BZM Bellzone

Our resource development and exploration programmes at Kalia and the Sadeka Nickel/Copper Project continue as planned. The ongoing Kalia magnetite resource programme added 1.34 billion tonnes during the year to bring our total resource at Kalia alone to 3.74 billion tonnes. The 2010 reverse circulation drilling campaign for the maiden oxide JORC resource tallied 24,490 metres, across 363 holes. The campaign targeted an area directly overlying a portion of the magnetite JORC zone.

Key project management staff have been put in place to manage the appointed engineering consultants, TWP Australia and Ausenco Limited, to complete the Kalia DFS by 2011 year end. The additional staffing for our commitments at Sadeka and Forecariah are also in place to ensure that these projects are developed to schedule.

The work with CIF on their leases in the Forecariah region has moved rapidly to a point where we are targeting production in Q1 2012. This development will transform Bellzone into a near-term producer and will bring cash flow to Bellzone several years earlier than expected and has an array of positive benefits to the Company, our partners and the people of Guinea. Work is underway to reduce further the relatively low total capital cost of US$300-350 million for a fully owner-operated operation through optimal use of contracted operations that are expected to leave the Company with a lower capital funding requirement for our 50%.

The Republic of Guinea successfully held its first democratic Presidential election process which culminated with the inauguration of His Excellency Alpha Conde as Guinea's President in December. The inauguration ceremony was well supported by international heads of state. The successful election process has improved the general perception of Guinea and supports the Company's long held view that Guinea is a favourable investment location. The comments of Guinea's Mining Minister at the Mining Indaba conference in Cape Town in February 2011, have underpinned the Government's support for our existing Convention and we continue to adhere firmly to our responsibilities as a proponent of the iron ore industry in the country.

Having made significant progress throughout 2010, we are confident of the year ahead and 2011 will see the focus on:

-- completing the Kalia Mine DFS;

-- completing the maiden JORC for the oxide at Kalia;

-- signing definitive agreements with CIF for the Kalia Mine financing;

-- completing the detailed commercially based off-take agreements with CIF;

-- completing the transport agreements with KLS;

-- completing the magnetite metallurgical bulk sample;

-- ongoing oxide and magnetite resource development with planned JORC upgrades to both;

-- development of the Forecariah project;

-- drilling and assessing the potential of the Sadeka Nickel / Copper targets; and

-- completing our assessment of the Mali targets,

-- maintaining sufficient liquidity by raising additional equity to permit the company to complete its planned project evaluation activities.

The value of the Company continues to increase under the leadership of our experienced management team and your continued support is very much appreciated. The Company will continue to deliver the outcomes required to reduce the project risk, increase our resources and develop the opportunities that will add value to the Company.

Michael Farrow

Chairman

Operational and Financial Overview

Kalia Iron Project

CIF Agreement

Definitive agreement signed with CIF following the Binding MOU including:

-- CIF to fund and develop rail and port infrastructure for the Kalia Mine

-- CIF to offer financing for the development of the Kalia Mine

-- Bellzone to retain 100% ownership of the Kalia I deposit

-- CIF has first rights to purchase 100% of the off-take from the Kalia Mine at market price

-- Bellzone to relinquish approximately 50% of Kalia II area and 100% of the Faranah permit

-- Bellzone and CIF will incorporate a 50:50 joint venture to finance, develop, produce, transport, export and sell iron ore from the Forecariah Permits held by a subsidiary of CIF, located in south-west Guinea approximately 40km from the coast line

-- Kalia Horizon Minerals Pte Ltd ("KHM") was incorporated for the development of the infrastructure required for the Kalia Mine. $40 million deposited by CIF on 14 June 2010 for the infrastructure feasibility study. KHM in turn has established Kalia Logistics SA ("KLS"), a 100% owned Guinea subsidiary to develop the rail and port infrastructure

-- In November, KLS awarded SGS Environment the contract to conduct the socio-economic ("SEIA") and environmental impact assessment ("EIA") for the infrastructure components

-- KLS has hosted engineering contractors on site for the scoping stage of the feasibility study for infrastructure and engineering design consultant contracts were awarded by CIF Q4 2010

Resource definition

-- Maiden magnetite JORC resource upgraded from 2.4 billion tonnes to 3.74 billion tonnes on 6 September 2010

-- Total diamond drilling to date in excess of 47,548 metres. In excess of 9,000 metres of diamond drilling on magnetite completed since last JORC in preparation of a JORC upgrade scheduled in Q3 2011

-- The initial reverse circulation drilling campaign for the maiden oxide JORC resource delivered 25,490 metres across 363 holes covering an area of 2.57km(2) when it was completed in Q4 2010.

Kalia Mine development

-- Mining Convention for the Kalia Mine approved and signed on 28 July 2010

-- Mining Convention passed into Guinea law through Presidential Decree signed on 31 August 2010

-- Awarded contracts to SGS Environment and commenced SEIA and EIA studies for the Kalia Mine in May 2010

-- CIF to offer financing for the development of the Kalia Mine

-- Contracts awarded to TWP Australia Pty Ltd ("TWP") and Ausenco Limited to conduct the detailed feasibility study ("DFS") for the Kalia Mine

-- Highly regarded project team in place

Infrastructure development

-- KHM was incorporated for the development of the infrastructure required for the Kalia Mine

-- US$40 million deposited into KHM by CIF on 14 June 2010 for the infrastructure feasibility study

-- Kalia Logistics SA ("KLS"), a 100% owned Guinea subsidiary of Kalia Horizons Minerals Pte Ltd was established

-- Bellzone signed an Infrastructure Accord (the "Accord") with the Republic of Guinea, announced 17 June 2010, which provides Bellzone with the exclusive access to a pre-defined infrastructure corridor and rights to conduct technical and economic feasibility studies for the rail and port infrastructure

-- Infrastructure Accord was passed into Guinea law through Presidential Decree signed on 31 August 2010

-- KLS awarded contract to SGS Environment in December for SEIA and EIA on the infrastructure development

-- Contracts for Engineering Studies let by CIF for the port for completion by Q1 2012

Forecariah

-- CIF holds iron ore permits in south western Guinea situated between 40 and 80kms from a suitable port facility

-- Oxide at surface with DSO potential and magnetite resources

-- Accelerated development to achieve an initial production rate of 3-4 mtpa by Q1 2012

-- Ramp up expected to reach 10 mtpa by 2013

-- Drilling programme underway

-- To be developed with CIF in 50:50 joint venture

Sadeka Nickel/Copper Project

-- Target drilling programme defined based on electro-telluric and ground magnetic surveys commenced Q4 2010

-- Initial drill hole results expected in Q2 2011

-- 3,709 soil and rock chip samples completed on target areas

Corporate and Finance

-- Appointment to the Board of Terry Larkan as Finance Director and Simon Farrell as Non-Executive Director

-- Appointment of Raj Kandiah as Head of Investor Relations and Corporate Development as well as Bryan Pearce as Bellzone Project Director

-- Admitted to the AIM on the London Stock Exchange on 1 April 2010

-- Raised GBP33.6 million (US$50 million equivalent) before expenses through IPO on AIM

-- Finalist in two categories at the 2010 AIM Awards

-- Cash balance at year end US$39.1 million

Consolidated Statement of Financial Position at 31 December 2010

* - See note 1(c) and 5(b)(i)

 
                                   Unaudited 
                                 31 December  31 December 2009  1 January 2009 
                                        2010         Restated*       Restated* 
                         Notes         $'000             $'000           $'000 
 
ASSETS 
Non--current assets 
Property, plant and 
 equipment                 2           2,275             4,265           4,721 
Mineral properties         3           9,277             4,214               - 
                                ------------  ----------------  -------------- 
Total non--current 
 assets                               11,552             8,479           4,721 
                                ------------  ----------------  -------------- 
 
Current assets 
Cash and cash 
 equivalents                          39,107            12,982          23,450 
Trade and other 
 receivables                             835               396             721 
Inventories                               62                27               - 
Other current assets                       -               940               - 
                                ------------  ----------------  -------------- 
Total current assets                  40,004            14,345          24,171 
                                ------------  ----------------  -------------- 
Total assets                          51,556            22,824          28,892 
                                ------------  ----------------  -------------- 
 
EQUITY 
Stated Capital             4          99,674            49,897          49,897 
Retained losses                     (50,286)          (26,175)        (13,064) 
Reserves                   5           1,065           (3,166)         (9,515)