Lionsgold Regulatory News (LION)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

8 December 2015

Kolar Gold Limited

("Kolar Gold" or the "Company")

Final Results Announcement, Strategic Review, Board Changes and Commencement of Offer Period

Kolar Gold Limited (AIM: KGLD), the Indian focussed gold exploration and mine development company, announces its audited final results for the year ended 30 June 2015, a review of its activities and strategic direction, changes to the Board of Directors and commencement of offer period, with a view to maximising value for shareholders.

Results

The Company recorded a loss after tax for the year ended 30 June 2015 of £1,254,716, (2014: loss after tax of £5,621,538). As at that date the Company had £1.4 million in cash and term deposits (2014: £3.4 million).

The Company has, at the date of this report, the following interests:

· a shareholding of 23.5 per cent. in Geomysore Mining Services (India) Private Limited ("GMSI");

· a Right of First Refusal, in association with the Cooperative Societies of Bharat Gold Mines Limited ("BGML") ex-employees, to acquire the BGML mining assets at Kolar through a tender process to be held by the owner, the Government of India;

· cash balances of £1.0 million; and

· liabilities in connection with changes to executive management of approximately £0.25 million.

Review of Activities

Kolar Gold's strategy from the outset has been to focus on building an Indian gold exploration and mine development company. It has been progressing this plan through its significant investment in Geomysore Services (India) Private Limited ("GMSI") and by pursuing its proposed acquisition of Bharat Gold Mines Limited, jointly with the BGML Gold Mine ex-employee united unions, to revive the historic BGML gold mine ("BGML Gold Mine"), which is located in the Kolar Gold Fields. However, both of these initiatives have taken significantly longer to progress than was originally foreseen. The environment for undertaking mine exploration and development in India is complex and sensitive and every step is very time consuming with many vested interests needing to be accommodated on an ongoing basis. Previously anticipated changes to the regulatory and business environment of the mining sector are still yet to materialise, despite the initial optimism following the election of the new government in May 2014 and its desire to attract more foreign direct investment. Kolar Gold's ability to continue with its current strategy is constrained given its present cash resources and the current equity market environment for junior exploration and mining companies in London, where the Company's shares are quoted.

GMSI

Kolar Gold has a 23.5 per cent shareholding in GMSI. GMSI is progressing with further exploration and appraisal work to assess the feasibility, scale and timing of building a producing gold mine at Jonnagiri, for which GMSI has been granted a 30 year mining licence to mine 365,000 tonnes of gold ore per year. Over the past 12 months a concerted drilling campaign has been undertaken at Jonnagiri totalling 15,800 metres in order to enhance the resource base and improve its definition. A Competent Person's Report on the drilling results is now expected in January 2016. A full assessment of the prospects for this mine and likely timing to reach production will not be known until March 2016 at the earliest once a pre-feasibility study has been prepared. However, GMSI will require further funding by early 2016, which it is seeking to procure from its shareholders, and Kolar Gold will assess its options and the attractiveness of investing further in GMSI following the availability of the assessment of the recent drilling results in January 2016. Any further investment in GMSI will require Kolar Gold to raise additional funds.

In November 2014 Kolar Gold was granted an option to invest a further US$2 million (£1.34 million) in GMSI within 12 months at the same valuation as the most recent round of funding, which was priced at the end of 2014 at a pre new money valuation of $18 million (£12.08 million). The option term expired during November 2015 but as the drilling programme and resource assessment has taken longer for GMSI to complete than expected, Kolar Gold is seeking to reinstate it with an expiry date of 30 April 2016. Exercise of this option, if reinstated, would be subject to Kolar Gold raising further capital.

As at 31 December 2014 the investment in GMSI was held in the balance sheet of the Company at £2.83 million since when the Company has invested a further £389,000. Further investment by GMSI's other major shareholders has resulted in Kolar Gold's shareholding now standing at 23.5 per cent. In the absence of Kolar Gold investing additional capital into GMSI its shareholding will be diluted further.

GMSI also has a number of other gold licences and applications in India at different stages of development in some very promising areas including North, East and South Kolar Belt but progressing these would require further capital.

Merger discussions with Deccan Gold Mines Limited ("DGM") have been in abeyance while DGM has focused on raising its own funds through a rights issue on the Bombay Stock Exchange which was completed on 9 November 2015 and raised £5.10 million. The logic of the merger, to create India's largest listed gold exploration company, remains strong and GMSI has indicated that discussions are likely to be renewed in 2016. Kolar Gold shareholders will be kept fully informed of developments. The achievability of obtaining a listing for GMSI shares either through a merger with DGM or by a listing on the Bombay Stock Exchange will only become clearer once the economic feasibility of constructing a mine at Jonnagiri are better known.

BGML

The revival of the BGML Gold Mine continues to be discussed at state and central government level but the form and timing of any tender remains uncertain despite previous indications that a process was likely to commence. The Company continues to pursue discussions with Government agencies, its partners and interested parties but the form and timing of the tender for this asset have still not been confirmed by the Government.

Strategic Review

Against this background the Company has taken further steps to preserve cash to extend the life of the Company beyond the end of 2016. The Company is reviewing its strategic options with the intention of considering all available opportunities for maximising value for shareholders. These include

· exploring the possibility of realising the value of its investment in India in an orderly manner, including the possible sale of one or more of the Company's assets or subsidiaries;

· investigating mining opportunities outside India, where Kolar Gold as a vehicle could be an attractive platform for current and new investors; and

· seeking new investors who may be prepared to invest in the share capital of Kolar Gold.

These options could involve a third party making an offer for the Company's shares or the Company making an acquisition for cash and/or shares and/or delisting from AIM.

If the Directors are unable to see a long term future for Kolar Gold they will consider winding up the Company and returning capital to investors.

Board Changes

The Company and Nick Spencer, the CEO of Kolar Gold, have reached a mutual agreement whereby Nick has today resigned from the Company and he will step down from the Board of Kolar Gold with immediate effect.

Separately, Stephen Coe, who has been a non-executive director since 2011, also today has given notice to resign, for personal reasons, and he will be stepping down from the Board and leaving the Company at the end of December 2015. Stephen Oke will replace Stephen Coe as Chairman of the Audit Committee with effect from 1 January 2016. 

Harvinder Hungin, Stephen Oke and Vidyanathan Sivakumar, SUN Group's representative on the Board of Kolar Gold and who is based in India and also on the Board of GMSI, will step up to a more active role in monitoring and developing the Company's interests in India for the immediate future. Nick Spencer will continue to support them for the remainder of his contract period that expires in May 2016. Following Nick's departure and the results of the current strategic review the Board will review the composition of the Board and management team.

The Directors wish both Nick and Stephen well and thank them for their contributions to developing Kolar Gold's position in the Indian gold mining sector, which has been a challenging journey.

Broker

Pareto Securities Ltd is no longer joint broker to the Company. N+1 Singer assumes the role of sole broker to the Company.

Conclusion

The Company will report back to shareholders as soon as the Strategic Review is complete.

Harvinder Hungin

Chairman

7 December 2015

Takeover Code

Discussions in relation to a merger with a third party or a sale of the Company will take place within the context of a "formal sale process" in accordance with Note 2 of Rule 2.6 of the City Code on Takeovers and Mergers (the "Takeover Code"), such that the Board of Kolar Gold is able to have discussions with third parties interested in such a transaction on a confidential basis to the extent permitted by the Takeover Code.

The Panel on Takeovers and Mergers (the "Takeover Panel") has granted a dispensation from the requirements of Rules 2.4(a), 2.4(b) and 2.6(a) of the Takeover Code such that any interested party participating in the formal sale process will not be required to be publicly identified as a result of this announcement (subject to Note 3 on Rule 2.2 of the Takeover Code) and will not be subject to the 28 day deadline referred to in Rule 2.6(a) of the Takeover Code, for so long as it is participating in the formal sale process. Interested parties should note Rule 21.2 of the Takeover Code, which prohibits any form of inducement fee or any other offer-related arrangement, and that the Company has not at this stage requested any dispensation from this prohibition under Note 2 of Rule 21.2 of the Takeover Code although it reserves the right to do so in the future.

This announcement is not an announcement of a firm intention to make an offer under Rule 2.7 of the Code and there can be no certainty that an offer will be made, nor as to the terms on which any offer may be made.

As a consequence of this announcement, the Company is now considered to be in an "Offer Period" as defined in the Takeover Code. The dealing disclosure requirements and other provisions of the Takeover Code that now apply are listed below.

International Advisory Partners Limited ("IAP"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as financial adviser to the Company and is acting for no-one else in connection with the matters referred to in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to clients of IAP nor for providing advice in relation to the matters referred to in this announcement.

Parties interested in a transaction with Kolar Gold should contact IAP (contact details as below).

Enquiries:

Further information and disclosure requirements of the Takeover Code (the "Code")

Information on Securities

In accordance with Rule 2.10 of the Code, the Company confirms that it has 106,293,537 ordinary shares of 7 pence each in issue at the close of business on 7 December 2015 and the Ordinary Shares are admitted to trading on the AIM market of the London Stock Exchange. The International Securities Identification Number is GG00B3M9KL68.

Disclosure Requirements

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Announcements

In accordance with Rule 26.1 of the Code, a copy of this announcement will be available, subject to certain restrictions relating to persons in any restricted jurisdiction on the Company's website at www.kolargold.com.au as soon as possible and in any event no later than 12:00 noon (London time) on 9 December 2015 (being the business day following the date of this announcement). The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

In accordance with Rule 30.2, a person may request a copy of the announcement in hard copy form. A person may also request that all future documents, announcements and information in relation to the Offer should be in hard copy form. A hard copy of the announcement will not be sent unless so requested. A hard copy may be obtained by sending a request to the Company, Kolar Gold Limited, Ground Floor, Dorey Court, Admiral Park, St Peter Port, Guernsey GY1 2HT.

Directors' Report

The directors present their report together with the consolidated financial statements of the Group comprising Kolar Gold Limited (the Company) and its subsidiaries for the year ended 30 June 2015 and the auditor's report thereon.

The Group made a comprehensive loss of £1,258,687 during the year ended 30 June 2015 (2014: loss of £5,631,480).

Principal activities and future developments

The Group's principal activity is the development of gold exploration and mining assets in India, in partnership with its Indian associate, GMSI and securing and reviving the historic gold mines of the Kolar Goldfields of Bharat Gold Mines Limited in that region.

Subsequent events

On 8 December 2015 the Company announced the commencement of a strategic review together with the mutually agreed termination of the CEO, Nick Spencer's, employment contract. Additionally Stephen Coe, a non-executive director, has given notice of his resignation to take effect from 31 December 2015.

Principal risks and uncertainties

The Group is exposed to a variety of financial risks including foreign exchange risk, market risk, liquidity risk and credit risk. These risks are discussed in detail in Note 2.

The accounting policies of the Group as set out on pages 16 to 22 have been applied consistently during the year.

No dividends have been paid or declared and the Directors do not recommend the declaration of a dividend for the year ended 30 June 2015 (2014: nil).

After making enquiries, and considering the current level of activity, financial arrangements made and for the reasons disclosed in note 1.3 of the financial statements, the Directors consider that the Company will have adequate resources to continue in operational existence for at least 12 months from the date of approval of these financial statements. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

In the longer term, the Group's ability to develop and enhance its interests in India, via BGML, if its tender bid is successful, via the right of first refusal and its stake in GMSI, including bringing the Jonnagiri mining assets to commercial production will depend upon the ability of the Group and its partners and/or GMSI to obtain further financing through equity financing, debt financing or other means.

The only sources of future funds presently available to the Group are the raising of equity capital by the Company or the sale of its interest in GMSI either in whole or in part. There can be no guarantee that any future negotiations will be successful in securing funding on terms satisfactory to the Group. If adequate finance is not available, the Group may be required to reduce its investments and related activities.

The Company, being listed on AIM, is not required to comply with the UK Corporate Governance Code ("the Code"). However, the Company has given consideration to the main principles of the Code and the Directors support the objectives of the Code and intend to comply with those aspects that they consider relevant to the Group's size and circumstances.

Following the completion of the Strategic Review described in the Chairman's Statement, the Company will assess its Board and management requirements and determine the appropriate committee and governance structures. Stephen Oke will replace Stephen Coe as Chairman of the Audit Committee with effect from 1 January 2016.

On behalf of the Board

_____________________________________ 

Stephen Coe

Director

7 December 2015

Kolar Gold Limited and its controlled entities

Consolidated Statement of Comprehensive Income

for the year ended 30 June 2015

The notes section below is an integral part of the consolidated financial statements.

Kolar Gold Limited and its controlled entities

Consolidated Statement of Financial Position 

as at 30 June 2015

The notes section below is an integral part of the consolidated financial statements.

Kolar Gold Limited and its controlled entities

Consolidated Statement of Changes in Equity

for year ended 30 June 2015

The notes section below is an integral part of the consolidated financial statements.

Kolar Gold Limited and its controlled entities

Consolidated Statement of Cash Flows

For the year ended 30 June 2015

The notes section below is an integral part of the consolidated financial statements.

Kolar Gold Limited and its controlled entities

Notes to the financial statements 

1. Accounting policies 

1.1 Reporting entity

The group financial statements consolidate those of Kolar Gold Limited and its controlled entities (together referred to as the "Group").

As at 30 June 2015, the wholly owned subsidiaries of the Company are:

· Kolar Gold Resources Limited (Mauritius);

· Kolar Gold Resources (India) Private Limited; and

· Kolar Gold Pty Limited

The group financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs"). The financial statements comply with the Companies (Guernsey) Law, 2008 as amended and give a true and fair view of the state of affairs of the Group.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements.

1.2 Measurement convention

The financial statements are prepared on the historical cost basis, except for the following material item in the statement of financial position and statement of comprehensive income:

§ Share-based payments are measured at fair value.

The financial statements are presented in Great British Pounds (GBP).

1.3 Going concern 

These financial statements have been prepared on the basis of accounting principles applicable to a "going concern" which assumes the Group will continue in operation for at least 12 months from the date of approval of the financial statements and will be able to realise its assets and discharge its liabilities in the normal course of operations.

The Group currently has no source of operating cash inflows, other than interest income, and has incurred net operating cash outflows for the year ended 30 June 2015 of £1,299,400 (2014: £1,276,423). At 30 June 2015, the Group had cash balances and term deposits of £1,437,719 (2014: £3,430,417) and a surplus in net working capital (current assets, including cash, less current liabilities) of £1,183,317 (2014: £2,985,994).

The Directors have assessed cash requirements and prepared forecasts for the next eighteen months. These forecasts are based on no capital being raised, no other cash inflow beyond interest income and GST refunds, and the Board changes proceeding as stated in the Chairman's Report. The Board changes have been agreed with all parties, with termination giving certainty over the short-term cash outflows required. Cost savings from downsizing of back office operations in Australia have also been included. No allowance has been made in these forecasts for any further investment in GMSI nor the funding of any other mining opportunities within or outside India. As at the date of this report the Group has no commitment to make further investments in GMSI.

In the longer term, the Group's ability to develop and enhance its interests in India, via BGML, if its tender bid is successful, via the right of first refusal and its stake in GMSI, including bringing the Jonnagiri mining assets to commercial production will depend upon the ability of the Group and its partners and/or GMSI to obtain further financing through equity financing, debt financing or other means.

The only sources of future funds presently available to the Group are the raising of equity capital by the Company or the sale of its interest in GMSI either in whole or in part. There can be no guarantee that any future negotiations will be successful in securing funding on terms satisfactory to the Group. If adequate finance is not available the Group may be required to reduce its investments and related activities.

Against this background the Company has taken further steps to preserve cash to extend the life of the Company until the first half of 2017 and these have been included in the forecasts. If the Company fails to raise further cash by this time it may have to cease trading in its current form. The Company is reviewing its strategic options with the intention of considering all available opportunities for maximising value for shareholders. These include

· exploring the possibility of realising the value of its investment in India in an orderly manner, including the possible sale of one or more of the Company's assets or subsidiaries;

· investigating mining opportunities outside India, where Kolar Gold as a vehicle could be an attractive platform for current and new investors; and

· seeking new investors who may be prepared to invest in the share capital of Kolar Gold.

These options could involve a third party making an offer for the Company's shares or the Company making an acquisition for cash and/or shares and/or delisting from AIM.

If the Directors are unable to see a long term future for Kolar Gold they will consider winding up the Company and returning capital to investors.

1.4 Basis of consolidation

SubsidiariesSubsidiaries are entities controlled by the Group. Control exists when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. In assessing its power over the investee, the Group takes into consideration its rights through shareholding or other arrangements to direct the activities which significant affect the investee's returns. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

All entities were 100% owned and controlled by the parent entity, Kolar Gold Limited during the period they were members of the Group.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

1.5 Investment in associates

The cost of acquiring equity investments in entities over which the Group is considered to have significant influence is capitalised and classified as an investment in associates. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of these policies.

The investment in associates is accounted for using the equity method. Under this method, on initial recognition the investment in an associate is recognised at cost, and the carrying amount is increased or decreased to recognise the Group's share of the profit or loss of the investee after the date of acquisition. The Group's share of the investee's profit or loss is recognised in the Group's profit or loss. The carrying amount is also adjusted for changes in the Group's proportionate interest in the investee.

After application of the equity method, including recognising the associate's losses, the Group applies the requirements of IAS 39 Financial Instruments: Recognition and Measurement to determine whether it is necessary to recognise any additional impairment loss with respect to its net investment in the associate. If any indication of impairment is noted under IAS 39, the impairment testing will follow the principals of IAS 36 Impairment of Assets.

1.6 Classification of financial instruments issued by the Group 

Following the adoption of IAS 32, financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions:

(a) they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and

(b) where the instrument will or may be settled in the Company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be settled by the Company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company's own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares.

Where a financial instrument that contains both equity and financial liability components exists these components are separated and accounted for individually under the above policy.

1.7 Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Trade and other receivables

Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses.

Trade and other payables

Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.

Term deposits

Term deposits comprise bank deposits with maturity dates of between 3 and 12 months from balance date.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

1.8 Plant and equipment

Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Where parts of an item of plant and equipment have different useful lives, they are accounted for as separate items of plant and equipment.

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of plant and equipment. Land is not depreciated. The estimated useful lives are as follows:

· plant and equipment 2.5 to 5 years; and

· fixtures and fittings 2.5 to 10 years

Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.

1.9 Foreign currency 

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Group's entities at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Foreign operations

The assets and liabilities of foreign operations are translated to the Group's presentation currency, at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from the translation of foreign operations are reported as an item of other comprehensive income and accumulated in the translation reserve. When a foreign operation is disposed of, such that control is lost, the entire accumulated amount in the translation reserve, is recycled to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while still retaining control, the relevant proportion of the accumulated amount is reattributed to non-controlling interests.

Exchange differences arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised directly in equity in the translation reserve.

1.10 Impairment

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

The carrying amounts of the Group's non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating unit").

An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash generated units are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

1.11 Employee benefits and other share based payment arrangements

Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

Long-term benefits

The Group's net obligation in respect of long-term employee benefits is the amount of the future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of the related assets is deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Group's obligations and that are denominated in the same currency in which the benefit is expected to be paid.

Share-based payment transactions

Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Group.

Share-based transactions, other than those with employees, are measured at the value of goods or services received where this can be reliably measured. Where the services received are not identifiable, their fair value is determined by reference to the grant date fair value of the equity instruments provided. Should it not be possible to measure reliably the fair value of identifiable goods and services received, their fair value shall be determined by reference to the fair value of the equity instruments provided measured over the period of time that the goods and services are received.

1.11 Employee benefits and other share based payment arrangements (Cont'd)

The expense is recognised in profit or loss (or capitalised as part of an asset) when the goods are received or as services are provided, with a corresponding increase in equity.

The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The fair value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

Share-based payment transactions in which the Group receives goods or services by incurring a liability to transfer cash or other assets that is based on the price of the Group's equity instruments are accounted for as cash-settled share-based payments. The fair value of the amount payable to recipients is recognised as an expense, with a corresponding increase in liabilities, over the period in which the recipients become unconditionally entitled to payment. The liability is re-measured at each balance sheet date and at settlement date. Any changes in the fair value of the liability are recognised in profit or loss.

1.12 Expenses

Operating lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense.

Due diligence - GMSI and other prospective gold assets

These expenses relate to technical, legal and financial advisory costs with respect to the agreements with GMSI and the assessment of other prospective gold assets.

Financing income and expenses

Financing expenses comprise interest payable and finance charges on shares classified as liabilities recognised in profit or loss using the effective interest method, unwinding of the discount on provisions, and net foreign exchange losses that are recognised in the income statement (see foreign currency accounting policy note 1.9). Financing income comprise interest receivable on funds invested, dividend income, and net foreign exchange gains.

Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Foreign currency gains and losses are reported on a net basis.

1.13 Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised.

1.14 Earnings per share

The Group presents basic and diluted earnings or loss per share data for its ordinary shares. Basic earnings/loss per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted earnings/loss per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options and warrants granted.

1.15 Operating segments

Segment results that are reported to the Chief Executive Officer include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses, and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the period to acquire plant and equipment, and intangible assets other than goodwill.

1.16 Adopted IFRS not yet applied

No newly adopted accounting standards have had a material impact on the Group. The following accounting standards and amendments have been issued and been endorsed by the EU but are not applicable to Kolar Gold Limited in the current year:

· Amendments to IAS 19 (Defined Benefit Plan: Employee Contributions)

The application of this amendment would not have a material effect on these financial statements.

1.17 Use of estimates and judgements

The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

In particular, information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are described in the following notes:

· Going concern (note 1.3), and

· Valuation of investment in associate (note 6).

2. Risk management 

Overview 

The Group has exposure to the following risks:

· Credit risk;

· Liquidity risk;

· Tax risk;

· Currency risk;

· Market risk; and

· Operational risk

This note presents information about the Group's exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk, and its management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework and developing and monitoring the Group's risk management policies. Key risk areas have been identified and the Group's risk management policies and systems will be reviewed regularly to reflect changes in market conditions and the Group's activities.

The Audit Committee oversees how management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

Credit risk 

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's bank deposits and receivables. The risk of non-collection is considered to be low.

Liquidity risk 

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

Tax risk

The Company holds its investments in India through Kolar Gold Resources Limited, a wholly owned Mauritian subsidiary.

A Tax Information Exchange Agreement is in place between Guernsey and India. 

The Group does not currently generate significant income in India and its investment is capital in nature. Future tax liabilities may be subject to how Indian tax law changes and how the relevant double tax treaties are interpreted from time to time.

Currency risk 

The Group is exposed to currency risk on cash and cash equivalents, receivables and payables that are denominated in a currency other than the functional currency of the each of the Group entities. In order to reduce currency risk, each entity holds most of its funds in the same currency as its functional currency in sufficient amounts to cover expected future outgoings for several months. The Group does not use derivatives to hedge its foreign currency exposures.

Market risk 

The Group has acquired an interest in GMSI. This exposes the Group to fluctuation in the value of that equity investment. The Group has one director on the board of GMSI and continues to work closely with GMSI to develop its resources.

In addition, the Group's future revenues from product sales will be affected by changes in the market price of gold and could also be subject to exchange controls or similar restrictions.

Operational risk 

The Group's business is at an early stage and is subject to several operational risks. These risks include exploration and mining risks, delays in approvals to undertake exploration activities, actual resources differing from estimates, operational delays and the availability of equipment, personnel and infrastructure. The significantly larger portfolio of projects resulting from the agreements with GMSI will spread the risk and impact of delays in licence approvals. In addition, the Group has business and liability insurance policies in place to mitigate some of these risks.

The Group is also dependent on key personnel and subject to the actions of third parties, including staff of GMSI and other contractors and suppliers.

The Group's operations are also subject to government laws and regulations, particularly environmental regulation. The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act was passed in India in 2013. This legislation put in place a requirement for rehabilitation and resettlement programmes for those affected by mining activities/ environmental damage. This does not have any direct impact on the Group at present, but it may impact on its investment in GMSI.

Capital management 

The Company has no loans or borrowings and has sufficient resources, in the view of the Directors, to meet its working capital requirements until second quarter of calendar year 2017.

The Group manages its capital through the preparation of detailed forecasts, and tracks actual receipts and outlays against the forecasts on a regular basis, to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders.

The capital structure of the Group consists of cash and cash equivalents and equity comprising, capital, reserves and accumulated losses.

The Group has one reportable segment, being Indian Exploration - Investment in gold exploration activities and administration in the Kolar Gold Fields region in Karnataka State, India.

The Group also has corporate administrative functions outside India which generate corporate expenses that have not been allocated to a segment.

The Group's Chief Executive Officer reviews internal management reports for this segment on a monthly basis.

Information regarding the results of the reportable segment is included below. The Group has no revenue at this stage of its development and performance is measured based on expenses incurred and exploration activity levels in the Indian segment.

The weighted average remaining contractual life of the options is 1.8 years (2014 2.8 years).

 c) Share-based payment expense recognised in the income statement

11. Capital and reserves

Issued capital - Kolar Gold Limited

All shares issued by the Company are 'ordinary' shares and rank equally in all respects, including for dividends, shareholder attendance and voter rights at meetings, on a return of capital and in a winding-up.

c) Reserves

Share premium reserve

The share premium reserve comprises the excess of consideration received over the par value of the shares issued.

Share based payments reserve

The options reserve comprises the equity value of share based payments issued by Kolar Gold.

Translation reserve

The translation reserve contains all foreign currency differences arising from the translation of the financial statements of foreign operations. Changes arising from monetary items that are considered to be part of the net investment are also included in the translation reserve.

12. Loss per share

The calculation of basic loss per share at 30 June 2015 was based on the loss of £1,254,716 (2014: £5,621,538), and a weighted average number of ordinary shares outstanding of 106,293,537 (2014: 106,293,537), calculated as follows:

Diluted loss per share

Options and warrants granted to the Directors, staff and external consultants are considered to be potential ordinary shares and have not been included in the determination of diluted loss per share because they are not considered to be dilutive. The options have not been included in the determination of the basic loss per share.

13. Financial instruments

(a) Fair values of financial instruments

The fair values of all financial assets and financial liabilities are equal to their carrying amounts shown in the statement of financial position.

Trade and other receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material.

Trade and other payables

The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material.

Cash and cash equivalents

The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is not repayable on demand then the fair value is estimated at the present value of future cash flows, discounted at the market rate of interest at the balance sheet date.

(b) Credit risk

Financial risk management

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables and cash and cash equivalents. The carrying amount of cash, cash equivalents and term deposits represents the maximum credit exposure on those assets. The cash and cash equivalents are held with bank and financial institution counterparties which are rated at least A for Australian and UK banks, and BBB for Indian banks, based on rating agency Standard and Poor's ratings.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. Therefore, the maximum exposure to credit risk at the reporting date was £1,444,669 (2014: £3,439,652), being the total of the carrying amount of financial assets, shown in the statement of financial position.

 (c) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

(d) Currency risk

The Group's exposure to foreign currency risk is as follows. This is based on the carrying amount for monetary financial instruments which are held in a currency that differs from that entity's functional currency, except derivatives when it is based on notional amounts.

The following significant exchange rates applied during the year:

Sensitivity analysis

A strengthening of the GBP, as indicated below, against the Australian dollar and Indian Rupee at 30 June 2015 would have decreased equity by the amount shown below. This analysis is on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant.

A weakening of the GBP against the Australian dollar and Indian Rupee at 30 June would have had the equal but opposite effect on the amounts shown above, on the basis that all other variables remain constant.

(e) Interest rate risk

Profile

At the reporting date the interest rate profile of interest-bearing financial instruments was:

Cash flow sensitivity analysis for variable rate instruments

The Group's interest bearing assets at balance date were invested with financial institutions with a minimum rating (S&P long term rating) of A for Australian and UK banks, and BBB for Indian banks and comprised solely bank accounts.

A change in interest rates would have increased/(decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. This analysis is performed on the same basis for 2015.

14. Operating leases

15. Group entities

16. Related parties

Key management personnel

In addition to their salaries and fees, key management personnel participate in the Group's share option programme (see Note 10).

Directors' remuneration and interests

1. SG Hambros Trust Company (Channel Islands) Limited hold 1,700,000 Ordinary Shares, as trustee of the Carlyle Settlement, in which Harvinder Hungin and his family have an interest.

Amounts owing to directors at 30 June 2015 were £14,275 (2014: 16,098).

GMSI is a related party, as the Company held a 25% equity investment in this entity (see Note 6) as at balance date. There were no amounts outstanding as at 30 June 2015.

SUN Mining is a related party, as Vaidyanathan Sivakumar, a director of SUN Group is a director of the Group.

SUN Group holds 11,666,237 (2014: 11,666,237) shares in the Company. There were no transactions between the Group and SUN and there were no amounts outstanding as at 30 June 2015.

17. Subsequent events

On 8th December 2015 the Company announced the commencement of a strategic review together with the mutually agreed termination of the CEO, Nick Spencer's, employment contract. Additionally Stephen Coe, a non-executive director, has given notice of his resignation to take effect from 31st December 2015.

Independent auditor's report to the members of Kolar Gold Limited

We have audited the Group financial statements (the "financial statements") of Kolar Gold Limited (the "Company") for the year ended 30 June 2015 which comprise the consolidated statements of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the EU.

This report is made solely to the Company's members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, 2008. 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 of directors and auditor

As explained more fully in the Statement of Directors' Responsibilities set out on page 9, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Board of Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Directors' Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statements

In our opinion the financial statements:

· give a true and fair view of the state of the Group's affairs as at 30 June 2015 and of its loss for the year then ended;

· are in accordance with International Financial Reporting Standards as adopted by the EU; and

· comply with the Companies (Guernsey) Law, 2008.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:

· the Company has not kept proper accounting records; or

· the financial statements are not in agreement with the accounting records; or

· we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit.

KPMG LLP

Chartered Accountants and Recognised Auditors

15, Canada Square

London

E14 5GL

7 December 2015

-ends-