"I am pleased to report that in the six months ended 30 June 2008, Bisichi Mining made a profit of£1,628,000 (2007: £2,092,000) on ordinary activities before interest, taxation, depreciation and amortisation. The 22% decrease in profit compared to the same period in 2007 reflects lower production in the first 3 months of 2008 due to localised flooding and scheduled maintenance on the Voest Alpine Continuous Miner.

The first six months of 2008 has been a `story of two halves'. During the first three months production was inhibited by unusually high levels of rainfall, which caused localised flooding in the underground workings, and by the scheduled maintenance of the Voest Alpine Continuous Miner. Fortunately, Black Wattle's operations were only marginally affected by the widely reported power cuts which took place in January and these did not affect the monthly production, exports or sales.

During the second three months, our management at the mine dealt successfully with the underground flooding and the Continuous Miner went back into full operation. As a result, the mine is now at full production and the second half of the year, with the open cast coming into operation in June, should be substantially more profitable than the first half. In fact, I am pleased to be able to report to shareholders that Black Wattle made more profit in the month of July than in the entire first six months of the year.

The commencement of commercial opencast operations at Black Wattle will have a significant impact on the mine's performance because it will lower the average cost of production, increase average washing plant yields and will allow Black Wattle to mine its reserves more flexibly. In addition, the area being mined contains high yielding export quality thermal coal that will be mined over a 24 month period. A secondary adit was created to link the open cast mining with the existing underground conveyor belt network. This has eliminated the need to transport the coal from our opencast site by road and thus further reduced our production costs. It also gives us the added benefits of reduced dust, noise, and other forms of environmental pollution. Once this open cast block has been mined out we will move on to other opencast blocks. We envisage Black Wattle maintaining an opencast section for the remainder of its life.

The two remaining underground sections - both the traditional drill-and-blast and the mechanised section where our Continuous Miner is operating - are producing well and, combined with the opencast, we anticipate producing 130,000 metric tonnes per month on a consistent basis. We are investigating the possibility of expanding our washing plant capacity to accommodate increased production from the various sections.

During the period, the market for domestic and internationally-traded coal has been very strong, with prices reaching their highest levels in recent history. In April, we announced a 46 percent increase in the price for our domestic thermal coal and a 42 percent increase in the price for our metallurgical product. We are pleased to report that in July, we negotiated a further 68
percent increase in the price for our metallurgical coal. The price for export coal is also very high and we are taking advantage of the buoyancy in the market by locking in prices when it suits us to do so. The sale of our discard product to the local power industry continues to add a substantial amount of nil cost revenue whilst simultaneously reducing our overall rehabilitation liability.

In April, we announced the full and final settlement of all disputes with Bisichi's former Black Economic Empowerment (BEE) partner. We are in the process of selecting a new BEE partner for Black Wattle and hope to make an announcement in the near future. Regarding the Pegasus reserve, there is currently nothing further to report to shareholders, except to state that the settlement of the dispute with Endulwini Resources (pty) Ltd, which had 51% of the equity in the contract, has cleared a major impediment to the successful conclusion of this transaction with the vendors.

In order to bolster the management of our operations in South Africa and to take advantage of sharp increase in the availability of mineral rights, we have promoted Robert Grobler to Mining Director of Bisichi Mining plc and appointed Luis Pinel to replace him as General Manager at Black Wattle.

Despite the downturn in UK property prices, our UK property portfolio, which is managed by London & Associated Properties PLC, is virtually fully let and there has been no reduction in the income we receive from rentals.

During the second half of the year management will continue to focus on increasing the levels of profitability at our operations at Black Wattle whilst at the same time continuing to identify opportunities for expansion in South Africa. With commercial production of our opencast operations now under way and coal prices at such high levels, I look to the future with confidence."

Michael Heller, Chairman 27 August 2008

Andrew Heller, Managing Director