Lionsgold Regulatory News (LION)

14th November 2011

Kolar Gold Ltd

Final results for year ended 30 June 2011

Notice of Annual General Meeting

Kolar Gold Limited ("Kolar Gold" or "KGL" or the "Company"), the Indian focussed gold exploration and mine development company, announces its audited results for the year ended 30 June 2011.

HIGHLIGHTS

Corporate and Operational:

·; Successful admission to trading on AIM.

·; Entered into agreements with Geomysore Services India Pvt ("GMSI") to secure tenement rights to the Kolar Gold Projects.

·; Entered into partnership with SUN Mining, part of the SUN Group, an Indian-based investor in a number of sectors including mining, for assistance in dealing with the Government regarding the Kolar Gold Projects and the possible acquisition of mining assets from BGML.

·; Commencement of drilling and evaluation at South Kolar Licence area.

·; Completion of a 40 line km IP survey along full length of the South Kolar Licence.

·; Appointment of four experienced board members pre-IPO.

Post Period Corporate and Operational:

·; Development of all planned site offices and workshop [at South Kolar].

·; Commencement of exploration activities as part of a two-rig drill programme at South Kolar.

·; First set of assay results received from the first 13 holes at the Chigargunta NE deposit, South Kolar were very encouraging.

Financial:

·; Raised £12 million before expenses through IPO in June.

·; Strong cash position at 30 June 2011 of £11.54m (2010: £0.740m)

·; £4.5m to be used primarily to fund tenement rights to gold assets and £3.3m on associated exploration at South, North and East Kolar up to December 2012.

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

"It has been a successful year for Kolar Gold and good progress has been made since we successfully listed on AIM in June. Kolar is now well capitalised and we anticipate an increasing level of operational activity in the coming quarters as we drill South Kolar and a second drill rig commences by end November. The initial drilling results have been very encouraging showing multiple high grade narrow veins close to surface. Upon receipt of the Prospecting Licence for North Kolar an additional two drill rigs will then begin exploration work as we seek to execute our medium term target of delineating 1-2Moz of gold.

"Management, with the assistance of SUN, continues to pursue the acquisition and development of the BGML mine assets jointly with our partner, the combined BGML ex-employee unions. The Supreme Court is expected to confirm the sale process soon. I look forward to updating the market on these developments."

About Kolar Gold Limited

Kolar Gold Limited is an Indian gold exploration and development company, listed on AIM London (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 Mining Associates Pty 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.

Notice of AGM

The First Annual General Meeting of Shareholders of the Company will be held at Frances House, Sir William Place, St Peter Port, Guernsey on Thursday 8 December 2011 at 3.00 pm. Notice of the AGM will be dispatched to shareholders along with the Group's report and accounts.

Copies of the 2011 Annual Report will be posted to shareholders on Monday 14th November 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:

Chairman's Report

Dear Shareholder,

I am pleased to present my first Chairman's Report to the shareholders of Kolar Gold Limited. I take this opportunity to thank all of our loyal, long-standing shareholders for their support and welcome those new shareholders who have recently joined us on our successful admission to trading on the AIM market in June of this year. I also welcome our newly appointed directors to the Board and look forward to working with them and the Group's management and staff towards building a substantial gold company in India as our longer term goal.

Gold and India

Gold is an integral part of Indian culture and society and India remains one of the largest consumers of the metal. The strong growth in the Indian economy combined with the strong cultural affinity for owning gold ensures India's position as a cornerstone for any future demand.

India's geology has endowed the country with some very promising gold prospects, especially the Archaean greenstone belts across Southern India. Within this, the Kolar belt is an important area in terms of historic production grades and deposit size and is considered a world class province. It was the location of a significant producer of gold until production ceased at the BGML mine in 2001. Today, India is a very modest producer by world standards. Limited modern exploration and feasibility studies within a restrictive mining regime, have curtailed the development of the Kolar region and the gold mining industry generally in India. Using modern exploration techniques and programmes, however, the Kolar belt has considerable potential for developing existing prospects and new discoveries.

On the regulatory front in India, reform to the current mining regulations is currently underway with a new Mines and Minerals Development Bill having been recently drafted and approved by Cabinet. The Bill is expected to go before parliament in December 2011, and it is understood that it will include the following features:

·; the establishment of a National Mineral Tribunal;

·; increased maximum area allowable per company, per state, for Prospecting Licences ("PL"s) and Mining Leases ("ML"s);

·; reduced and specified time limits for the grant of Reconnaissance Permits ("RP"s), Prospecting Licenses, and Mining Leases; and

·; simplified process for transferring licences.

The passing of this Bill is a crucial step forward in the development of the gold mining industry in India.

The Indian government is now also striving to increase transparency and curtail illegal mining activities. This, together with the proposed new mining policy, gives us confidence that India is indeed heading towards a more developed mining regime resulting in improved prospects for the gold mining industry in particular.

In its activities, Kolar Gold has adopted internationally accepted best practices and standards. By adopting these benchmarks we hope to create a culture of excellence for not only Kolar Gold but also the emerging gold mining industry in India.

Key achievements

The Group achieved a number of significant milestones during the year, namely:

§ successful completion of our Initial Public Offering and admitted to trading on the AIM Market, raising gross proceeds of £12 million;

§ securing the tenement rights to the Kolar Gold Projects in India;

§ entering into a strategic relationship with SUN Mining; and

§ commencement of exploration activities at South Kolar.

The Kolar Gold Group ("the Group") underwent a major restructure in early 2011 and the shares of Kolar Gold Limited were admitted to trading on AIM on 17th June, 2011, when we raised gross proceeds of £12 million of new equity in a difficult and volatile market.

The Group negotiated the securing of the tenement rights to the Kolar Gold Projects with GMSI in November 2010. The Kolar Gold Projects comprise one granted Prospecting Licence ("South Kolar"), and applications for six further Prospecting Licences, four Mining Leases and three Reconnaissance Permits. The rights should secure the Group's strategic position in the region.

The Kolar Gold Projects are situated in the Kolar Gold Belt, a 80km long and 3 to 6km wide Archaean greenstone belt in Southern India. This area includes the now dormant Central Kolar Mines operated in the past by Bharat Gold Mines Limited (BGML).

Kolar Gold's rights to exploit the potential value of the Kolar Gold Projects are derived from these agreements. These agreements entitle Kolar Gold, in partnership with GMSI, to conduct exploration activities in the Kolar Gold Projects as and when each license area is granted by the government.

Following the £12 million placing and Admission to AIM, the Group is now well positioned to exploit its tenement rights and establish itself as a significant entity in the Indian gold mining sector.

Relationship with SUN Mining

SUN Mining is part of the SUN Group, an Indian-based global investor with a diverse portfolio in several industry sectors, including mining and oil and gas. SUN Mining is a shareholder in GMSI and has interests in the gold exploration and development potential of India. It also owns two gold mines in Kazakhstan and Siberia.

Kolar Gold has issued shares and warrants to SUN Mining in exchange for the provision of past and future services. These services include assisting the Group in its dealings with the Government of India, local government and other interested parties in managing and exploiting the Kolar Gold Projects, and dealing with the possible acquisition of the BGML assets.

SUN Mining is a valued partner and I believe it will be a key contributor to the Group's success in India.

Commencing exploration activities

The Company commenced drilling in the Chigargunta NE tenements at South Kolar at the beginning of this financial year and results to date have been encouraging, validating the historical results from earlier work carried out by the Geological Survey of India.

We have now commenced drilling at Mallapakonda, also at South Kolar. The Group expects to spend a total of over £3 million in exploration and evaluation activities by December 2012.

We recently announced the completion of 40 line kilometres of detailed Induced Polarisation ("IP") Surveys to delineate conductive zones favourable for sulphide mineralisation that have potential for associated gold mineralisation.

Further details of our exploration activities to date are set out in your Chief Executive Officer's Report.

Outlook and strategy

The successful capital raising, coupled with the agreements with GMSI and SUN Mining, has put the Group on a sound footing to explore the Kolar Gold Projects, acquire further licences and pursue the potential acquisition of the BGML Assets. The inherent synergies in pursuing these goals will greatly contribute to your Company's future success. Depending on results and the rate of progress, it is likely that the Group will need to raise additional finance by December 2012 in order to continue to build value.

Thank you for your support.

Harvinder Hungin

Chairman

Kolar Gold Limited

Chief Executive Officer's Report

I am pleased to report that this has been a year of significant achievements for Kolar Gold.In the last 12 months we have secured rights to the Kolar Gold Projects in Southern India, established Kolar Gold in Karnataka, South India and started drilling on our first licensed area, South Kolar in February. We underwent a corporate restructure; established a new board and then successfully raised £12m and the Company's shares were admitted to trading on AIM on 17th June 2011. Despite the turbulent markets, we have funding for our exploration programme, with highly prospective gold exploration assets and a clear execution plan - and we believe 2012 should be an exciting year for Kolar Gold.

Kolar Gold Projects

A significant milestone was achieved in November 2010 when we finalised agreements with GMSI, a Bangalore based exploration group that gives us the exclusive option to acquire the economic interest and title of the Kolar Gold Projects. These projects consist of one granted Prospecting Licence and applications for six further Prospecting Licences, four Mining Leases and three Reconnaissance Permits in the states of Andhra Pradesh, Karnataka and Tamil Nadu. These Projects cover 568km2 across the highly prospective Kolar Greenstone belt and together they encircle the historic BGML mine which has produced more than 25 million ounces of gold. The first granted Prospecting Licence is South Kolar which extends on strike 20 kilometres south of the BGML mine and includes two known deposits and twelve mineralised prospects ready for drilling.

Kolar Gold is working closely with GMSI and their key geologists successfully on drilling and exploration work at South Kolar. Our Chief Operating Officer Richard Johnson is now based in Bangalore as he establishes our operations, initially at South Kolar. Our collective efforts also focus on progressing priority licence applications through the government process.

Exploration Programme

We plan to have a second drill rig on the granted South Kolar licence area by the end of November 2011 and two further drill rigs at North Kolar in 2012 upon granting of this second Prospecting Licence. We have budgeted £3.3million for exploration and drilling up to December 2012. Diamond core drilling started at South Kolar in February 2011 to better understand the geology and mineralisation and to validate gold resources of the Chigargunta NE deposit, which could potentially be a repetition of the neighbouring historic BGML Chigargunta mine. We have recently set up offices and a workshop in the area and have been employing approximately 30 local people on this drill programme. The latest drilling update issued on 15th August 2011 reported some significant mineralised intersections.

Chigargunta NE and Eastern Lodes

Gold mineralisation is localised along shear zones, characterised by strong mylonitic fabric, 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 previous 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 and drilling commenced there in October 2011. There are an initial twelve target holes planned.

Bisanatham

New Bisanatham is an area with ancient workings and underground development about 2km to the north west of the old Bisanatham Mine of BGML. Three diamond drill holes were completed on the southerly extension of the main Bisanatham lode. This lode extension was confirmed and the holes are being logged to prepare for sampling.

Mallapakonda

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 Mallapakonda Hill, only 150m has been evaluated with drilling. Historically there have been three levels of underground development. Mallapakonda has an initial JORC compliant resource of 61,527 ounces of gold.

IP Survey

An IP Survey was commenced ahead of schedule in May 2011. This survey is now complete over the full 20 kilometre extent of the South Kolar Licence. Close line spacing at Chigargunta has helped with the drill hole placements and also identified several anomalies along strike to the north. This data confirms three long anomalies possibly associated with sulphidic mineralisation. A Reverse Circulation ("RC") drill rig will start to step out along the licence area at these identified targets in November 2011.

BGML Acquisition

Kolar Gold, with the assistance of SUN Mining, continues to pursue the acquisition and development of the BGML mine assets jointly with our partner, the combined BGML ex-employee unions. The matter has been passed to the Supreme Court for final direction on the sale process. 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 would require additional funding from the market.

The next 12 months should be a very exciting time for Kolar Gold as we embark on establishing a strong presence in India and pursue the exploration of these potentially world class gold assets. We look forward to executing our acquisition and exploration plans and delivering to you positive results.

Many thanks for your ongoing support.

Nick Spencer

Chief Executive Officer

Kolar Gold Limited

Kolar Gold Limited and its controlled entities

Consolidated Statement of Comprehensive Income

for the year ended 30 June 2011

Kolar Gold Limited and its controlled entities

Consolidated Statement of Financial Position

as at 30 June 2011

Kolar Gold Limited and its controlled entities

Consolidated Statement of Changes in Equity

for year ended 30 June 2011

Kolar Gold Limited and its controlled entities

Consolidated Statement of Cash Flows

For the year ended 30 June 2011

The notes which follow are an integral part of the consolidated financial statements.

1. Accounting policies

1.1 Reporting entity

The group financial statements consolidate those of the Kolar Gold Limited and its controlled entities (together referred to as the "Group"). During the year, the Group underwent a restructure which resulted in Kolar Gold Limited, a new entity incorporated in Guernsey, becoming the new parent entity, as explained below.

On 8 April 2011 the Company completed a share swap with the shareholders of Kolar Gold plc, whereby the Company acquired all of the 1,543,267 'A' class shares and 60,768,681 'B' class shares in Kolar Gold plc from its shareholders as at 28 February 2011 and issued 1,543,267 'A' class shares and 60,768,681 'B' class shares. On 8 April 2011 the Company reorganised its share capital into one class of ordinary shares of 7p each and deferred shares of 18p each. The deferred shares were cancelled immediately thereafter by Board Resolution, leaving the Company with 62,311,950 ordinary shares of 7p each.

As a result of the restructure, Kolar Gold Limited became the legal parent company of the Kolar Gold Group and the majority shareholders of Kolar Gold plc remain the majority shareholders of the Kolar Gold Group.

The Company's consolidated financial statements are presented as a continuation of the consolidated Kolar Gold plc financial statements. The comparative information presented is consistent with the disclosures made in the consolidated financial statements of Kolar Gold plc for the year ended 30 June 2010. Comparative loss per share calculations were not affected as a result of the restructure.

Following the share swap, the Group has undertaken a reorganisation to simplify the Group structure and reporting lines. As at 30 June 2011, the wholly owned subsidiaries of the Company are:

·; Kolar Gold Resources Limited (Mauritius);

·; Kolar Gold Resources (India) Private Limited;

·; Kolar Gold Pty Limited; and

·; Kolar Gold plc.

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 and give a true and fair view of the state of affairs of the Company.

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 and 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 the foreseeable future 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 2011 of £788,002 (2010: £688,237). The Group successfully completed an Initial Public Offering during the year and the Company's shares were admitted to trading on AIM in London in June 2011, raising gross funds of £12 million. At 30 June 2011 the Group had cash balances of £11,544,630 (2010: £739,410) and a surplus in net working capital (current assets less current liabilities) of £10,442,755 (2010: deficiency of £1,164,267).

The funds raised from the Initial Public Offering are being applied to acquire further mineral exploration rights in India and conduct an exploration programme with respect to these mining tenements. These outlays will only be incurred when the licences have been approved for exploration by the Government of India.

The directors have prepared cash flow forecasts that indicate that the Group will have sufficient cash to continue meeting its current operating expenditure (e.g. staff costs, administrative costs, exploration costs, lease commitments) until at least December 2012. In order to continue to operate beyond December 2012, in line with current cash flow forecasts, it is likely that the Group will need to raise additional finance by December 2012.

The Group commenced an exploration programme in respect of its Indian mining tenements in January 2011, engaging a drilling contractor to operate one drilling rig on the South Kolar tenements. These exploration activities are being expanded during the 2011-12 financial year, with a second drilling rig commencing operations since year end.

The Group's forecasts include cash outflows to acquire further mineral exploration rights and subsequent exploration activities. These outlays will only proceed if and when the mineral exploration rights have been granted ready for drilling. When the Government of India grants all of the mineral exploration rights specified in the Group's agreement with Geomysore Mining Services India (Private) Limited (GMSI), the Group is entitled to acquire the remaining tenement rights for approximately £4.4 million and the Group has budgeted for additional exploration expenditure of £3.3 million over the next 18 months, subject to availability of funds.

The Directors are confident that these licences will be granted and all matters can be resolved satisfactorily, and consequently, the Directors consider that the Group has adequate resources to continue in operational existence for at least the next 12 months, and if the licences are not granted for some reason, the Group will have additional funds available, thus they continue to adopt the going concern basis in preparing the financial statements.

In the longer term, the development of economically recoverable mineral deposits on the Group's existing or future exploration properties depends on the ability of the Group to obtain further financing through equity financing, debt financing or other means. If the Group's exploration programmes are ultimately successful, additional funds will be required to develop the Group's properties and to place them into commercial production. The only sources of future funds presently available to the Group are through the exercise of outstanding share options, the raising of equity capital by the Company or the sale of an interest in mineral exploration rights either in whole or in part. The ability of the Group to arrange such funding in the future will depend in part upon the prevailing market conditions as well as the business performance of the Group. There can be no guarantee that the Group will be successful in its efforts to arrange additional financing, if needed, on terms satisfactory to the Group. If adequate financing is not available, the Group may be required to delay, reduce the scope of, eliminate its current or future exploration activities, or relinquish rights to certain parts of its interests.

1.4 Basis of consolidation

SubsidiariesSubsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. 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 Foreign currency 

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group 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 this 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.

1.6 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.

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.

Loans and borrowings

Loans and borrowings are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these loans and borrowings are measured at amortised cost using the effective interest method.

1.8 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

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

Depreciation is charged to the income statement on a straight-line basis over the estimateduseful lives of each part of an item of property, 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 Exploration and evaluation expenditure 

Exploration and evaluation costs, including the costs of acquiring licences, are capitalised as exploration and evaluation assets on an area of interest basis. Costs incurred before the Group has obtained the legal rights to explore an area are recognised in the profit or loss.

Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either:

·; the expenditures are expected to be recouped through successful development and exploitation of the area of interest; or

·; activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing.

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity related. The cash-generating unit shall not be larger than the area of interest.

Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from intangible assets to mining property and development assets within property, plant and development.

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

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.

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the profit or loss in the periods during which services are rendered by employees.

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 this is not the case the value of goods or services received is determined by reference to the grant date fair value of the equity instruments provided. 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.

Share-based payment transactions (cont'd)

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.

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 1.5). 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 property, plant and equipment, and intangible assets other than goodwill.

1.16 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:

·; measurement of share-based payments (note 16);

·; capitalisation of exploration and evaluation expenditure (note 1.9 and note 9); and

·; going concern (note 1.3).

1.17 Adopted IFRS not yet applied

The following Adopted IFRSs have been issued but have not been applied by the Group in these financial statements. Their adoption is not expected to have a material effect on the financial statements.

·; Revised IAS 24 'Related Party Disclosure';

·; IFRS 9 'Financial Instruments';

·; IFRS 10 'Consolidated Financial Statements'; and

·; IFRS 13 'Fair Value Measurement'.

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 has been established and it will oversee 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 from taxation authorities. 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

Guernsey and India are in the process of reaching agreement to enter into a specific Tax Information Exchange Agreement (TIEA) between the two countries. This is expected to be completed shortly. Without a TIEA it is possible that the Indian Tax authorities could reclassify the Group's capital investment in India as income subject to Indian company taxation. Such a treatment is dependent upon Guernsey being considered as an unfavourable tax jurisdiction by the Indian authorities, which would be in contrast to the recognition that Guernsey has from 2009, being placed on the OECD white list of countries that have implemented internationally agreed tax standards.

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. Each entity has sufficient funds in its functional currency to cover its expected future outgoings for several months to reduce currency risk. The Group does not use derivatives to hedge its foreign currency exposures.

Market risk 

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, actual resources differing from estimates, operational delays and the availability of equipment, personnel and infrastructure.

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.

Capital management 

In June 2011 the Company successfully completed the admission of its shares to trading on AIM in London, raising gross proceeds of £12m, netting approximately £11.3m. The Group has no loans or borrowings and these proceeds are expected to meet the Group's requirements until late calendar year 2012.

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.

3. Operating segments 

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

The Group also has corporate administrative functions in Guernsey and Australia.

The Group's Board and Chief Executive Officer review 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 in each segment and exploration activity levels in the Indian segment.

The Group had one reporting segment during the year ended 30 June 2010, being the Administration office in Brisbane, Australia

6. Income tax expense

A deferred tax asset of £2,930,648 (2010: £2,114,489) has not been recognised in respect of losses, as there is currently uncertainty surrounding the recoverability of such assets.

7. Plant and equipment

8. Investments

At 30 June 2010 the Group had entered an agreement to acquire interests in mining tenements in the Kolar region in India from Geomysore Services India (Private) Limited (GMSI). Under the terms of the agreement, at 30 June 2010 the Group had paid deposits totalling £984,046 and it was intended that the Group and GMSI would establish a joint venture to conduct exploration and evaluation of the mining tenements.

During the year ended 30 June 2011 the agreement with GMSI was renegotiated and new agreements were entered into. Under the terms of the new agreements the Group has acquired mining tenements from GMSI. These tenements have been accounted for in accordance with the Group's accounting policy for exploration and evaluation expenditure which is set out in Note 1.9.

* extended by three years in June 2008

2. On 1 December 2010, Kolar Gold plc issued 1,350,000 options to directors, employees and consultants. Each option confers a right to one "B" class ordinary share at an exercisable price of £0.30 and a term of three years. There are no vesting conditions and the options vest immediately.

On 8 April 2011 all of the above options were released by the optionholders and Kolar Gold Limited issued new options to or for the benefit of employees, directors or former employees or directors of the Group in respect of 5,850,000 Ordinary Shares in aggregate as set out in the table at the end of this paragraph. These options replaced the original options on identical terms granted to the same persons by Kolar Gold plc. The new options have vested and may be exercised at any time before the date of lapse set out in the following table. They are transferable, and on an alteration of the ordinary share capital of the Company by capitalisation or rights issue, consolidation, sub-division or reduction or other alteration, the number of ordinary shares subject to the Existing Options or the option price may be adjusted by the Board.

Bonus Options

The directors and Shareholders of Kolar Gold plc had previously resolved to grant options subject to completion of a successful Initial Public Offering to Norman Coldham-Fussell, Nicholas Spencer and Richard Johnson (Bonus Options) and a consultant, but the options had not been formally granted. No performance conditions were to be imposed on the Bonus Options.

No vesting conditions have been imposed on these options

Options issued by Kolar Gold Limited

4. The following options were granted by Kolar Gold Limited on 10 June 2011 to directors. The options vested on grant date.

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

b) Warrants

The following unexercised warrants existed as at 30 June 2011:

Each warrant entitles the holder to subscribe for one ordinary share in the Company. Warrants do not confer any voting rights on the holder.

1. On 30 June 2010, there were 3,664,000 warrants in issue.

2. In July 2010, a further 1,000,000 warrants were issued. Each warrant gives the holder the option to acquire one ordinary "B" class share in Kolar Gold plc at any time on or before 31 December 2011 at a price of 30 pence. The warrants were issued for no consideration in connection with the convertible loan notes issued in June and July 2010. Refer note 14.

On 8 April 2011, all 4,664,000 warrants in Kolar Gold plc were released, and identical warrants were issued by the Company. The warrants have an exercise price of 30 pence per share and expire on 31 December 2011.

3. On 5 May 2011 the Company issued 1,000,000 warrants to Cenkos Securities plc and 300,000 warrants to Ocean Equities Limited in consideration for historical services provided by them as brokers to Kolar Gold plc. These warrants have an exercise price of 40 pence per share and expire on 17 June 2014.

4. On 17 June 2011 the Company's shares listed for trading on AIM, entitling Cenkos Securities plc and Ocean Equities Limited to 750,000 warrants each. These warrants have an exercise price of 60 pence and expire on 17 June 2014.

5. On 24 February 2011 the Company issued warrants to SUN Mining, pursuant to the following agreement:

Under the terms of this agreement, subject to satisfaction of the conditions necessary to give effect to the share swap and restructure:

(a) Kolar Gold Limited agreed to issue to SUN Mining 5,833,119 Ordinary Shares, in consideration for SUN Mining providing services with respect to securing the tenement rights in the Kolar Gold Field through the agreements with GMSI. These shares were valued at 30 pence and the total cost of £1,749,936 has been capitalised as exploration expenditure (see Note 9);

(b) Kolar Gold Limited has agreed to issue the following Ordinary Shares (such agreement being reflected by the grant to SUN Mining of warrants):

(i) 2,916,559 Shares, subject to SUN performing certain ongoing services for 12 months; and

(ii) a further 2,916,559 Shares, subject to SUN:

A) performing such ongoing services for 24 months; and

B) assisting Kolar Gold Limited to acquire the BGML Assets;

(c) Kolar Gold agreed to grant SUN the Additional Warrant, being:

(i) a right by SUN to subscribe for 3,499,871 Ordinary Shares in cash;

(ii) at the subscription price equal to the VWAP for the 3 months prior to exercising the option; and with an expiry date of 2 years from the date of the agreement.

Inputs for measurement of grant date fair values

The grant date fair values of warrants 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 fair values at grant date of the share-based payment plans are the following:

* Volume weighted average price

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

17. Capital and reserves

As set out in Note 1.1, during the year ended 30 June 2011 the Group undertook a restructure on 8 April 2011. The details of changes in issued capital set out below reflect the movements in the issued capital of Kolar Gold plc during the period to 8 April 2011 and then the movements in issued capital of Kolar Gold Limited during the period 8 April 2011 to 30 June 2011.

Kolar Gold plc was the parent entity of the Group up until 8 April 2011. Following the completion of the restructure on 8 April 2011, Kolar Gold Limited is the parent entity of the Group and Kolar Gold plc is a wholly owned entity in the Group.

a) Issued capital - Kolar Gold plc

* At 30 June 2011 all of the issued shares of Kolar Gold plc are held by Kolar Gold Resources (India) Private Limited.

b) Issued capital - Kolar Gold Limited

Notes:(i) On incorporation Kolar Gold Limited issued one "A" Class Ordinary Share for 25p and one "B" Class Ordinary Share for 7p.

(ii) On 8 April 2011, Kolar Gold Limited, by special resolution of its shareholders, reorganised its share capital into one class of Ordinary Shares of 7p each and Deferred Shares of 18p each. The Deferred Shares were cancelled immediately thereafter by resolution of the Board in accordance with the Articles of Association.

(iii) On 17 June 2011 Kolar Gold Limited completed a share placement and subsequently its shares were admitted to trading on AIM.

(iv) 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.

d) Reserves

Share premium reserve

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

Options reserve

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

Translation reserve

The translation reserve contains all foreign currency differences arising from the translation of the financial statements of foreign operations.

18. Loss per share

The calculation of basic loss per share at 30 June 2011 was based on the loss of £3,256,290 (2010: £799,293), and a weighted average number of ordinary shares outstanding of 57,184,802 (2010: 44,490,936), calculated as follows: