Currency risk arises whenfuture commercial transactions and recognised assets and liabilities aredenominated in a currency that is not the

Currency risk arises whenfuture commercial transactions and recognised assets and liabilities aredenominated in a currency that is not the Group's functional currency. TheGroup is exposed to foreign exchange risk arising from various currencyexposures primarily with respect to the Euro, Bulgarian Lev and Turkish Lira.The Group's management monitors the exchange rate fluctuations on a continuousbasis and acts accordingly.The carrying amounts of the Group's foreign currency denominated monetaryassets and monetary liabilities at the reporting date are as follows: LiabilitiesAssets Liabilities Assets 200820082007 2007GBP'000 GBP'000 GBP'000GBP'000 Euro12 1 -3 United States Dollar - - -5 New Turkish Lira 156 103 - 11Sensitivity analysisA 10% strengthening of the British Pound against the following currencies at 31December 2008 would have increased/(decreased) equity and profit or loss by theamounts shown below. This analysis assumes that all other variables, inparticular interest rates, remain constant. Operating loss 20082007 GBP'000 GBP'000 Operating loss is stated after charging the following items:Depreciation of property, plant and equipment (Note 11)2313 Share-based employee benefits89 167 Staff costs including directors in their executive capacity 490 540 Auditors' remuneration - audit 2724 - interim review5 3 - listing fees-26 - subsidiary audit fees 3 25. Staff costs2008 2007GBP'000GBP'000 Salaries 137 74 Social insurance costs and other funds22 12159 866. Finance income20082007 GBP'000 GBP'000 Interest income123912398 Finance costsSundry finance costs 53539. TaxGBP'000 GBP'000 Loss before tax (1,137) (1,687) Tax calculated at the applicable tax rates(159) (225) Tax effect of expenses not deductible for tax purposes 2359 Tax effect of tax loss for the year6466 Tax effect of allowances and income not subject to tax (39) (3) Tax effect of tax losses brought forward- (7) Tax effect on exploration expenses taxed separately 111 110 Charge for the year 0 0The Directors believe that the company is resident in Cyprus for tax purposes.A deferred tax asset of GBP430,735 (2007: GBP255,737) has not been accountedfor due to the uncertainty over the timing of future recoverability.CyprusThe corporation tax rate is 10%.

Under certain conditions interest may besubject to defence contribution at the rate of 10%. In such cases 50% of thesame interest will be exempt from corporation tax, thus having an effective taxrate burden of approximately 15%. In certain cases, dividends received fromabroad may be subject to defence contribution at the rate of 15%.Due to tax losses sustained in the period, no tax liability arises on theCompany. Under current legislation, tax losses may be carried forward and beset off against taxable income of the following years. As at 31 December 2008,the balance of tax losses which is available for offset against future taxableprofits amounts to GBP1,302,758 (2007: GBP661,799).BulgariaMediterranean Minerals (Bulgaria) EOOD, the 100% subsidiary of the Company, isresident in Bulgaria for tax purposes.The corporation tax rate is 10%. Due to tax losses sustained in the period, notax liability arises on the Mediterranean Minerals (Bulgaria) EOOD. Undercurrent legislation, tax losses may be carried forward and be set off againsttaxable income of the following five years.

As at 31 December 2008, the balanceof tax losses which is available for offset against future taxable profitsamounts to GBP165,490 (2007: GBP164,694).TurkeyDo?u Akdeniz Mineralleri Sanayi ve Ticaret Limited ?irket (Do?u AkdenizMineralleri), the 100% subsidiary of Mediterranean Minerals (Bulgaria) EOOD,and ultimately 100% subsidiary of the Company, is resident in Turkey for taxpurposes.The corporation tax rate is 20%. Under local tax legislation, exploration costsare can only be set off against income from mining operations. As at 31December 2008, the balance of exploration costs that is available for offsetagainst future income from mining operations amount to GBP1,419,549 (2007:GBP865,440).10. Loss per shareThe calculation of the basic and diluted earnings per share attributable to theordinary equity holders of the parent is based on the following data: 20082007GBP'000GBP'000 Net loss attributable to equity shareholders1,137 1,687'000'000 Average number of ordinary shares for the purposes of basic 122,708 102,392earnings per shareEarnings per share: GBP GBP Basic and fully diluted losses per share 0.010.02The effect of share options on earnings per share is anti-dilutive; no separatedisclosure is required.11. Property Plant and EquipmentMotorFurniture, Total fixtures vehiclesand officeequipmentThe GroupGBP'000GBP'000GBP'000CostAdditions4717 64Disposals (7) -(7)At 31 December 2007 / 1 January4017 572008Exchange difference on translation of 5 27subsidiariesAt 31 December 20084519 64Accumulated DepreciationCharge for the period11 2 13On disposal (3) -(3)At 31 December 2007 / 1 January 8 2 102008Charge for the period18 5 23Exchange difference on translation of (4) (1)(5)subsidiariesAt 31 December 200822 6 28Net Book Value at 31 December2313 362008Net Book Value at 31 December20073215 47The above fixed assets are located in Turkey.The Company has no fixed assets.12. Intangible assets - goodwillTotal Cost GBP'000Additions 364 Provision for impairment(364) At 31 December 2007/ 1 January 2008 - Additions - Provision for impairment- At 31 December 2008 -13. Trade and other receivables 2008 2007 The GroupGBP'000GBP'000 Other receivables 99 39 Deposits and prepayments104109 43The Company Owed by group companies 1,651 1,13615.

Cash and cash equivalents20082007 The Group GBP'000 GBP'000 Cash at bank and in hand293 502 The Company Cash at bank and in hand288 47216. Upon the issue an amount of GBP 933,333 wascredited to the Company's share premium reserve.On 19 February 2007 11,666,667 shares of GBP 0.01 were issued at a price of GBP0.03. Upon the issue an amount of GBP 233,333 was credited to the company'sshare premium reserve.On 12 March 2007 250,000 shares of GBP 0.01 were issued to Mr Omer Celenk atthe price of GBP 0.03. Upon the issue an amount of GBP5,000 was credited to theCompany's share premium reserve.On 4 June 2007 1,000,000 shares of GBP 0.01 were issued to Malcolm Stallman atthe price of GBP 0.035. Upon the issue an amount of GBP25,000 was credited tothe Company's share premium reserve.On 4 June 2007 1,250,000 shares of GBP 0.01 were issued for Muratdag Licence inTurkey at the price of GBP 0.035.