Lionsgold Regulatory News (LION)

10 December 2012

Kolar Gold Ltd

Final results for year ended 30 June 2012

Notice of Annual General Meeting

Kolar Gold Limited ("Kolar Gold" or "KGL" or the "Company"), the Indian focused gold exploration and mine development company, announces its audited results for the year ended 30 June 2012.

HIGHLIGHTS

Corporate and Operational:

·; 8,000 metres of Diamond and RC drilling activities completed on target deposits at South Kolar licence area.

·; Consolidation and review of exploration data generated since February 2011 to determine next phase drill targets

·; New JORC compliant gold resource at the Mallappakonda deposit of 3.46 million tonnes at an average grade of 1.76 g/t gold containing 195,000 oz of gold.

·; The Group's total JORC compliant gold resource stands at approximately 226,000 ounces of gold.

·; Drilling programme of an additional 160 holes submitted to government at the Chigargunta and Mallappakonda deposits; awaiting forestry approval.

·; Increased focus and resources to be applied to the permitting process which has been slower than anticipated due to the current state of flux in India's domestic mining regime

·; Appointment of N+1 Singer as Nominated Adviser and joint broker.

Financial:

·; Strong cash position at 30 June 2011 of £8.13m (2010: £11.54m)

Post Period:

·; Richard Johnson steps down as COO.

Nick Spencer, Chief Executive Officer of Kolar Gold Limited, comments:

"It has been a period of solid operational progress for Kolar Gold following our listing on the AIM Market in June 2011. We were pleased to treble the JORC resource at the Mallappakonda deposit after exploration work conducted on our granted South Kolar licence area. Upon receiving forestry approval, the next phase of exploration will begin in the key target areas of Chigargunta and Mallappakonda.

"In conjunction with our local partners, we have increased efforts with regard to accelerating the permitting process on priority licences which has been slower than expected. We have also reviewed and investigated a number of additional gold projects in India with the aim of building our position into the leading Indian gold exploration and development company. Kolar remains well capitalised which is vital in these current market conditions."

Notice of AGM

The second Annual General Meeting of Shareholders of the Company will be held at Frances House, Sir William Place, St Peter Port, Guernsey on Monday 31 December 2012 at 9.30 am.

Copies of the 2012 Annual Report and Notice of AGM will be posted to shareholders on Tuesday 11 December following which they may be obtained from the date of posting for one month free of charge from the registered office of the Company, Frances House, Sir William Place, St Peter Port, Guernsey, as well as from the Company's web site www.kolargold.com.au 

For further information:

About Kolar Gold Limited

Kolar Gold is an Indian gold exploration and development company, listed on the AIM market (Ticker: KGLD) that has an experienced international board and strong local partners.

KGL has rights to explore and develop one prospecting licence and 13 further licence applications in the Kolar Gold Belt, an 80 kilometre long Archaean Greenstone Belt, in Southern India. The Kolar Gold Belt is one of the most prospective underdeveloped Archaean Greenstone Belts in the world and is regarded by Mr Andrew J Vigar of Mining Associates Limited, the Competent Person, as comparable to the Archaean Greenstone Belts of South Africa, Canada and Western Australia which have similar geology, structure and style of mineralisation. This project area includes 32 known mineralised prospects and covers 568 square kilometres in the southern states of Andhra Pradesh, Karnataka and Tamil Nadu. KGL commenced exploration on the first Prospecting Licence in South Kolar in February 2011.

KGL is also jointly pursuing, with the mine employee unions, the acquisition and revival of the neighbouring historic Kolar Gold Fields which has produced 25 million ounces of gold at 15.9 grams per tonne over 120 years until closure in 2001.

Chairman's Report

Dear Shareholder

This is my second Chairman's Report to the shareholders of Kolar Gold Limited. It has been a year of consolidation and challenges for the Company.

On a macro level, India's deeply entrenched passion for gold, combined with low domestic production, results in India importing most of its gold requirements. During 2011 more then one third of all gold produced globally was imported to India. Yet India sits on some of the most prospective gold terrain in the world.

India's domestic mining regime is in a state of flux. The anticipated passing at the time of the Company's admission to AIM in June 2011 of the Mines and Minerals Development and Regulation (MMDR) Bill, which is approved by Cabinet, still awaits approval by the Indian Parliament. Indeed, now, the timing of the passing of this Act and the exact terms is unclear. This, together with the examination and consequences of the historic privatization of assets and granting of licences in the mining and other industries in India has resulted in an environment in Delhi that is not conducive to prompt and timely decision making, even when all the relevant processes are followed diligently.

This has led to the slower than anticipated grant of new licenses to GMSI of which Kolar Gold would be the beneficiary. Consequently, the Board is reviewing its exploration strategy with a view to utilizing its cash resources to create the best value for shareholders over the near and medium term. As part of a refined strategy, more management and cash resources are likely to be focused on assisting and working with GMSI to procure granting of the few key licenses that Kolar Gold has prioritised. We are also in discussions with additional local mining and permitting partners to explore whether they can assist us with faster permitting in India. At this point in time, we have no reason to believe that we will not ultimately get the additional licenses as anticipated.

It is hoped that the MMDR, once passed, will create a better legislative environment for attracting investment and technology to the mining sector. This would help India to develop its mining sector to its full potential with companies in the sector operating to international best practice standards. Recent clampdowns on illegal mining will also assist in this area.

On the exploration front, there have been encouraging exploration results at South Kolar with the two rig programme confirming some high grade veins and wider low grade sections at NE Chigargunta and Mallappakonda areas. The historic gold resource at the Mallappakonda deposit of 61,527oz defined by the Minerals Exploration Corporation Limited has been more than trebled to 195,000 oz of gold. There remains considerable scope to add more ounces to this deposit with further resource drilling.

Whilst we still have preferential rights over the Kolar belt projects, the permitting processes and forestry approvals are more complicated than expected, even over the asset over which we have rights. The granting of approvals from organisations like the forestry commission has been slow and unpredictable and this had had an impact on our rate of exploration. We have, however, drilled more than 8,000m and we are consolidating and interpreting all the data generated. A phase 2 drilling programme of 160 holes has been submitted to the authorities and we expect to start drilling again as soon as the approvals are received, subject to prioritising the use of our cash resources.

Under the terms of its grant, the South Kolar prospecting license expired on 17 July 2012, and in accordance with industry practice GMSI applied for a renewal of this license on 17 April 2012. This site was inspected by the Department of Mines and Geology, Government of Andhra Pradesh, on 11 July 2012 and to date GMSI has not received any subsequent communication from the Department of Mines and Geology. Under the terms of the license, the State Government has the right to dispose of the prospecting license prior to the expiry date. If this does not happen, the prospecting license is then deemed to be renewed.

Our balance sheet remains strong, with more than £8m in cash at year end, providing us with sufficient funds to execute our current exploration programme, which is under constant review, for the next 12-18 months. We continue to work ever more closely with our partners, including GMSI, on permitting and exploration.

Our relationship with BGML ex-employees and their representative bodies remains strong and together we are progressing the historic BGML mine revival project in the Supreme Court to secure a final verdict to proceed with the sale tender process.

We also continue to review a number of additional quality gold projects in India with a view to expanding our portfolio of licences and licence applications, if that provides a better and enhanced way of developing shareholder value within a reasonable timeframe.

We have confirmed we are in a very prospective gold province and have now established our presence in India. Our foundations are set, the portfolio of licences and licence applications is outstanding and our priority focus remains execution of permits in key areas with our collective resources and local partners. We are committed to building the leading gold explorer and mine developer in India.

Finally, I have to report the resignation of Richard Johnson, our COO in India. The Company remains well served by a strong technical team which will expand as Kolar Gold grows.

Harvinder Hungin

Chairman

Kolar Gold Limited

7th December 2012

Chief Executive Officer's Report

In the last 12 months, we have made solid progress both operationally and in respect of corporate activities.

Firstly, we successfully upgraded the JORC gold resource at our Mallappakonda deposit in the South Kolar licence area (GP 13) from 61,527 to 195,000 ounces of gold. This brings our total JORC compliant resource to date to approximately 226,000 ounces of gold. Mallappakonda and Chigargunta remain our priority targets for further resource drilling. A number of gold prospects in the South Kolar license area have been confirmed from significant anomalies via an Induced Polarisation survey, geochemical analysis of samples, detailed mapping, filtering magnetics and interpretation. It is expected that these targets will be further drilled in the next phase of exploration.

Secondly, given the slower than expected grant of new licenses we have increased efforts with our local partners to expedite permitting on priority licenses. Permitting in India is a complex and lengthy process which needs continual application of key resources to move files through a large number of bureaucratic steps. Our established partner, GMSI, a Bangalore based exploration group, is one of the few private groups that has succeeded by securing 22 Reconnaissance Permits and 2 Prospecting Licences in the gold sector a number of which we have rights over. We continue to work closely with GMSI and are also in discussion with a number of other sizeable mining partners who regularly and successfully achieve permit grants in their sphere of business.

SUN performance warrants

KG has granted their local partner SUN Mining, two tranches of Performance Warrants to be issued for assisting with operations in India and performing an agreed set of services. SUN is due to receive its first set of warrants and the board intends to issue these in due course.

Exploration Programme

We have established our operations at South Kolar with an office, accommodation and a workshop in the area and have been employing approximately 30 local people on the drill programme and exploration support services.

Kolar Gold has been working closely with GMSI geologists on drilling and exploration work at South Kolar. To date 8,000m of both Reverse Circulation (RC) and diamond drilling has been completed on our target deposits and prospects. Drilling has principally targeted known zones of mineralisation and extensions of auriferous lodes previously mined at the Chigargunta mine in the south and the Bisanatham mine in the north of the licence area.

The Drilling in the South Kolar prospect at NE Chigargunta, the Chigargunta Eastern lodes and the Mallappakonda deposit has successfully validated historical drilling results and also provided valuable fresh geological data on the host rocks and structural controls to mineralisation.

Following a thorough review of exploration data in February 2012 all data generated from stage one of the drilling programme that had been underway in 2011 was consolidated, digitised and interpreted. This data included full surface geological mapping, a reinterpretation of the geophysics, a 40 km line of detailed Induced Polarisation surveys (IP), which confirmed the continuity of auriferous structures previously mined at the Chigargunta and Old Bisanatham mines, and a structural analysis. The revised interpretation also identified a number of significant anomalies along the north-south trend of the greenstone belt that indicated a number of good target areas for drilling.

This IP data was combined with a large database of information comprising ASTER imaging, close spaced ground magnetics, IP surveys, mapping, Reverse Circulation ("RC") and diamond drilling. This in turn has assisted with the identification of larger structural anomalies, likely mineralisation trends and drill target generation.

A drill plan has been drawn up for an additional 160 drill holes in the Chigargunta and Mallapakonda areas, to be implemented upon obtaining forestry permission, subject to prioritizing the use of our cash resources. The application for this permit has been submitted to the authorities and is being expedited with priority.

Chigargunta NE and Eastern Lodes

Gold mineralisation is localised along shear zones, characterised by profuse quartz veining and hydrothermal alteration. The current Chigargunta NE JORC compliant resource is 13,182 ounces of gold due to limited drilling under the earlier Reconnaissance Permit.

Currently, in Chigargunta NE, we have completed thirteen diamond drill holes, with all holes intersecting mineralised zones. Logging, sampling and further assays are underway and a full review of data and geological modelling is being carried out.

The Chigargunta Eastern Lodes are mapped and identified on surface. An access road was cut and a small causeway built for the core rig; drilling commenced there in October 2011. A further drilling programme, subject to our prioritising and our cash reserves, is proposed upon the granting of the forestry permit.

Mallappakonda

The Mallappakonda deposit was first identified during regional exploration conducted by the Geological Survey of India to the south of Kolar Gold Fields in 1975-79. The mineralisation here occurs as sulphidic zones associated with banded iron formation within mafic units. Several substantial ancient workings are seen at surface. Of the 800m strike length of mineralisation at the end of the prominent Mallappakonda Hill, only 150m has been evaluated with drilling. Historically there have been three levels of underground development.

The newly revised Mallappakonda gold resource, which was calculated from recent and historical drill data, is 3.46 million tonnes of ore at an average grade of 1.76 g/t gold, containing 195,000 ounces of gold. The revised resource estimate has been compiled by the Company's Competent Person, Mr Andrew J Vigar of Mining Associates and all work has been conducted under JORC guidelines.

Further resource delineation work is proposed at the Mallappakonda deposit via an additional 40 surface drill holes and, subject to prioritising and cash reserves, an underground programme of resource drilling from two existing adits. Clearing work has been undertaken and approvals have been sought to reopen the adits in preparation for underground drilling.

Bharat Gold Mines Limited (BGML) Acquisition

Kolar Gold, jointly with its partner, the combined BGML ex-employee unions, and with the assistance of SUN Mining, continues to make progress with the Government of India in the pursuit of the acquisition and development of the BGML mine assets. The matter has been passed to the Supreme Court for final direction on the tender sale process. We are encouraged with the recent agreement in the Supreme Court to proceed with the sale and revival of the BGML mine by tender process. We are awaiting the court order to ratify this process and the issue of the sale tender documents which have been drafted by Ernst & Young as advisors to the government.

We believe that exploration and development of the Kolar Gold Projects, which surround the historic BGML mines, will demonstrate our commitment to gold exploration in this region and should assist this process. Any acquisition of the assets would require additional funding from the market.

The next 12 months are expected to be a very busy time for Kolar Gold as we build a strong presence in India and proceed with focussed effort on permitting and selective exploration of these potentially world class gold assets.

Nick Spencer

Chief Executive Officer

Kolar Gold Limited

7th December 2012

Kolar Gold Limited and its controlled entities

Consolidated Statement of Comprehensive Income

for the year ended 30 June 2012

Kolar Gold Limited and its controlled entities

Consolidated Statement of Financial Position

as at 30 June 2012

These financial statements were approved by the Board of Directors on 7th December 2012 and were signed on its behalf by:

Harvinder Hungin

Chairman

Kolar Gold Limited and its controlled entities

Consolidated Statement of Changes in Equity

for year ended 30 June 2012

Kolar Gold Limited and its controlled entities

Consolidated Statement of Cash Flows

For the year ended 30 June 2012

The notes are an integral part of the consolidated financial statements 

Notes to the financial statements 

5. Income tax expense

A deferred tax asset of £3,107,096 (2011: £2,930,648) has not been recognised in respect of losses, as there is currently uncertainty surrounding the recoverability of such assets.

The number and weighted average exercise price of the options are as follows:

b) Warrants

The following unexercised warrants existed as at 30 June 2012:

Inputs for measurement of grant date fair values

The grant date fair values of warrants issued or agreed to be issued were measured based on the Black-Scholes formula, or in the case of the SUN Mining Additional Warrants, the Monte Carlo simulation method was used.

Expected volatility is estimated by considering historic average share price volatility. The inputs used in the measurement of the initial fair values at grant date of the share-based payment plans are the following:

* Volume weighted average price

Vesting conditions require that the charge for the SUN Mining Initial warrants Series 1 and 2 be spread over the service period. The fair value of the identifiable services received in exchange for these warrants cannot be reliably measured under IFRS 2 therefore their fair value has been determined by reference to the fair value of the equity instruments provided measured over the period of time that the services are received. This has resulted in a lower average fair value in the current year.

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

11. Loss per share

The calculation of basic loss per share at 30 June 2012 was based on the loss of £2,329,598 (2011: £3,256,290), and a weighted average number of ordinary shares outstanding of 100,124,647 (2011: 57,184,802), 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.