting had been applied

in the previous year, Penjom’s cash cost would have been

US$262/oz for that year, reflecting lower consumable costs and

lower mining volumes required per ounce of gold produced

than in the year just ended. Costs in the final quarter of the year

were impacted by the global increase in fuel costs and by

contract renewals for many of the operation’s consumables.

Over one third of the mine’s operating costs are directly related

to diesel fuel or kerosene, used in the plant to suppress highly

carbonaceous ores, with many of the other consumable and

related costs indirectly related to the price of oil.

OUTLOOKAs part of the Company’s strategy to grow its resources and

reserves, a resource development drilling programme of over

70,000 metres is scheduled at Penjom over the next year. This

includes deep drilling to help assess the potential for

underground mining in the near future, where areas of high

grade ore are known to exist. This programme is significantly

larger than the year just ended, which reflects the Company’s

commitment to maximising the value of its existing operations,

as well as the addition of a new US$1.0 million drill rig capable

of drilling to greater depth. Remodelling of the open pit resource

Mining cost of US$1.16/t was kept below last year’s cost ofUS$1.17/t despite year on year price rises for diesel and otherconsumables of over 20%


25% increase in milling capacity



will take place once the progamme of drilling is complete, which

is expected to take 12 months. Work has already commenced

on a review of existing resources that may allow for an early

commencement of underground mining with associated

exploration drilling from underground. A number of years ago an

exploration drive was successfully developed at Penjom from

the bottom of the open pit. These previous works have now

been encompassed by the expanded open pit. Equipment and

expertise remains on hand to recommence this process given

favourable economics.

In the next year gold production will benefit from a full year of

expanded mining and milling capacity to offset the impact of

lower grades mined. This should allow gold production levels to

at least be maintained in the next year and is expected to ensure

consistent gold production in the future despite an anticipated

decline in grades.

Four new trucks have been purchased to maintain cycle times

as mining takes place deeper in the pit, bringing the total

haulage fleet to 49 units. Mining will be less dependent on the

bottom of the pit, with more production coming from the east

wall, the north of the pit and to the south at the Manik pit where

grades are expected to be less variable. Full development of the

Manik pit will require the diversion of the Jaleh creek around the

south of the mine and this project is in progress with forest

clearance under way. An interim creek diversion is being carried

out in the meantime to allow access to resources in the Janik

area between the Manik and Kalampong pits. The joining of the

Kalampong and Manik pits will result in a single pit almost three

kilometres in length.

Costs will remain under significant inflationary pressure,

especially the direct and indirect effects of higher oil prices. The

7 per cent royalty paid on all gold sales will also have an

adverse effect on unit production costs as the gold price

remains stronger than previous years. Continuous operational

improvement will be a top priority in order to minimise

unit costs, both through cost controls and efforts to maximise

gold production.

In the next year gold production will benefit from a full year of expanded mining and millingcapacity to offset lower grade

Pit will extend to 3km in length

OPERATING REVIEW – PENJOM (CONTINUED)



OPERATIING REVIEW – PENJOM (CONTINUED)


(1) North Lanut commenced production in October 2004

RESOURCE DEVELOPMENTIn December 2007 North Lanut upgraded its resources following

the completion of 34 RC infill drill holes at the operation’s Riska

pit, representing 3,585 metres drilled. The upgrade added

99,000 ounces to the resource before depletion. Resource

development work has continued since then as part of an

ongoing effort to expand the reserves and mine life. In May 2008

the Company announced further encouraging results from

resource definition drilling at Riska. This consisted of 173 RC

and 9 diamond drill holes, representing 15,109 metres of a

planned 21,200 metres programme, and included a number of

high grade intercepts.

The programme is scheduled to be completed by September

2008 when a new resource estimate will be published to include

both the Riska deposit and the nearby Effendi deposit where the

resource is also expected to grow following successful extension

drilling. A deep drilling programme is also planned to assess the

resource and reserve potential of the deep sulphide resources

up to 250 metres below the current designed open pit.

OPERATING REVIEW – NORTH LANUT

Encouraging results from resourcedefinition drilling at Riska including anumber of high grade intercepts

NORTH LANUT PRODUCTION STATISTICS


Record gold production of

74,183oz

Years ended 31 March 2005(1) 2006 2007 2008

Ore mined (tonnes) 429,000 1,333,000 1,255,000 1,969,000

Waste mined (tonnes) 556,000 1,801,000 2,322,000 1,144,000

Ore and waste mined (tonnes) 985,000 3,134,000 3,577,000 3,113,000

Ore leached (tonnes) 302,000 1,327,000 1,157,000 1,683,000

Average ore head grade (g/t) 1.45 1.65 1.86 2.54

Process recovery rate 63% 75% 69% 54%

Gold produced (oz) 8,852 54,520 48,170 74,183

Cash costs (US$/oz)

– mining 274 96 188 139

– processing 69 39 68 67

– royalties and overheads 157 66 98 89

Total cash cost 500 201 354 295





MINING AND PROCESSINGA significant factor during the year was that ore grades were

approximately 50 per cent higher than shown in the resource

model, which is based on initial man portable diamond drilling

prior to access roads having been developed to the property; the

mine also experienced gains in ore tonnes compared with the

model. Analysis has indicated that higher than expected grades

were the result of gold in highly leachable rock being washed out

during previous diamond drilling by high pressure water used to

cool the drill bite, causing the grades to be underestimated.

Ore mined in the year of 1,969,000 tonnes was 57 per cent

higher than the previous year, partly reflecting the introduction of

all weather trucks, and partly because during the previous year

the mine was forced to focus on the movement of waste

required for re-engineering of the waste dumps and storm water

ponds, following unseasonal rainfall in early 2006. However, the

benefits of higher grades and ore tonnes mined were partially

offset by a decline in recovery from 69 per cent in the previous

year to 54 per cent, caused by an increasing proportion of

transitional and sulphide ore now being processed as the Riska

pit deepens. A number of changes have been initiated to

improve recovery, including crushing of ore prior to leaching,

separate processing of different ore types and an upgrade to the

processing plant.

GOLD PRODUCTION AND CASH COSTSNorth Lanut achieved record production of 74,183 ounces in the

year, an increase of 54 per cent over the previous year, as the

benefits of higher ore processed and higher grades more than

compensated for lower recovery. Cash costs fell 17 per cent to

US$295/oz. The reduction partly reflects the contribution of higher

grades in increasing production, but also reflects operating

efficiencies made during the year including improvements to

drilling and blasting, and greater productivity from the new Volvo

ADT trucks which are capable of operating in extremely wet

conditions commonly encountered in tropical locations. Unit costs

in the final quarter of the year were affected by higher fuel prices

and by lower production associated with the change in ore type

from oxide to transitional ore, which requires a longer leach time.

Changes initiated to improverecovery including crushing of oreprior to leaching, separate processingof different ore types and an upgradeof the process plant

Ore grades 50%higher than the resource model

OPERATING REVIEW – NORTH LANUT (CONTINUED)



OPERATING REVIEW – NORTH LANUT (CONTINUED)

OUTLOOKThe open pit portion of the Riska resource will be remodelled

once the current resource definition drilling programme is

complete. Deep drilling will also assess the potential of the

deep sulphide resources up to 250 metres below the current

designed open pit.

Construction of a new heap leach pad (HLP3) is scheduled to

be completed around the middle of the next financial year,

providing leach pad capacity for the next 3-4 years. The

operation expects the trend of higher grades than in the

resource model to continue albeit at a lower percentage

increase. However, the change in ore type to more transitional

and sulphide ore means that longer leach times will be required

to optimise recovery levels and maximise life of mine gold

production. This may also require a change to the processing

route in the future. Ore tonnes irrigated and production of gold

in the next year are therefore expected to be lower than in the

year just ended. A number of initiatives will be completed in the

next year to improve recovery. A mobile crusher has been

purchased to allow ore to be crushed prior to leaching which is

expected to enhance recovery by 5 to 8 per cent. Different

types of ore will be processed separately allowing transitional

and sulphide ores the medium and long leach times,

respectively, that they require. A plant upgrade will also be

completed which will double the adsorption circuit capacity

and provide increased irrigation pumping capacity, allowing gold

to be recovered more quickly from the leach pad solution.

The change in ore type to moretransitional and sulphide ore meansthat longer leach times will berequired to optimise recoverylevels and maximise life of mine gold production

Deep sulphide resource up to

250mbelow the current pit



Avocet is committed to organic growth through exploration.

During the year the Company spent US$13.9 million on resource

development and greenfield exploration in Malaysia and

Indonesia, and drilled 72,470 metres. The Company continues to

generate and explore new targets in its existing countries and

in other South East Asian countries, and has approved

an exploration budget of up to US$28.0 million for the next year.

This includes US$11.4 million for resource development

programmes at Penjom, North Lanut and Bakan. The remainder

is focused on greenfield exploration and includes a contingent

amount of US$8.5 million that will only be spent if earlier phases

of exploration justify further expenditure. The Company

anticipates that its resource base may grow to over 6 million

ounces in the next two years from these programmes. Strict

performance measures are applied to ensure appropriate

prioritisation and that all projects fit an optimal development

pipeline as shown below. Where possible, projects that are

deemed non-core to the development pipeline will be divested

for value, as occurred with the Buffalo Reef prospect in Malaysia.

OPERATING REVIEW – EXPLORATION

Up to

US$28millionexploration expenditure next year

Avocet’s resource base may grow to over 6 million ounces in the next two years

DEVELOPMENT PIPELINE

GENERATIVEMALAYSIA

Penjom DistrictEast MalaysiaINDONESIA

Pusian Sulawesi UtaraPatung-Anggrek Pani (>3 Moz)

Serantak Bulagidun

SCOUT DRILLINGINDONESIA

Mangkaluku (>0.5 Moz) Totopo (>0.5 Moz)Tanoyan (>0.5 Moz) Bolangitang (>0.4 Moz)

Seruyung (>0.5 Moz) Upper TobayaganMolobog

PRE-FEASIBILITYINDONESIA

Doup (>1.0 Moz)CHINA

Hatu (>1.0 Moz)

FEASIBILITYINDONESIA

Bakan (0.7 Moz)

MINE DEVELOPMENTMALAYSIA

Penjom (1.2 Moz)INDONESIA

North Lanut (0.7 Moz)

(Figures represent minimum resource targets)



MALAYSIAExploration around the Penjom mine remains the Company’s

priority in Malaysia, although there continues to be an active but

low-key generative programme. The latter has led us to a

number of grass roots targets in East Malaysia which the

Company will be pursuing in the next year.

The team has focused exploration efforts in the last year on infill

drilling to upgrade the confidence in the resource and facilitate

improved life of mine planning. This has been a function of the

limited depth capacity of the Company’s RC drilling rig.

The Company has purchased a larger multi-purpose drilling rig

capable of drilling to 600 metres that will enable exploration

of the deeper parts of the ore body along and beneath the

persistent Penjom Thrust where there is significant potential

for a future underground mining operation. Deep drilling is

illustrated by the thick black lines in the section below.

During the year, the Company completed 31,270 metres of

RC drilling at Penjom and spent a total of US$3.2 million on

exploration in Malaysia. The budget for the current year

is approximately US$3.5 million which will fund an expanded

drill programme at Penjom of over 70,000 metres in addition

to district and regional exploration initiatives. The latter are

contingent on successfully obtaining tenements over selected

target areas.

A new drilling rig will enableexploration of the deeper ore bodyalong and beneath the Penjom Thrustwhere there is significant potentialfor underground mining

Larger multi-purpose drillingrig capable of drilling to

600m depthPenjom Thrust



INDONESIADuring the year exploration in Indonesia focused on resource

development at North Lanut and Bakan and evaluation of the

newly acquired Banda properties. Drilling at North Lanut focused

on resource extensions at Riska and Effendi; positive results

received from both prospects may lead to such extensions in

the next year. The Riska drilling also highlighted potential

for deep high grade sulphide mineralisation beneath the Riska

oxide deposit.

Infill drilling in the next year will evaluate the potential for this

resource to sustain a longer mine life, albeit with different

processes for the recovery of gold. Exploration in the district

continues to seek incremental resource additions to sustain the

current operation. Infill drilling at Bakan, in support of ongoing

feasibility work, confirmed and increased the confidence in the

resources at Durian and Osela. Scout drilling of nearby

prospects has identified several low grade satellites that may

add to the project’s resource base.

The acquisition of the Banda properties in July 2007

transformed the Company’s exploration in Indonesia by

significantly expanding its portfolio of advanced exploration

projects. Of the Banda properties, Doup and Tanoyan are the

most advanced. Both located close to North Lanut and initial

scout drilling has produced positive results. Doup consists of

two main prospects, Panang and Benteng, which were

previously drilled by Placer Dome in the late 1980s.

The Riska drilling also highlightedpotential for deep high grade sulphidemineralisation beneath the Riska heapleach deposit

+70,000mdrilling scheduled at Penjom next year

+100,000min Indonesia

Riska pit section

OPERATING REVIEW – EXPLORATION (CONTINUED)






Placer defined a resource of 17Mt @ 2.15 g/t Au containing

1.2 million ounces of gold based on this drilling. This resource

is currently not JORC compliant because the original drill core

is no longer available and the underlying data cannot be

substantiated. Avocet has completed two holes to validate

Placer’s drilling results and allow for initial metallurgical

testwork; both holes intersected mineralisation over significant

lengths and confirmed the previous drilling results. The Tanoyan

vein system has lower grade, lower temperature veining at

higher levels, which is typically located above or adjacent to

higher temperature, multiphase veins that may include boiling

textures. These boiling textures are associated with gold

deposition in the vein system and can host bonanza gold grades.

Many of the scout holes drilled at Tanoyan have intersected

the higher level veins, suggesting that the boiling zone(s) may

exist at depth.

Equally promising is the Seruyung project in North Kalimantan,

for the acquisition of which the Company signed a Memorandum

of Understanding in February 2008 with an Indonesian company.

Seruyung is a high-sulphidation epithermal system. Exploration

by previous companies inferred a resource in the region of

225,000 to 330,000 ounces. Avocet believes that the high grade

feeders that form these deposits have not been fully explored

or modelled in this resource estimate, and also recognises

potential for additional low grade, heap-leachable mineralisation

within the tenement. The Company believes that each of these

three projects has the potential for a million ounce resource and

are amenable to development as mines.

Avocet completed a first round of scout drilling on the

Mangkaluku project in South Sulawesi. This produced several

significant intercepts that confirm the potential of the project.

The results of this exploration programme are under review.

The Company spent US$8.1 million in Indonesia on resource

development and greenfield exploration in the year and drilled

41,200 metres. The budget for the next year is US$6.7 million

for resource development and US$11.5 million for exploration,

with a programme to drill 44,700 metres and 60,000 metres,

respectively. One third of the next year’s exploration budget

is contingent on the success of early phase exploration.

Doup section

Tanoyan section

Each of these three projects has thepotential for a million ounce resource







RESOURCES AND RESERVES

MALAYSIAN (PENJOM) RESOURCE AND RESERVE SUMMARY AT 31 MARCH 2008 (at a cut off grade of 0.8 g/t Au; reserves undiluted; pits generated at US$700/oz)

Gross Net attributable(1)

Tonnes Grade Metal Tonnes Grade Metal

Category (g/t Au) (ounces) (g/t Au) (ounces)

ORE RESERVESKalampong

Proved 479,000 4.04 62,200 479,000 4.04 62,200 Probable 1,309,000 4.04 170,200 1,309,000 4.04 170,200 Manik

Proved 263,000 3.17 26,800 263,000 3.17 26,800 Probable 440,000 3.80 53,800 440,000 3.80 53,800 Stockpiles

Proved 1,167,000 1.60 60,200 1,167,000 1.60 60,200 Probable – – – – – –

Reserves subtotal 3,658,000 3.17 373,200 3,658,000 3.17 373,200

Depletion since 31 March 2007 596,000 4.84 92,800 Change from 31 March 2007(2) 550,000 16,700 15% 4%

MINERAL RESOURCES (excluding reserves)

Kalampong

Measured 97,000 2.15 6,700 97,000 2.15 6,700 Indicated 2,162,000 2.79 194,200 2,162,000 2.79 194,200 Inferred 2,545,000 3.18 259,900 2,545,000 3.18 259,900 Manik

Measured 17,000 1.65 900 17,000 1.65 900 Indicated 209,000 2.68 18,000 209,000 2.68 18,000 Inferred 504,000 4.02 65,200 504,000 4.02 65,200 Kurnia

Measured – – – – – –Indicated – – – – – –Inferred 77,000 4.73 11,700 77,000 4.73 11,700

Resources subtotal 5,611,000 3.09 556,600 5,611,000 3.09 556,600

Total 9,269,000 3.12 929,800 9,269,000 3.12 929,800

Change from 31 March 2007(2) 1,186,000 41,000 14% 4%

(1) The Company owns 100% of the Penjom mine

(2) Year on year change is before depletion



INDONESIAN RESOURCE AND RESERVE SUMMARY AT 31 MARCH 2008(at a cut off grade of 0.35 g/t Au oxide, 0.50 g/t Au transitional, 1.2 g/t Au sulphide; reserves undiluted; pits generated at US$800/oz)


Gross Net attributable(1)

Tonnes Grade Metal Tonnes Grade Metal

Category (g/t Au) (ounces) (g/t Au) (ounces)

ORE RESERVESRiska(3)

Proved 589,000 1.86 35,200 471,200 1.86 28,160 Probable 1,977,000 2.35 149,400 1,581,600 2.35 119,520 Effendi(3)

Proved – – – – – –Probable 886,000 1.69 48,100 708,800 1.69 38,480Stockpiles(3)

Proved 351,000 2.29 25,800 280,800 2.29 20,640 Probable – – – – – –

Reserves subtotal 3,803,000 2.11 258,500 3,042,400 2.11 206,800

Depletion since 31 March 2007 1,969,000 2.45 155,100 Change from 31 March 2007(2) 1,402,000 186,200 32% 82%

MINERAL RESOURCES (excluding reserves)

Riska(3)

Measured 152,000 0.53 2,600 121,600 0.53 2,080 Indicated 2,197,000 0.59 41,800 1,757,600 0.59 33,440 Inferred 1,999,000 1.26 81,000 1,599,200 1.26 64,800 Effendi(3)

Measured – – – – – –Indicated 2,627,000 0.82 69,400 2,101,600 0.82 55,520 Inferred 655,000 0.99 20,800 524,000 0.99 16,640 Talugon(3)

Measured – – – – – –Indicated – – – – – –Inferred 600,000 2.59 50,000 480,000 2.59 40,000 Durian(4)

Measured 3,704,000 1.08 128,600 2,963,200 1.08 102,880 Indicated 3,573,000 0.84 96,500 2,858,400 0.84 77,200 Inferred 4,758,000 0.7 111,700 3,806,400 0.73 89,360 Osela(4)

Measured 1,716,000 1.48 81,600 1,372,800 1.48 65,280 Indicated 1,326,000 1.17 49,900 1,060,800 1.17 39,920 Inferred 1,797,000 0.9 50,800 1,437,600 0.88 40,640

Resources subtotal 25,104,000 0.97 784,700 20,083,200 0.97 627,760

Total 28,907,000 1.12 1,043,200 23,125,600 1.12 834,560

Change from 31 March 2007(2) 63,000 132,500 –% 11%

(1) The Company owns 80% of the North Lanut mine and Bakan project

(2) Year on year change is before depletion

(3) North Lanut mine

(4) Bakan project



The health and safety of the Group’s employees and strict

adherence to environmental compliance are of paramount

importance, and Avocet recognises its responsibilities in these

critical areas (HSE). The Company ensures that a culture of

continuous improvement exists across all of its work locations

through the use of hazard identification systems and individual

departmental audits. Its executive committee members use

each visit to Avocet’s mines, development or exploration sites

as an opportunity to discuss HSE issues. The Group’s local

management will immediately report any incident, breach of

health, safety or environmental regulation, or change in local

regulations to the Chief Executive Officer who will immediately

inform the board as necessary.

MALAYSIAPenjom has implemented numerous safety initiatives including

first aid and fire fighting training and audiometry and dust

testing. During the year the mine also implemented a number

of measures to ensure the safety of mine operators on night

shift. This was part of the mine’s move from contract mining on

day shift only to an owner operator mining fleet operating day

and night. Measures that were implemented include; sleeping

cabins and extra rest hours for night time operators and “nap

zappers” – ear pieces capable of detecting an operator falling

asleep and sounding an alarm. A thorough audit of the trucking

operation by external consultants has also been conducted to

improve standards and increase operational safety. Regular

operator training will be provided to ensure safety mindset is an

integral part of the operation.

The operation uses resin as part of its detoxification process

to clean the processed water before discharging to the

environment. A larger primary detoxification pond was

commissioned recently to enable more effluent to be

discharged without adverse environmental impact. The larger

pond will also prolong the effluent exposure to sunlight which

will reduce cyanide concentration further below permissible

limits. The primary detoxification pond is lined with HDPE

to prevent ground water contamination. Efforts are ongoing

to bring the effluent discharge to even lower levels.

Health, safety and environmentalcompliance are of paramountimportance

HDPE lined ponds to preventground water contamination

Night shift safety measures include extra rest hours andnap zappers

HEALTH, SAFETY AND ENVIRONMENT



HEALTH, SAFETY AND ENVIRONMENT



INDONESIANorth Lanut is committed to providing a safe and healthy

working environment for all employees, contractors and visitors

to the Company’s operations. To this end, all personnel are

educated about their individual responsibilities within the

Occupational Health and Safety System utilised by the

operation. Management believes that all incidents and accidents

are preventable and seeks to comply with statutory safe work

requirements as well as striving for best practices at work.

Safety efforts are underpinned by ensuring that:

• procedures and work practices are regularly reviewed and

updated;

• protective equipment is correctly maintained and properly

used;

• safety is a measure of individual, departmental and site

performance;

• staff are adequately trained and instructed for their

assigned duties;

• staff are trained in first aid, health issues and emergency

response;

• positive encouragement is given toward safety awareness

and initiatives;

• all incidents are promptly reported, assessed and actions

taken;

• regular workplace inspections and audits are conducted;

• regular safety inductions, meetings and training are

provided.

This year saw the appointment of a Risk and Safety Manager to

the Group’s Indonesian operations, which includes the enlarged

exploration portfolio. This reflects the Company’s dedication to

streamlining and standardising the approach to a safe and

healthy working environment. One of the Risk and Safety

Manager’s first tasks will be to gain accreditation in the

Occupational Health and Safety Audit System (OHSAS)

18001:2007. The long term goal is to see the implementation of

OHSAS 18001:2007 across all of Avocet’s operations.

This year also saw the establishment at North Lanut of an

Emergency Response Team (ERT) with team members drawn

from both permanent employees and contractors. The ERT is

part of a long term commitment to the transfer of skills and

knowledge to local members of the community.

OHSAS 18001:2007to be implemented

Management believes that all incidents and accidents are preventable

HEALTH, SAFETY AND ENVIRONMENT (CONTINUED)



HEALTH, SAFETY AND ENVIRONMENT (CONTINUED)



MALAYSIAPenjom puts great emphasis on nurturing good relationships with

its local community of Kuala Lipis. It supports and participates

in community activities involving hospitals, schools, sports and

social events. The infrastructure in the Kuala Lipis community

around Penjom is generally good but where further development

is needed in the district, the mine assists local people in

upgrading their facilities where possible.

Penjom has a close relationship with the Kuala Lipis Hospital and

a blood donation day is organised every year at the minesite.

The operation holds the record for the most amount of blood

donated by a company in Kuala Lipis. A Kuala Lipis Hospital

Spring Cleaning Day event is planned with the local community

in August 2008.

The mine regularly assists the Kuala Lipis Chung Hwa School in

its fundraising activities. Penjom has supported the school’s

efforts to build a computer building and a sports pavilion and

more recently sponsored the school’s Chinese language

elocution competition. Other schools have been helped with

landscaping and renovation projects. Penjom’s commitment to

education has enabled the local schools to organise annual exam

preparation and motivational camps. Various kindergartens in the

Kuala Lipis locality have benefited from the operation through

sponsorship of their activities while donations are also given for

local schools’ sports days and other extracurricular activities. The

operation has been involved in one local secondary school’s

student exchange programme whereby a number of students

and teachers will go to a school in the UK.

The Kuala Lipis Lions Club annually hosts students from Japan

as part of its foreign student exchange programme and a

presentation and site tour of the Penjom mine is a key feature of

the visit. The operation supports the local soccer team, which

plays in the State League, in its efforts to break into the National

COMMUNITY RELATIONS

Penjom supports communityactivities involving hospitals, schools,sports and social events

Penjom holds the record for most blooddonated by a company in its community



Skills development programmes have nurtured a highly skilled Malaysian workforce

League. Penjom also assists the Pahang Cycling Association in

organising Le Tour de Langkawi, Asia’s biggest cycle road race,

and gives scholarship to talented athletes. Other community

events benefiting from Penjom’s support include the annual Lipis

Carnival, an annual Chinese chess tournament, and weddings,

festivals, and dignitary visits for which the operation rents out

tents, chairs and tables to various village development

committees. Kuala Lipis is a historic British administration centre

and has a wealth of monuments with national historical value.

Penjom recently played a crucial role in the formation of the Kuala

Lipis History Club which has been active since 2006 to promote

local history and tourism.

Penjom is recognised by Malaysian government agencies as a

role model in the mining industry for safety, environmental,

rehabilitation and mining practices. Under a Penjom initiative

aimed at raising the standard of the local mining industry, the

Department of Mineral and Geosciences uses the mine as one

of two training centres for its young officers to gain experience

in hard rock mining operations. This commitment extends to

student industrial training as well as hosting educational field

studies and visits, and these are seen by Penjom as an

important opportunity to demonstrate to the public the

industry’s commitment to safety, health, environment and

rehabilitation matters. Skills development programmes for local

employees have successfully nurtured a highly skilled Malaysian

workforce. In addition, the mine is an important employer in the

region and makes a wider contribution through its procurement

of goods and services from local contractors and suppliers.



INDONESIANorth Lanut and Bakan conduct monthly community consultative

meetings with senior management, all stakeholders from local

communities, government bodies and NGO groups to ensure

that the voice of the people is heard directly by Avocet

management. These meetings facilitate the implementation of a

community development plan for the seven villages in the Lanut

district and ten in the Bakan district through consultation and

agreement with the community appointed representatives.

Avocet has established a number of community related

initiatives during the year and these continue into the next year,

including:

• ongoing maintenance and improvement of roads and

infrastructure near the mine site areas;

• completion of clean water supply systems for a further

three villages;

• assistance to agricultural groups both directly and by

enlisting university professionals. One example of the

programme has seen the corn yield per hectare increase

by approximately 200 per cent;

• an animal husbandry programme has provided each of

the seven villages with a cow for their benefit;

• commencement of a programme to eradicate mosquitoes

in the villages through fogging.

An assistance scheme is in place to support 200 orphans and

handicapped children through supply of food and building

materials. Also three orphans are fully sponsored to attend

the local Kotamobagu University to study for forestry degrees.

Community consultative meetingsensure the voice of the people isheard by Avocet

Agricultural assistance led to

200%increase in corn yield

COMMUNITY RELATIONS (CONTINUED)



COMMUNITY RELATIONS

A member of the Pononiungan orphanage is soon to join Avocet

as an apprentice in the North Lanut mine workshop.

The mine community relations team continues to monitor local

villages and provides support to underprivileged groups. Some

examples of the support progammes are:

• full education sponsorship of 70 school children;

• assistance to low income families by providing basic

foodstuffs (rice and other staples) and scholastic support

where required through a monthly payment;

• Avocet has completed two separate programmes of free

medicals and vaccinations for over 1,000 adults and

children at both Bakan and Lanut areas through the local

doctors who identify the treatment and vaccinations that

are required;

• provision of computers, chairs, desks and books to local

schools.

The socialisation of Avocet’s community relations programmes

is conducted by the local television station, TV Totabunan and

two local newspapers (Manado Post and Komentar) and Avocet

produces a monthly news bulletin that is distributed to

provincial, regional and local governments and interested

persons.

During the year the North Lanut mine continued to receive a

number of recommendations from government and a local

university under a partnership established to monitor and assess

the social and economic impact of the operation's activities.

These recommendations are incorporated into the operation’s

ongoing programmes.

Free medicals and vaccinations for over

1,000locals



FINANCIAL REVIEW

FINANCIAL HIGHLIGHTS

Years ended 31 March 2004(1) 2005(1) 2006(1) 2007(2) 2008(2)

US$000

Revenue 68,844 71,060 90,493 108,236 128,703

Gross profit 17,064 18,559 18,182 22,865 54,948

Operating profit 14,304 15,936 14,561 18,268 48,038

Profit before tax 15,592 15,803 15,905 23,628 37,583

Profit attributable to the equity

shareholders of the parent company 11,280 11,686 10,819 17,619 28,348

Cash flow from operations (before interest and tax) 23,036 17,092 19,942 25,844 65,435

Net cash inflow/(outflow) 16,012 (11,525) 964 50,147 57,487

(1) Prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP); 2006 is restated to reflect FRS20 – Share based payments

(2) Prepared in accordance with International Financial Reporting Standards (IFRS)

REVENUEGroup revenue increased by 19 per cent to US$128.7 million as a result of realised gold prices 26 per cent higher at US$767/oz, offset

by gold sales 6 per cent lower at 167,437 ounces (2007 – 177,635 ounces). As a result of the restructure of the Group’s gold collar

announced in October 2007, all sales were at spot prices. Penjom gold sales were 12 per cent lower at 84,319 ounces (2007 – 96,002

ounces) with the average realised price increasing 30 per cent from US$590/oz to US$768/oz. North Lanut sold 76,030 ounces (2007

– 47,740 ounces) at an average realised price of US$775/oz (2007 – US$627/oz). ZGC, which was disposed of on 9 July 2007, sold

7,088 ounces (2007 – 33,893 ounces) at an average realised price of US$672/oz (2007 – US$627/oz).

GROSS PROFIT AND UNIT COSTSThe 140 per cent increase in gross profit to US$54.9 million reflected higher gold prices offset by cost increases, including higher

prices for diesel, reagents and grinding media, combined with the disposal of the Company’s loss making ZGC operation.

Total cash costs at Penjom reduced by 5 per cent from US$351/oz to US$334/oz, with the adverse effects of lower grades and higher

consumable costs more than compensated by deferral of excess stripping costs associated with the pit expansion which represented

a reduction in Penjom’s mining costs of US$80/oz. Total cash costs at North Lanut reduced by 17 per cent to US$295/oz, reflecting

increased gold production during the year. The Group’s cash cost of gold production from continuing operations reduced by 10 per

cent to US$316/oz.

Operating Total Total

cash costs(1) cash costs(2) production costs(3)

Years ended 31 March 2008 2007 2008 2007 2008 2007

US$/oz

Penjom 280 306 334 351 365 371

North Lanut 288 347 295 354 436 451

Continuing operations 284 320 316 352 399 395

ZGC 940 717 983 750 1,000 764

Group 311 396 344 428 424 468

(1) Includes all cash costs except royalties

(2) Operating cash costs plus royalties

(3) Total cash costs plus depreciation

Throughout this report, unit cash costs or cash cost per ounce refer to total cash costs, including royalties.



The table below reconciles the Group’s cost of sales to the cash cost per ounce. Further detail is provided in note 4 to the financial

statements:

Years ended 31 March 2008 2007

US$000

Cost of sales 73,755 85,371

Depreciation and amortisation (13,579) (6,895)

Changes in inventory 1,414 1,125

Other adjustments including costs not directly related to production (4,908) (3,278)

Cash costs of production 56,682 76,323

Gold produced (oz) 164,832 178,318

Cash cost per ounce (US$/oz) 344 428

PROFIT BEFORE TAXThe Group’s profit before tax increased by 59 per cent from US$23.6 million to US$37.6 million. Excluding an exceptional profit of

US$21.2 million on disposals and a mark to market loss of US$36.0 million on the Group’s gold collar, the Group’s profit before tax

increased by 126 per cent to US$52.4 million. Administrative expenses increased 46 per cent from US$3.6 million to US$5.3 million,

and share based payment costs increased by 68 per cent to US$1.6 million from US$1.0 million. These higher administrative costs

reflect the Group’s strengthening of its operational support and business development teams. Finance income of US$4.7 million

reflects interest income earned on funds placed on short term deposits.

TAXATIONThe Group’s taxation charge reduced to US$5.7 million in the year (2007 – US$6.3 million) analysed as follows:


US$000

Penjom, Malaysia 7,909 4,144

North Lanut, Indonesia 7,916 1,471

ZGC/CBM (UK) Limited, Tajikistan/UK 47 226

Avocet Mining PLC, UK (10,200) 443

5,672 6,284

The credit in Avocet Mining PLC includes deferred tax of US$10.1 million on the Group’s gold collar liability. Increased profitability at the

Group’s operations in Malaysia and Indonesia resulted in increased tax charges.



FINANCIAL REVIEW (CONTINUED)

CASH FLOW AND LIQUIDITYThe Group’s cash flow from operations, before interest and tax, increased by 153 per cent to US$65.4 million (2007 – US$25.8 million)

reflecting higher gold prices partially offset by cost increases. The Group’s year end cash balance increased to US$122.6 million (2007

– US$65.3 million) reflecting higher operating cash generation as well as net proceeds on the disposal of ZGC and other assets of

US$46.1 million, partially offset by higher investment in property, plant and equipment of US$30.0 million (2007 – US$13.3 million) and

deferred exploration of US$13.9 million (2007 – US$9.2 million).

DEPRECIATIONThe Group’s depreciation charge increased to US$13.6 million (2007 – US$6.9 million), analysed as follows:


US$000

Penjom 3,003 1,703

North Lanut 10,442 4,703

ZGC 118 473

Other 16 16

13,579 6,895

The depreciation charge for 2008 includes amortisation related to closure provisions of US$2.0 million at North Lanut and US$166,000

at Penjom. No charge was made in 2007. The remaining increase in depreciation reflects increased capital expenditure at

both operations.

CAPITAL EXPENDITUREThe Group’s capital expenditure increased to US$43.9 million (2007 – US$22.5 million) analysed as follows:

Property, Total Property, TotalDeferred plant and capital Deferred plant and capital

exploration equipment expenditure exploration equipment expenditureYears ended 31 March 2008 2008 2008 2007 2007 2007

US$000

Malaysia 1,818 25,412 27,230 2,160 8,116 10,276

Indonesia 11,917 3,689 15,606 4,638 3,769 8,407

China – – – 1,040 – 1,040

Tajikistan 209 222 431 1,365 1,364 2,729

UK – 634 634 – 15 15

13,944 29,957 43,901 9,203 13,264 22,467

Property, plant and equipment in Malaysia includes US$6.9 million of excess stripping costs that were deferred in the year as well as

a further US$12.7 million of mining equipment and US$4.4 million for the plant upgrade at Penjom. In Indonesia, deferred exploration

expenditure of US$11.9 million reflects activity at North Lanut, Bakan and the Banda properties.

FINANCIAL RISK MANAGEMENTThe Company’s executive committee is responsible for arranging financing and for managing the commodity price, foreign currency,

interest rate, and liquidity risks of the Group. Related policies and procedures are reviewed and approved by the board. The Group’s

policies prohibit transactions that are speculative or unrelated to its trading activities. Instead, the Group seeks to reduce the volatility

of its operating cash flows, and to match the currencies of its borrowings with the currencies of its operating cash flows.



COMMODITY PRICE RISKThe Group uses financial instruments for short to medium term hedging of its gold production. As announced in October 2007,

the Group restructured its put and call collar position with Macquarie Bank Limited whereby the Group sold European call options over

190,000 ounces with 10,000 ounces exercisable per month at a strike price of US$755/oz between January 2010 and July 2011, and

purchased European put options over 460,000 ounces with 10,000 ounces exercisable per month at US$600/oz between October 2007

and July 2011. The put option contracts up to 30 June 2008 have expired without being exercised, leaving options over 370,000 ounces

unexpired at that date.

FOREIGN CURRENCY RISKAs a producer of gold, the Group realises US dollars for all of its sales. To mitigate the impact of US dollar weakness on operating

costs that are not US dollar denominated, the Group occasionally purchases short term currency options. There were no such

purchases during the year. The Group may, from time to time, hold material cash balances in a currency other than the US dollar with

the potential for short term foreign exchange exposure.

INTEREST RATE RISKAt 31 March 2008 the Group’s only debt related to a US$137,000 (2007 – US$779,000) finance lease in Indonesia which has been

repaid since the year end. All borrowings and cash deposits during the year were at floating rates of interest. The Group does not

currently use financial instruments to hedge its interest rate exposure.

LIQUIDITY RISKThe Group’s objectives for managing its liquidity are to ensure that the maturities of any debt it may have are not beyond its ability to

repay or refinance, and that its operating subsidiaries have available to them local cash balances and lines of credit sufficient to fund

their working capital needs. The Group has a US$25.0 million revolving credit facility with Macquarie Bank Limited which was undrawn

at 31 March 2008 and a US$5.0 million overdraft facility with Barclays Bank PLC which was also undrawn at the year end.


Executive directorsJ G Henry

A M Norris

Non-executive directorsN G McNair Scott


J F Newman

R A Pilkington

M J Donoghue

R S Robertson

Company SecretaryA P McFarlane

Senior managementE Vesel

P A Flindell

M N Omar

D P Stuart

G W Clayton

J W Sweeney


EXECUTIVE DIRECTORSJ G Henry (41) – was appointed Chief Executive Officer in July

2006 having previously been Finance Director since October

2002. He has held several positions with Avocet since joining

the Company in 1994, including the position of General Manager

of the Bishop facility in the USA. He is a member of the Group’s

executive committee based in London.

A M Norris (43) – was appointed Finance Director in July 2007.

He worked for L.E.K. Consulting, a firm of strategic

management consultants, before qualifying as a chartered

accountant with Coopers & Lybrand in 1993. He held senior

financial and operational roles within Rio Tinto plc and Anglo

American plc, including CFO at two of Rio’s mines in the US and

production manager at one of them, an open pit gold mining

operation. He is a member of the Group’s executive committee

based in London.

CURRENT BOARD OF DIRECTORS AND SENIOR MANAGEMENT

J G Henry

A M Norris

E Vesel

P A Flindell

EXECUTIVE COMMITTEE



SENIOR MANAGEMENTE Vesel (44) – a mining engineer with over 20 years mining and

process plant experience in Namibia, Australia, Papua New

Guinea, Indonesia and Malaysia. He joined Avocet in 1997 as

Mining Manager and was subsequently General Manager at

Penjom and Country Manager in Malaysia, and then Regional

Director, South East Asia before being appointed Chief Operating

Officer in 2006. He is a member of the Group’s executive

committee based in Malaysia.

P A Flindell (44) – a geologist with over 20 years experience in

gold and copper exploration, resource evaluation and reserve

development in South East Asia, Central Asia and North America.

He played a key role in the discovery and development of two

gold mines in Indonesia, including North Lanut. He joined the

Group as Chief Geologist in 2002 following 12 years with

Newmont Mining Corporation. He is a member of the Group’s

executive committee based in Malaysia.

M N Omar (43) – a mining engineer with 19 years international

experience. At Niugini Mining Ltd. of Australia he was seconded

to gold projects in Australia, Chile, Thailand, China and Malaysia.

Prior to joining Avocet, he was General Manager of a heap leach

operation in north eastern Malaysia. In 11 years at Penjom, he

has headed mining operations and managed the process plant

and was appointed General Manager in 2005.

D P Stuart (43) – a mining engineer with over 20 years

experience including more than 10 years in Indonesia. At Aurora

Gold Ltd of Australia he was seconded to several gold projects in

Indonesia. He has worked in the Goldfields mining region and the

Pilbara iron ore mining region of Western Australia. He joined

Avocet in 2005 as General Manager at North Lanut, becoming

Indonesian Country Manager shortly thereafter, and then General

Manager, Technical Services in April 2008.

G W Clayton (50) – a chartered professional mining engineer

and a Fellow of the Australian Institute of Mining and Metallurgy.

He has over 30 years experience in all Australian mainland states,

PNG and Indonesia at more than 30 gold, coal, copper, iron ore

and quarrying operations, as both mine operator and mining

contractor. He joined Avocet in December 2007 as General

Manager at North Lanut, becoming Indonesian Country Manager

in April 2008.

J W Sweeney (38) – a geologist with over fifteen years

exploration and evaluation experience on gold and diamond

projects and mines in Angola, Australia, China, Finland, Hungary,

Ireland, Malaysia and Scotland. He was part of the team that

brought Penjom from exploration to production. Prior to rejoining

Avocet in 2007 as Exploration Manager for Southeast Asia, he

was a Senior Project Manager for a BHP Billiton subsidiary in

Angola working on a multi-million dollar diamond exploration

programme.

NON-EXECUTIVE DIRECTORSN G McNair Scott (62) – has been non-executive Chairman of

the Company since its listing on the London Stock Exchange in

1996. He has been Finance Director of Helical Bar plc since

1987. Previously he was a director of Johnson Matthey Plc and

held various positions in the Anglo American plc and Charter

Consolidated groups. He had over 25 years direct experience in

the mining business before becoming non-executive Chairman

of Avocet.

Sir Richard Brooke Bt. (69) – became a non-executive director

in June 1995. He serves on the board of Fidelity Special Values

PLC and is chairman of other investment entities associated

with J O Hambro Investment Management Ltd. He was

previously a director of S G Warburg Group plc, J O Hambro &

Company Limited and a number of publicly quoted investment

trusts and other private companies. He has over 45 years of

experience in all aspects of the securities industry worldwide.

J F Newman (78) – became a non-executive director in

February 1996. He has been deputy Chairman of Blick plc and

Chairman of Galloway Group, Rom River Co. Ltd and Hoogovens

UK Ltd. He has had a breadth of experience in the engineering

industry.

R A Pilkington (62) – became a non-executive director in March

1996. He is a Managing Director of UBS Investment Bank. He is

also a director of ASA Limited, a closed end fund specialising

in gold and other precious mineral investments. Following

an earlier career with the Anglo American Group, he has been an

investment banker in New York for the last 25 years, and has

advised some of the world’s leading gold mining companies.

M J Donoghue (59) – became a non-executive director in July

2006. He is a mining engineer with over 30 years experience in

mining operations and new mine developments in Africa,

Australia, South East Asia and Europe. Currently he is the

Executive Chairman of Ormonde Mining plc. Previously he held

the position of General Manager – Operations of Delta Gold,

based in Sydney, Australia.

R S Robertson (56) – became a non-executive director in

February 2007. He is Chairman of West China Cement Limited

and Project Trust and a director of BlackRock Smaller

Companies Trust plc. He has over thirty years experience

in extractive industry and was previously Chief Executive of

Tarmac and Anglo Industrial Minerals.

COMPANY SECRETARYA P McFarlane (54) – joined Avocet in June 1999 and was

appointed Company Secretary in May 2003. He is a chartered

management accountant and previously was the Chief

Accountant for Hardy Oil and Gas plc.

Note: Ages are at 31 March 2008



REPORT OF THE DIRECTORS

The directors are pleased to present their report together with

the audited financial statements of the Company and of the

Group for the year ended 31 March 2008.

PRINCIPAL ACTIVITY AND BUSINESS REVIEWThe Group's principal activity during the year continued to

be gold mining, mineral processing and exploration. Further

information is included within the Chairman's Statement, the

Chief Executive Officer’s Statement and the Operating Review.

FUTURE DEVELOPMENTSThe Group’s future developments are outlined in the Chairman's

Statement and the Chief Executive Officer’s Statement.

COMPANY’S LISTINGThe Company’s ordinary shares have traded on London’s

Alternative Investment Market (AIM) since 26 July 2002.

Previous to that the Company was listed on the London Stock

Exchange main market for listed securities (the Official List).

Ambrian Partners Limited acts as the Company’s nominated

adviser (NOMAD) and joint broker. JPMorgan Cazenove Limited

acts as the Company’s lead broker.

RESULTS AND DIVIDENDSThe Group made a profit for the year of US$31,911,000 (2007 –

US$17,344,000). The financial results are explained in the Chief

Executive Officer’s Statement and the Financial Review. The

directors do not recommend the payment of a dividend.

POST BALANCE SHEET EVENTSPlease refer to note 33 to the financial statements.

KEY PERFORMANCE INDICATORSThe Group monitors its key performance indicators (KPIs) on a

monthly basis or more frequently, and when KPIs diverge from

expectation, an investigation is carried out and appropriate

action taken. The Group’s KPIs for each operation for the year

are shown in the highlights tables within the Operating Review

commencing on page 12.

PRINCIPAL RISKS AND UNCERTAINTIESThe Principal risks and uncertainties facing the Group are

outlined within the Report on Corporate Governance and the

Financial Review, and in note 2 to the financial statements.

DIRECTORS AND THEIR INTERESTS IN SHARESThe names of the current directors are shown on pages 42 to 43

and details of their interests in the share capital of the Company

are shown on page 52. G L Toll resigned from the board

on 10 July 2007. A M Norris was appointed to the board on

10 July 2007.

N G McNair Scott, J F Newman, Sir Richard Brooke Bt.,

R A Pilkington and M J Donoghue, being eligible, offer

themselves for re-election at the Company’s Annual General

Meeting (AGM).

SUBSTANTIAL SHAREHOLDERSAt 8 July 2008 the following had notified the Company of

disclosable interests in three per cent or more of the nominal

value of the Company's shares:

Name Shareholding %

Elliott Associates L.P.

and Elliott International L.P. 18,693,852 15.47%

Artemis Investment

Management Limited 13,686,905 11.33%

BlackRock Inc 12,342,180 10.21%

JPMorgan Asset Management

(UK) Limited 11,408,500 9.44%

AXA Financial S.A. 7,542,919 6.24%

N G McNair Scott 6,100,000 5.05%

Gartmore Investment Limited 5,331,488 4.41%

CREDITOR PAYMENTSIt is the Group’s policy to agree the terms of payment with

suppliers when entering into contracts and to meet its

obligations accordingly. The Group does not follow any specific

published code or standard on payment practice. The Company

does not have any trade creditors.

DONATIONSAs in previous years, no donations were made for political

purposes during the year.

STATEMENT OF DIRECTORS'RESPONSIBILITIESThe directors are responsible for preparing the Annual Report

and the Group financial statements in accordance with

applicable law and International Financial Reporting Standards as

adopted by the European Union. The parent company financial

statements have been prepared in accordance with applicable

law and United Kingdom Accounting Standards (United

Kingdom Generally Accepted Accounting Practice).

Company law requires the directors to prepare financial

statements for each financial year. The financial statements are



required by law to give a true and fair view of the state of affairs

of the Company and the Group and of the profit or loss of the

Group for that period. In preparing these financial statements,

the directors are required to:

• select suitable accounting policies and then apply them

consistently

• make judgments and estimates that are reasonable and

prudent

• state whether applicable accounting standards have been

followed, subject to any material departures disclosed

and explained in the financial statements

• prepare the financial statements on the going concern

basis unless it is inappropriate to presume that the Group

will continue in business.

The directors are responsible for keeping proper accounting

records that disclose with reasonable accuracy at any time the

financial position of the Company and the Group and enable

them to ensure that the financial statements comply with the

Companies Act 1985. They are also responsible for safeguarding

the assets of the Company and the Group and hence for taking

reasonable steps for the prevention and detection of fraud and

other irregularities.

In so far as each of the directors is aware:

• there is no relevant audit information of which the

Company's auditors are unaware;

• the directors have taken all steps that they ought to have

taken to make themselves aware of any relevant audit

information and to establish that the auditors are aware of

that information.

The directors are responsible for the maintenance and integrity

of the corporate and financial information included on the

Company's website. Legislation in the United Kingdom

governing the preparation and dissemination of financial

statements may differ from legislation in other jurisdictions.

CORPORATE GOVERNANCEA report on corporate governance is provided on pages 46 to 48.

EMPLOYEES The Company has, and continues to put in place, appropriate

structures to make Avocet a rewarding place to work and to

retain its valued employees. The Group’s policy on employee

involvement is stated within the Corporate Governance report.

HEALTH, SAFETY AND ENVIRONMENT Details of the Group’s activities relating to health, safety and the

environment are provided on pages 30 to 33.

ANNUAL GENERAL MEETINGDetails are given on pages 97 to 100 of business to be considered

at the AGM.

On behalf of the board

J G Henry

8 July 2008



REPORT ON CORPORATE GOVERNANCE

In July 2005 the Quoted Companies Alliance (QCA) published

Corporate Governance Guidelines for AIM Companies. In July

2006 the Company’s board agreed to adopt these guidelines with

which it has been in full compliance throughout the year.

The board remains accountable to the Company’s shareholders

for good corporate governance and continues to strive for the

highest standards.

A summary of matters requiring action/approval by the board is

compliant with Appendix A of the QCA published Corporate

Governance Guidelines for AIM Companies.

At its AGM in September 2008 the Board is seeking to amend

the articles of association of the Company in order to reflect

certain changes made to the law by the Companies Act 2006

(CA 2006) and effective on or before 1 October 2008. CA 2006

is being implemented in phases with the anticipated remaining

provisions coming into force in October 2009. Accordingly the

Company will undertake a detailed review of its articles of

association in 2009 in order to reflect the entirety when the

complete Act is in force. It is proposed at the AGM that certain

technical amendments be made to the articles of association to

reflect certain provisions of CA 2006 which came into force

on 1 October 2007 and 6 April 2008 as well as certain provisions

coming into force on 1 October 2008. CA 2006 largely codifies

the existing law in relation to directors’ duties. Further

information about the proposed changes to the articles of

association is included in the notice of the AGM.

BOARD OF DIRECTORSThe Company supports the concept of an effective board

leading and controlling the Company. The board is responsible

for approving Company policy and strategy. It meets at least

every three months and is supplied with appropriate and timely

information. The directors are free to seek any further

information they consider necessary. All directors have access

to advice from the Company Secretary and independent

professionals at the Company’s expense. Training is available for

new directors and other directors as necessary. A number of the

Group’s key strategic and operational decisions are reserved

exclusively for the decision of the board.

The board consists of two executive directors who hold the key

operational positions in the Company and six non-executive

directors, who bring a breadth of experience and knowledge, all

of whom are independent of management and any business or

other relationship which could interfere with the exercise of

their independent judgement. The board’s make up provides a

balance whereby the board’s decision making cannot be

dominated by an individual or small group. The Chairman of the

board is N G McNair Scott and the Company’s business has

been managed since July 2006 by J G Henry, the Chief

Executive Officer. The board has named Sir Richard Brooke Bt.

as the senior independent non-executive director. The board

members are profiled on page 42 to 43.

The Company notes the QCA’s view that independence of

action is likely to be lost the longer a director serves on the

board. The period of nine years has been put forward by the

QCA as the time by which independence may be deemed to be

compromised. The directors of the Company take the view that

the breadth of experience of the six non-executive directors,

their knowledge of the Company after a significant period of

service, and their detachment from the day to day issues within

the Company provide a sufficiently strong and experienced

balance with the executive members of the board.

This breadth of experience, allied to the management

information provided by the Company, enables the non-

executive board members to assess and advise the executives

on the major risks faced by the Company. In view of this the

board continues to believe that shareholders should regard all

the Company’s non-executive directors as independent.

In keeping with the provisions of the QCA the directors of the

Company acknowledge that a number of the non-executive

directors have served for a period that exceeds nine years.

Therefore N G McNair Scott, Sir Richard Brooke Bt.,

J F Newman and R A Pilkington continue to offer themselves

for re-election to the board on an annual basis.

Announced changes to the board in the year include the

resignation of G L Toll and the appointment of A M Norris as

Finance Director.

BOARD PERFORMANCEThe board conducted a formal process to evaluate its

effectiveness and that of the board committees and individual

directors. Each director’s performance was appraised by the

Chairman reflecting input from the other directors: the senior

non-executive director appraised the Chairman’s performance

on the same basis. This evaluation process takes place annually

and aims to cover board dynamics, board capability, board

process, board structure, corporate governance, strategic clarity

and alignment and the performance of individual directors.

BOARD MEETINGSIn addition to ad hoc meetings arranged to discuss particular

transactions and events and the AGM, the full board met on

five occasions during the year. The Audit committee met on

three occasions, the Remuneration committee on one occasion

and the Nomination committee on one occasion. The

attendance record of the directors during the year is shown in

the following table:



NOMINATION COMMITTEE The Nomination committee meets at least once per year to

select and recommend to the board suitable candidates for both

executive and non-executive appointments to the board. The

committee reviewed the annual performance appraisals of all

the board members during the year. The membership of the

committee comprises N G McNair Scott (Chairman), Sir Richard

Brooke Bt., J F Newman and R A Pilkington.

REMUNERATION COMMITTEEThe Remuneration committee reviews the performance of the

executive directors and sets the scale and structure of their

remuneration on the basis of their service agreements with due

regard to the interests of the shareholders and the performance

of the Group. The Remuneration committee also makes

recommendations to the board concerning employee

incentives, including the allocation of share issues to

employees. Directors of the Group are not permitted to

participate in discussions or decisions of the committee

concerning their own remuneration. The membership of the

committee comprises N G McNair Scott (Chairman), Sir Richard

Brooke Bt., J F Newman and R A Pilkington. The committee’s

report is set out on pages 49 to 52.

AUDIT COMMITTEEThe committee is chaired by Sir Richard Brooke Bt. and consists

of N G McNair Scott, R S Robertson, J F Newman and

R A Pilkington.

The Audit committee meets at least twice a year and provides a

forum for reporting by the Company’s external auditors.

Meetings are also attended, by invitation, by other members of

senior management as appropriate. The Audit committee is

responsible for reviewing a wide range of financial matters

including the status of the Company as a going concern and the

interim and annual financial statements prior to their submission

to the board. The Audit committee keeps under review whether

an internal audit function would add value to the Company, and

also the extent of non-audit services supplied by the external

auditors to the Company.

SERVICE CONTRACTSNo director has any service contracts, consultancy agreements

or other such arrangements with a notice period in excess of

one year.

GOING CONCERNAfter making enquiries and considering the matters referred to

in the financial review and the basis of the financial statements’

preparation, the directors have a reasonable expectation that the

Group has adequate resources to continue in operational

existence for the foreseeable future. For this reason they

continue to adopt the going concern basis in preparing the

financial statements.

AUDITORSA resolution to re-appoint Grant Thornton UK LLP as auditors will

be proposed at the AGM.

NON-AUDIT SERVICESThe board is satisfied that the provision of non-audit services is

compatible with the general standard of independence for

auditors and does not give rise to any conflict of interest. The

board keeps its non-audit advisers under continual review.

Full Audit Remuneration Nomination

board committee committee committee

J G Henry 5 n/a n/a n/a

A M Norris (1) 4 n/a n/a n/a

N G McNair Scott 5 3 1 1

Sir Richard Brooke Bt. 5 3 1 1

J F Newman 5 3 1 1

R A Pilkington 5 3 1 1

M J Donoghue 4 n/a n/a n/a

R S Robertson 4 3 n/a n/a

(1) A M Norris was appointed to the board as Finance Director on 10 July 2007



REPORT ON CORPORATE GOVERNANCE (CONTINUED)

INTERNAL CONTROLThe board is responsible for maintaining a sound system of

internal control to safeguard shareholders’ investment and the

Company’s assets. Such a system is designed to manage, but

not eliminate, the risk of failure to achieve business objectives.

There are inherent limitations in any control system and,

accordingly, even the most effective system can provide only

reasonable, and not absolute, assurance against material

misstatement or loss.

In accordance with the guidance of the Turnbull Committee on

Internal Control, an ongoing process has been established for

identifying, evaluating and managing risks faced by the

Company. This process has been in place throughout the year

and to the date of approval of these financial statements and

includes the following features:

• key risks and the impact of these to the Group’s business

are reviewed and considered by the directors;

• the board reviews these key risks as part of the budget

approval process;

• executive directors visit each operation regularly, when

these key risks are reviewed and actions taken as

necessary;

• control procedures have been communicated to

operations’ management who review local procedures for

Group compliance;

• the head office finance function will visit each operation at

least twice a year to review local financial controls and

compliance with Group procedures and report to the

board;

• the Group has a comprehensive system for financial

reporting. The board approves the annual budget and five

year forecast. Monthly results are reported against

budgets and variances analysed. Great importance is

placed on the monitoring and control of cash flows, and

cash forecasts are reported to the board on a weekly

basis;

• as part of the year end external audit, management have

requested the local auditors of each operation, including

the head office in London, to prepare a management

letter on their findings on the internal financial controls.

This is reported to and reviewed by the Audit committee;

• the external auditors periodically carry out a review of the

head office’s internal financial controls and report to

management and the Audit committee;

• the board has to approve all long term currency,

commodity and interest rate hedging, along with all

capital investment projects and debt facilities;

• the Chairman and the executive directors meet on a

regular basis to discuss the management of the Group

and review any business action risks. Minutes of these

meetings are circulated to all members of the board.

RISKS AND UNCERTAINTIESThe principal risks facing the Group are those relating to the

volatility of the gold market, reliance on the expertise of the key

Group personnel, as well as risks connected with uncertainties

of the Indonesian, Malaysian and Chinese political, fiscal and

legal systems, including taxation and currency fluctuations,

as well as those regimes in which the Group has direct or

indirect interests.

EMPLOYEESRegular meetings are held with employee representatives to

discuss strategies and the financial position of the Group and

their own business units. The Group is committed to provide

equal opportunity for individuals in all aspects of employment.

RELATIONS WITH SHAREHOLDERSThe Company values the views of its shareholders and

recognises their interest in the Company’s strategy and

performance, board membership and quality of management. It

therefore holds regular meetings with, and presentations to, its

institutional and private shareholders to discuss its objectives.

The Company also regularly meets, with the help of its brokers,

institutions that do not currently hold shares in the Company, to

inform them of its objectives.

The AGM is used to communicate with institutional and private

investors and they are encouraged to participate. The Chairmen

of the Audit, Remuneration and Nomination committees are

available to answer questions. Separate resolutions are

proposed on each issue so that they can be given proper

consideration and there is a resolution to approve the Annual

Report and Accounts, and to approve the report on directors’

remuneration. The Company counts all proxy votes and will

indicate the level of proxies lodged on each resolution, after it

has been dealt with by a show of hands.

The Company operates and regularly updates its website

(www.avocet.co.uk) with shareholder information.

The Company has engaged the services of Buchanan

Communications to help in its financial public relations strategy.



REPORT ON DIRECTORS’ REMUNERATION

The 2007 Remuneration Report was approved by shareholders

at the September 2007 AGM.

The Remuneration committee is chaired by N G McNair Scott.

Its other members are Sir Richard Brooke Bt., J F Newman and

R A Pilkington. All members of the committee are independent

non-executive directors. The committee determines an overall

remuneration package for executive directors in order to attract

and retain high quality executives.

None of the committee has any personal financial interest in the

matters to be decided, other than as shareholders or potential

conflicts of interest arising from cross-directorships, nor any day

to day involvement in running the business. The committee

consults the Chief Executive Officer about its proposals and has

access to professional advice from inside and outside the

Company.

EXECUTIVE DIRECTORS’ REMUNERATIONPOLICY ON EXECUTIVE DIRECTORS’ REMUNERATION

The Company operates within a competitive environment and

its performance depends on the individual contributions of the

directors and employees.

Executive remuneration packages are designed to attract,

motivate and retain directors of the calibre necessary to manage

the Group's operations and to reward them for enhancing

shareholder value. The performance measurement of the

executive directors and the determination of their annual

remuneration package are undertaken by the committee.

The executive directors’ remuneration packages may include:

(i) basic annual salary

(ii) benefits

(iii) pension contributions

(iv) annual cash and share bonus payments

(v) share options

(vi) long term share incentives.

Each executive director's basic salary and pension contributions

are reviewed annually by the committee. In deciding upon

appropriate levels of remuneration the committee has regard to

rates of pay for similar jobs in comparable companies as well as

internal factors such as performance. Executive directors' basic

salaries were last reviewed with effect from 1 July 2008 with

appropriate changes made in order to continue to attract the

highest calibre management possible.

The committee establishes the objectives which must be met

for a cash and deferred share bonus to be paid. The committee

believes that the award of any annual bonuses should be tied to

the interests of the Company's shareholders and that the

principal measure of those interests is shareholder value.

The executive directors may participate in share incentive

schemes recommended by the Remuneration committee for

the Group’s key employees.

SHARE BONUS PLANIn order to ensure the Company continues to be able to attract

and retain high calibre senior management, in July 2006 the

Remuneration committee approved a share bonus plan for

executive directors and senior management not on the board.

The plan operates as follows:

• of the total bonus award, 50 per cent is at the discretion

of the Remuneration committee, with the remaining 50

per cent determined by the Company’s share price

performance measured against that of the companies

included in the FTSE Gold Mines Index (the Index

Constituents);

• as shown in the table below, the non-discretionary share

awards are made on a sliding scale whereby higher

awards are made when the Company’s shares perform

above or within the higher quartiles. Should the shares

perform in the lower half of the index, awards are at the

discretion of the Remuneration committee;

Performance vs Index Share award value as

Constituents percentage of salary(1)

Exceeds all Index Constituents up to 200%

Within quartiles:

First (top) up to 150%

Second up to 100%

Third and fourth awards at discretionof the Remuneration

committee

(1) Based on individual criteria for each employee

• bonuses are ordinarily paid in shares, although the

Remuneration committee may elect to pay up to 50 per

cent of the value of any award to an individual in cash;

• half of any share awards will be restricted for sale for a

period of 12 months should the employee remain in the

Company’s employment for this period of restriction;

• the scheme is reviewed by the board on an annual basis.

Participation in the plan is at the discretion of the board

and currently comprises the two executive directors as

well as the Chief Operating Officer and the Chief

Geologist.

The Company’s share performance in the year just ended placed

it in the second quartile.



NON-EXECUTIVE DIRECTORS’REMUNERATIONCHAIRMAN’S FEES AND LETTER OF APPOINTMENT

It is the Company’s policy that the Chairman should be

remunerated on a competitive basis and at a level which reflects

his contribution to the Group, as assessed by the board. He does

not participate in the Group’s pension arrangements and a formal

letter of appointment setting out his duties and responsibilities is

available for inspection at the Company’s registered office and

AGM. Details of his fees can be found on page 52.

NON-EXECUTIVE DIRECTORS’ FEES AND LETTERS OF

APPOINTMENT

The board as a whole, with the benefit of independent

professional advice, determines non-executive directors’ fees,

although non-executive directors do not vote on any increases

of their own fees. Fees are set to reflect the responsibilities and

time spent by the directors on the affairs of the Company. They

do not participate in the Group’s pension arrangements. Non-

executive directors have a formal letter of appointment setting

out their duties and responsibilities which are available for

inspection at the Company’s registered office and AGM. Details

of non-executive directors’ fees are set out on page 52.

DIRECTORS' CONTRACTSExecutive directors currently have employment contracts, which

may be terminated by the Company with up to one year’s notice.

No other payments are made for compensation for loss of office

unless otherwise agreed by the Remuneration committee.

The Chairman and other non-executive directors currently have

employment contracts which may be terminated by the

Company with up to one year’s notice. No other payments are

made for compensation for loss of office.

LONG TERM EMPLOYEE SHARE AWARDSThe Company has established an offshore Employee Benefit

Trust (EBT) and a UK Share Incentive Plan (SIP). These plans

were set up in order to reward employees for the performance

of the Company on a long term basis and to enable the

Company to continue to attract a high calibre of management

and operational personnel. Any awards under the EBT and SIP

are approved by the Remuneration committee and members of

the plans must continue in the Company’s employment for at

least one year in order for the shares to vest. At 8 July 2008 both

plans held a combined total of 1,339,799 shares of the Company

which have been purchased in the market.

SHARE OPTION SCHEMEOn occasion, the Remuneration committee considers whether a

grant of options should be made under the share option

schemes in place for the Company, and if so, at what level. In

arriving at a decision, the committee takes into consideration the

personal performance of each executive as well as

remuneration practice for the Company’s peer group.

REPORT ON DIRECTORS’ REMUNERATION (CONTINUED)

The share options held by the executive directors during the year were as follows:

Options Options Options Options Date

held at exercised granted held at from

31 March during during 31 March Exercise which Expiry

2007 the year the year 2008 price exercisable date

J G Henry 115,000 (115,000) – – 25p 20/12/03 20/12/07

J G Henry 215,000 – – 215,000 35.5p 05/02/06 05/02/10

J G Henry 110,000 – – 110,000 72p 27/11/06 27/11/10

J G Henry 263,415 – – 263,415 82p 14/07/08 14/07/12

J G Henry 36,585 – – 36,585 82p 14/07/08 14/07/10

J G Henry 500,000 – – 500,000 175.75p 14/07/09 14/07/13

J G Henry 500,000 – – 500,000 103.25p 15/11/09 15/11/13

A M Norris 500,000 – – 500,000 103.25p 15/11/09 15/11/13



During the year J G Henry exercised 115,000 options at a market price of 135.50p per share resulting in an unrealised gain of

approximately £127,000.

The options are exercisable between three and seven years of being issued, subject to performance conditions requiring growth in

the Company’s net assets per share and returns to shareholders, through share price increase and dividends, being in excess of at

least half of the companies in the FTSE Gold Mines Index.

EMPLOYEE BENEFIT TRUST During the year the Remuneration committee approved the allocation (subject to certain conditions) of 204,294 shares from the EBT.

Of these and previous awards, the following were allocated to directors of the Company with the following vesting dates:

EBT shares EBT shares Release of EBT shares Latest

held at allocated EBT held at date

31 March during the shares to 31 March on which

2007 year director 2008 shares vest

Executive directors

J G Henry 161,745 – (91,116) 70,629 12/07/09

Non-executive directors

N G McNair Scott 43,473 10,656 – 54,129 12/07/10

Sir Richard Brooke Bt. 15,650 4,098 – 19,748 12/07/10

J F Newman 12,520 3,279 – 15,799 12/07/10

R A Pilkington 12,520 3,279 – 15,799 12/07/10

M J Donoghue – 3,279 – 3,279 12/07/10

R S Robertson – 3,279 – 3,279 12/07/10

All awards to the directors form part of the deferred share bonus payments included in their remuneration packages. All awards are

made at the recommendation of the Remuneration committee to the trustees of the EBT as the Company does not operate a defined

bonus plan. During the year no deferred bonus payments were recommended for the executive directors or senior management by

the Remuneration committee in relation to the share bonus plan.

The EBT trust held 1,306,000 shares at 8 July 2008.

SHARE INCENTIVE PLAN The following SIP shares were allocated to directors of the Company with the following vesting dates:

SIP shares SIP shares SIP shares SIP shares Latest

held at allocated released held at date

31 March during the during the 31 March on which

2007 year year 2008 shares vest

J G Henry 29,981 – – 29,981 12/07/11

J G Henry received 10,344 shares on 3 April 2008 and 10,000 shares on 2 July 2008 being shares that had vested from the SIP.

The Company’s share price ranged from a high of 200p to a low of 115p during the year with a closing mid price of 179p at

31 March 2008.



REPORT ON DIRECTORS’ REMUNERATION (CONTINUED)

DIRECTORS’ EMOLUMENTS

Salary Benefits(4) Pension(5) Cash bonus(6) Total

Years ended 31 March 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007

US$000

Executive directors:

J G Henry 375 319 3 3 26 25 698 237 1,102 584

A M Norris(1) 219 – 3 – – – 147 – 369 –

G L Toll(2) 10 76 – – – – – – 10 76

J T Catchpole – 87 – 9 – – – – – 96

Non-executive directors

(fees only):

N G McNair Scott

(Chairman) 156 130 – – – – – – 156 130

Sir Richard Brooke Bt. 68 54 – – – – – – 68 54

J F Newman 48 38 – – – – – – 48 38

R A Pilkington 48 38 – – – – – – 48 38

M J Donoghue(3) 48 27 – – – – – – 48 27

R S Robertson 48 6 – – – – – – 48 6

1,020 775 6 12 26 25 845 237 1,897 1,049

(1) A M Norris was appointed to the board on 10 July 2007 as Finance Director

(2) G L Toll resigned from the board on 10 July 2007

(3) M J Donoghue, in addition to the director fees above, received US$58,675 for technical consulting

(4) Benefits include medical allowances

(5) Pension contributions represent payments into the directors’ personal pension plans, which are money purchase schemes

(6) The 2008 cash bonus paid to J G Henry and A M Norris related to the successful disposal of ZGC and was paid on the basis that 50 per cent of the total amount

would be used to purchase Avocet shares

The directors and their beneficial interests in the shares of the Company were as follows.Ordinary shares of 25p each

At 31 March 2008 At 31 March 2007or date of or date of

appointment appointmentif later if later

J G Henry 781,126 500,010

A M Norris 90,496 –

N G McNair Scott 6,100,000 6,100,000

Sir Richard Brooke Bt. 68,214 68,214

J F Newman 59,314 59,314

R A Pilkington 204,214 204,214

M J Donoghue 32,000 32,000

R S Robertson 130,000 30,000

Interests beneficially held by directors’ wives included in the above are as follows:

N G McNair Scott 34,563 32,730

Sir Richard Brooke Bt. 2,500 2,500

The SIP held a total of 33,799 shares at 8 July 2008. These shares are held in the name of N G McNair Scott who is one of two trustees

of the SIP. He has no beneficial interest in the shares held by the SIP. Of the 6,100,000 shares held by N G McNair Scott, 190,000 are

held in the Avocet Charitable Trust, in which N G McNair Scott has no beneficial interest.

J G Henry received 10,344 shares on 3 April 2008 and 10,000 shares on 2 July 2008 being shares that had vested from the SIP

increasing his holding to 801,470 shares. There were no other changes to the directors’ shareholdings up to 8 July 2008.



We have audited the Group financial statements of Avocet

Mining PLC for the year ended 31 March 2008 which comprise

the Consolidated Income Statement, the Consolidated Balance

Sheet, the Consolidated Statement of Changes in Equity, the

Consolidated Cash Flow Statement and notes 1 to 34. These

Group financial statements have been prepared under the

accounting policies set out therein.

We have reported separately on the parent Company financial

statements of Avocet Mining PLC for the year ended

31 March 2008.

This report is made solely to the Company’s members, as a

body, in accordance with Section 235 of the Companies Act

1985. Our audit work has been undertaken so that we might

state to the Company’s members those matters we are required

to state to them in an auditor's report and for no other purpose.

To the fullest extent permitted by law, we do not accept or

assume responsibility to anyone other than the Company and

the Company’s members as a body, for our audit work, for this

report, or for the opinions we have formed.

RESPECTIVE RESPONSIBILITIES OFDIRECTORS AND AUDITORSThe directors' responsibilities for preparing the Annual Report

and the Group financial statements in accordance with United

Kingdom law and International Financial Reporting Standards

(IFRSs) as adopted by the European Union are set out in the

Statement of Directors' Responsibilities.

Our responsibility is to audit the Group financial statements in

accordance with relevant legal and regulatory requirements and

International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the Group financial

statements give a true and fair view and whether the Group

financial statements have been properly prepared in accordance

with the Companies Act 1985. We also report to you whether in

our opinion the information given in the Report of the Directors

is consistent with the financial statements. The information

given in the Report of the Directors includes that specific

information presented in the Chairman's Statement, Chief

Executive Officer's Statement, Operating Review, Financial

Review, Report on Corporate Governance, the Health, Safety

and Environment section, and Notes to the Financial Statements

that are cross referred from the sections of the Report of the

Directors on Principal Activity and Business Review, Future

Developments, Results and Dividends, Post Balance Sheet

Events, Key Performance Indicators, Principal Risks and

Uncertainties, Corporate Governance, Employees and Health,

Safety and Environment.

In addition we report to you if, in our opinion, we have not

received all the information and explanations we require for our

audit, or if information specified by law regarding directors'

remuneration and other transactions is not disclosed.

We read other information contained in the Annual Report and

consider whether it is consistent with the audited Group

financial statements. The other information comprises only the

Chairman's Statement, the Chief Executive Officer's Statement,

the Gold Market, the Operating Review, the Financial Review,

the Report of the Directors, the Report on Corporate

Governance and the Report on Directors' Remuneration. We

consider the implications for our report if we become aware of

any apparent misstatements or material inconsistencies with

the Group financial statements. Our responsibilities do not

extend to any other information.

BASIS OF AUDIT OPINIONWe conducted our audit in accordance with International

Standards on Auditing (UK and Ireland) issued by the Auditing

Practices Board. An audit includes examination, on a test basis,

of evidence relevant to the amounts and disclosures in the

Group financial statements. It also includes an assessment of

the significant estimates and judgments made by the directors

in the preparation of the Group financial statements, and of

whether the accounting policies are appropriate to the Group's

circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the

information and explanations which we considered necessary in

order to provide us with sufficient evidence to give reasonable

assurance that the Group financial statements are free from

material misstatement, whether caused by fraud or other

irregularity or error. In forming our opinion we also evaluated the

overall adequacy of the presentation of information in the Group

financial statements.

OPINIONIn our opinion:

• the Group financial statements give a true and fair view,

in accordance with International Financial Reporting

Standards as adopted by the European Union, of the state

of the Group's affairs as at 31 March 2008 and of its profit

for the year then ended;

• the Group financial statements have been properly

prepared in accordance with the Companies Act 1985;

• the information given in the Directors' Report is

consistent with the financial statements.

GRANT THORNTON UK LLP

Registered Auditor

Chartered Accountants

London

8 July 2008

REPORT OF THE INDEPENDENT AUDITOR TO THEMEMBERS OF AVOCET MINING PLC

Avocet AR-53-100–AWK-final:Layout 1 4/8/08 15:39 Page 53

note 2008 2007

US$000 US$000

Revenue 4Continuing operations 123,938 86,818Discontinued operations 4,765 21,418

128,703 108,236

Cost of sales 4Continuing operations (65,004) (59,284)Discontinued operations (8,751) (26,087)

(73,755) (85,371)

Gross profit 4 54,948 22,865

Administrative expenses – continuing operations (5,292) (3,636)Share based payments – continuing operations 26 (1,618) (961)

Operating profit 4 48,038 18,268

Profit on disposal of non-current asset investments 8 8,904 –Profit on disposal of discontinued operations 8, 11 12,297 –

Finance items – continuing operations

(Loss)/gain on gold collar not qualifying for hedge accounting (36,025) 416Exchange (losses)/gains (190) 2,234Finance income 9 4,655 2,822Finance expense 9 (96) (112)

Profit/(loss) before taxation

Continuing operations 29,272 28,297Discontinued operations 8,311 (4,669)

Profit before taxation 4 37,583 23,628

Analysed as:

Profit before taxation and exceptional items 52,407 23,212Exceptional items – profits on disposals and (loss)/gain on gold collar (14,824) 416

Profit before taxation 4 37,583 23,628

Taxation

Continuing operations (5,625) (6,058)Discontinued operations (47) (226)

10 (5,672) (6,284)

Profit/(loss) for the period

Profit for the period from continuing operations 23,647 22,239Profit/(loss) for the period from discontinued operations 8,264 (4,895)

Profit for the period 4 31,911 17,344

Attributable to:Equity shareholders of the parent company 28,348 17,619Minority interests 3,563 (275)

4 31,911 17,344

Earnings per share 12Basic (cents per share) 23.59 14.74Diluted (cents per share) 23.19 14.45

Earnings per share from continuing operations

Basic (cents per share) 16.23 17.75Diluted (cents per share) 15.96 17.41Earnings per share from discontinued operations

Basic (cents per share) 7.36 (3.01)Diluted (cents per share) 7.23 (2.96)

The accompanying accounting policies and notes form an integral part of these financial statements.


CONSOLIDATED INCOME STATEMENTFor the year ended 31 March 2008


note 2008 2007

US$000 US$000

Non-current assets

Goodwill 13 8,678 5,488

Intangible assets 14 23,810 12,224

Property, plant and equipment 15 54,009 48,722

Other financial assets 16 8,323 3,765

Deferred tax assets 17 16,512 4,871

111,332 75,070

Current assets

Inventories 18 17,350 26,421

Trade and other receivables 19 5,287 6,303

Other financial assets – 981

Cash and cash equivalents 20 122,596 65,299

145,233 99,004

Current liabilities

Trade and other payables 17,684 16,142

Current tax liabilities 9,656 1,727

21 27,340 17,869

Non-current liabilities

Other financial liabilities 22 45,600 9,575

Deferred tax liabilities 17 3,579 4,293

Other liabilities 23 11,836 4,738

61,015 18,606

Net assets 168,210 137,599

Equity

Issued share capital 28 9,867 9,867

Share premium 52,834 52,834

Other reserves 29 11,454 13,894

Retained earnings 88,390 60,281

Total equity attributable to the parent 162,545 136,876

Minority interests 5,665 723

Total equity 168,210 137,599

These financial statements were approved and signed on behalf of the board of directors on 8 July 2008.

N G McNair Scott A M Norris



CONSOLIDATED BALANCE SHEETAt 31 March 2008



CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 March 2008

Share Share Other Retained Minority Total

capital premium reserve earnings interest equity

US$000 US$000 US$000 US$000 US$000 US$000

At 1 April 2006 8,445 133 17,337 41,701 998 68,614

Profit for the period – – – 17,619 (275) 17,344

Exchange differences on

translation of foreign operations – – (64) – – (64)

Revaluation of other financial assets – – (555) – – (555)

Total recognised income and

expense for the year – – (619) 17,619 (275) 16,725

Share based payments – – – 961 – 961

Issue of shares 1,422 52,701 – – – 54,123

Investment in own shares – – (2,824) – – (2,824)

At 31 March 2007 9,867 52,834 13,894 60,281 723 137,599

Profit for the period – – – 28,348 3,563 31,911

Exchange differences on

translation of foreign operations – – 168 – – 168

Revaluation of other financial assets – – (459) – – (459)

Total recognised income and

expense for the year – – (291) 28,348 3,563 31,620

Share based payments – – – 1,618 – 1,618

Losses on issue from treasury shares – – – (876) – (876)

Investment in own shares – – (2,149) – – (2,149)

Disposals – – – (981) 1,379 398

At 31 March 2008 9,867 52,834 11,454 88,390 5,665 168,210



note 2008 2007

US$000 US$000

Cash flows from operating activities

Profit for the period 4 31,911 17,344

Adjusted for:

Depreciation of non-current assets 15 13,579 6,895

Exploration costs written off – 242

Share based payments 1,618 961

Provisions 23 580 217

Taxation in the income statement 10 5,672 6,284

Non operating items in the income statement 27 10,455 (5,360)

63,815 26,583

Movements in working capital:

Increase in inventory (2,687) (2,638)

Increase in trade and other receivables (1,959) (2,882)

Increase in trade and other payables 6,266 4,781

Net cash generated by operations 65,435 25,844

Interest received 9 4,655 2,424

Interest paid 9 (96) (112)

Income tax paid 10 (8,692) (4,669)

Net cash generated by investing activities 61,302 23,487

Cash flows from investing activities

Net proceeds from disposals of non-current asset investments 8 46,149 –

Payments for property, plant and equipment 15 (29,957) (13,264)

Deferred consideration 23 (1,994) (1,196)

Exploration and evaluation expenses 14 (13,944) (9,203)

Net cash movement on sale of subsidiary (87) –

Net cash generated by/(used in) investing activities 167 (23,663)

Cash flows from financing activities

Proceeds from issue of equity shares 824 56,733

Issue costs – (2,610)

Treasury and EBT shares purchased (4,164) (3,220)

Capital repayments on finance leases 25 (642) (580)

Net cash (used in)/generated by financing activities (3,982) 50,323

Net increase in cash and cash equivalents 57,487 50,147

Exchange (losses)/gains (190) 2,234

Total increase in cash and cash equivalents 57,297 52,381

Cash and cash equivalents at the start of the period 65,299 12,918

Cash and cash equivalents at the end of the period 20 122,596 65,299

The cash flow of the Group’s discontinued activity (ZGC) is shown in note 4.



CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 March 2008



NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 March 2008

1. BASIS OF PREPARATION AND ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

The Group financial statements consolidate those of the Company and of its subsidiary undertakings; the

consolidated financial statements have been prepared in accordance with IFRS and International

Financial Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union at

31 March 2008.

The consolidated financial statements have been prepared under the historical cost convention except for share

based payments that are fair valued at the date of grant and other financial assets and liabilities that are

measured at fair value. The accounting policies applied in these financial statements are unchanged from those

used in the previous annual financial statements except to the extent required by the adoption of IFRS as set

out below.

Certain amounts included in the consolidated financial statements involve the use of judgement and/or

estimation. Judgements, estimations and sources of estimation uncertainty are discussed in note 2.

The parent company financial statements in notes 35 to 51 present information about the Company as a

separate entity rather than about the Group, and have continued to be prepared under UK GAAP as permitted

by the Companies’ Act 1985.

FIRST TIME ADOPTION OF IFRS

The Group adopted IFRS with effect from 1 April 2007 and has accordingly prepared these consolidated

financial statements under IFRS for the year ended 31 March 2008, the first annual reporting date for which the

Group is required to apply IFRS. IFRS requires that an opening IFRS balance sheet be prepared at the transition

date to 1 April 2006, which is a date one year prior to the adoption of IFRS in order to ensure that appropriate

comparative information may be presented. The Group has taken advantage of IFRS 1.25B exemption which

permits application of IFRS 2 from the transition date, rather than from January 2005. The Group’s opening IFRS

balance sheet at 1 April 2006 has been prepared in accordance with IFRS 1 – First time adoption and the Group

has elected to apply the exemption available on first time adoption whereby business combinations that

occurred before the opening IFRS balance sheet date are exempt from the application of IFRS 3 – Business

combinations. The format of financial statements and certain accounting policies differ under IFRS compared

with UK GAAP. Comparative financial information previously published under UK GAAP has therefore been

adjusted on an IFRS basis for the opening balance sheet at 1 April 2006 and the year ended 31 March 2007.

The change in the Group’s reported performance and financial position arising on adoption of IFRS is set out in

detail in note 34 to these consolidated financial statements.

Accounting policy changes necessitated by the adoption of IFRS are as follows:

IFRS 3 – BUSINESS COMBINATIONS

• under UK GAAP an amount of negative goodwill arising from a past acquisition was recognised on the

balance sheet within intangible fixed assets; IFRS 3 requires all negative goodwill to be credited to the

income statement;

• under UK GAAP positive goodwill is carried on the balance sheet and amortised over an appropriate life;

IFRS 3 requires that amortisation cease at the date of transition and a regime of impairment testing be

put in place including a test for impairment at the date of transition.

IAS 12 – INCOME TAXES

• The charge in the income statement in respect of share based payments is calculated by reference to

the fair value of options granted to employees, whereas deferred tax is based on an estimate of the

deduction the Company will receive in a future period, by reference to the period end market price of the

options less the exercise price. The deferred tax credit in the income statement is limited to the lower

of the estimated deduction and the fair value charge in the income statement. Under UK GAAP where



the future deduction was estimated to be in excess of the fair value charge in the income statement,

this was considered a permanent difference and no deferred tax asset was recognised; IAS 12 requires

that a deferred tax asset be recognised in respect of the difference, with the credit taken to equity.

IAS 39 – FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT

• under UK GAAP the Group did not recognise as assets a number of warrants entitling it to acquire shares

in Primary Metals Inc. (Primary), a company listed on the Toronto Venture Exchange; IAS 39 requires that

investments in the form of warrants and shares be recognised on the balance sheet at fair value, with

changes in fair value being taken to equity. This treatment was applied to the Group’s interest in

Monument Mining Limited at the transition date; the Group disposed of its warrants in Primary during

the six month period ended 30 September 2007;

• under UK GAAP the Group’s gold collar was not recognised on the balance sheet; IAS 39 requires that

the collar be recognised on the balance sheet at fair value and that changes in fair value be taken to the

income statement on the basis that the collar does not qualify for hedge accounting under IFRS, for

reasons set out in note 22.

• The adjustments made to reflect these changes in accounting policies are detailed in note 34.

At the date of authorisation of these financial statements, certain new accounting standards, and amendments

to, or interpretations of, existing standards have been published but are not yet effective. The Group has not

early adopted any of these pronouncements. The new standards, amendments and interpretations that are

expected to be relevant to the Group’s financial statements are as follows:

IAS 1 – PRESENTATION OF FINANCIAL STATEMENTS (REVISED 2007)

• effective for reporting periods beginning on or after 1 January 2009

IAS 23 (REVISED) – BORROWING COSTS

• effective for accounting periods beginning on or after 1 January 2009

IAS 27 – CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

• effective for reporting periods beginning on or after 1 July 2009

AMENDMENT TO IFRS 2 SHARE BASED PAYMENT – VESTING CONDITIONS AND CANCELLATIONS

• effective for accounting periods beginning on or after 1 January 2009

IFRS 3 (REVISED) – BUSINESS COMBINATIONS

• effective for accounting periods beginning on or after 1 July 2009

IFRS 8 – OPERATING SEGMENTS

• effective for reporting periods beginning on or after 1 January 2009

The directors anticipate that all the above pronouncements will be adopted in the Group’s financial statements

for the year beginning 1 April 2009 and will have little impact on the Group’s accounting policies or results.



NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the year ended 31 March 2008

2. JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND SOURCES OF UNCERTAINTY

Certain amounts included in the financial statements involve the use of judgement and/or estimation. These are

based on management’s best knowledge of the relevant facts and circumstances, having regard to prior

experience. However, judgments and estimations regarding the future are a key source of uncertainty and

actual results may differ from the amounts included in the financial statements. Information about judgements

and estimation is contained in the accounting policies and/or other notes to the financial statements. The key

areas are summarised below:

FUNCTIONAL CURRENCIES

Identification of functional currencies requires a judgement about which currency is most relevant to the results

of the entity, which is based on analysis of the economic environments and cash flows of the subsidiaries of

the Group.

DEFERRED EXPLORATION EXPENDITURE

The recoverability of exploration amounts capitalised within intangible assets is assessed based on a judgement

about the feasibility of the project and estimates of its future cash flows. Future gold prices and operating costs

are sources of estimation uncertainty.

CARRYING VALUES OF PROPERTY, PLANT AND EQUIPMENT

The Group periodically makes judgements as to whether its property, plant and equipment may have been

impaired, based on internal and external indicators. Any impairment is based on estimates of future cash flows.

DEFERRED STRIPPING COSTS

The recoverability of deferred stripping costs is assessed based on the projected future cash flows of the

project. The amount deferred or charged in each period is based on the projected current life of mine stripping

ratio. Future changes in mineral resources, ore reserves or waste volumes are a source of estimation

uncertainty.

DEFERRED TAX

Estimates of future profitability are required when assessing whether a deferred tax asset may be recognised.

MINERAL RESOURCES AND ORE RESERVES

Quantification of mineral resources requires a judgement on the reasonable prospects for eventual economic

extraction. Quantification of ore reserves requires a judgement on whether mineral resources are economically

mineable. These judgements are based on assessment of mining, metallurgical, economic, marketing, legal,

environmental, social and governmental factors involved, in accordance with the Joint Ore Reserves Committee

of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council

of Australia (JORC code). These factors are a source of uncertainty and changes could result in an increase or

decrease in mineral resources and ore reserves. This would in turn affect certain amounts in the financial

statements such as depreciation, deferred stripping and closure provisions, which are calculated on projected

life of mine figures.

INVENTORY VALUATIONS

Valuations of gold in stockpiles, gold in process and gold in leach pads require estimations of the amount of gold

contained in, and recovery rates from, the various work in progress gold circuits. These estimations are based

on analysis of samples and prior experience. A judgement is also required about when stockpiles will be used

and what gold price should be applied in calculating net realisable value; these are both sources of uncertainty.

RESTORATION, REHABILITATION AND ENVIRONMENTAL PROVISIONS

Such provisions require a judgement on likely future obligations, based on assessment of technical, legal and

economic factors. The ultimate cost of environmental remediation is uncertain and cost estimates can vary in

response to many factors, including changes to the relevant legal requirements, the emergence of new

restoration techniques and changes to the life of mine.



PROVISIONS AND CONTINGENT LIABILITIES

Judgements are made as to whether a past event has led to a liability that should be recognised in the financial

statements or disclosed as a contingent liability. Quantifying any such liability often involves judgements and

estimations. These judgements are based on a number of factors including the nature of the claim or dispute,

the legal process and potential amount payable, legal advice received, previous experience and the probability

of a loss being realised. Several of these factors are a source of estimation uncertainty.

ACQUISITIONS AND DISPOSALS

Accounting for acquisitions requires an estimation of the fair value of assets acquired and consideration paid,

including deferred consideration. These estimations are based on the condition and useful lives of assets,

future gold production, and the projected cash flows generated. Projections of future gold production are a

source of estimation uncertainty in calculating deferred consideration. In addition to the US$45.1 million

received in respect of the ZGC disposal, Avocet is entitled to a further US$10.0 million should ZGC be granted

an exploration or mining licence for the Chore deposit in Tajikistan. The grant of such a license remains

uncertain and the Directors have made a judgement that this contingent deferred consideration should only be

recognised in the period of receipt.

3. ACCOUNTING POLICIESCONSOLIDATION

The Group financial statements consolidate the results of the Company and its subsidiary undertakings using

the acquisition accounting method. On acquisition of a subsidiary, all of the subsidiary’s identifiable assets and

liabilities which exist at the date of acquisition are recorded at their fair values reflecting their condition on that

date. The results of subsidiary undertakings acquired are included from the date of acquisition. In the event of

the sale of a subsidiary, the subsidiary results are consolidated up to the date of completion of the sale.

The Group uses the purchase method of accounting for the acquisition of a subsidiary. The cost of an

acquisition is measured by the fair value of the assets given, equity instruments issued and liabilities incurred

or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets

acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at

their fair values at the acquisition date irrespective of the extent of any minority interest. The excess of the

cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded

as goodwill. If the cost of the acquisition is less than the fair value of the net assets of the subsidiary acquired

the difference is recognised directly in the income statement as a gain. Goodwill acquired at the time of the

acquisition is reviewed annually to assess whether impairment of the carrying value is required.

Exchange differences arising from the translation of the net investment in foreign entities are taken to equity. All

other transactions, balances and unrealised gains and losses on transactions between Group companies are

eliminated, unless the unrealised loss provides evidence of an impairment of the asset transferred.

EXCEPTIONAL ITEMS

Exceptional items are those significant items which are separately disclosed by virtue of their size or incidence

to enable a full understanding of the Group's financial performance. Transactions which may give rise to

exceptional items are principally gains or losses on disposal of investments and movements in the fair value

of the gold collar that does not qualify for hedge accounting.

SEGMENTAL REPORTING

A business segment is a group of assets and operations engaged in production that is subject to risks and

returns that are different from those of other business segments. The Group’s segments are geographic by

location of the Group’s assets, as operations in each country are separate and each country has a different

economic and regulatory environment. The Group’s current geographical segments are UK, Malaysia, and

Indonesia. The Tajikistan segment is now discontinued. The Group does not report geographic segments

by location of customer as its business is the production of gold which is traded as a commodity on a world

wide basis.





3. ACCOUNTING POLICIES (CONTINUED)

FOREIGN CURRENCY TRANSLATION

A) FUNCTIONAL AND PRESENTATIONAL CURRENCY

The functional currency of the Group is the US dollar, as the currency which most affects each company’s

revenue, costs and financing. The Group’s reporting currency is also US dollars.

B) TRANSACTIONS AND BALANCES

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at

the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such

transactions and from the translation at reporting period end exchange rates of monetary assets and liabilities

denominated in foreign currencies are recognised in the income statement.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities are

taken to equity.

REVENUE

Revenue is the amount receivable by the Group for goods supplied, and is recognised when confirmation of the

refined metal is received from the purchaser. VAT and similar local taxes and trade discounts are excluded.

GOODWILL AND DEFERRED CONSIDERATION

Goodwill is the difference between the fair value of the consideration paid and the fair value of the identifiable

assets and liabilities acquired. Goodwill is capitalised and is subject to impairment testing on an annual basis or

more frequently if circumstances indicate that the asset may have been impaired. For the purpose of

impairment testing goodwill is allocated to cash generating units.

Deferred consideration is payable in respect of Avocet’s 2002 acquisition of an 80 per cent interest in the

Indonesian company now named PT Avocet Bolaang Mongondow, based on the value of future production

output. The value of future production output is reassessed on an annual basis and additional consideration is

provided for when its payment is considered probable; a corresponding increase in goodwill is recognised.

INTANGIBLE ASSETS

All costs associated with mineral exploration including those incurred through joint venture projects are

capitalised within non-current intangible assets pending determination of the project’s feasibility. If an exploration

project is deemed to be economically viable based on feasibility studies, the related expenditures are transferred

to property, plant and equipment and amortised over the life of the mine on a unit of production basis. Where a

project is abandoned or is considered to be no longer economically viable, the related costs are written off.

PROPERTY, PLANT AND EQUIPMENT

Mining and milling plant and equipment, consisting of buildings, machinery, vehicles and fixtures & fittings, are

depreciated over the shorter of the estimated useful life of the asset or the life of the mine. Mining property for

mines in production, including pre-stripping costs and closure costs, are depreciated on a unit of production

basis over the life of the mine. Residual values and useful lives are reviewed on annual basis and changes are

accounted for over the remaining lives.

STRIPPING COSTS

Stripping costs are the costs of removing overburden to expose ore. Stripping costs incurred prior to the

commencement of production are deferred and amortised on a unit of production basis. Stripping costs incurred

during the production phase are deferred to the extent that the waste to ore stripping ratio exceeds the average

life of mine stripping ratio. All amounts deferred are subject to the directors’ review of recoverability.

IMPAIRMENT OF GOODWILL, INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT

The Group carries out a review at each balance sheet date to determine whether there is any indication that the

above assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated based



on future cash flows, in order to determine the extent of impairment. Future cashflows are based on estimates

of the life of mine reserves together with estimates of future gold prices and cash costs. Goodwill is assessed

on the basis of separate cash generating units. Goodwill and deferred exploration costs are tested for

impairment at least annually.

The recoverable amount is the higher of fair value less cost to sell and value in use. An impairment is

recognised immediately as an expense; where there is a reversal of the conditions leading to an impairment,

the impairment is reversed as income through the income statement. Impairments relating to goodwill are

never reversed.

INVENTORIES

Inventories comprise consumables, work in progress and finished goods. Consumables are valued at average

cost. Consumables and finished goods are held at the lower of cost, less a provision for obsolescence, and net

realisable value. Work in progress consists of ore in stockpiles and heap leach pads that are valued at the lower

of average production cost and net realisable value. Net realisable value is the estimated selling price less any

applicable selling expenses.

FINANCIAL ASSETS

Financial assets are classified into the following specific categories which determine the basis of their carrying

value in the balance sheet and how changes in their fair value are accounted for: at fair value through profit &

loss account, held to maturity investments, available for sale financial assets, and loans and receivables.

Financial assets are assigned to their different categories by management on initial recognition, depending on

the purpose for which the investment was acquired. The designation of financial assets is re-evaluated at every

reporting date at which a choice of classification or accounting treatment is available.

Available for sale financial assets are included within non-current assets unless designated for sale in which

case they are included within current assets. They are carried at fair value at inception and changes to the fair

value are recognised through equity; when sold the accumulated fair value adjustments recognised in equity

are recycled through the income statement. Trade and other receivables are measured on initial recognition at

fair value.

Derecognition of financial instruments occurs when the rights to receive cash flows from the investments

expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. An

assessment for impairment is undertaken at least annually at each balance sheet date whether or not there is

objective evidence that a financial asset or a group of financial assets is impaired.

Non-compounding interest and other cash flows resulting from holding financial assets are recognised in profit

and loss when received, regardless of how the related carrying amount of financial assets is measured.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents are defined as cash on hand, demand deposits and short term highly liquid

investments and are measured at cost which is deemed to be fair value as they have short term maturities.

LEASES

Finance leases are recognised as those leases that transfer substantially all the risks and rewards of ownership.

Assets held under finance leases are capitalised and the outstanding future lease obligations are shown in

liabilities at their fair value, or if lower at the present value of the lease payments. They are depreciated over the

term of the lease or their useful economic lives, whichever is the shorter. The interest element (finance charge)

of lease payments is charged to the income statement on a constant basis over the period of the lease.

All other leases are regarded as operating leases and the payments made under them are charged to the

income statement in the period on a straight line basis. The Company does not act as a lessor.





3. ACCOUNTING POLICIES (CONTINUED)

FINANCIAL LIABILITIES

Financial liabilities include bank loans and overdrafts and trade and other payables. In the balance sheet these

items are included within Current liabilities and Non-current liabilities. Financial liabilities are recognised when

the Group becomes a party to the contractual agreements giving rise to the liability. All interest related charges

are recognised as an expense in ‘Finance costs’ in the income statement.

Trade and other payables are recognised initially at their fair value and subsequently measured at amortised

costs less settlement payments.

As part of a strategy of commodity price risk management the Group has a gold collar consisting of purchased

put options and sold call options which restricts both the minimum and maximum prices available to the

Company for its gold sales. The gold collar is held on the balance sheet at the net fair value of the options and

changes in the carrying value of the options are marked to market through the income statement.

INCOME TAXES

Current income tax liabilities comprise those obligations to fiscal authorities in the countries in which the Group

carries out mining operations and where it generates its profits. They are calculated according to the tax rates

and tax laws applicable to the financial period and the country to which they relate. All changes to current tax

assets and liabilities are recognised as a component of the tax charge in the income statement.

Deferred income taxes are calculated using the liability method on temporary differences. This involves the

comparison of the carrying amount of assets and liabilities in the consolidated financial statements with their

respective tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the

initial recognition of an asset or liability unless the related transaction is a business combination or affects taxes

or accounting profit.

Deferred tax liabilities are always provided for in full; deferred tax assets are recognised when there is sufficient

probability of utilisation. Deferred tax assets and liabilities are calculated at tax rates that are expected to apply to

their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

PENSION OBLIGATIONS

The only defined benefit pension scheme operated by the Group relates to a former US subsidiary undertaking

which is no longer part of the Group. Accordingly full provision has been made for outstanding post retirement

benefits.

The liability recognised in the balance sheet is the present value of the defined benefit obligation (DBO) at the

balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains

or losses and past service costs. The DBO is calculated annually by independent actuaries using the projected

unit credit method or an accepted equivalent in the USA, and independent assumptions. The present value of

the DBO is determined by discounting the estimated future cash outflows using interest rates of high quality

corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to

maturity approximating the terms of the related pension liability.

Actuarial gains and losses are not recognised as an expense unless they exceed 10 per cent of the obligation.

The amount exceeding this 10 per cent corridor is charged or credited to the income statement. Actuarial gains

and losses within 10 per cent of the obligation are disclosed separately.

PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Other provisions are recognised when the present obligations arising from legal or constructive commitment,

resulting from past events, will probably lead to an outflow of economic resources from the Group which can

be estimated reliably. Provisions are measured at the present value of the estimated expenditure required to

settle the present obligation, based on the most reliable evidence available at the balance sheet date. All

provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates.



RESTORATION, REHABILITATION AND ENVIRONMENTAL COSTS

An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance

is caused by the development or ongoing production of a mining property. Such costs arising from the

decommissioning of plant and other site preparation work, discounted to their net present values, are provided

for in full as soon as the obligation to incur such costs arises and can be quantified. On recognition of a full

provision, an addition is made to property, plant and equipment of the same amount; this addition is then

charged against profits on a unit of production basis over the life of the mine. Closure provisions are updated

annually for changes in cost estimates as well as for changes to life of mine reserves.

SHARE BASED PAYMENTS

The Group operates equity settled share based compensation plans for remuneration of its employees.

All employee services received in exchange for the grant of any share based compensation are measured at

their fair values. These are indirectly determined by reference to the share option awarded. Their value is

appraised at the grant date and excludes the impact of any non-market vesting conditions (e.g. profitability or

sales growth targets).

All share based compensation is ultimately recognised as an expense in profit and loss with a corresponding

credit to retained earnings, net of deferred tax where applicable. If vesting periods or other vesting conditions

apply, the expense is allocated over the vesting period, based on the best available estimate of the number of

shares options expected to vest. Non market vesting conditions are included in assumptions about the number

of options that are expected to become exercisable. Estimates are subsequently revised if there is any

indication that the number of share options expected to vest differs from previous estimates. No adjustment

to expense recognised in prior periods is made if fewer share options are ultimately exercised than originally

estimated.

Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, up

to the nominal value of the shares issued are reallocated to share capital with any excess being recorded in

share premium.



NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 March 2008

4. SEGMENTAL REPORTINGUK Total

2008 (head continuing Tajikistan

notes office) Malaysia Indonesia operations (discont'd) Total

US$000 US$000 US$000 US$000 US$000 US$000

INCOME STATEMENTRevenue – 64,881 59,057 123,938 4,765 128,703

Cost of sales 3,980 (37,845) (31,139) (65,004) (8,751) (73,755)

Cash production costs:

– mining – (13,288) (10,363) (23,651) (3,526) (27,177)

– processing – (8,108) (4,977) (13,085) (1,730) (14,815)

– overheads – (2,022) (6,049) (8,071) (1,254) (9,325)

– royalties – (4,541) (526) (5,067) (298) (5,365)

– (27,959) (21,915) (49,874) (6,808) (56,682)

Changes in inventory – (2,197) 3,789 1,592 (178) 1,414

Other cost of sales (a) 3,996 (4,686) (2,571) (3,261) (1,647) (4,908)

Depreciation and amortisation (b) (16) (3,003) (10,442) (13,461) (118) (13,579)

Gross profit/(loss) 3,980 27,036 27,918 58,934 (3,986) 54,948

Administrative expenses and

share based payments (6,910) – – (6,910) – (6,910)

Operating profit/(loss) (2,930) 27,036 27,918 52,024 (3,986) 48,038

Net finance items before exceptionals 5,237 473 (1,341) 4,369 – 4,369

Profit before tax and exceptionals 2,307 27,509 26,577 56,393 (3,986) 52,407

Exceptional items (27,121) – – (27,121) 12,297 (14,824)

Profit/(loss) before taxation (24,814) 27,509 26,577 29,272 8,311 37,583

Taxation 10,200 (7,909) (7,916) (5,625) (47) (5,672)

Profit/(loss) for the period (14,614) 19,600 18,661 23,647 8,264 31,911

Attributable to:

Minority interests – – 4,144 4,144 (581) 3,563

Equity shareholders of parent company (14,614) 19,600 14,517 19,503 8,845 28,348

EBITDA (c) (2,914) 30,039 38,360 65,485 (3,868) 61,617

(a) Other cost of sales represents costs not directly related to production;

(b) Includes amounts of US$166,000 and US$2.0 million in respect of the amortisation of closure provisions at Penjom and North Lanut, respectively, see notes 15

and 23 for further details;

(c) EBITDA represents earnings before exceptional items, interest, tax and depreciation and amortisation, and is calculated by adding back depreciation and

amortisation to operating profit. EBITDA is commonly used as an indication of underlying cash generation; it is not defined by IFRS.



4. SEGMENTAL REPORTING (CONTINUED)

UK Total

2008 (head continuing Tajikistan

notes office) Malaysia Indonesia operations (discont'd) Total

US$000 US$000 US$000 US$000 US$000 US$000

BALANCE SHEETNon-current assets (d) 39,278 43,785 28,269 111,332 – 111,332

Inventories – 7,287 10,063 17,350 – 17,350

Trade and other receivables 813 801 3,673 5,287 – 5,287

Cash and bank balances 86,616 11,926 24,054 122,596 – 122,596

Total assets 126,707 63,799 66,059 256,565 – 256,565

Current liabilities (e) 3,995 10,482 12,863 27,340 – 27,340

Non-current liabilities (f) 50,470 4,839 5,706 61,015 – 61,015

Total liabilities 54,465 15,321 18,569 88,355 – 88,355

Net assets 72,242 48,478 47,490 168,210 – 168,210

CASH FLOW STATEMENTProfit/(loss) for the period (14,614) 19,600 18,661 23,647 8,264 31,911

Adjustments for non-cash items (g) 1,021 10,439 20,279 31,739 165 31,904

Movements in working capital 14,756 5,251 (6,196) 13,811 (12,191) 1,620

Net cash generated from operations 1,163 35,290 32,744 69,197 (3,762) 65,435

Net interest (paid)/received 5,328 473 (1,242) 4,559 – 4,559

Tax paid (1,065) (3,960) (3,620) (8,645) (47) (8,692)

Purchase of property, plant and equipment (634) (25,411) (3,690) (29,735) (222) (29,957)

Deferred exploration expenditure (762) (1,818) (11,155) (13,735) (209) (13,944)

Other cash movements (h) 29,695 327 5,977 35,999 3,897 39,896

Total increase in cash and

cash equivalents 33,725 4,901 19,014 57,640 (343) 57,297

Employees – average number 19 443 385 847 – 847

(d) Geographic analysis of intangible assets and property, plant and equipment is provided in notes 14 and 15, respectively. Goodwill, other financial assets

and deferred tax assets are all included within UK (head office);

( e) Current liabilities in Indonesia include US$7.1 million of current tax payable, an increase of US$6.8 million over the prior year due to increased profits

and the timing of payments;

(f) Non-current liabilities for UK (head office) include a US$45.6 million mark to market liability in respect of the Group’s gold collar;

(g) Adjustments for non-cash items include depreciation and amortisation, share based payments, movement in provisions, taxation in the income statement

and non-operating items in the income statement;

(h) Other cash movements include net proceeds on disposals, deferred consideration paid, cash flows from financing activities, and exchange losses.



UK Total(head continuing Tajikistan

2007 notes office) Malaysia Indonesia operations (discont'd) Total

US$000 US$000 US$000 US$000 US$000 US$000

INCOME STATEMENTRevenue – 56,751 30,067 86,818 21,418 108,236

Cost of sales 2,876 (40,370) (21,790) (59,284) (26,087) (85,371)

Cash production costs

– mining – (20,297) (9,060) (29,357) (13,208) (42,565)

– processing – (7,659) (3,269) (10,928) (7,076) (18,004)

– overheads – (1,449) (4,364) (5,813) (4,232) (10,045)

– royalties – (4,234) (350) (4,584) (1,125) (5,709)

– (33,639) (17,043) (50,682) (25,641) (76,323)

Changes in inventory – (1,115) 1,080 (35) 1,160 1,125

Other cost of sales (a) 2,892 (3,913) (1,124) (2,145) (1,133) (3,278)

Depreciation and amortisation (16) (1,703) (4,703) (6,422) (473) (6,895)

Gross profit/(loss) 2,876 16,381 8,277 27,534 (4,669) 22,865

Administrative expenses and

share based payments (4,597) – – (4,597) – (4,597)

Operating profit/(loss) (1,721) 16,381 8,277 22,937 (4,669) 18,268

Net finance items before exceptionals 6,528 131 (1,715) 4,944 – 4,944

Profit before tax and exceptionals 4,807 16,512 6,562 27,881 (4,669) 23,212

Exceptional items 416 – – 416 – 416

Profit/(loss) before tax 5,223 16,512 6,562 28,297 (4,669) 23,628

Taxation (443) (4,144) (1,471) (6,058) (226) (6,284)

Profit/(loss) for the period 4,780 12,368 5,091 22,239 (4,895) 17,344

Attributable to:

Minority interests – – 1,018 1,018 (1,293) (275)

Equity shareholders of parent company 4,780 12,368 4,073 21,221 (3,602) 17,619

EBITDA (b) (1,705) 18,084 12,980 29,359 (4,196) 25,163

(a) Other cost of sales represents costs not directly related to production;

(b) EBITDA represents earnings before exceptional items, interest, tax and depreciation and amortisation, and is calculated by adding back depreciation and

amortisation to operating profit. EBITDA is commonly used as an indication of underlying cash generation; it is not defined by IFRS.






UK Total(head continuing Tajikistan

2007 notes office) Malaysia Indonesia operations (discont'd) Total

US$000 US$000 US$000 US$000 US$000 US$000

BALANCE SHEETNon-current assets (c) 20,232 19,229 20,096 59,557 15,513 75,070

Inventories – 8,708 4,817 13,525 12,896 26,421

Trade and other receivables 77 3,088 2,404 5,569 1,715 7,284

Cash and bank balances 52,891 7,025 5,040 64,956 343 65,299

Total assets 73,200 38,050 32,357 143,607 30,467 174,074

Current liabilities 5,459 6,404 3,668 15,531 2,338 17,869

Non-current liabilities (d) 14,113 1,577 2,916 18,606 – 18,606

Total liabilities 19,572 7,981 6,584 34,137 2,338 36,475

Net assets 53,628 30,069 25,773 109,470 28,129 137,599

CASH FLOW STATEMENTProfit/(loss) for the period 4,703 12,368 5,091 22,162 (4,818) 17,344

Adjustments for non-cash items (e) (1,810) 6,028 4,676 8,894 345 9,239

Movements in working capital 1,020 (340) 1,278 1,958 (2,697) (739)

Net cash generated from operations 3,913 18,056 11,045 33,014 (7,170) 25,844

Net interest (paid)/received 3,802 131 (1,621) 2,312 – 2,312

Tax paid – (3,567) (1,102) (4,669) – (4,669)

Purchase of property, plant and equipment (15) (8,116) (3,769) (11,900) (1,364) (13,264)

Deferred exploration expenditure (2,694) (2,160) (2,984) (7,838) (1,365) (9,203)

Other cash movements (f) 44,498 (2,842) 575 42,231 9,130 51,361

Total increase in cash and

cash equivalents 49,504 1,502 2,144 53,150 (769) 52,381

Employees – average number 17 336 347 700 1,466 2,166

(c) Geographic analysis of intangible assets and property, plant and equipment is provided in notes 14 and 15, respectively. Goodwill, other financial assets

and deferred tax assets are all included within UK (head office);

(d) Non-current liabilities for UK (head office) include a US$9.6 million mark to market liability in respect of the Group’s gold collar;

(e) Adjustments for non-cash items include depreciation and amortisation, exploration written off, share based payments, movement in provisions, taxation

in the income statement and non-operating items in the income statement as set out in note 27;

(f) Other cash movements include deferred consideration paid, cash flows from financing activities, and exchange gains.




5. PROFIT FOR THE PERIOD BEFORE TAX

2008 2007

US$000 US$000

Profit for the period has been arrived at after charging:

Depreciation of property, plant and equipment:

– owned 12,859 6,410

– leased 720 485

Operating lease charges 101 95

Audit services:

– fees payable to the Company’s auditor for the audit

of the Company and Group accounts 148 100

Non-audit services:

– the auditing of accounts of subsidiaries of the Company 97 164

Fees payable to the Company’s auditor for other services:

– tax services 38 20

– other services 50 28

6. REMUNERATION OF KEY MANAGEMENT PERSONNELIn accordance with IAS 24 – Related party transactions, key management personnel, including all executive and non-executive

directors, are those persons having authority and responsibility for planning, directing and controlling the activities of the Group.

2008 2007

US$000 US$000

Wages and salaries 1,625 1,269

Bonuses 1,482 531

Social security costs 153 87

Pension costs – defined contribution plans 27 25

3,287 1,912

7. TOTAL EMPLOYEE REMUNERATION The following amounts include key management personnel.

2008 2007

US$000 US$000


Bonus 1,969 1,141

Social security costs 1,242 913

Pension costs – defined contribution plans 683 915

16,463 13,928

The average number of employees during the period was made up as follows:

Directors 8 8

Management and administration 11 9

Mining, processing and exploration staff 828 2,149

847 2,166

The average number of employees reduced from the previous year as a result of the sale of ZGC.



8. PROFIT ON DISPOSAL OF NON-CURRENT ASSET INVESTMENTS During the period the Group divested its interest in Damar Consolidated Exploration Sdn Bhd (Damar), the owner of the Buffalo Reef

prospects in Malaysia, and its remaining interest in Primary Metals Inc. (Primary). In addition it disposed of its ZGC operation in

Tajikistan and its subsidiary Commonwealth and British Minerals (UK) Limited (CBM (UK) Ltd), through which ZGC was held.

Other Total Discontinued

continuing continuing operations ZGC/

Damar Primary operations operations CBM (UK) Ltd

US$000 US$000 US$000 US$000 US$000

Sale proceeds

– cash 1,629 1,751 150 3,530 45,100

– shares 7,618 – – 7,618 –

9,247 1,751 150 11,148 45,100

Net assets disposed (1,249) (981) – (2,230) (30,336)

Disposal costs (14) – – (14) (2,467)

(1,263) (981) – (2,244) (32,803)

Profit on disposal

of non-current

asset investments 7,984 770 150 8,904 –

Profit on disposal

of discontinued

operations – – – – 12,297

In addition to the US$45.1 million cash proceeds received in respect of the ZGC disposal, Avocet is entitled to a further US$10.0 million

should ZGC be granted an exploration or mining license for the Chore deposit in Tajikistan. The grant of such a license remains

uncertain. This amount would be recognised in the period of receipt as deferred profit on the sale of ZGC.

9. FINANCE INCOME AND EXPENSE

2008 2007

US$000 US$000

Finance income

Bank interest received 4,655 2,822

Finance expense

Finance charges payable under finance leases 96 112




10. TAXATION

2008 2007

US$000 US$000

Current tax:

Corporation tax on profit for the period 885 1,382

Overseas tax 15,400 4,505

16,285 5,887

Deferred tax (10,613) 397

Tax charge for the period 5,672 6,284

Factors affecting the current tax charge for the year:

2008 2007

US$000 US$000

Profit for the period before tax 37,583 23,628

Profit for the period multiplied by the UK standard rate

of corporation tax 30 per cent (2007 – 30 per cent) 11,275 7,088

Effects of:

Expenses not taxable (605) 1,658

Tax losses not utilised/(utilised) in the year 1,241 (1,861)

Gains not taxable (6,761) –

Decrease in tax rate on deferred tax assets 916 –

Tax relief for employee share issues (394) (601)

Tax charge for the period 5,672 6,284

11. DISCONTINUED OPERATIONS The results of ZGC and CBM (UK) Ltd for the period up to the date of their disposal are shown below, together with the profit on

their disposal.

2008 2007

US$000 US$000

Loss from discontinued operations before taxation (3,986) (4,669)

Profit on disposal of discontinued operations 12,297 –

Profit/(loss) before taxation 8,311 (4,669)

Taxation from discontinued operations (47) (226)

Profit/(loss) for the period from discontinued operations 8,264 (4,895)



12. EARNINGS PER SHAREEarnings per share are analysed in the table below for continuing and discontinued operations. The table below also shows earnings

per share after adjusting for profits on disposals and the mark to market loss in respect of the Group’s gold collar.

2008 2007

Shares Shares

Weighted average number of shares in issue for the period:

– number of shares with voting rights 120,186,174 119,543,971

– effect of share options in issue 2,070,535 2,349,390

– total used in calculation of diluted earnings per share 122,256,709 121,893,361

2008 2007

US$000 US$000

Earnings per share from continuing operations

Profit for the period from continuing operations 23,647 22,239

Adjustments:

Less minority interests (4,144) (1,018)

Profit for the period attributable to equity shareholders of the parent 19,503 21,221

Earnings per share:

– basic (cents per share) 16.23 17.75

– diluted (cents per share) 15.95 17.41

Earnings per share from discontinued operations

Profit/(loss) for the period from discontinued operations 8,264 (4,895)

Adjustments:

Add back/(less) minority interests 581 (1,293)

Profit/(loss) for the period attributable to equity shareholders of the parent 8,845 (3,602)

Earnings per share:

– basic (cents per share) 7.36 (3.01)

– diluted (cents per share) 7.23 (2.96)

Earnings per share before exceptionals

Profit for the period 28,348 17,619

Adjustments:

Deduct profit on disposal of non-current asset investments (21,201) –

Add back/(deduct) loss/(gain) on gold collar 36,025 (416)

Deferred tax on (loss)/gain on gold collar (10,087) 125

Profit for the period attributable to equity shareholders of the parent 33,085 17,328

Earnings per share:

– basic (cents per share) 27.53 14.49

– diluted (cents per share) 27.06 14.22




13. GOODWILL

2008 2007

US$000 US$000

At 1 April 5,448 4,395

Additions 3,512 1,053

Disposals (282) –

At 31 March 8,678 5,448

The additions to goodwill are associated with re-evaluation of deferred consideration payable in respect of Avocet’s 2002 acquisition

of an 80 per cent interest in the Indonesian company now named PT Avocet Bolaang Mongondow. Further details on deferred

consideration are provided in note 23. The disposal of goodwill relates to the sale of ZGC in July 2007.

14. INTANGIBLE ASSETS

2008 2007

US$000 US$000

At 1 April 12,224 6,521

Transfers to property, plant and equipment – (3,258)


Disposals (2,358) –

Amounts written off – (242)

At 31 March 23,810 12,224

The above intangible assets represent deferred exploration expenditure. The disposal during the year was in respect of the Buffalo

Reef prospect, as announced in April 2007. Year end balances are analysed as follows:

2008 2007

US$000 US$000

Malaysia 3,175 2,606

Indonesia 15,508 4,352

China 5,127 4,365

Tajikistan (discontinued) – 901

23,810 12,224


15. PROPERTY, PLANT AND EQUIPMENT Office

Mining property and plant equipment

Year ended 31 March 2008 Malaysia Indonesia Tajikistan UK UK Total

US$000 US$000 US$000 US$000 US$000 US$000

Cost

At 1 April 2007 66,142 24,998 18,622 – 221 109,983

Additions

– deferred stripping 6,928 – – – – 6,928

– other property, plant and equipment 18,483 3,690 222 625 9 23,029

– closure provisions 1,000 4,000 – – – 5,000

Disposals (220) – (19,999) – – (20,219)

Intragroup transfers (1,155) – 1,155 – – –

At 31 March 2008 91,178 32,688 – 625 230 124,721

Depreciation

At 1 April 2007 47,565 9,485 4,010 – 201 61,261

Charge for the year 3,003 10,442 118 – 16 13,579

Disposals – – (4,128) – – (4,128)

At 31 March 2008 50,568 19,927 – – 217 70,712

Net book value at 31 March 2008 40,610 12,761 – 625 13 54,009

At 31 March 2007 18,577 15,513 14,612 – 20 48,722

The addition in respect of closure provisions reflects the recognition during the year of anticipated closure liabilities at the Company’s

operations in Malaysia and Indonesia. On the recognition of a provision, an addition is made to property, plant and equipment of the

same amount. This addition is charged against profits on a unit of production basis over the life of the mine. The total charge to the

income statement for the year ended 31 March 2008 is US$2.2 million which is included in the Group’s depreciation charge.

The disposal in Tajikistan represents the sale of ZGC in July 2007.

Office Mining property and plant equipment

Year ended 31 March 2007 Malaysia Indonesia Tajikistan UK UK Total

US$000 US$000 US$000 US$000 US$000 US$000

Cost

At 1 April 2006 54,788 20,919 16,123 – 206 92,036

Transfer from intangible assets 1,813 310 1,135 – – 3,258

Additions 8,116 3,769 1,364 – 15 13,264

Deferred stripping reclassified from

long term debtors 1,425 – – – – 1,425

At 31 March 2007 66,142 24,998 18,622 – 221 109,983

Depreciation

At 1 April 2006 45,862 4,782 3,537 – 185 54,366

Charge for the year 1,703 4,703 473 – 16 6,895

At 31 March 2007 47,565 9,485 4,010 – 201 61,261

Net book value at 31 March 2007 18,577 15,513 14,612 – 20 48,722

Net book value at 31 March 2006 8,926 16,137 12,586 – 21 37,670





16. OTHER FINANCIAL ASSETS

2008 2007

US$000 US$000

At 1 April 3,765 6,106

Additions 7,050 –

Fair value adjustment (2,492) (2,341)

At 31 March 8,323 3,765

Other financial assets represent the Company’s interests of 20 per cent in Dynasty Gold Corporation (Dynasty) and 19 per cent in

Monument Mining Limited, both companies listed on the TSX Venture Exchange in Canada. These investments are accounted for as

other financial assets rather than equity accounted as associates, on the basis that the Company is not in a position to exercise

significant influence over the activities of, and has no board representation in, either company. The addition during the year represents

the aquisition of the interest in Monument Mining Limited as part of the Damar transaction.

17. DEFERRED TAX

Assets 2008 2007

US$000 US$000

At 1 April 4,871 2,997


At 31 March 16,512 4,871

Additions to deferred tax assets principally reflect US$10.1 million recognised on the US$36.0 million unrealised loss arising from

marking to market the Group’s gold collar at 31 March 2008. Other deferred tax asset additions arise from timing differences on share

options and EBT.

Although the Company has US$79.0 million accumulated capital losses, no deferred tax assets have been recognised on the basis

that future capital gains are uncertain. Deferred tax assets will be recognised in the event of a qualifying capital gain.

Liabilities 2008 2007

US$000 US$000

At 1 April 4,293 3,808

(Utilisation)/addition (714) 485

At 31 March 3,579 4,293

18. INVENTORIES

2008 2007

US$000 US$000

Consumables 4,749 10,455

Work in progress 9,949 8,003

Finished goods 2,652 7,963

17,350 26,421



19. TRADE AND OTHER RECEIVABLES

2008 2007

US$000 US$000

Other receivables 2,000 1,960

VAT 2,015 2,264

Prepayments 1,272 2,079

5,287 6,303

20. CASH AND CASH EQUIVALENTS

2008 2007

US$000 US$000

Cash at bank and in hand 31,573 20,453

Short term bank deposits 91,023 44,846

Cash and cash equivalents 122,596 65,299

21. CURRENT LIABILITIES

2008 2007

US$000 US$000

Finance lease obligation 137 642

Trade payables 7,824 9,365

Corporation tax 9,656 1,727

Social security and other taxes 592 552

Other payables 830 1,772

Accrued expenses 8,301 3,811

27,340 17,869

The finance lease obligation was repaid in July 2008.

The increase in corporation tax liability arose principally at North Lanut due to higher profits and the timing of payments.

22. OTHER FINANCIAL LIABILITIES

2008 2007

US$000 US$000

Gold collar not qualifying for hedge accounting 45,600 9,575

The Group has taken out different financing facilities with Macquarie Bank Limited (MBL) over a number of years, initially project

financing for Penjom and subsequently corporate facilities for the Group. In respect of the current US$25.0 million revolving credit

facility, which remains undrawn, MBL required the Group to hedge its realised sales price to ensure a minimum of US$600/oz received

over the term of the facility. This requirement was imposed by MBL to ensure that the Group would, in the bank’s opinion, generate

sufficient revenue to cover adequately debt and interest payments following draw down of funds. This facility replaced a similar facility

of US$10.0 million that required hedging to ensure a minimum of US$450/oz received. To satisfy these requirements and to eliminate

certain forward sales hedges arising from previous project financing, in January 2006 the Group entered into a gold collar comprising

the purchase of put options and the sale of call options, whereby the sale of call options generated premiums sufficient to purchase

.




22. OTHER FINANCIAL LIABILITIES (CONTINUED)

the put options required by MBL. A restructing of this position was announced in October 2007. At 31 March 2008 the Group had sold

call options over 190,000 ounces at a strike gold price of US$755/oz expiring at a rate of 10,000 ounces per month between January

2010 and July 2011, and purchased put options over 400,000 ounces at a strike gold price of US$600/oz expiring at a rate of 10,000

ounces per month between April 2008 and July 2011. At 31 March 2008 the London closing gold price was US$918/oz, compared

with US$658/oz at 31 March 2007. As a result of the increase in price, the Group’s gold collar represented a liability at 31 March 2008

of US$45.6 million compared with a liability of US$9.6 million at 1 April 2007. A mark to market loss on the gold collar of US$36.0

million has therefore been recognised in the year, being the movement in fair value during the year.

Under IAS 39 – Financial Instruments: Recognition and Measurement, the gold collar does not qualify for hedge accounting on the

basis that the original collar contract constituted a net written option and was capable of being cash settled. IAS 39 requires that the

collar be recognised on the balance sheet at fair value, with changes in fair value being taken to the income statement. As the collar

was entered into in order to meet the requirements of its financing facility with MBL, these changes in fair value, also known as mark

to market adjustments, are presented in the income statement as gains or losses within finance items. During all periods presented

within these financial statements, all sales of gold have been at spot prices.

23. OTHER LIABILITIESPost

Mine Deferred Employment retirement

closure consideration benefits benefits Total

US$000 US$000 US$000 US$000 US$000

At April 2007 – 3,267 1,041 430 4,738

Provisions made

during the year 5,000 3,512 580 – 9,092

Utilised

during the year – (1,994) – – (1,994)

At 31 March 2008 5,000 4,785 1,621 430 11,836

Mine closure provisions of US$5.0 million represent management’s best estimate of the cost of mine closure at its operations in

Malaysia and Indonesia. As set out in note 4 the charge to the income statement for the year ended 31 March 2008 was US$2.2 million.

Deferred consideration is payable in respect of Avocet’s 2002 acquisition of PT Avocet Bolaang Mongondow, at a rate of 4 per cent

on projected net sale proceeds of future production. The value of future production is reassessed on an annual basis and additional

consideration is provided for when this value increases, based on the current life of mine and the directors’ view on future gold prices.

The amount utilised in the year represents deferred consideration paid during the year.

Indonesian employment benefits represent a provision for employee termination benefits required by the Indonesian Manpower Law.

The provision for post retirement benefits represents the directors’ best estimate of costs following the closure of a US subsidiary no

longer owned by the Group. The above amount represents a full provision for the liability, based on the most recent actuarial valuation

at 1 January 2008. The main assumptions used by the actuary were as follows:

2008 2007

US$000 US$000

Rate of increase for pensions in payment 0.0% 0.0%

Discount rate 6.0% 6.0%

Inflation 3.0% 3.0%

The assets in the scheme and the expected long term rate of return were:

Cash 61 61

Present value of scheme liabilities (468) (477)

Deficit in scheme (407) (416)

Rate of return -11.5% -13.7%

The negative rates of return reflect payment of the pension trust fees and costs of the independent actuarial valuation from the

pension trust fund.



24. FINANCIAL INSTRUMENTSCategories of financial instrument:

2008 2007

Measured Measuredat amortised at amortised

Measured at fair value cost Measured at fair value cost

Loans and Loans andHeld for receivables Held for receivablestrading including trading including

through cash and through cash andAvailable income cash Available income cash

Categories for sale statement equivalents for sale statement equivalents

US$000 US$000 US$000 US$000 US$000 US$000

Financial assets

Cash and cash equivalents – – 122,596 – – 65,299

Trade and other receivables – – 5,287 – – 6,303

Other financial assets – – – 981 – –

– – 127,883 981 – 71,602

Financial liabilities

Trade and other payables – – 27,340 – – 17,869

Other financial liabilities – 45,600 – – 9,575 –

– 45,600 27,340 – 9,575 17,869

2008 2007

US$000 US$000

Results from financial assets and liabilities

Other financial assets at fair value through equity (459) (555)

Financial liabilities at fair value through income statement (derivatives – see note 22) (36,025) 416

The value of financial liabilities represents the value of the Group’s gold collar arrangement which is sensitive to current and future

gold prices. The collar liability was valued at 31 March 2008 on the basis of a closing gold price of US$918/oz. Had the closing spot

gold price been US$950/oz the estimated liability would have been US$51.0 million, and at a closing spot gold price of US$850/oz the

estimated liability would have been US$34.0 million.

All gold was sold at spot prices during the year averaging US$767/oz. Had prices been 10 per cent lower during the year profit before

tax would have been reduced by approximately US$12.4 million; had prices been 10 per cent higher during the year profits would have

increased by approximately US$12.4 million.

CREDIT RISK

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. In order

to minimise this risk the Group endeavours only to deal with companies which are demonstrably creditworthy and this, together with

the aggregate financial exposure, is continuously monitored. The maximum exposure to credit risk is the value of the outstanding

amounts as follows:

2008 2007

US$000 US$000

Cash and cash equivalents 122,596 65,299

Trade and other receivables 5,287 6,303

Available for sale financial assets – 981

127,883 72,583

Credit risk on cash and cash equivalents is considered to be small as the counterparties are all substantial banks with high credit

ratings. The maximum exposure is the amount of the deposit.




24. FINANCIAL INSTRUMENTS (CONTINUED)

LIQUIDITY RISK

The Group constantly monitors the cash outflows from day to day business and monitors longer term liabilities to ensure that liquidity

is maintained. At the balance sheet date the Group’s short term financial liabilities were as follows:

2008 2007

US$000 US$000

Finance lease obligations 137 642

Trade payables 7,824 9,365

Other short term financial liabilities 19,379 7,862

27,340 17,869

INTEREST RATE RISK

The Group currently finances its operations through equity fundraising and therefore does not carry significant borrowings. Cash

balances and short term deposits are held at floating interest rates based on LIBOR as follows:

Weighted Weightedaverage average

interest rate 2008 interest rate 2007

% US$000 % US$000

Cash and cash equivalents 4.3 31,573 4.6 20,453

Short term deposits 4.7 91,023 4.5 44,846

122,596 65,299

The Group may be exposed to falls in deposit interest. The Group has no debt. Had the interest rate been lower by 1 per cent during

the year profit before tax would have been approximately US$900,000 lower.

FOREIGN CURRENCY RISK

The Group’s cash balances at 31 March consisted of the following currency holdings:

2008 2007

US$000 US$000

Sterling 5,615 14,559

US dollars 115,184 47,563

Other 1,797 3,177

122,596 65,299

The Group may be exposed to transaction foreign exchange risk due to its transactions not being matched in the same currency. The

Group currently has no currency hedging in place.

Local currency costs account for approximately 65 per cent and 43 per cent of operating costs in Malaysia and Indonesia, respectively.

The Malaysian ringgit strengthened against the US dollar by 7 per cent during the current year. It is estimated that a further 7 per cent

strengthen in the Malaysian ringgit would have reduced profit before tax in the current year by US$1.1 million. There was little change

in the Indonesian rupiah exchange rate against the US dollar during the year. Had the Indonesian rupiah strengthened by 7 per cent in

the current year it would have reduced profit before tax by approximately US$700,000.

There is no material difference between the fair values and the book values of these financial instruments.



25. LEASE COMMITMENTS

2008 2007

US$000 US$000

Finance leases

Finance lease liabilities – minimum lease payments:

– within one year 139 694

– within two to five years – 139

139 833

Less amount representing interest (2) (54)

Obligation under capital lease 137 779

Less current portion obligation under capital lease (137) (642)

Long term portion of obligation under capital lease – 137

The finance lease obligation was repaid in July 2008.

26. SHARE BASED PAYMENTS Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the year are as follows:

2008 2007

Number WAEP (£) Number WAEP (£)

Outstanding at the beginning of the year 6,527,000 1.00 3,289,000 0.73

Granted during the year 1,025,000 1.57 3,600,000 1.26

Exercised during the year (640,000) 0.64 (50,000) 0.30

Forfeited during the year (488,000) 0.90 (312,000) 0.82

Outstanding at the year end 6,424,000 1.14 6,527,000 1.00

Exercisable at the year end 599,000 0.55 1,039,000 0.45

The fair value of options granted after 7 November 2002 but not vested at IFRS transition on 1 April 2006 has been arrived at using a

third party Monte Carlo simulation model. The assumptions inherent in the use of this model are as follows:

Vesting Expected Exercise Share Volatility Number

Date of period Date of life price Risk free price at of share Fair out-

grant (years) vesting (years) (£) rate grant (£) price value (£) standing

27/11/2003 3 27/11/2006 5 0.72 5.02% 0.72 50.34% 0.30 319,000

14/07/2005 3 14/07/2008 5 0.82 4.25% 0.82 48.57% 0.32 1,500,000

14/07/2006 3 14/07/2009 5 1.76 4.72% 1.76 50.25% 0.76 950,000

07/09/2006 3 07/09/2009 5 1.73 4.75% 1.73 50.56% 0.72 150,000

15/11/2006 3 15/11/2009 5 1.03 4.83% 1.03 53.57% 0.45 2,350,000

12/07/2007 3 12/07/2010 5 1.36 5.74% 1.36 52.04% 0.65 325,000

14/12/2007 3 14/12/2010 5 1.74 4.66% 1.74 50.55% 0.70 400,000

03/03/2008 3 03/03/2011 5 1.72 4.11% 1.72 46.50% 0.81 150,000

Expected volatility was determined by calculating the historical volatility of the Company's share price over the previous five years.

The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability,

exercise restrictions and behavioural considerations.

The Group recognised total expenses of US$1,618,000 (2007 – US$961,000) related to equity settled share based payment

transactions during the year.




27. CONSOLIDATED CASH FLOW STATEMENTIn arriving at net cash flow from operating activities, the following non-operating items in the income statement have been adjusted for:

2008 2007

US$000 US$000

Profit on disposal of non-current asset investments (8,904) –

Profit on disposal of discontinued operations (12,297) –

Loss/(gain) on gold collar not qualifying for hedge accounting 36,025 (416)

Exchange losses/(gains) 190 (2,234)

Finance income (4,655) (2,822)

Finance expense 96 112

10,455 (5,360)

28. SHARE CAPITAL

2008 2007

Number US$000 Number US$000

Authorised:

Ordinary shares of 5p 400,000,000 36,756 400,000,000 36,756

Issued and fully paid:

At 1 April 121,576,530 9,867 106,276,530 8,445

Issued during the year – – 15,300,000 1,422

At 31 March 121,576,530 9,867 121,576,530 9,867

On 15 May 2006 the Company issued 15,250,000 shares to institutional investors at a price of 200p per ordinary share. During the

previous year the Company allotted 50,000 ordinary 5p shares by way of exercise of options.

29. OTHER RESERVES

Investment Revaluation

in own and of other

Merger Acquisition treasury financial Foreign

reserve reserve shares assets exchange Total

US$000 US$000 US$000 US$000 US$000 US$000

At 1 April 2006 19,901 (1,992) (732) – 160 17,337

Movement in year – – (2,824) (555) (64) (3,443)

At 31 March 2007 19,901 (1,992) (3,556) (555) 96 13,894

Movement in year – – (2,149) (459) 168 (2,440)

At 31 March 2008 19,901 (1,992) (5,705) (1,014) 264 11,454

The acquisition reserve arose on an acquisition from the issuing of 14,000,000 ordinary shares of the Company on 12 November 2002 at

the market price of 16p per share compared to the nominal value of 25p. The reserve was created following independent legal advice.



30. CONTINGENT LIABILITIES There were no contingent liabilities at 31 March 2008 or 31 March 2007.

31. CAPITAL COMMITMENTS There were no capital commitments at 31 March 2008 or 31 March 2007.

32. RELATED PARTY TRANSACTIONS There were no related party transactions during the years ended 31 March 2008 and 31 March 2007.

33. POST BALANCE SHEET EVENTSOn 1 April 2008 the Company completed the purchase of the Banda exploration properties in Indonesia for an

initial consideration of 712,000 Avocet Mining PLC ordinary shares which were transferred from treasury at a

fair value of US$2,5 million. An additional 1,000,000 shares may be issued in two stages triggered by the

publication of a total 500,000 ounce and 1,000,000 ounce JORC compliant resource.

34. IFRS TRANSITIONAL ADJUSTMENTSThe previously published financial statements under UK GAAP were restated on an IFRS basis in the accounts

for the six months ended 30 September 2007. The following exemptions under IFRS 1 – First time adoption

of IFRS were applied:

a) Cumulative translation differences which exist at the time of the transition can be transferred into the

retained earnings and the foreign exchange reserve therefore shows only differences occurring after

transition IFRS 1 – First time adoption of IFRS.

b) Business combinations that occurred before the opening IFRS balance sheet date are exempt from the

application of IFRS 3 – Business combinations.

A reconciliation of equity at 1 April 2006 (the transition date) and 31 March 2007, together with a reconciliation

of profit for the year to 31 March 2007 are shown below with an explanation of the adjustments:

IFRS 3 – BUSINESS COMBINATIONS

• negative goodwill has been credited to opening reserves at 1 April 2006, being the date of transition to

IFRS, instead of being recognised as negative goodwill within intangible fixed assets as permitted by

UK GAAP;

• goodwill amortisation has been added back to profit in the year ended 31 March 2007 as goodwill is not

amortised under IFRS.

IAS 12 – INCOME TAXES

• an additional deferred tax asset has been recognised in respect of the difference between the estimated

future tax deduction and the fair value charge in the income statement for share based payments, with

the corresponding credit taken to equity;

• deferred tax has been recognised in respect of the IAS 39 fair value adjustments noted below; the

deferred tax impacts are reflected within the IAS 39 column in the reconciliations.

IAS 39 – FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT

• the Group’s warrants in respect of Primary and its shares and warrants in respect of Monument Mining

Limited have been recognised as other financial assets on the balance sheet at fair value, with changes

in fair value taken to equity;

• the Group’s gold collar has been recognised at fair value as an other financial liability on the balance

sheet, with changes in fair value taken to opening reserves at 1 April 2006 and to the income statement

thereafter.


34. IFRS TRANSITIONAL ADJUSTMENTS (CONTINUED)

Reconciliation of equity at 1 April 2006

UK GAAP IFRS 3 IAS 12 IAS 39 IFRS

US$000 US$000 US$000 US$000 US$000

Non-current assets

Goodwill 2,971 1,424 – – 4,395

Intangible assets 6,521 – – – 6,521

Property, plant and equipment 39,443 – – – 39,443

Other financial assets 1,937 – – 4,169 6,106

Deferred tax assets – – – 2,997 2,997

50,872 1,424 – 7,166 59,462

Current assets

Inventories 23,783 – – – 23,783

Trade and other receivables 3,073 – – – 3,073

Other financial assets – – – 981 981

Cash and cash equivalents 12,918 – – – 12,918

39,774 – – 981 40,755

Current liabilities

Trade and other payables 11,821 – – – 11,821

Current tax liabilities 705 – – – 705

12,526 – – – 12,526


Other financial liabilities – – – 9,991 9,991

Deferred tax liabilities 2,263 – – 1,545 3,808

Other liabilities 5,278 – – – 5,278

7,541 – – 11,536 19,077

Net assets 70,579 1,424 – (3,389) 68,614

Total equity 70,579 1,424 – (3,389) 68,614





Reconciliation of equity at 31 March 2007


US$000 US$000 US$000 US$000 US$000

Non-current assets

Goodwill 3,541 1,947 – – 5,488

Intangible assets 12,224 – – – 12,224

Property, plant and equipment 48,722 – – – 48,722

Other financial assets 1,937 – – 1,828 3,765

Deferred tax assets 628 – 1,371 2,872 4,871

67,052 1,947 1,371 4,700 75,070

Current assets

Inventories 26,421 – – – 26,421

Trade and other receivables 6,303 – – – 6,303

Other financial assets – – – 981 981

Cash and cash equivalents 65,299 – – – 65,299

98,023 – – 981 99,004

Current liabilities

Trade and other payables 16,142 – – – 16,142

Current tax liabilities 1,727 – – – 1,727

17,869 – – – 17,869


Other financial liabilities – – – 9,575 9,575

Deferred tax liabilities 3,451 – – 842 4,293

Other liabilities 4,738 – – – 4,738

8,189 – – 10,417 18,606

Net assets 139,017 1,947 1,371 (4,736) 137,599

Total equity 139,017 1,947 1,371 (4,736) 137,599




Reconciliation of profit for the year ended 31 March 2007


US$000 US$000 US$000 US$000 US$000

Gross profit 22,342 523 – – 22,865

Administrative expenses (3,636) – – – (3,636)

Share based payments (961) – – – (961)

Operating profit 17,745 523 – – 18,268

Finance items

Gain on gold collar not

qualifying for

hedge accounting – – – 416 416

Exchange gains 2,234 – – – 2,234

Finance income 2,822 – – – 2,822

Finance expense (112) – – – (112)

Profit before taxation 22,689 523 – 416 23,628

Taxation (6,447) – 288 (125) (6,284)

Profit for the period 16,242 523 288 291 17,344

Attributable to:

Equity shareholders

of the parent company 16,517 523 288 291 17,619

Minority interests (275) – – – (275)

16,242 523 288 291 17,344

CASHFLOW

IFRS adjustments are non-cash. However, certain aspects of cash flow disclosure differ under IFRS compared with UK GAAP, including

the description of line items in the cash flow statement. The definition of cash under UK GAAP is narrower than under IAS 17 – Cash

flow statements. Under IFRS highly liquid investments, readily convertible to a known amount of cash and with an insignificant risk of

a change in value are regarded as cash equivalents. Such a readily convertible investment is the money market deposit and this is

included in the heading cash and cash equivalents.

Under UK GAAP payments to acquire property, plant and equipment were classified as part of capital expenditure and financial

investment whilst under IFRS such payments have been reclassified as part of investing activities.

There are no other material differences between the cashflow statement presented under IFRS and that presented under UK GAAP.





We have audited the parent company financial statements (the

''financial statements'') of Avocet Mining PLC for the year

ended 31 March 2008 which comprise the significant

accounting policies, the balance sheet and notes 35 to 51.

These parent company financial statements have been prepared

under the accounting policies set out therein.

We have reported separately on the Group financial statements

of Avocet Mining PLC for the year ended 31 March 2008.

This report is made solely to the Company’s members, as a

body, in accordance with Section 235 of the Companies Act

1985. Our audit work has been undertaken so that we might

state to the Company’s members those matters we are required

to state to them in an auditor's report and for no other purpose.

To the fullest extent permitted by law, we do not accept or

assume responsibility to anyone other than the Company and

the Company’s members as a body, for our audit work, for this

report, or for the opinions we have formed.

RESPECTIVE RESPONSIBILITIES OFDIRECTORS AND AUDITORSThe directors' responsibilities for preparing the Annual Report

and the parent company financial statements in accordance with

United Kingdom law and Accounting Standards (United

Kingdom Generally Accepted Accounting Practice) are set out in

the Statement of Directors' Responsibilities.

Our responsibility is to audit the parent company financial

statements in accordance with relevant legal and regulatory

requirements and International Standards on Auditing (UK and

Ireland).

We report to you our opinion as to whether the parent company

financial statements give a true and fair view and whether the

parent company financial statements have been properly

prepared in accordance with the Companies Act 1985. We also

report to you whether in our opinion the information given in the

Report of the Directors is consistent with the financial

statements. Chairman's Statement, Chief Executive Officer’s

Statement, Operating Review, Financial Review, Report on

Corporate Governance, the Health, Safety and Environment

section, and Notes to the Financial Statements are cross referred

from the sections of the Report of the Directors on Principal

Activity and Business Review, Future Developments, Results

and Dividends, Post Balance Sheet Events, Key Performance

Indicators, Principal Risks and Uncertainties, Corporate

Governance, Employees and Health, Safety and Environment.

In addition we report to you if, in our opinion, the Company has

not kept proper accounting records, if we have not received all

the information and explanations we require for our audit, or if

information specified by law regarding directors' remuneration

and other transactions is not disclosed.

We read other information contained in the Annual Report and

consider whether it is consistent with the audited parent

company financial statements. The other information comprises

only the Chairman's Statement, the Chief Executive Officer’s

Statement, the Gold Market, the Operating Review, the

Financial Review, the Report of the Directors, the Report on

Corporate Governance and the Report on Directors'

Remuneration. We consider the implications for our report if we

become aware of any apparent misstatements or material

inconsistencies with the parent company financial statements.

Our responsibilities do not extend to any other information.

BASIS OF AUDIT OPINIONWe conducted our audit in accordance with International

Standards on Auditing (UK and Ireland) issued by the Auditing

Practices Board. An audit includes examination, on a test basis, of

evidence relevant to the amounts and disclosures in the parent

company financial statements. It also includes an assessment of

the significant estimates and judgments made by the directors in

the preparation of the parent company financial statements, and

of whether the accounting policies are appropriate to the

Company's circumstances, consistently applied and adequately

disclosed.

We planned and performed our audit so as to obtain all the

information and explanations which we considered necessary in

order to provide us with sufficient evidence to give reasonable

assurance that the parent company financial statements are free

from material misstatement, whether caused by fraud or other

irregularity or error. In forming our opinion we also evaluated the

overall adequacy of the presentation of information in the parent

company financial statements.

OPINIONIn our opinion:

• the parent company financial statements give a true and

fair view, in accordance with United Kingdom Generally

Accepted Accounting Practice, of the state of the

Company's affairs as at 31 March 2008, and of its profits

for the year then ended;

• the parent company financial statements have been

properly prepared in accordance with the Companies Act

1985;

• the information given in the Directors' Report is

consistent with the financial statements.

GRANT THORNTON UK LLP

Registered Auditor

Chartered Accountants

London

8 July 2008

REPORT OF THE INDEPENDENT AUDITOR TO THEMEMBERS OF AVOCET MINING PLCFor the year ended 31 March 2008




COMPANY BALANCE SHEET

At 31 March 2008 note 2008 2007

US$000 US$000

Fixed assets

Deferred exploration 38 5,127 4,365

Tangible assets 39 639 20

Investments 40 13,804 47,976

19,570 52,361

Current assets

Debtors due within one year 41 9,883 8,203

Debtors due after more than one year 41 15,645 21,506

Cash at bank and in hand 86,617 52,891

112,145 82,600

Creditors: amounts falling due in less than one year 42 (4,066) (5,458)

Net current assets 108,079 77,142

Total assets less current liabilities 127,649 129,503

Provisions for liabilities 43 (4,785) (3,267)

122,864 126,236

Capital and reserves

Called up share capital 44 9,867 9,867

Share premium account 45 52,834 52,834

Other reserves 45 – 10,258

Investment in own shares 46 (1,810) (2,130)

Investment in treasury shares 46 (3,895) (1,426)

Profit and loss account 47 65,868 56,833

Equity shareholders’ funds 122,864 126,236

These financial statements were approved and signed on behalf of the board of directors on 8 July 2008.

N G McNair Scott A M Norris




35. FINANCIAL STATEMENTS OF THE PARENT COMPANYThe separate financial statements of the Company are presented as required by the Companies Act 1985. The Company has taken

advantage of the exemption under section 230 (2) of the Companies Act 1985 not to publish its individual profit and loss account and

related notes. As permitted by the Act, the separate financial statements have been prepared in accordance with all applicable UK

accounting standards.

36. SIGNIFICANT ACCOUNTING POLICIESThe financial statements have been prepared on the historical cost basis. This differs from the Group financial statements which

are prepared under IFRS and which require movements in the fair value of the Group’s gold collar to be recognised in the Group’s

income statement. The principal accounting policies which differ to those set out in note 1 to the consolidated financial statements

are noted below.

INVESTMENTS

Investments are included at cost less amounts written off.

DEFERRED TAX

Deferred tax is recognised on all timing differences where the transactions or events that give the Company an obligation to pay more

tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax is measured using rates

of tax that have been enacted or substantially enacted by the balance sheet date.

LEASED ASSETS

Assets acquired under finance leases are capitalised and the outstanding future lease obligations are shown in creditors. The assets

are depreciated over their useful economic lives. The interest element of leasing payments is charged to the profit and loss account

over the period of the lease. Finance leases are identified as being those that transfer the substantial risks and rewards of ownership.

All other leases are regarded as operating leases and the payments made under them are charged to the profit and loss account on a

straight line basis over the lease term.

FOREIGN CURRENCIES

The Company’s financial statements have been reported in US dollars as the dollar is considered to be the Group’s functional currency.

Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and

liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. The financial statements of

foreign subsidiary undertakings are translated at the rate of exchange ruling at the balance sheet date. Exchange differences arising

from the retranslation of the opening net investment in subsidiary undertakings are taken directly to reserves. All other exchange

differences are dealt with through the profit and loss account.




37. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATIONThe profit is stated after charging/(crediting):

2008 2007

US$000 US$000

Auditor’s remuneration:

– audit – Company 12 11

Non audit services:

– other services relating to taxation 30 20

– all other services – Nominated Adviser (NOMAD) 30 28

Depreciation of owned tangible fixed assets 15 15

Operating lease charges 101 95

Staff and executive directors 2008 2007

Number Number

The average number of employees, including executive directors, was as follows:

– management and administration 9 8

9 8

The employment costs of staff including executive directors comprised: 2008 2007

US$000 US$000


Bonuses 1,644 641

Social security costs 248 147

Pension contributions 45 43

5,063 2,072

Details of directors’ remuneration, including their beneficial interests in the share capital and share options of the Company, are shown

in the Report on Directors’ Remuneration on pages 49 to 52.

38. DEFERRED EXPLORATION

Deferred

exploration

expenditure

US$000

Cost

At 1 April 2007 4,365

Additions 762

At 31 March 2008 5,127

Amortisation at 31 March 2008 and 2007 –

Net book value at 31 March 2008 5,127


Deferred exploration expenditures relate to the Idenburg joint venture in West Papua, Indonesia and the Hatu project in China.



39. TANGIBLE FIXED ASSETS

Plant & Office

machinery equipment Total

US$000 US$000 US$000

Cost

At 1 April 2007 – 221 221

Additions 625 9 634

At 31 March 2008 625 230 855

Depreciation

At 1 April 2007 – 201 201

Charge for the year – 15 15

At 31 March 2008 – 216 216

Net book value at 31 March 2008 625 14 639

Net book value at 31 March 2007 – 20 20

40. INVESTMENTS

Subsidiary

undertakings

and shares

US$000

Cost

At 1 April 2007 83,508

Addition 7,050

Disposals (64,418)

At 31 March 2008 26,140

Provisions

At 1 April 2007 (35,532)

Disposals 23,196

At 31 March 2008 (12,336)

Net book value

At 31 March 2008 13,804


The disposals in the year represent the sale of Commonwealth and British Minerals (UK) Limited and its Tajikistan subsidiary ZGC,

which had a combined net book value of US$40.9 million on disposal, together with the divestment of Damar which had a net book

value of US$307,000. The addition represents the acquisition of a 19.9 per cent interest in Monument Mining Limited as part of the

Damar transaction.




40. INVESTMENTS (CONTINUED)

During the year the principal trading subsidiaries of the Company, including those held indirectly by the Company, were as shown in

the following table.Country of Percentage

registration or Class of of

Nature of incorporation share capital ordinary share

business & operation held capital held by

Company Group

Avocet Gold Gold exploration England &

Limited & mining Wales Ordinary – 100%

Specific Resources Gold exploration &

Sdn. Bhd. mining contractor Malaysia Ordinary – 100%

PT Avocet Bolaang Gold exploration

Mongondow & mining Indonesia Ordinary 80% 80%

JV Zeravshan LLC Gold exploration

(discontinued) & mining Tajikistan Ordinary – 75%(1)

(1) Prior to disposal

41. DEBTORS

2008 2007

US$000 US$000

(a) Due within one year

Amounts owed by Group undertakings 9,000 7,681

Other debtors 640 44

Prepayments 243 478

9,883 8,203

(b) Due after more than one year

Amounts owed by Group undertakings 14,442 20,878

Deferred tax 1,203 628

15,645 21,506

42. CREDITORS: AMOUNTS FALLING DUE IN LESS THAN ONE YEAR

2008 2007

US$000 US$000

Corporation tax 560 1,047

Other taxes and social security 99 55

Other creditors 490 1,711

Accruals and deferred income 2,917 2,645

4,066 5,458



43. PROVISIONS FOR LIABILITIES

2008 2007

US$000 US$000

Deferred consideration

At April 3,267 3,369

Provisions made during the year 3,512 1,094

Utilised during the year (1,994) (1,196)

At 31 March 4,785 3,267

Deferred consideration is payable in respect of Avocet’s 2002 acquisition of PT Avocet Bolaang Mongondow, at a rate of 4 per cent

on projected net sale proceeds of future production. The value of future production is reassessed on an annual basis and additional

consideration is provided for when this value increases, based on the current life of mine and the directors’ view on future gold prices.

The amount utilised in the year represents deferred consideration paid during the year.

44. SHARE CAPITAL

2008 2007

Number US$000 Number US$000

Authorised:

Ordinary shares of 5p 400,000,000 36,756 400,000,000 36,756

Allotted, called up and fully paid:

At 1 April 121,576,530 9,867 106,276,530 8,445

Issued during the year – – 15,300,000 1,422

At 31 March 121,576,530 9,867 121,576,530 9,867

On 15 May 2006 the Company issued 15,250,000 shares to institutional investors at a price of 200p per ordinary share. During the

previous year the Company allocated 50,000 ordinary 5p shares by way of exercise of options.

45. COMPANY RESERVE AND SHARE PREMIUM ACCOUNT

Company reserve Share premium

US$000 US$000

At 1 April 2007 10,258 52,834

Released during the year (10,258) –

At 31 March 2008 – 52,834

The Company reserve arose from a gain of US$35.8 million on the transfer of 9,000,000 ordinary shares of 10p each in CBM (UK)

Limited from Commonwealth & British Minerals Limited to the Company on 15 May 2006, offset by a US$6.2 million write-off of the

Company’s investment in Commonwealth & British Minerals Limited on its liquidation and an impairment of US$19.3 million against the

investment in CBM (UK) Limited. The reserve was released as part of the disposal of ZGC and CBM (UK) Limited in July 2007.




46. INVESTMENT IN OWN SHARES AND TREASURY SHARES

Own shares Treasury shares

US$000 US$000

At 1 April 2007 2,130 1,426

Purchased from the market – 4,164

Released during the year (320) (1,695)

At 31 March 2008 1,810 3,895

During the year US$320,000 of EBT shares vested to employees of the Company after a 3 year vesting period.

During the year 1,400,000 ordinary 5p shares were purchased by the Company at a cost of US$4.2 million and 640,000 ordinary

shares at a cost of US$1.7 million were released to satisfy the exercise of employee options. At 31 March 2008 1,472,000 shares

remained in treasury at a cost of US$3.9 million.

47. PROFIT AND LOSS ACCOUNT

Company

2008

US$000

At 1 April 2007 56,833

Share based payments 1,618

Loss on employee option exercise satisfied by treasury (876)

Retained profit for the year 8,293

At 31 March 2008 65,868

The Company has taken advantage of Section 230 of the Companies Act 1985 in electing not to publish its own profit and

loss account.



48. RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS’ FUNDS

2008 2007

US$000 US$000

Profit/(loss) for the financial year 8,293 (9,860)

Impairment provision released – 19,268

(Release)/creation of Company reserve (10,258) 10,258

New capital subscribed (net of costs) – 54,123

Loss on employee option exercise satisfied by treasury (876) –

Reduction/(increase) in investment in own shares 320 (1,398)

Share based payments 1,618 961

Investments in treasury shares (2,469) (1,426)

Net change in equity shareholders’ funds (3,372) 71,926

Opening equity shareholders’ funds 126,236 54,310

Closing equity shareholders’ funds 122,864 126,236

The reduction in investment in own shares arose from the issue to employees of shares held by the Company’s EBT.

49. CONTINGENT LIABILITIESThere were no contingent liabilities at 31 March 2008 or 31 March 2007.

50. CAPITAL COMMITMENTS There were no capital commitments at 31 March 2008 or 31 March 2007.

51. POST BALANCE SHEET EVENTS On 1 April 2008 the Company completed the purchase of the Banda exploration properties in Indonesia for an initial consideration of

712,000 Avocet Mining PLC ordinary shares which were transferred from treasury. An additional 1,000,000 shares may be issued in

two stages triggered by the publication of a total 500,000 ounce and 1,000,000 ounce JORC compliant resource.


HISTORICAL SHARE PRICES:

Quarter ending: High, £ Low, £

30 June 2007 1.40 1.15

30 September 2007 1.52 1.28

31 December 2007 1.93 1.42

31 March 2008 2.01 1.61

30 June 2008 1.85 1.50

Closing price: £

31 March 2008 1.79

Number of shares in issue:

31 March 2007 120,864,530

31 March 2008 120,029,530

30 June 2008 120,816,530

UNSOLICITED MAIL:

Avocet Mining PLC is aware that some shareholders have had

occasion to complain that outside organisations, for their own

purposes, have used information obtained from the Company’s

share registers. Avocet Mining PLC, like other companies,

cannot by law refuse to supply such information provided that

the organisation concerned pays the appropriate statutory fee. If

you are in the UK and wish to stop receiving unsolicited mail

then you should register with The Mailing Preference Service by

letter, telephone or through its website:

The Mailing Preference Service

DMA House

70 Margaret Street

London

W1W 8SS

Complaints Department – 020 7291 3321

www.mpsonline.org.uk


SHAREHOLDER INFORMATION

Avocet Mining PLC ordinary shares are listed on the Alternative

Investment Market of the London Stock Exchange.

The Company’s lead and joint brokers are JPMorgan Cazenove

Limited and Ambrian Partners Limited, respectively. The

Company’s Nominated Adviser (NOMAD) is Ambrian Partners

Limited.

Avocet Mining PLC has a web site (www.avocet.co.uk) on

which press releases and background information on the

Company and some of its operations can be found.

The share price is quoted on a daily basis in the Financial Times

and The Daily Telegraph. Shares may be bought or sold through

a stockbroker who is a member of the London Stock Exchange.

Market makers in the shares of the Company are Landsbanki

Securities (UK) Limited, Arbuthnot Securities Limited, Shore

Capital Stockbrokers Limited, Evolution Securities Limited,

Ambrian Partners Limited and Winterflood Securities Limited.



ANNUAL GENERAL MEETING (AGM)

GENERAL AUTHORITIES TO ALLOT RELEVANT

SECURITIES

It is proposed to renew the general authority previously granted

to the directors to allot relevant securities. Resolution 6 would

give the directors authority until the end of the 2009 AGM to

allot additional shares up to an aggregate nominal amount of

£2,024,249 representing 33.3 per cent of the ordinary shares of

the Company in issue at 8 July 2008. The directors have no

present intention to exercise this authority.

It is further proposed, in Resolution 7, to give the directors

authority, until the end of the 2009 AGM, to allot additional

shares equalling up to 100 per cent of the current issued share

capital of the Company, in connection with an acquisition. The

allotment of any greater number of shares would amount to a

reverse takeover, requiring a separate shareholder approval.

Once again, the directors have no present intention to exercise

this authority, but your board believes that it is in the best

interests of shareholders for the directors to be in a position to

respond swiftly to any opportunities which might arise.

DISAPPLICATION OF PRE-EMPTION RIGHTS

Section 89 of the Companies Act 1985 gives holders of equity

securities, with limited but important exceptions, certain rights

of pre-emption on the issue for cash of new equity securities.

Your board believes that it is in the best interests of

shareholders that, as in previous years, the directors should

have limited authority to allot some part of the Company’s

authorised but unissued equity share capital for cash without

first having to offer such shares to existing shareholders. It is

proposed that this authority will expire at the end of the 2009

AGM. The authority proposed in Resolution 8 will relate to

allotments in respect of issues by way of rights (where

difficulties arise in offering shares to certain overseas

shareholders and in relation to fractional entitlements) and to

allotments (other than in respect of rights issues) of equity

securities having an aggregate nominal amount not exceeding

£303,941 being five per cent of the issued equity share capital

of the Company at 8 July 2008.

PURCHASE OF OWN SHARES

Resolution 9 would give the directors authority until the end of

the 2009 AGM to purchase up to 15 per cent of its own shares

in the market at a price not less than the nominal value of the

shares and not exceeding 105 per cent of the average of the

middle market quotations for the ordinary shares of the

Company for the five days prior to the date of purchase. If this

authority is exercised, the shares purchased by the Company

will be cancelled, held in treasury or a combination of both, as

the directors consider appropriate at the time.

ADOPTION OF NEW ARTICLES OF ASSOCIATION

It is proposed that the Company adopt new articles of

association (the "New Articles") in substitution for its existing

articles of association (the "Existing Articles") in order to take

advantage and account of the provisions of the Companies Act

2006 (the "2006 Act") relating to electronic communications,

disclosure of interests in shares, retirement of directors,

directors’ duties, shareholder meetings and proxies.

Copies of the Existing Articles and the New Articles (and a

comparison document showing all the proposed changes to the

Existing Articles) are available for inspection during normal

business hours at the registered office of the Company until the

date of the AGM or upon request of the company secretary.

Copies will also be available at the AGM from 2.30 p.m. until its

conclusion.

The material differences between the Existing Articles and the

New Articles are summarised below. Changes of a minor,

conforming or purely technical nature have not been mentioned

specifically.

1. PROVISIONS RELATING TO ELECTRONIC

COMMUNICATIONS

The 2006 Act contains provisions relating to electronic

communications between companies and their shareholders.

The key change enables companies to use electronic

communications with shareholders as the default position by

placing documents on a website unless shareholders

specifically elect to receive hard copies. Shareholders may elect

for all or any communications to be sent to them via email rather

than receiving documents in hard copy form and shareholders

may communicate with the Company by electronic means

where the Company has given an electronic address in a notice

calling a meeting or in an instrument of proxy. The Company

needs to amend its Existing Articles to be able to use these

provisions and accordingly changes are to be made to the

Existing Articles dealing with notice of general meetings,

electronic proxies, sending of notices, documents and

information and those provisions about notices and deemed

delivery.

2. DISCLOSURE OF INTERESTS IN SHARES

The provisions relating to the disclosure of interests in shares

contained in the 1985 Act, including Section 212 on company

investigation powers, were repealed in January 2007. Section

793 and related sections in Part 22 of the 2006 Act, which

contain the corresponding company investigation powers

previously contained in Section 212, have been brought into

force and accordingly the Existing Articles are to be amended to

reflect these changes.



ANNUAL GENERAL MEETING (AGM) (CONTINUED)

3. DIRECTORS’ RETIREMENT AGE LIMIT

The provisions relating to the 70 year age limit for directors in

the 1985 Act were repealed in April 2007. Accordingly, the

article contained in the Existing Articles which deals with this is

no longer necessary and is to be deleted.

4. DIRECTORS’ DUTIES

The 2006 Act sets out directors’ general duties. The provisions

largely codify the existing law, but with some changes. Under

the current law, a director must avoid a situation where he has,

or can have, a direct or indirect interest that conflicts, or possibly

may conflict with the Company’s interests, or otherwise ensure

that such conflict is approved by the shareholders in general

meeting. The requirement is very broad and could apply, for

example, if a director becomes a director of another company or

a trustee of another organisation. The 2006 Act allows directors

of public companies to authorise conflicts and potential conflicts

where the articles of association of that company contain a

provision to this effect. The relevant provisions of the 2006 Act

in relation to conflicts of interest have not yet come into force

and it is expected that they will come into force on 1 October

2008. In anticipation of this change in the law, it is therefore

proposed that the New Articles will have an effective provision

which will give the directors authority to approve such conflicts

of interest in the future when the 2006 Act permits it.

There are safeguards which will apply when directors decide

whether to authorise a conflict or potential conflict. Firstly, only

independent directors (i.e. those who have no interest in the

matter being considered) will be able to take the relevant

decision, and secondly, in taking the decision the directors must

act in a way they consider, in good faith, will be most likely to

promote the Company’s success. The independent directors will

be able to impose limits or conditions when giving authorisation

if they think this is appropriate.

The New Articles also contain provisions relating to confidential

information, attendance at board meetings and availability of

board papers to prevent a director being in breach of duty if a

conflict of interest or potential conflict of interest arises. These

provisions will only apply where the position giving rise to the

potential conflict has previously been authorised by the directors

in accordance with the 2006 Act.

5. SHAREHOLDER MEETINGS

The New Articles reflect the fact that the 2006 Act does not

contain any references to extraordinary general meetings of

shareholders. Under the 2006 Act, any meeting other than an

annual general meeting is simply classified as a general

meeting. The provisions in the Existing Articles dealing with the

convening of general meetings and the length of notice required

to convene general meetings have been amended to conform to

the new provisions in the 2006 Act.

In particular, a general meeting to consider a special resolution

can be convened on 14 days’ notice whereas previously, 21

days’ notice was required.

6. PROXIES

The 2006 Act now provides that shareholders can appoint

multiple proxies (provided that each proxy is appointed to

exercise the rights attached to a different share held by the

shareholder) and that these proxies can speak at general

meetings. The 2006 Act also provides that proxies shall have the

same voting rights on a show of hands as shareholders. The

New Articles contain provisions which correspond with these

changes in the law.



NOTICE OF MEETING

Notice is hereby given that the AGM of Avocet Mining PLC will

be held at the Holiday Inn Mayfair, 3 Berkeley Street, London W1

on 25 September 2008 at 3pm for the following purposes:

ORDINARY BUSINESS

1. To receive the Company's accounts and reports of the

directors and auditors for the year ended 31 March 2008.

2. To receive and approve the Directors’ Remuneration

Report for the year ended 31 March 2008.

3. To re-elect the following as directors (as separate

resolutions):

(a) N G McNair Scott

(b) Sir Richard Brooke Bt.

(c) J F Newman

(d) R A Pilkington

The above directors offer themselves for re-election in

accordance with the provisions of the Quoted Companies

Alliance published Corporate Governance Guidelines for

AIM Companies. J F Newman and R A Pilkington also

retire by rotation in accordance with the Company’s

Articles of Association.

4. To re-elect M J Donoghue as a director who retires by

rotation in accordance with the Company’s Articles of

Association.

5. To re-appoint Grant Thornton UK LLP of Grant Thornton

House, Melton Street, Euston Square, London NW1 2EP

as auditors of the Company until the AGM of the Company

to be held in 2009 at a remuneration to be agreed with the

board of directors.

SPECIAL BUSINESS

To consider, and if thought fit, pass the following resolutions

which will be proposed, as to resolutions 6 and 7 as ordinary

resolutions and, as to resolutions 8, 9 and 10, as special

resolutions.

ORDINARY RESOLUTIONS

6. That, in substitution for any existing authority under

section 80 of the Companies Act 1985 (the Act), the

directors be and are hereby generally and unconditionally

authorised for the purposes of that section to exercise all

the powers of the Company to allot relevant securities

(within the meaning of that section) up to a maximum

aggregate nominal amount of £2,024,249, such authority

to expire at the end of the next AGM, save that the

Company may before such expiry make an offer or

agreement which would or might require relevant

securities to be allotted after such expiry and the directors

may allot relevant securities pursuant to any such offer or

agreement as if such authority had not expired.

7. That, in addition to the authority granted by Resolution 6

above, the directors be and are hereby generally and

unconditionally authorised for the purposes of section 80

of the Act to exercise all the powers of the Company to

allot relevant securities (within the meaning of that

section) up to a maximum aggregate nominal amount of

£6,078,826 in connection with an arrangement providing

for the allotment of relevant securities on terms that the

whole or part of the consideration for the securities

allotted is to be provided by the transfer to the Company

(or the cancellation) of all or some of the securities in

another company or of all or some of the assets and

liabilities of another company, such authority to expire at

the end of the next AGM save that the Company may

before such expiry make an offer or agreement which

would or might require relevant securities to be allotted

after such expiry and the directors may allot relevant

securities pursuant to any such offer or agreement as if

such authority had not expired.

SPECIAL RESOLUTIONS

8. That, subject to the passing of Resolution 6 above, in

accordance with section 95(1) of the Act, and in

substitution for any existing authorities under that

section, the directors are given power until the end of the

next AGM to allot equity securities (as defined in section

94(2) to 94(3A) of the Act) for cash pursuant to the

authority conferred on the directors for the purposes of

section 80 of the Act by the passing of Resolution 6

above as if section 89(1) of the Act did not apply to such

allotment and the directors shall be entitled to make

at any time prior to the expiry of the power thereby

conferred any offer or agreement which would or might

require equity securities to be allotted after the expiry

of such power; provided that such authority shall be

limited to:

(a) the allotment (other than pursuant to paragraph (b)

below) of equity securities up to an aggregate nominal

amount of £303,941;

(b) the allotment of equity securities in connection with

an issue to ordinary shareholders in the Company in

proportion (as nearly as may be) to the respective

numbers of ordinary shares each then held by them,

subject only to such exclusions or other arrangements as



the directors may deem necessary or expedient to deal

with fractional entitlements or legal or practical problems

under the laws of any territory or the requirements of any

regulatory body or stock exchange.

This power applies in relation to a sale of shares which is

an allotment of equity securities by virtue of section

94(3A) of the Act as if in the first paragraph of this

Resolution the words “subject to the passing of

Resolution 6 above,” and “pursuant to the authority

conferred on the directors for the purposes of section 80

of the Act by the passing of Resolution 6 above”, were

omitted.

9. That the Company be and is hereby generally and

unconditionally authorised for the purpose of section 166

of the Act to make market purchases (within the meaning

of section 163(3) of the Act 1985) of ordinary shares of

the Company on such terms and in such manner as the

directors shall determine, provided that:

(a) the maximum number of shares hereby authorised to

be acquired shall be 18,236,480 ordinary shares;

(b) the minimum price which shall be paid for each share

will be its nominal value and the maximum price shall be

an amount equal to 105 per cent of the average of the

middle market quotations for the ordinary shares of the

Company (derived from the London Stock Exchange

Alternative Investment Market) for the five business days

prior to the date of purchase;

(c) the authority hereby given shall expire at the

conclusion of the next AGM of the Company save that

the Company may make a purchase of ordinary shares

under such authority after such date if the contract of

purchase for the same was entered into before such date.

10. That the Company adopt the New Articles (as such term

is defined in the circular to shareholders dated 8 July

2008) in substitution for the existing articles of

association.

Dated 8 July 2008

By order of the board

A P McFarlane

Company Secretary

Registered Office:

7th Floor, 9 Berkeley Street, London W1J 8DW

NOTES

A member entitled to attend and vote at the meeting convened by this notice is

entitled to appoint a proxy to attend, speak and vote in his place. A proxy need not

be a member of the Company. More than one proxy may be appointed to exercise

the rights attaching to different shares held by the member, but a member may not

appoint more than one proxy to exercise rights attached to any one share. To be

valid, the duly completed and executed Form of Proxy and the power of attorney or

other authority (if any) under which they are signed or a copy of that power or

authority certified notarially or in accordance with the Powers of Attorney Act 1971

must be deposited with the Company’s registrars not later than 48 hours before the

time of the meeting or any adjourned meeting. Completion and return of a Form of

Proxy will not prevent a member from attending and voting if he/she so wishes.

Pursuant to regulation 41 of the Uncertified Securities Regulations 2001, the

Company specifies that only those shareholders registered in the Company’s

register of members at 6.00 p.m. on 23 September 2008 shall be entitled to attend

or vote at the AGM in respect of the number of shares registered in their name at

that time. Changes to entries on the register after 6.00 p.m. on 23 September 2008

will be disregarded in determining the rights of any person to attend or vote at the

meeting.

Copies of service contracts of the directors with the Company and any subsidiaries

with a notice period of one year or more or with provisions for predetermined

compensation on termination of an amount which equals or exceeds one year's

salary and benefits in kind are available for inspection at the registered office during

normal business hours and at the AGM for at least 15 minutes prior to and during the

meeting.

NOTICE OF MEETING (CONTINUED)


HIGHLIGHTS FOR THE YEAR ENDED 31 MARCH 2008


CONTENTS2 Gold mines in production

6 Chairman’s statement

8 Chief Executive Officer’s statement

10 The gold market

12 Operating review

28 Resources and reserves

30 Health, safety and environment

34 Community relations

38 Financial review

42 Current board of directors and senior management

44 Report of the directors

46 Report on corporate governance

49 Report on directors’ remuneration

53 Report of the independent auditor (Group)

54 Consolidated income statement

55 Consolidated balance sheet

56 Consolidated statement of changes in equity

57 Consolidated cash flow statement

58 Notes to the financial statements

87 Report of the independent auditor (Company)

88 Company balance sheet

96 Shareholder information

97 Annual general meeting

99 Notice of meeting

101 Directors and advisers


DIRECTORS AND ADVISERS

EXECUTIVE DIRECTORS

J G Henry – Chief Executive Officer

A M Norris – Finance Director

NON-EXECUTIVE DIRECTORS

N G McNair Scott – Chairman


M J Donoghue

J F Newman

R A Pilkington

R S Robertson

COMPANY SECRETARY AND REGISTERED OFFICE

A P McFarlane

7th Floor, 9 Berkeley Street

London W1J 8DW

REGISTRARS AND TRANSFER OFFICE

Equiniti Registrars

Aspect House

Spencer Road

Lancing

West Sussex BN99 6DA

BANKERS

Barclays Bank PLC

Macquarie Bank Limited

Standard Chartered Bank

NOMINATED ADVISER


STOCKBROKERS

JPMorgan Cazenove Limited


AUDITORS

Grant Thornton UK LLP

SOLICITORS

Field Fisher Waterhouse

Design Mustbethebest Printing Dexter Graphics

+161%operating cash flow at US$61.3 million

+10%production from continuingoperations at 157,907oz

-10%cash costs from continuing operations down at US$316/oz

US$122millioncash at year end and no debt

+126%profit before tax and exceptionals at US$52.4 million


Avocet Mining PLC

7th Floor

9 Berkeley Street

London W1J 8DW

Tel +44 (0) 20 7907 9000

Fax +44 (0) 20 7907 9019

E-mail [email protected]

www.avocet.co.uk

GROWTH AND OPERATIONAL EXCELLENCE

Annual Report and Accounts for the year ended 31 March 2008

AV

OC

ET M

ININ

G PLC

AN

NU

AL REPO

RT AN

D A

CC

OU

NTS 2008


FORM OF PROXY

EQUINITI REGISTRARS ASPECT HOUSE SPENCER ROAD LANCING WEST SUSSEX BN99 6ZLI/We __________________________________________________________________________________________________________________________________________

of __________________________________________________________________________________________________________________________________________

being a member/members of Avocet Mining PLC, hereby appoint the Chairman of the meeting or*

__________________________________________________________________________________________________________________________________________

of __________________________________________________________________________________________________________________________________________

or, failing him/her ____________________________________________________________________________________________________________________________

of __________________________________________________________________________________________________________________________________________

as my/our proxy to vote on a poll in my/our name(s) and on my/our behalf at the Annual General Meeting of the Company to be held on25 September 2008, and at any adjournment thereof.

I/we direct my/our proxy to vote (or abstain from voting) as directed below, or as he/she thinks fit on any of the resolutions submittedto the meeting where no specific direction is given or on any other business which may properly come before the meeting.

ORDINARY RESOLUTIONS FOR AGAINST

1. Receive the accounts and Report of the Directors and Report of the Independent Auditor

2. Receive and approve the Report on Directors’ Remuneration for the year ended 31 March 2008

3. Re-elect the following as directors (as separate resolutions):

(a) N G McNair Scott

(b) Sir Richard Brooke Bt.

(c) J F Newman

(d) R A Pilkington

4. Re-elect M J Donoghue as a director

5. Re-appoint Grant Thornton UK LLP as auditors and authorise the determination of their remuneration

6. Authority to allot shares pursuant to section 80 of the Companies Act 1985

7. Further authority to allot shares pursuant to section 80 of the Companies Act 1985 in connection with an acquisition

SPECIAL RESOLUTIONS

8. Disapplication of pre-emption rights pursuant to section 89 of the Companies Act 1985

9. Authority for the Company to purchase its own shares pursuant to section166 of the Companies Act 1985

10. That the Company adopt the New Articles

* If you wish to appoint a person other than the Chairman, then insert his/her name and delete the words “the Chairman of themeeting or”

Please indicate how you wish your vote to be cast by placing an 'X' in the appropriate box. Unless otherwise instructed, the proxymay vote (or abstain from voting) as he/she thinks fit on any of the resolutions submitted to the meeting or on any other business,which may properly come before the meeting.

Signed this ________________________________________ day of ________________________________________ 2008

Signature(s) ________________________________________________________________________________________

NOTE

1. All members are entitled to attend and vote at the meeting, whether or not they have returned a Form of Proxy.

2. In the case of a corporation, the Form of Proxy must be executed under its common seal or under the hand of an officer or attorney duly authorised in writing.

3. Any alterations made in this Form of Proxy must be initialled.

4. To be valid, the Form of Proxy and any authority under which it is executed (or a notarially certified or office copy of such authority), must be lodged at the Company’s

registrars at the address given above not less than 48 hours before the time fixed for the meeting.

5. A shareholder is entitled to appoint a proxy of his/her own choice. A shareholder may appoint more than one proxy to attend on the same occasion.

6. In the case of joint holders of a share the vote of the first-named holder on the register of members (whether voting in person or by proxy) will be accepted to the

exclusion of the votes of the other joint holders in respect of the joint holding. For this purpose, seniority shall be determined by the order in which the names

of such holders stand in the register of members in respect of the joint holding.

Avocet AR-Proxy_AWK_final:Avocet 5/8/08 16:12 Page 2

EQUINITI REGISTRARSASPECT HOUSESPENCER ROAD LANCINGWEST SUSSEXBN99 6ZL

Affixpostagestamphere

Firs

t fo

ld

Second fold

Third fold (tuck in)

Avocet AR-Proxy_AWK_final:Avocet 5/8/08 16:12 Page 1

Documents

AVOCET MINING PLC - annualreports.co.uk · Avocet Mining PLC Annual Report and Accounts 2008 1 PROFITABLE PRODUCER, CLEAR GROWTH STRATEGY PENJOM MALAYSIA INDONESIA GOLD MINING OPERATION