Lionsgold Regulatory News (LION)

28 January 2013

Kolar Gold Ltd

Trading Update

Kolar Gold Limited ("Kolar Gold" or the "Company") the Indian focused gold exploration and mine development company, today announces an update in relation to its Indian operations.

HIGHLIGHTS

·; Review of corporate and exploration strategy completed.

·; Increased focus on the management of key licence applications and closer cooperation with partner GMSI in the permitting process.

·; The parties have identified additional local mining partners to also assist permitting.

·; Cash reserves of £6.5 million at 31 December 2012.

·; Increase in management resources in India and closure of Brisbane office.

·; The Government of India and BGML employee societies have agreed to the sale tender route for revival of the historic BGML mine.

Focus on key licences

The Board has completed a full review of its exploration and licence acquisition strategy with a view to improve its effectiveness over the near and medium term. The Board is strongly of the view that the timeous grant of new licences is critical to the future of Kolar Gold and its stakeholders. The Company and its partner, Geomysore Services India Private Limited ("GMSI"), have agreed therefore to work closer together and concentrate on jointly pursuing key gold licences that the Board has prioritised. The parties also intend to engage additional local mining partners to assist with the permitting process and provide on-going technical mining services and support. The Board believes that this enhanced focus and effort should accelerate the process of securing key Prospecting Licences and Mining Leases in India.

Exploration

The large data compilation task recently undertaken at South Kolar is presently being modelled and interpreted. This includes recent detailed geological mapping and geochemical sampling which indicates a number of prospective anomalies in the licence area that will require further close spaced induced polarization, trenching and follow up drilling. In addition, the Company is actively seeking ways to secure additional quality gold licences that are drill ready, to further broaden its Indian gold portfolio.

Management

The Company intends to increase its management resources in India and close down its Australian office by the end of Q1 2013. Following the closure, Company CEO, Nick Spencer, and GM, Chris Clowes, will operate out of the well-established GMSI head office in Bangalore, thereby achieving a number of costs savings. The Board believes it is imperative that Kolar Gold senior management be in-country to work with GMSI and partners to focus on and drive the permitting process.

BGML update

The Government of India and BGML ex-employee society have agreed to the sale tender route for revival of the historic BGML mine. The parties await the Supreme Court order before proceeding with the prepared tender, which is expected later this year.

Cash position

Kolar Gold had cash reserves of £6.5 million at 31 December 2012 and the Board plans to carefully deploy this capital, principally on securing key gold licence areas, but also on conducting further focused exploration at the South Kolar PL area. In order to minimise cash burn the Company has deployed a number of initiatives to reduce its monthly cost base.

Commenting today, Kolar Gold's CEO, Nick Spencer, said: "Kolar is entering an important period and it is key that we strengthen our team in India and focus efforts with GMSI and partners on a number of key gold licence permits and projects. We are confident that this is the most prudent way to utilise our funds to achieve maximum shareholder value over the longer term. We remain committed to building India's leading gold exploration and mine development company with an increased portfolio of well funded, quality gold projects."

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About Kolar Gold Limited:

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

Kolar Gold 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.

Kolar Gold 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.