Ratel Group Limited - Managements Discussion and analysis and Interim Financial Statements

PERTH, Western Australia, May 15, 2012 /CNW/ -

MANAGEMENT DISCUSSION AND ANALYSIS ("MD&A") 
PERIOD ENDED MARCH 31, 2012

(All figures are in US dollars unless otherwise indicated and the effective date of this MD&A is May 14, 2012)

Introduction

Management's discussion and analysis provides a review of the performance of Ratel Group Limited's ("Ratel Group", "Company" or "the Group") operations and compares its performance with those of the preceding year and quarters. Ratel Group was incorporated on October 18, 2010, and formed a consolidated group on December 17, 2010, hence the prior year comparatives show the results for the period from incorporation.  This discussion also provides an indication of future developments along with issues and risks that can be expected to impact future operations.  This report has been prepared on the basis of available information up to May 14, 2012 and should be read in conjunction with the interim unaudited financial statements of the Company for the period ended 31 March 2012 and the audited financial statements of the Company for the year ended 30 June 2011 and the related notes thereto, which have been prepared in accordance with International Financial Reporting Standards and the Annual Information Form dated 28 September 2011 for June 2011. All dollar amounts referred to in this discussion and analysis are expressed in United States dollars except where indicated otherwise.

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

Cautionary Note Regarding Forward Looking Statements

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

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

Background and Review of Operations

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

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

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

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

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

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

Under the terms off the JV Agreement, SGL was required to pay TML a signature bonus of US$650,000 with US$250,000 becoming due upon TML obtaining the necessary approvals to the farmin of SGL to the joint venture with the balance of the signature bonus to be paid prior to the exercise by SGL of the third option whereby it would acquire the final 13% interest to give SGL a 51% interest in the Segilola Gold Project.  The balance of the signature bonus of US$400,000 was paid to TML on March 16, 2011 and in return TML agreed to extend the time through to 31 March 2012 during which SGL is required to exercise the third option in order for SGL to complete further drilling at the Segilola Gold Project. The drilling campaign at the Segilola Gold Project was finalised on 16 December 2011, and comprised of a further 36 holes totalling 3,704m. This phase of drilling was to test the southern extension of gold mineralisation for a further 400m from the open southern end of the previous drilling programme. A survey has also been completed of the drill boreholes. A notice was submitted to TML on 30 March 2012 advising that SGL wished to acquire the final additional 13% interest in the Segilola Gold Project. On April 30, 2012 TML advised SGL that they were disputing SGL's notice on the grounds that they required a Production Sharing Contract. SGL disagrees that the execution of a Production Sharing Contract is a requirement for the exercise of the Third Option and is currently in the process of responding to TML on this matter.

The Heap Leach development at the Mkushi Copper Project continued in the March 2012 quarter with approximately 18,000 tonnes of ore having been having been crushed. The bacterial generation tanks are on site and the 5 cubic metre tank is functioning. Growth of bacteria in the tank continues and results are being analysed. Other key items that have arrived and been installed on site during the quarter, included the sulphuric acid tanks and the bacterial general facilities and their associated equipment. The Company and its joint venture partners are in discussion with the Zambian Government with regard to licence related matters and the current development activities.

On 3 November 2011, the Company announced that the contract to acquire CAML Ghana Limited ("CAML Ghana") (the holder of the interest in the Obuasi Prospecting Farmin and Joint Venture Agreement in Ghana) had been terminated. Westchester Resources Limited ("Westchester") (a party to the Obuasi Joint Venture) issued proceedings in Ghana against a number of parties, including Ratel in February 2012, which are considered both unsubstantiated and without foundation. Westchester has subsequently stayed those proceedings following an order from the London Court of Arbitration ("LCIA") on April 3, 2012 in the context of arbitration proceedings launched against Westchester by CAML Ghana (an unrelated entity to Ratel Group).

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

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

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

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

Profit and Loss

	Three month period ended			Year to Date
	March 31 2012	December 31 2011	Variance	March 31 2012
Income	1	2	1	4
Group net profit/(loss) from continuing operations	(1,049)	(1,505)	456	(3,821)
Exploration and drilling costs	10	456	(446)	906
Depreciation	7	8	(1)	24
Basic loss per share	(0.70)	(1.00)	0.30	(2.55)

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

	Three month period ended		Year to Date
	March 31 2012	December 31 2011	March 31 2012
Reconciliation of net loss after tax to net cash flows from operations
Net profit/(loss) after related income tax	(1,049)	(1,505)	(3,821)
Adjustments for non-cash income and expense items
Depreciation	7	8	24
Unrealised foreign exchange gain/(loss)	7	19	65
Changes in Assets & Liabilities
Change in working capital	(9)	101	(218)
Net cash inflow/(outflow) from operating activities	(1,041)	(1,377)	(3,947)

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

	For the period ended
	March 31 2012	December 31 2011	Variance
Cash and cash equivalent	1,158	2,671	(1,513)
Current Assets	1,331	2,863	(1,532)
Property, Plant & Equipment	2,048	1,589	459
Total Assets	3,379	4,453	(1,074)
Total Liabilities	144	168	(24)
Shareholders' Equity	3,235	4,284	(1,049)

Selected Quarterly Data

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

	Q3 Mar 2012	Q2 Dec 2011	Q1 Sep 2011	2011 Annual Total	Q4 Jun 2011	Q3 Mar 2011	Q2 Dec 2010	Q1 Sep 2010	2010 Annual Total	Q4 Jun 2010
Total income	1	2	1	7	(1)	6	-	N/A	N/A	N/A
Net profit/(loss)	(1,049)	(1,505)	(1,267)	(4,360)	(1,638)	(2,556)	(166)	N/A	N/A	N/A
Per share (undiluted US$ cents per share)	(0.7)	(1.00)	(1.13)	(5.86)	(1.49)	(7.27)	(0.08)	N/A	N/A	N/A
Per share (diluted US$ cents per share)	(0.70)	(1.00)	(1.13)	(5.86)	(1.49)	(7.27)	(0.08)	N/A	N/A	N/A

Ratel Group was incorporated on October 18, 2010. On December 17, 2010, Ratel Group acquired 100% of CGX and Zambian Mining, and thereby acquired their interests in the Segilola Gold Project and Mkushi Copper Project, respectively hence there are no comparatives prior to the December 2010 quarter.

Quarterly and Year to Date Results

Three Months Ended March 31, 2012 as Compared to the Three Months Ended December 31, 2012 and the Three Months Ended March 31, 2011

The Company's result for the three months to March 31, 2012 was a net loss of $1.049M, as compared to a net loss of $1.505M for the previous quarter, and $2.556M for the prior year comparative period, a decrease of $0.456M or 30% from the previous quarter and $1.507M or 60% from the prior year. The decrease from the prior quarter is largely attributable to the decrease in exploration and drilling expenses, as discussed further below. The Company's activities are mineral exploration and development. It currently has no assets in production, hence earns only nominal interest income.

Revenues and Foreign Exchange Gains/Losses

As discussed above, the Company does not have any producing assets hence earns only minimal interest income on its cash balances.  The Company earned interest income of $1k for the March quarter as compared to $2k for the December 2011 quarter and $6k for the March 2011 quarter. A foreign exchange loss of $7k was recorded in the March quarter, as compared to foreign exchange loss of $19k in the December 2011 quarter and a gain of $118k for the March 2011 quarter. This March 2012 quarter loss is reduced due to the strengthening of the US dollar during the quarter and the impact on expenses recorded in local currencies Australian Dollar, Zambian Kwacha and Nigerian Naira, as compared to the December 2011 quarter which related largely to the weakening of the US dollar. The March 2011 gain relates mainly to a foreign exchange gain on the funds from the C$10M capital raising in January 2011, which were converted to USD in March 2011.

Expenses

Expenses for the March 2012 quarter were $1.052M as compared to $1.506M for the December 2011 quarter, a decrease of $0.454M or 30% and $2.562M for the March 2011 quarter, a decrease of $1.510M or 59%. The decrease from the prior quarter is predominantly due to the completion of the drilling programme at the Segilola Gold Project in December 2011. Administration expenditure also decreased by $0.202M from the previous quarter, largely due to legal expenses incurred in the prior quarter related to the termination of the CAML Ghana acquisition agreement. The significant decrease from the prior year quarter relates predominantly to a notional share option expense of $0.948M required to be recorded under accounting standards.

Specific items discussed below:

Exploration and evaluation costs written off

The Company incurred exploration costs of $0.623M during the current quarter as compared to $1.004M in the prior quarter, a decrease of $0.381M or 38% and $1.337M in the March 2011 quarter, a decrease of $0.714M or 105%. The drilling campaign at the Segilola Gold Project was finalised on 16 December 2011 therefore minimal exploration and drilling expenditure of $0.010M was incurred in the March 2012 quarter as compared to $0.714M in the December 2011 quarter. Expenditure in the March 2011 quarter included a $0.400M signature bonus paid in relation to the Segilola Gold Project in return for an extension of time to exercise the third option under the joint venture agreement as well as $0.259M of exploration expenditure incurred in relation to the prospective Obuasi project held by CAML Ghana. The contract to acquire CAML Ghana was terminated in November 2011 due to Ghanaian Ministerial Approval not being obtained. The Company expenses all of its exploration costs to the profit and loss. Development expenditure on the heap leach development at the Mkushi Copper Project commenced in the June 2011 quarter and has been capitalised to the balance sheet, in accordance with the Company's accounting policies.

Administrative expenses

The Company incurred administrative costs of $0.245M during the March 2012 quarter, as compared with $0.447M in the prior quarter, a decrease of $0.202M or 45% and $1.343M in the March 2011 quarter, a decrease of $1.098M or 511%. The variance for the March 2012 quarter and December 2011 quarter relates largely to the reduced legal fees of $0.033M in the March 2012 quarter as compared to $0.237M in the December 2011 quarter. The variance in the March 2012 quarter as compared to the March 2011 quarter largely relates to the share option expenses of $0.948M and share registry costs for listing on the TSX of $0.149M incurred in the March 2011 quarter. The share option expense represents the amortisation of notional value placed on these options and does not represent a cash payment by the Company.

Business development expenditure

Business development expenditure of $0.176M was incurred in the March 2012 quarter as compared to $0.037M in the prior period and nil in the March 2011 quarter. The expenditure relates to legal and consultants fees regarding the incorporation of a special purpose entity for an incorporated joint venture structure to hold the Segilola Gold Project structure should the joint venture partners commit to a development of the project.

Capitalised development expenditure

Development expenditure on the heap leach development at the Mkushi Copper Project commenced in the June 2011 quarter and has been capitalised to the balance sheet, in accordance with the Company's accounting policies, with $0.465M capitalised in the March 2012 quarter as compared to $0.527M in the December 2011 quarter.  Activities during the December 2011 included electrification of the main building and crusher plant and electrification reticulation of the leach pad commenced. Crushing of the ore commenced after testing of the crushing plant was completed. The HDPE liner was received on site and laying and welding of the liner commenced. Fencing of the pads and leach ponds were also carried out in this period. During the March 2012 quarter concentrate for the bacterial leach operation was received. Earthworks continued with stock piling and also loading ore onto the heap leach pad. Stockpiled ore was loaded onto the heap leach pad and aeration pipes were laid. Crushing of the ore continued during the period and samples of the mineral ore were sent to the contractor for analysis. Construction continued on the heap leach pad, ponds, cementation tanks and bacterial generation facility. Installation of the two sulphuric acid storage tanks including construction of a suitable concrete base was completed. The bacterial generation facility was completed and the bacteria growth commenced.

Year to Date Results

Year to date from 1 July 2011 to 31 March 2012

The Company's result for the period ended March 31, 2012 was a net loss of $3.821M as compared to a net loss of $2.722M in the prior year, an increase of $1.099M or 29%. The increased expenditure in the current year period largely relates to the drilling campaign at the Segilola Gold Project, which commenced in the June 2011 quarter and was finalised in December 2011, with a survey of the drill boreholes together with a revised mining optimisation model completed in March 2012. The Company was incorporated on 18 October 2010, hence the prior year comparatives do not reflect an equal nine month period of activities.

The Company's activities are mineral exploration and development. It currently has no assets in production, hence earns only minimal income largely related to interest income on its bank accounts.

Revenues and Foreign Exchange Gains/Losses

As discussed above, the Company does not have any producing assets hence earns only minimal interest revenue.  The Company earned interest revenue of $4k for the current year to date as compared to $6k in the prior year. A foreign exchange loss of $0.065M was recorded in the 9 months to 31 March 2012, related largely to the weakening of the US dollar during the period and the impact on expenses recorded in local currencies Australian Dollar, Zambian Kwacha and Nigerian Naira. A foreign exchange gain of $0.114M was recorded from the date of incorporation of 18 October 2010 to 31 March 2011. The 2011 gain relates mainly to foreign exchange gain on the funds from the C$10M capital raising in January 2011, which were converted to USD in February 2011.

Expenses

Expenses for the current year to date amounted to $3.825M as compared to $2.728M in the prior year, an increase of $1.097M or 40%. The increase largely relates to exploration and evaluation expenses of $2.593M incurred in the March 2012 compared to $1.495M in the March 2011 period, an increase of $1.098M or 73%.  Exploration costs written off are further discussed below. The Company expenses all of it exploration costs to the profit and loss. Expenditure on the heap leach development at the Mkushi Copper Project has been capitalised to the balance sheet, in accordance with the Company's accounting policies. Heap Leach expenditure capitalized for the year to date $1.578M as compared to $0.411M for the prior year. The Heap Leach development began construction in the June 2011 quarter with the major works being undertaken in the 2012 year.

Specific items discussed below:

Exploration costs written off

The Company incurred exploration and evaluation costs of $2.593M during the current year to date as compared to $1.495M in the prior year, an increase of $1.098M or 73%. The current year expenditure relates predominantly to the drilling campaign at the Segilola Gold Project, which was completed in December 2011, with a survey of the drill boreholes together with a revised mining optimisation model completed in March 2012. Employee costs for the current year period were $0.829M as compared to $0.307M in the prior year, an increase of $0.526M or 171%. The increase is due to the increase in activities of the Company, including the appointment of a fulltime CEO as well as additional site employee costs related to the drilling campaign. In addition, travel expenses of $0.310M were incurred in the current year period as compared to $0.080M in the prior year period, an increase of $0.230M or 288%, for travel expenditure in relation to meetings with its joint venture partner at the Segilola Gold Project and the restructuring of the Segilola Gold Project.  Expenditure in the prior year period included a $0.400M signature bonus paid in relation to the Segilola Gold Project in return for an extension of time to exercise the third option under the joint venture agreement as well as $0.259M of exploration expenditure incurred in relation to the Obuasi project held by CAML Ghana. The contract to acquire CAML Ghana was terminated in November 2011 due to Ghanaian Ministerial Approval not being obtained.

Administrative expenses

The Company incurred administrative costs of $0.942M during the period as compared to $1.347M in the prior year, a decrease of $0.405M or 30%. The decease largely relates to the notional share option expense of $0.948M recorded in the prior year period (current year period: nil )along with share registry expenses of $0.149M incurred in the prior year related to the public listing of the Company in January 2011 as compared to $0.049M for the current year. Legal expenses of $0.349M were incurred in the current year, largely related to the termination of the CAML Ghana acquisition agreement as compared to $0.072M in the prior year. The current year's expense also includes three quarterly payments of the Company's serviced office and management fees totalling $0.307M in the current year as compared to one quarters payment totalling $0.096M in the prior year comparative period.

Capitalised Development expenditure

Heap Leach expenditure capitalized for the year to date $1.578M as compared to $0.411M for the prior year. The Heap Leach development began construction in the June 2011 quarter with the major works being undertaken in the 2012 year. In the 2012 year suppliers were sourced and contracts entered into. The electrification of the main building and crusher plant and electrification reticulation of the leach pad commenced. Crushing of the ore commenced after testing of the crushing plant was completed. The HDPE liner was received on site and laying and welding of the liner commenced. Fencing of the pads and leach ponds were also carried out in this period. Concentrate for the bacterial leach operation was received. Earthworks continued with stock piling and also loading ore onto the heap leach pad. Stockpiled ore was loaded onto the heap leach pad and aeration pipes were laid. Crushing of the ore continued during the period and samples of the mineral ore were sent to the contractor for analysis. Construction continued on the heap leach pad, ponds, cementation tanks and bacterial generation facility. Installation of the two sulphuric acid storage tanks including construction of a suitable concrete base was completed. The bacterial generation facility was completed and the bacteria growth commenced and results are being analysed.

Liquidity and Capital Resources 

As at March 31 2012, the Company had cash and cash equivalents of $1.157M.  Ratel Group was incorporated on October 18 2010, and formed a consolidated group with Zambian Mining and CGX on December 17 2010, therefore there is no available comparative information prior to the December 2010 quarter. On December 17, 2010 the Company issued 49,999,998 shares at an issue price of C$0.10 per share to acquire the interest in the African assets held by Ratel Gold (now SAU).

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

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

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

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

Contractual obligations

	Payments due by period
Contractual obligations	Total	Less than 1 year	1-3 years	4-5 years	More than 5 years
Joint venture obligations^1	182,000	182,000	-	-	-
Management services contract^2	403,000	403,000	-	-	-
Total contractual obligations	585,000	585,000	-	-	-

¹ The joint venture obligations represents commitments to the development at the Company's Mkushi Copper Project in Zambia.
² The management services contractual obligation is for the provision of, serviced office, company secretarial, administrative, accounting and management services by CGA Mining Limited that came into effect on the Company listing on the TSX, which was January 4, 2011.

Transactions between the group and its related entities

During the quarter ended March 31, 2012, the Company entered into transactions with related parties in the wholly-owned group:

Loans were advanced on short term inter-company accounts between;

• CGX and its wholly owned subsidiary SGL for the purpose of funding feasibility study on the Segilola Gold Project and the funding of the day to day operating costs of SGL. The total amount loaned for the period was $0.529M; and
  
  
• between Zambian Mining and its wholly owned subsidiary SML for the purpose of funding the day to day operating costs of SML. The total amount loaned for the period was $0.593M;

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

• loans are repayable at call; and
  
  
• no interest is payable on the loans at present.

Transactions between the group and other related parties

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

Office accommodation and administrative support were provided to the consolidated entity at commercial rates from CGA, who is holder of 19.1% of the outstanding share capital of the Company.  In the current quarter CGA charged $0.107M (excluding GST) in relation to the provision of these services.

Outstanding Share Data

As at May 14, 2012, the Company had 150,000,000 common shares outstanding and 12,000,000 options, exercisable at C$0.25 per share.

Subsequent Events

There have been no significant events subsequent to balance date.

Critical Accounting Estimates

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

Accounting Policies

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

Income Taxes 

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

Internal Controls and Disclosure Controls

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

During the quarter ended March, 2012, there have been no changes in the Company's policies and procedures and other processes that comprise its internal control over financial reporting, that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

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

The Company's CEO and CFO have each evaluated the effectiveness of the Company's internal controls over financial reporting and disclosure controls and procedures as of March 31, 2012 and have concluded that these controls and procedures are effective in reasonably assuring the reliability of financial reporting and that material information relating to the Company is made known to them by others within the Company and that such controls and procedures have no material weaknesses and no limits on the scope of their design.

Future Outlook

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

• the completion of the Heap Leach Development at the Company's Mkushi Copper Project; and
• restructuring of the Segilola project interest into an incorporated joint venture structure to facilitate a financing of the development should the joint venture partners commit to a development.

Interim Financial Statements

For the three months and nine months ended
31 March 2012

RATEL GROUP LIMITED
Level 5, The BGC Centre, 28 The Esplanade, Perth WA 6000
Phone: [phone] Fax: [phone].
Website: www.ratelgroup.com

NOTICE OF NO AUDITOR REVIEW OF
INTERIM FINANCIAL STATEMENTS

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

For further information please contact:

Hannah Hudson
Chief Financial Officer and Company Secretary

Telephone: [phone]
Fax: [phone]

CORPORATE DIRECTORY

RATEL GROUP LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Unaudited - Prepared By Management

For the three and nine months ended 31 March

		Consolidated Three months ended Mar 31,	Consolidated Three months ended Mar 31,	Consolidated Nine months ended March 31,	Consolidated Period from Oct 18, 2010 to March 31,
	Note	2012	2011	2012	2011
		US$	US$	US$	US$
Continuing Operations
Revenue	3	1,354	5,628	3,911	5,634
Exploration and evaluation expenditure	4	(623,306)	(1,336,907)	(2,592,661)	(1,494,755)
Business development		(176,194)	-	(226,119)	-
Foreign exchange gains/(losses)		(6,558)	117,786	(64,590)	113,845
Administrative expenses	5	(244,544)	(1,342,781)	(941,840)	(1,347,150)
Loss from continuing operations		(1,049,248)	(2,556,274)	(3,821,299)	(2,722,426)
Income tax benefit		-	-	-	-
Loss for the period		(1,049,248)	(2,556,274)	(3,821,299)	(2,722,426)
Other comprehensive income for the period		-	-	-	-
Total comprehensive income/(loss) for the period		(1,049,248)	(2,556,274)	(3,821,299)	(2,722,426)
Earnings per share for loss attributable to the ordinary equity holders of the company
Basic loss per share (cents)		(0.70)	(7.27)	(2.55)	(7.36)
Diluted loss per share (cents)		(0.70)	(7.27)	(2.55)	(7.36)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.  The Company was incorporated on October 18, 2010, hence the prior year comparative figures represent the period from incorporation.

RATEL GROUP LIMITED
INTERIM CONSOLIDATED BALANCE SHEET
Unaudited - Prepared By Management

			Consolidated	Consolidated
		Note	31 March 2012	30 June 2011
			US$	US$
ASSETS
Current Assets
Cash and cash equivalents		7	1,157,513	6,628,366
Trade and other receivables			141,861	128,251
Prepayments			31,164	27,895
Total Current Assets			1,330,538	6,784,512
Non-Current Assets
Property, plant and equipment			180,776	199,797
Construction in progress		8	1,867,637	411,406
Total Non-Current Assets			2,048,413	611,203
TOTAL ASSETS			3,378,951	7,395,715
LIABILITIES
Current Liabilities
Trade and other payables		9	143,792	339,259
Total Current Liabilities			143,792	339,259
TOTAL LIABILITIES			143,792	339,259
NET ASSETS			3,235,159	7,056,456
SHAREHOLDER'S DEFICIT
Issued capital		6	14,493,355	14,493,353
Reserve		10	(3,076,157)	(3,076,157)
Accumulated losses			(8,182,039)	(4,360,740)
TOTAL SHAREHOLDER'S EQUITY			3,235,159	7,056,456

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

RATEL GROUP LIMITED
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited - Prepared By Management

For the three and nine months ended 31 March 2012

			Consolidated Three months ended March 31,	Consolidated Three months ended March 31,	Consolidated Nine months ended March 31,	Consolidated Period from Oct 18, 2010 to March 31,
		Note	2012	2011	2012	2011
			US$	US$	US$	US$
Cash flows from operating activities
Payments to suppliers and employees			(401,926)	(287,349)	(1,214,651)	(287,568)
Exploration costs			(640,261)	(1,464,200)	(2,734,973)	(1,623,323)
Interest received			801	5,628	2,505	5,634
Net cash outflow from operating activities			(1,041,386)	(1,745,921)	(3,947,119)	(1,905,257)
Cash flows from investing activities
Payments for property, plant & equipment			(465,448)	-	(1,459,817)	133,345
Net cash inflow/(outflow) from investing activities			(465,448)	-	(1,459,817)	133,345
Cash flows from financing activities
Loan funds received			-	-	-	95,066
Proceeds from the issue of shares			-	10,060,360	-	10,060,362
Capital raising costs			-	(541,643)	-	(541,643)
Net cash inflow from financing activities			-	9,518,717	-	9,613,785
Net increase / (decrease) in cash and cash equivalents			(1,506,834)	7,772,796	(5,406,936)	7,841,873
Effects of exchange rate fluctuations on the balances of cash held in foreign currencies			(6,558)	-	(63,382)	-
Cash and cash equivalents at beginning of the period			2,670,905	65,138	6,627,831	113,845
Cash and cash equivalents at end of the financial period		7	1,157,513	7,955,718	1,157,513	7,955,718

The above consolidated statement of cash flow should be read in conjunction with the accompanying notes. The Company was incorporated on October 18, 2010, hence the prior year comparative figures represent the period from incorporation.

RATEL GROUP LIMITED
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited - Prepared By Management

For the nine months ended 31 March 2012

		Issued capital US$	Acquisition reserve US$	Share based payment reserve US$	Accumulated losses US$	Total US$
At 1 July 2011		14,493,355	(4,300,157)	1,224,000	(4,360,741)	7,056,457
Loss for the period		-	-	-	(3,821,299)	(3,821,299)
Total comprehensive income /(loss) for the period		-	-	-	(3,821,299)	(3,821,299)
At 31 March 2012		14,493,355	(4,300,157)	1,224,000	(8,182,039)	3,235,159

For the period from 18 October 2010 to 31 March 2011

		Issued capital US$	Acquisition reserve US$	Share based payment reserve US$	Accumulated losses US$	Total US$
At 18 October 2010		-	-	-	-	-
Loss for the period		-	-	-	(2,722,426)	(2,722,426)
Total comprehensive income /(loss) for the period		-	-	-	(2,722,426)	(2,722,426)
Issue of share capital		14,493,353	-	-	-	14,493,353
Acquisition reserve		-	(4,300,157)		-	(4,300,157)
Share based payment		-	-	948,000	-	948,000
At 31 March 2011		14,493,353	(4,300,157)	948,000	(2,722,426)	(8,418,770)

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. The Company was incorporated on October 18, 2010 hence the prior year comparative figures are from date of incorporation to March 31, 2011.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the period ended 31 March 2012
Unaudited - Prepared By Management

1. CORPORATE INFORMATION

The financial report of Ratel Group Limited ("the Company", "Ratel", "the Group" or "the Entity") as at 31 March 2012 and for the periods 1 July 2011 to 31 March 2012 and 1 January 2011 to 31 March 2012.

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

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Accounting

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

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

The Company was incorporated on 18 October 2010 and accordingly comparatives for the Statement of Comprehensive Income and Statement of Cash Flows and Statement of Changes in Equity are for the period from incorporation to 31 March 2011.

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

(b) Significant accounting policies

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

	Consolidated	Consolidated	Consolidated	Consolidated
	3 months ended March 31, 2012	3 months ended March 31, 2011	9 months ended March 31, 2012	Period from October 18 2010 to March 31, 2011
3. REVENUES	US$	US$	US$	US$
Interest income	811	5,628	2,598	5,634
Other income	543	-	1,313	-
	1,354	5,628	3,911	5,634

4. EXPLORATION AND EVALUATION EXPENSES

	Consolidated 3 months ended March 31, 2012	Consolidated 3 months ended March 31, 2011	Consolidated 9 months ended March 31, 2012	Consolidated Period from October 18, 2010 to March 31, 2011
	US$	US$	US$	US$
Employee benefits	284,579	264,899	831,332	302,672
Consultants fees	57,992	8,391	86,704	14,139
Motor vehicle expenses	10,171	15,566	25,635	28,047
Travel expenses	122,955	45,531	309,732	79,887
Exploration and drilling costs	10,101	791,278	905,962	824,120
Depreciation expense	7,434	8,277	23,788	11,179
Rental expense	484	19,601	40,137	25,739
Other	129,590	183,364	369,371	320,791
	623,306	1,336,907	2,592,661	1,494,755

5. ADMINISTRATIVE EXPENSES

Audit & accounting fees	31,854	1,058	65,575	1,058
Business development	-	17,644	-	17,644
Share option expense	-	948,000	-	948,000
Legal fees	33,979	69,245	349,361	72,432
Management fees	106,674	95,614	307,206	95,614
Share registry costs	18,870	148,905	49,116	148,905
Other	53,167	62,315	170,581	63,497
	244,544	1,342,781	941,839	1,347,150

Share option expense represents the amortisation of notional value placed on these options and does not represent a cash payment by the Company.

6. CONTRIBUTED EQUITY

		Consolidated March 31,                      2012 Number	Consolidated June 30, 2011 Number
(a)  Issued and paid up capital:
Issued and fully paid shares		150,000,000	150,000,000

Movements in contributed equity during the past three months were as follows:

Ordinary Shares	Number	US$
Opening balance at 1 July 2011	150,000,000	14,493,353
Total shares on issue at 31 March 2012	150,000,000	14,493,353

7. CASH AND CASH EQUIVALENTS

	Consolidated March 31 2012	Consolidated June 30 2011
	US$	US$
Cash at bank and on hand	1,157,513	6,628,366
	1,157,513	6,628,366

8. CONSTRUCTION IN PROGRESS

	Consolidated March 31 2012	Consolidated June 30 2011
	US$	US$
Heap leach construction in progress	1,867,637	411,406
	1,867,637	411,406

 

9. TRADE AND OTHER PAYABLES

			March 31,	June 30,
			2012	2011
			US$	US$
Trade creditors			143,792	169,121
Accrued expenses			-	170,138
			143,792	339,259

10. Reserves

		March 31, 2012 US$	June 30, 2011 US$
Acquisition reserve		(4,300,157)	(4,300,157)
Share based payment reserve		1,224,000	1,224,000
		(3,076,157)	(3,076,157)

11. SEGMENT INFORMATION

The following table presents the revenue and result information regarding operating segments for the period ended March 31, 2012.

	Nigeria	Zambia	Eliminations/ Unallocated	Consolidated
	March 31, 2012	March 31, 2012	March 31, 2012	March 31, 2012
	US$	US$	US$	US$
Other income	160	1,246	2,505	3,911
Segment profit/(loss)	(2,273,567)	(389,551)	(1,157,181)	(3,821,299)

	Nigeria	Zambia	Eliminations/ Unallocated	Consolidated
	March 31, 2011	March 31, 2011	March 31, 2011	March 31, 2011
	US$	US$	US$	US$
Other income	139	-	(35)	104
Segment profit/(loss)	(1,740,288)	(704,956)	879,541	(1,565,703)

12. EVENTS AFTER BALANCE SHEET DATE

There have been no significant events subsequent to the balance date up to the date of this report.

 

 

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

Tel:  [phone]
Fax: [phone]
Email: [email protected]
www.ratelgroup.com

ABN: 85 903 304 771