Last checked at 19 Dec 2008 07:00
Solomon Gold plc
19 December 2008
NEWS RELEASE
FOR IMMEDIATE RELEASE AIM Code - SOLG
ISSUE OF ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2008
Solomon Gold plc has today issued consolidated financial statements for the year ended 30 June 2008. The Chairmans' Statement, Operation Review, Directors' Report, Consolidated Income Statement, Consolidated and Company Balance Sheets, Statement of Changes of Equity and Consolidated and Company Statements of Cash Flows and supporting notes are included below.
The full Annual Report is available on the Company's website www.solomongold.com.
For further information in respect of the Company's activities, please contact:
Nicholas Mather Kevin Nagle
CEO Company Secretary and CFO
Tel: +61 417 880448 Tel: +61 7 3303 0660
Email:nmather@solomongold.com Email: knagle@solomongold.com
Nominated adviser for the purposes of AIM:
Contact:
Mr Stephen Weir
RFC Corporate Finance
Tel +61 2 9250 0048
Email: Stephen.Weir@rfc.com.au
CORPORATE INFORMATION
DIRECTORS
Nicholas Mather (Chief Executive Officer)
Cameron Wenck (Non-Executive Chairman)
Brian Moller (Non-Executive Director)
Dr Robert Weinberg (Non-Executive Director)
COMPANY SECRETARY
Kevin Nagle
REGISTERED OFFICE
7 Pilgrim Street, London EC4V 6LB
United Kingdom
Registered Number 5449516
AUSTRALIAN OFFICE
Level 5, 60 Edward Street,
Brisbane QLD 4000
Phone: + 61 7 3303 0660
Fax: +61 7 3303 0681
Email: info@solomongold.com
Web Site: www.solomongold.com
AUDITORS
PKF (UK) LLP
Farringdon Place, 20 Farringdon Road
London EC1M 3AP
NOMINATED ADVISOR
RFC Corporate Finance Ltd
Level 14, 19-31 Pitt Street
Sydney NSW 2000, Australia
BROKER
Hanson Westhouse Ltd
One Angel Court, London EC2R 7H
United Kingdom
BANKERS
Macquarie Bank Ltd (Brisbane Branch)
300 Queen Street, Brisbane QLD 4000
Australia
SOLICITORS
Faegre & Benson LLP
7 Pilgrim Street, London EC4V 6LB
United Kingdom
AUSTRALIAN SOLICITORS
Hopgood Ganim
Level 8, Waterfront Place
1 Eagle Street, Brisbane QLD 4000
REGISTRARS
Computershare Investor Services plc
The Pavilions, Bridgwater Road
Bristol BS99 7NH
CHAIRMAN'S STATEMENT
Dear Shareholder,
The year ending June 2008 was the Company's strongest ever in respect of our drilling program and resulted in approximately 14,000 metres drilled and a large number of core samples assayed and tested over mineralised zones. Our encouraging discovery at Sutakiki in November last year provided us with great optimism, driving our decision to further intensify our drilling efforts in the Sutakiki area. Unfortunately subsequent drilling and sampling, whilst promising, has not yet delivered sufficient results to define a resource.
The seeds of concern planted into credit markets in the US in 2007, have grown into what is now a severe credit crisis throughout the world. This has had significant ramifications for Solomon Gold, since the pool of capital available for investment to fund its aggressive drilling program has virtually dried up. As a result the company has had to refocus its exploration program to suit market conditions. Accordingly the company's drilling activities have been recently wound back which, together with significant reductions in support overheads is leading to considerable cost savings. Unfortunately this has meant retrenching a number of staff whose loyalty and hard work during their time with Solomon Gold has been greatly appreciated.
The focus of our current exploration activities is now firmly at the grass roots, the objective being to find and add value without using capital intensive drilling programs as an exploration tool. This marks a return to our original strategy adopted when the company was first floated, and before we had such encouraging drill results from Sutakiki. Recently, following considerable discussions and field visits, Solomon Gold agreed a Terms Sheet with Newmont Ventures Limited, a wholly owned subsidiary of Newmont Mining Corporation in respect of the five core central Guadalcanal tenements.
Newmont can earn a 70% interest of these areas over the next five years by expending US$12 million. We believe that the injection of capital and expertise by Newmont provides a higher likelihood of a discovery and successful development with considerably less dilution to the current shareholders than if we had continued on a 100% basis with the attendant dilutive share issue in a poor market. The Terms Sheet with Newmont is intended to form a basis for a binding definitive agreement under negotiation. We are aiming for a completion of this by 26 January 2009.
The Company's efforts over the last 2 years have not been wasted. Our growing geological understanding of the project area is being applied to the valuable store of data that we have already acquired. This has led to the delineation of some promising targets previously overlooked particularly at Mbetilonga, Chupukama and Kuma. During the last quarter, detailed mapping and sampling at the Hambusimaloso prospect in the Mbetilonga tenement, 15km south of Honiara, outlined an area of 300m x 400m characterised by rich copper mineralisation typical of the upper zone of a mineralised copper porphyry system. Additional mapping and sampling of the Kuma project area has defined the extent and geochemistry of an extensive area of pyrite silica cap rock thought to overlie a porphyry prospect at depth. These prospects are exciting and highly prospective in our view.
The airborne electromagnetic survey has been completed and once processed will enable the identification of a renewed set of targets for detailed mapping and sampling (prior to drill testing) in these areas. Solomon Gold believes that this will highlight a number of interesting anomalies at Mbetilonga and new opportunities at Sutakiki as well as in the previously untested areas of Kuma, Chupukama and the Koloula Valley.
Koloula, Central Guadalcanal and Mbetilonga licences were renewed for 2 years from the 8 December 2008 to 7 December 2010 and the current term of Prospecting Licence 05/05 over Sutakiki has been extended by 8 months following which renewals may be made.
The other prospect emerging as showing significant potential is Ngella Island in the Florida Group (of islands), 10km north of Honiara, where we continue to encounter encouraging nickel values across an identified zone over 2km long and 1km wide. The area contains potentially economic nickel grades of up to 2% nickel in the lowest sample of one of the pits. The Company considers that many of the hand dug surface pits have not yet reached a sufficient depth to have sampled the mineralised zone. It is also believed that the nickel bearing layer extends under cover to the south. A maiden resource of 1.695Mt @ 0.6% nickel and 0.06% cobalt has been defined and a target of 5.4 Mt at a grade of 1.0% nickel and 0.1% cobalt has been outlined.
Despite a change of government earlier this year, the political environment has been relatively stable. The maintaining of law and order at all times throughout the period is encouraging and the Solomon Island Government and RAMSI (the protective detachment of the Australian Government) are to be congratulated for their efforts.
On behalf of the board, I wish to acknowledge the unprecedented commitment of our managers and staff in the field. Their tireless and often unheralded work, in very difficult working and operating conditions, make an immeasurable contribution to our company.
The company has recently raised capital to fund the exploration efforts of the company going forward on the projects not farmed out to Newmont and any new opportunities which may present themselves and operating capital generally. Solomon Gold continues to work resolutely on further investment options to secure the Company's future prospects and its unflagging objective to discover and define a world-class copper/gold mineral system.
Cameron Wenck
Chairman
OPERATIONS REVIEW
The Solomon Gold field program has been dominated during the year under review by drilling activities in the Sutakiki and Koloula Valleys on Guadalcanal. In addition the company conducted nickel exploration on Ngella in the Florida Group of islands and secured the Fauro Island Prospecting Licence application in the Shortland Island Group south east of Bougainville (Papua New Guinea). Logistically the field project on Guadalcanal was supported by three field camps at Mbina and Chikora in the Koloula Valley, and Sutakiki with an additional three fly camps at Mbetilonga and Kuma on Guadalcanal and an established field camp at the Ngella nickel project. During the year Solomon Gold had three drilling rigs engaged on the program supported by a team of four expatriate and five Solomon Islands geologists. The Company also employed local Solomon Islands personnel for field hand, labour, office, camp support and management. The Company maintained an office in Honiara. Solomon Gold's projects are held in the Company's wholly owned operating subsidiary, Australian Resource Management Pty Ltd (ARM), under Prospecting Licences 02/05 Koloula, 03/05 Central Guadalcanal, 04/05 Mbetilonga and 05/05 Sutakiki as detailed in Table 1. Total Expenditure during the year was A$8.2 million (approximately £3.6 million) and the total spent on the areas to date of this report by Solomon Gold and ARM is A$18.5 million (approximately £7.7 million). Subsequent to June 2008, the company applied for renewals to the licences for a further two years and will have a right to a further renewal for another two years thereafter. Prospecting Licences 02/05 Koloula, 03/05 Central Guadalcanal and 04/05 Mbetilonga were renewed for 2 years from 8 December 2008 to 7 December 2010 and the current term at Sutakiki has been extended from 9 November 2008 to 9 July 2009. Landowner Agreements have been renewed at Koloula, Central Guadalcanal and Mbetilonga.
Figure 1: Tenements and Recent Renewals
Table 1 - ARM Tenure - Solomon Islands
| Tenement Name | Tenement # | Original Grant Date | Current Expiry Date | Area (km2) |
| Koloula | PL 02/05 | 10/11/2005 | 7/12/2010 | 60 |
| Central | PL 03/05 | 10/11/2005 | 7/12/2010 | 42 |
| Mbetilonga | PL 04/05 | 10/11/2005 | 7/12/2010 | 63 |
| Sutakiki | PL 05/05 | 10/11/2005 | 10/7/2009 | 55 |
| Kuma | PL 08/06 | 23/11/2006 | 22/11/2009 | 80 |
| East Guadalcanal | APL | 6/5/2008 | 5/5/2011 | 116 |
| Florida | PL 57/07 | 10/9/2007 | 9/9/2010 | 78 |
| Wainoni | APL | Abandoned | Na | 48 |
| Fauro | APL | Application | Na | 70 |
|
| TOTAL |
|
| 612 |
Strategic Direction
In view of the inconclusive results from the drilling campaign on the Valehailala structure at Sutakiki and against the background of a severe global shortage of risk capital the Company has decided that the forward program should focus for the time being on further target generation by way of extended field geology in a number of additional locations, particularly Chupukama, Kuma, Chikora and Mbetilonga. Accordingly, Solomon Gold has released the drilling rigs and has completed the data collection phase of the airborne electromagnetic survey.
Terms Sheet with Newmont
On 26 November 2008 Solomon advised that the Company has signed a Terms Sheet outlining the principal terms of a proposed agreement with Newmont Ventures Limited (Newmont) a wholly owned subsidiary of Newmont Mining Corporation, (NYSE: NEM) in respect of the Solomon Gold's copper gold exploration projects on the island of Guadalcanal, Solomon Islands.
Under the terms of the proposed agreement, Newmont will be able to earn up to an 80% interest in five exploration licences (Koloula PL 02/05, Central PL03/05, Mbetilonga PL04/05, Sutakiki PL05/05, and Kuma PL08/05).
The Terms Sheet signed by both Solomon Gold and Newmont is subject to the execution of a definitive agreement by both parties and the completion of due diligence by Newmont within 60 days of signing (26 January 2009).
The principle terms provide that Newmont may earn a 51% interest by expending US$6 million within 3 years (Stage 1 earn-in), and may elect to expend a further US$6 million (total US$12 million) to earn a further 19% to a total 70% over a further 2 year period (Stage 2 earn-in). Solomon Gold will act as manager for the first year of the program and Newmont may elect to manage the program thereafter. Newmont currently proposes to second at least one of its geoscientists experienced in porphyry projects discovery and assessment in the South Pacific, to the project.
Solomon Gold may elect after Newmont has earned 70% within 5 years to accept a Newmont funding option which provides for Newmont to earn a further 10% to total 80% by funding Solomon Gold to mining. Solomon Gold would in that case be obligated to repay its 20% share of all of Newmont's costs from the 70% earn point at the end of year 5, plus interest from its share of cash flows or distributions.
If either Solomon Gold's or Newmont's interest is reduced below 10% interest in the project, then that party shall revert to a 0.5% net smelter return royalty on production within the project.
Alternatively, in the event that Newmont does not elect to progress to Stage 2 of the earn-in, the parties will contribute pro-rata to a minimum $1m per annum budgets or dilute on a pro rata basis. Management of the project will be subject to agreed fees.
The Solomon Gold board considers Newmont's interest in Guadalcanal Island as a significant demonstration of support for the prospectivity of Solomon Gold's projects on Guadalcanal Island. Newmont is one of the world's leading gold project development and operating companies, with considerable experience in the south west Pacific and Indonesia.
Sutakiki
The Sutakiki project area was initially highlighted by the occurrence of high order stream sediment anomalies during surveying by Newmont Mining Inc in 1989 which was followed up by Solomon Gold plc in July 2006. The discovery outcrop in the Sutakiki River, some 1.5km up the Sutakiki River from the early anomalous Newmont sample site (73ppb gold in a bulk stream sediment sample), yielded gold mineralisation of 85 metres @ 0.8g/t gold in a series of continuous 5 metre rock chip channel samples. Mineralisation styles were considered to be similar to those at Bouganville, a large copper gold porphyry to the north in neighbouring Papua New Guinea. Subsequent mapping and sampling yielded gold results up to 1,090g/t from quartz vein exposures in Taborora Creek above the discovery outcrop. Samples at this location averaged 7g/t gold excluding the very high grade samples. Regional mapping and sampling at the time of the discovery yielded grades up to 65g/t gold in veins in a zone up to 600m east of the discovery zone (Eastern Zone). Drillholes SK001 (as per the table below) to SK006 inclusive for 3,168m were drilled on the vein system over the Eastern Zone between December 2006 and mid May 2007 and the significant results are tabulated in Table 2 below.
Table 2- Sutakiki Drill Hole Summary
| Drill Hole # | Significant Intersections |
| SK001 | 309m @ 0.54ppm Au, 0.13ppm Cu from 291m (incl 2m @ 12.43g/t Au and 18.83g/t Te from 445m) |
| SK002 | 2m@ 1.1g/t from 147m, 1m @ 0.91g/t from 167m, 3m @ 3.44g/t from 198m, 1m @ 1.23g/t from 302m and 3m @ 1g/t from 389m |
| SK003 | 1m @ 0.62g/t from 23m, 1m @ 0.82g/t from 36m, 2m @ 3.35g/t from 78m (with 2m @ 4.49ppm Te), 1m @ 0.71g/t from 159m and 1m @ 1.45g/t from 1.91g/t |
| SK004 | 1m @ 2.08g/t from 59m, 1m @ 1.06g/t from 161m, 2m @ 0.84g/t from 167m, 2m @ 0.53g/t from 170m, 1m @ 0.78g/t from 175m, 2m @ 0.52g/t from 218m, 1m @ 0.54g/t from 225m, 1m @ 1.47g/t from 250m and 1m @ 0.73g/t from 266m |
| SK005 | 31m @ 0.50g/t Au and 0.11% Cu from 17m & 5m @ 0.5g/t from 56m, |
| SK006 | 9m @ 0.6g/t Au from 226m, 4m @ 0.85g/t Au from 308m, 1m @ 1.83g/t Au from 319m, 8m @ 0.55g/t Au from 375m, 6m @ 0.58g/t Au from 462m, 1m @ 1.07g/t Au from 483g/t Au, 1m @ 1.29g/t Au from 491m |
| SK007 | 1m @ 0.84g/t Au from 127m, 2m @ 1.8g/t from 372m (with 2145ppm Cu) |
| SK008 | 1m @ 0.75g/t Au from 306m, 1m @ 1.09g/t Au from 311m, 1m @ 1.23g/t Au from 318m, 7m @ 0.4g/t Au from 438m (with 1822ppm Cu), 1m @ 1.87g/t from 459m, 13m @ 0.54g/t from 470m, 11m @ 0.7g/t from 505m |
| SK009 | 5m @ 2.56g/t Au from 218m incl. 1m @ 10.85g/t Au from 221m. |
| SK010 | No Significant Intersection |
| SK011 | 50m @ 6.39g/t Au from 108m incl. 32m @ 9.45g/t Au from 108m and 10m @ 21.10g/t Au from 113m (skarn). Also includes 7m @ 2.37 from 144m and 4m@3.08g/t from 154m |
| SK012 | Target not reached. No Significant Intersection |
| SK013 | 3m@0.02g/tAu from 113.4m,1m@0.26g/tAu from 164.5m, 2m@0.02g/tAu from 200.0m |
| SK014 | 13m @ 2.33g/t Au from 206m to 219m |
| SK015 | 2m @ 0.6g/t Au from 245m to 247m, 3m 2 0.89g/t Au from 260m to 263m |
| SK016 | 10m @ 1.76g/t Au from 104m to 114m, 1m @ 0.48g/t Au from 124m to 125m, 1m @ 0.97g/t from 128m to 129m. |
| SK017 | 16m @ 1.12g/t Au from 133m to 149mm (incl 1m @ 9.33g/t Au from 133m to 134m. |
| SK018 | 3m @ 5.2g/t Au from 87m to 90m ( incl 1m @ 12.15 from 87m to 88m), 2m @ 0.27g/t Au from 135m to 137m, 2m @ 0.52g/t Au from 143m to 145m. |
| SK019 | No Significant Intersection |
| SK020 | 1m @ 3.69g/t Au from 57m to 58m, 4m @ 2g/t Au from 80m to 84m. Results expected from 87 - 88m. |
| SK021 | 3m @ 1.80g/t Au from 71m |
| SK022 | SK022 - 9m@ 3.70g/t Au, 6.49g/tAg, and 0.52%Cu from 204m |
| SK023 | SK023 - 9m@ 1.03g/t Au, and 2.31g/tAg from 158m |
| SK024 | No Significant Intersection |
A number of holes intersected significant mineralisation however the results were insufficiently congruent to allow delineation of a resource figure. Additional mapping and sampling identified the Vunuvalekama and Charimbarau prospects on the eastern end of the mineralised zone and areas of gold anomalism up to 3.5g/t gold in rocks in the western Sutakiki drainages in a 750m x 500m area known as the Uluda Egg - an elliptical feature evident on the magnetics and radiometric surveys. Drill holes SK007 to SK010 were drilled to test the western Sutakiki and Uluda Egg anomalies but no significant assay results were returned.
Reconnaissance work by the company during July and August of 2007 in the area north of Sutakiki River defined a zone of epithermal quartz carbonate veins in Valehailala Creek which returned gold grades up to 2.5g/t.
During the year under review the Company focused its drilling program on the mineralisation outcropping in Valehailala Creek and the extended Valehailala mineralised structure at Sutakiki with the aim of rapidly delineating a resource. The program consisted of a further 14 holes for a total of 3,917.8 metres. The first hole on the Valehailala structure in November 2007 was SK011 which discovered skarn style gold mineralisation in a shear system which persisted over a strike length of approximately 1,500 metres. The highly encouraging SK011 intersection returned 32m @ 9.45g/t gold. Follow up mapping and sampling and further drilling identified extensive mineralisation in the lime rich sediments and volcanics which host the gold mineralising system. This style, known as "skarn" mineralisation is a typical indicator of the margins of a significant porphyry system and mineral studies conducted on behalf of the Company supported a porphyry related genetic model for the Valehailala gold occurrence.
Vunuvalekama
During the year Solomon Gold identified additional areas of mineralisation at Vunuvalekama and Charimbarau to the south east of the Sutakiki system, approximately 1,200 metres south east of the mineralisation originally outlined at Taborora and intersected in drill hole SK001 in December 2006. Highlights of mineralisation reported from two trenches excavated 80 metres apart on the prospect are set out in Table 3 below. The Vunuvalekama prospect is considered to be a promising target and appears both spatially and geologically to be a continuation of the Taborora stockworked porphyry.
Table 3 - Highlights of sampling from trench sampling at Vunuvalekama, 1.2km south east of the Taborora Vein system, Sutakiki.
| SAMPLE | gold | silver | copper | zinc | lead | Tellurium |
| ppm | ppm | ppm | ppm | ppm | ppm | |
| grab, vein | 6.8 | 50.5 | >10,000 | >10,000 | 4,910 | 116 |
| grab, vein | 7.04 | 60.8 | >10,000 | >10,000 | 3,340 | 30 |
| 2m composite | 1.01 | 13.5 | 4,810 | 4,280 | 3,020 | 94.7 |
| 2m composite | 0.83 | 9.7 | 5,490 | >10,000 | 1,710 | 5.17 |
| 2m composite | 4.51 | 10.4 | >10,000 | >10,000 | 187 | >250 |
| 2m composite | 4.09 | 2.5 | 475 | 1,300 | 119 | 59.4 |
| 2m composite | 0.61 | 1.8 | 461 | 4,020 | 2,340 | 4.48 |
| 2m composite | 0.61 | 1.2 | 588 | 31 | 40 | 0.83 |
| 2m composite | 4.65 | 6.3 | 244 | 2,050 | 757 | 33.7 |
| 2m composite | 2.45 | 6.5 | 639 | 2,790 | 800 | 29.3 |
| 2m composite | 1.63 | 5.5 | 1,140 | 2,770 | 276 | 12.4 |
| 2m composite | 1.24 | 3.7 | 92 | 463 | 8 | 5.98 |
| 2m composite | 2.59 | 12.5 | 7,910 | >10,000 | 466 | 68.9 |
Very high tellurium values were reported in both surface and drillhole samples showing significant gold values. Tellurium is considered to be rarer than gold in crustal abundance and the presence of such high values suggests the presence of a very large metalliferous porphyry system. High grade copper, silver, lead and zinc values (over 1%) are also reported. These values are characteristic of the marginal zones of a large metalliferous intrusive porphyry system and accordingly Solomon Gold believes the results provide further encouragement for the discovery of a major porphyry copper gold orebody at Sutakiki.
Excluding the two grab samples of 7.04g/t and 6.8g/t Au taken from epithermal quartz veins, the trench returned 24m @ 1.12g/t Au from the southern section and 24m @ 0.52g/t Au from the northern section. These gold values are believed to be derived from fine stockwork quartz magnetite and sulphide veins in the intrusive porphyry host.
The porphyry outcropping in the trenches is altered with promising clay quartz and sulphide minerals and is weathered. Fine stockwork (networks) of quartz veins accompanied by chalcopyrite and magnetite cut the porphyry with higher vein density in the south (accompanied by higher gold grades). Two parallel epithermal to mesothermal quartz veins up to 1m wide overprint the porphyry on the southern zone and returned samples assaying 7.04 and 6.8g/t gold.
Drillholes SK022 and SK023 were drilled under the Vunuvalekama trench site to test the mineralisation. Results of 9m @ 3.70g/t Au from 204m to 213m (including 3m @ 6.25g/t Au from 204m to 207m), 8m @ 7.25g/t Ag from 204 to 212m, 3m @ 1.3% Cu from 204m to 207m in SK022 were considered encouraging as were results of 11m @ 0.93g/t Au from 158m to 169m, 5m @ 0.728g/t Au from 196m to 201m and 12m @ 2g/t Ag from 158m to 170m in SK023.
Additional mapping and sampling at the Charimbarau prospect to the north of Vunuvalekama revealed an extensive zone of alteration and copper gold mineralisation with up to 15.0g/t Au and 0.79% Cu. The Charimbarau prospect is characterized by a magnetic low feature interpreted to be a zone of host rock alteration and mineralisation. Additional mapping and sampling is underway on this prospect to define a drilling target.
To the south of the Valehailala structure the Mbetigarutu drainages were considered prospective for porphyry copper gold targets on the basis of magnetic features indicative of a strongly mineralised intrusive body. A stream sediment sampling program has been implemented and the results will be used in the next phase of target generation in 2009.
Koloula Valley, Mbina prospect
During the year Solomon Gold engaged a third drilling rig to test the gold zones on the east side of the Mbina Porphyry system in the Koloula Valley, south of Sutakiki. Five holes were drilled between July 2007 and February 2008 to test a 1.5km x 300m zone centred around the Mbina Prospect in the upper reaches of the Koloula Valley. Mapping and sampling outlined a 1.5 metre wide low temperature epithermal vein, assaying 9.34g/t gold, 0.94% copper with high zinc, antimony and tellurium anomalies in the northern portion of the Mbina zone. Previous rock chip channel samples in the zone returned 125 m @ 0.5g/t gold and 0.23% copper along the Koloula River.
The prospective zone was tested with the first drillhole KL001 which encountered anomalism over the entire hole with best results over 1m intervals of 6.77, 2.36, 1.28, 1.25, 1.26, 3.61, 3.43, and 1.93g/t gold in thin veins with associated copper, zinc and lead mineralization.
The mineralisation at Mbina is diagnostic of a gold and zinc rich halo on the margins of a significant porphyry copper body. The Solomon Gold exploration team believes the source porphyry zone to lie less than 2km to the south west.
Figure 2: -Koloula rock chip samples
Chikora
During the year under review, exploration at Chikora, 2km south south west of Mbina targeted a copper molybdenum porphyry system. At Chikora copper and molybdenum mineralisation is evident over a 2.5 x 1.5km zone in which soil sampling data collected by Utah International in the 1970s and Solomon Gold's subsidiary ARM in the late 1990s and augmented by sampling during the year, returned values of up to more than 3,000ppm (0.3%) copper.
Utah drilled 13 short vertical holes into Chikora in the 1970s. The best hole was CH08 returning 115m @ 0.34% Copper and 142ppm Molybdenum from 152m to 266m and showing mineralisation strengthening with depth. Maximum values of 0.76% Cu and 820ppm molybdenum (0.082%) were intersected in the zone near the end of the hole. The hole was drilled vertically and is believed to have missed the sub-vertical quartz copper molybdenum sulphide veins outcropping in the Chikora prospect area.
During the year Solomon Gold drilled two inclined holes to a depth of 600 metres to test the true grade of the mineralisation evident on north south and east west vein sets at Chikora. The results were inconclusive (117m @ 0.17% Cu from DDH CK001, and 215m @ 0.17% Cu from DDH CK001) but in conjunction with the magnetic and soil geochemistry data suggest that the core of the porphyry system may lie several hundred metres to the west. The Company intends to test the Chikora target again in the next year.
Figure 3: Chikora Copper Molybdenum
Vurakare
During the year mapping and sampling in the area immediately north east of Chikora also outlined free molybdenite (MoS2) mineralisation in quartz veins, thought to be related to the Chikora porphyry.
Rock chip samples assayed up to 0.17% Molybdenum in rock chip samples at the Vurakare prospect on the north east of the Chikora grid. Mapping and rock chip sampling has identified intermittent zones of quartz veining containing visible molybdenite over a 600m x 200m zone of interest.
The Chikora prospect is situated at a vertical elevation of between 650 and 1,000 metres above sea level, and only 6km from the south coast of Guadalcanal. The Chikora prospect is believed by Solomon Gold geologists to represent a deeper, copper and molybdenum phase of the gold/zinc/lead mineralization evident at higher elevations at the Mbina (850 to 1,100m asl) and Sutakiki prospects (950 to 1,300m asl), located two and six kilometres respectively to the north north east.
Mbetilonga
During the last quarter, detailed mapping and sampling at the Hambusimaloso prospect in the Mbetilonga tenement, 15km south of Honiara outlined a cohesive zone, characterised by rich copper mineralisation typical of the upper zone of a mineralised copper porphyry system over a 300m x 400m area. Rock Chip sampling returned up to 8.53% copper and 69ppm molybdenum. Up to 9.8% copper and 243ppm molybdenum has been noted in previous rock chip sampling programs. Molybdenum is considered to be indicative of a porphyry system at depth and the presence of gypsum and anhydrite, two minerals characteristic of an oxidized cap to a porphyry system, is considered highly encouraging. The size and intensity of the copper soil anomaly at Hambusimaloso and the coincidence with magnetic features is considered to be encouraging. No drilling was conducted at Mbetilonga during the year. The Company will further evaluate the prospect prior to drilling using sophisticated clay alteration mapping techniques and the interpretation of the airborne electromagnetic data recently collected. Mbetilonga hosts the greatest number of targets of all of the tenement areas on Guadalcanal.
Figure 4: Mbetilonga Prospects soils Cu. Geol. Prospects and key rock results
Figure 5 : Hambusimaloso mapping and sampling
Figure 6 : Hambusimaloso Copper Mineralisation
Chupukama
Since the end of the year, the Company has been successful in gaining access into the Chupukama Ridge prospect located in the centre east section of the central tenement, some 7km north west of the Sutakiki prospects. The Chupukama prospect has not been accessed by Solomon Gold or ARM since 1997 and is considered prospective for copper gold porphyry bodies and epithermal gold mineralisation. A mineralised zone exposed in a landslide and sampled in 1997 returned a 50 metre intersection in a channel sample of 2.4g/t gold including 5m @ 12.7g/t of gold. Individual rockchip highlights of 46.8g/t gold and 8.37g/t gold have been recorded. The prospect shows the necessary complexity and alteration features characteristic of a mineralised intrusive porphyry system. Magnetic interpretation has identified a magnetic target to the west of the mineralised zone. Solomon Gold geologists are currently mapping and sampling the prospect in detail and with the airborne electromagnetic survey data are expected to define drill targets in the area.
Results have been received for soil sampling traverses over aeromagnetic anomalies adjacent to known gold anomalous areas at Chupukama. The samples show elevated levels of copper mineralisation, which in the context of the magnetic anomaly and adjacent gold mineralisation, outline a copper porphyry target. Copper anomalism ranges from 0.1% copper to 1.37% copper in soil samples across a core zone 200m wide. The mineralised system on the basis of magnetics and gold results in the eastern portion covers an area of 1km x 1km. The core zone, coincident with a magnetic high feature, is some 200 x 700 metres and is surrounded by magnetic low features indicative of an alteration zone of up to 300 metres wide.
Figure 7 : Chupukama Copper - Gold Porphyry
Solomon Gold expects that the target zones at Chupukama will be properly and more intensively investigated in the course of the next field exploration program.
Figure 8: Chupukama gold grades
Kuma
During the year the Kuma project area on the south coast of Guadalcanal was accessed and a detailed mapping and sampling program conducted. The program defined an extensive area of alteration and sulphide mineralization - positive indicators of a major mineralized system. Within this zone, additional mapping and sampling of the Kuma project area were conducted to define the extent and geochemistry of an extensive area of pyrite silica cap rock thought to overlie a porphyry prospect at depth. A zone covering 1km2 with rock chip gold anomalies up to 0.69g/t gold and up to 14g/t silver forms the core of the area of interest. Magnetic and airborne electromagnetic data collected during the current airborne electromagnetic survey will also assist in the definition of future drill targets. An elliptical magnetic feature underlying the cap rock zone is considered encouraging and supports an intrusive porphyry target at Kuma. The current extent of the mineralised cap rock is over 3km x 1.5km and the zone is believed to extend to the west into the Koloula tenement.
Figure 9: Kuma Geology Structure Rock Chip Sampling
Figure 10: Kuma Magnetics
Fauro Island
The Fauro project area is located on the north western end of Solomon Islands on the island of Fauro, Shortland group of islands, Western Province, immediately south of the Papua New Guinea border and approximately 50 kilometres south east of the giant Panguna copper gold porphyry deposit on Bougainville Island. Fauro Island lies on the south-east trending volcanic arc that extends from the Tabar group of islands in Papua New Guinea through the Solomon Islands volcanic chain. Fauro Island exhibits all the favourable characteristics of an area that is highly prospective for both oxide and epithermal gold mineralisation. Solomon Gold holds a 100% interest in a Prospecting License Application over Fauro Island.
Figure 11: Fauro Island Project Location
The Fauro project area covers an extinct volcanic caldera with extensively altered and brecciated quartz rich intrusive and volcanic rocks. The area has yielded significant gold anomalies in surface sampling and drilling programs conducted by other explorers, notably BHP, in the late 1980s and Western Pacific Mining Corporation in the late 1990s. In the light of the results of work carried out initially by the Solomon Islands' Ministry of Natural Resources in the early 1970s and by these previous explorers Solomon Gold considers the Fauro gold project area to have considerable potential for the discovery of both oxide and epithermal gold deposits. The area covered by the Prospecting Licence Application measures approximately 70km2 and is considered by Solomon Gold to be geologically analogous to the Lihir Island gold mine which has reported measured and indicated resources of approximately 35 million ounces of gold.
The BHP work programs yielded gold anomalies from soil, rockchip, channel and drill core samples on numerous targets over a 16km2 area interpreted to be the remnant western rim of a volcanic crater which had developed over the upper levels of a large copper and gold system. Solomon Gold considers the location of the project, approximately 50km south east of the giant Panguna porphyry copper gold deposit on the Island of Bougainville is testimony to the prospectivity of Fauro. The geology of the area indicates that the mineral system has been exposed at a high level in the gold dominant zone. This level is considered to be analogous to the depth of exposure for Lihir Island.
Work by earlier explorers on Fauro defined a number of prospects. Three of the more advanced prospects are Kiovakase, Hornbill and Meriguna, key results for which are summarised below. The Ballyorlo and Bataha prospects also show high prospectivity based on stream sediment sampling and geology but require further work.
Kiovakase Prospect:
400m x 150m gold in soil anomaly (>0.2g/t Au)
Highest gold in soil value of 2g/t Au
Channel sampling in bulldozer cuts returned up to 18m at 1.42g/t Au
Highest grade rock chip sample of 317g/t Au
Best results from the four drillholes completed at Kiovakase were:
Table 4: Kiovakase Drill Results
| Hole ID | Depth m | Au g/t |
| KD1 | 16 - 17 | 0.61 |
| KD4 | 66 - 67 | 0.54 |
Hornbill Prospect:
480m x 400m gold in soil anomaly open to south and west in a silicified dacite host
At least seven sub-parallel zones of gold enrichment
Highest gold in soil value of 22.6g/t
Channel sampling in bulldozer cuts returned up to 30m @ 1.42gpt Au with one zone of 2.5m grading 24.60g/t Au
Highest grade rock chip sample of 5.04g/t Au
Two drillholes started by Western Pacific showed significant mineralisation reporting a 0.5m intersection grading 8g/t Au and a 5m zone @ 0.32g/t Au. A second hole encountered a pyritic stockwork and terminated in mineralisation at 116m.
Meriguna Prospect:
500m x 300m gold in soil anomaly open to south and west
Highest gold in soil value of 1.45g/t Au
Channel sampling in bulldozer cuts returned 30m @ 1.6g/t Au, 10m @ 5g/t Au and 6m @ 4.9g/t Au
Other trench results include: 5m @ 3.95g/t Au, 30m @ 1.60g/t Au, 4m @ 8.74g/t Au, 6m @ 2.3g/t Au, 5m @ 2.93g/t Au and 6m @ 4.90g/t Au.
Reported diamond drill intersections from the Loklokimola area of Meriguna Prospect include:
Table 5: Meriguna Prospect - Historic diamond drill intersections from the Loklokimola area
| Hole ID | Depth m | Thickness m | Au g/t |
| LD1 | 57 - 58 | 1 | 0.66 |
| 76 - 77 | 1 | 0.58 | |
| LD2 | 3 - 16 | 13 | 0.95 |
| 81 - 83 | 2 | 0.73 | |
| LD3 | 44 - 45 | 1 | 0.73 |
| 49 - 53 | 4 | 0.55 | |
| 73 - 75 | 2 | 3.00 | |
| 110 - 111 | 1 | 1.88 | |
| 113 - 114 | 1 | 0.63 | |
| LD4 | 4 - 6 | 2 | 0.94 |
| 16 - 18 | 2 | 1.43 | |
| 22 - 24 | 2 | 0.91 | |
| 28 - 32 | 4 | 2.52 | |
| 46 - 48 | 2 | 0.59 | |
| 54 - 57 | 3 | 0.79 | |
| LD5 | 4 - 6 | 2 | 0.55 |
| 18 - 24 | 6 | 0.85 | |
| 30 - 44 | 14 | 1.06 |
The historic results indicate the potential for a significant gold resource in oxidised zones close to the surface and Solomon Gold intends to test these prospects systematically by trenching followed by a shallow and an extensive drilling program. Deeper drilling will also be undertaken to test systems which would have been sources for the oxide zones.
The Company commenced a program of immediate community liaison on Fauro to reinvigorate previously established relationships with a view to access agreements being executed swiftly. To date however an access and compensation agreement has not been negotiated and efforts are continuing. Solomon Gold intends to establish a camp to provide support for a mapping sampling and geophysical and drilling program to enable rapid follow up during the next year of previous results collected by earlier explorers and by the Solomon Islands Ministry of Natural Resources.
Airborne Electromagnetic Survey
Since the end of the year, the airborne electromagnetic survey has been completed. Data processing and interpretation is expected to be completed by the end of February 2009 and will enable the selection of a renewed set of targets for detailed follow up mapping and sampling, prior to drill testing. The survey has been flown at a 60 metre elevation over a total distance of 4000 line kilometres with a line spacing of 100 metres. The survey has also collected new magnetic data over the Kuma area on the east side of the Koloula tenement Kuma has not previously been the subject of a magnetics survey.
Nickel Project, Ngella Florida Islands
During the year, the company applied for three Prospecting Licences over areas on Ngella Florida Islands, Eastern Guadalcanal and the Island of Makira.
Following grant of the Prospecting Licence on Ngella in October 2007, sampling of lateritised serpentinite greenstone zones at the Ngella Nickel Prospect outlined a zone over 2km long and 1km wide open to the south which contains potentially economic nickel grades of up to more than 2% nickel taken from the bottom of one of the pits. Samples in most pits ended in mineralisation averaging 0.5% Ni and the company considers that many of the hand dug surface pits have not reached a sufficient depth to have completely sampled the entire profile of the mineralised zone. Historical sampling by the British Geological Survey has identified nickel mineralisation up to 1.6% nickel in Hay Hill on the south western side of the Ngella nickel prospect. Nickel mineralisation is targeted undercover to the southeast of the known mineralized zone.
Since 30 June 2008, the Company has defined a maiden resource of 1.695 Mt at a grade of 0.6% nickel and 0.06% Cobalt at Ngella. Based on increased grades at the bottom of pits, a target of 5.4 Mt at a grade of 1.0% nickel and 0.1% cobalt has been defined and will be tested with further pitting. Additional targets exist to the south east, under barren cover.
The company is assessing the potential for power augering of the prospect to define nickel mineralised zones at depth.
Figure 12: Ngella Prospect Nickel Sampling
Risks and Uncertainties
The Directors consider that the factors and risks described below are the most significant.
Use of Funds
The Company has prepared detailed budgets setting out the way in which it proposes its funds from time to time. However, the quantum and timing of expenditure will necessarily be dependent upon the continued positive results from the Company's ongoing exploration activities on the Tenements and an ongoing acceptable state of law and order. The programs and budgets and terms of expenditure in respect of the tenements, the subject of the Terms Sheet with Newmont, are largely dependant on finalisation of a definitive agreement and decisions to be made by Newmont in accordance with such a definitive agreement based on the Terms Sheet. The Terms Sheet provides for a minimum expenditure by Newmont in the first year of US$1.5 million. It is possible that results and circumstances may dictate a departure from the existing budget at the time. Further, the Company may, from time to time as opportunities arise, utilise part of its financial resources (including the funds raised as part of the Placing) to participate in additional opportunities that arise and fit within the Company's broader objectives, as a means of advancing shareholder value.
No production history
The Group currently has no producing properties and its ultimate success may depend on its operating ability to generate cashflow from producing properties in the future. The Group has not generated any revenue from mining to date and there is no assurance that it will do so in the future. The interest the Group may have in the field operations on the exploration tenements on Guadalcanal may depend on the decision of Newmont pursuant to the Terms Sheet agreed with Newmont.
General exploration and extraction risks
There is no certainty that the Company will identify commercially mineable reserves in the Tenements. The Company is currently in the early stages of exploration. The exploration for and development of mineral deposits involves significant uncertainties and the Group's operations will be subject to all of the hazards and risks normally encountered in such activities and in addition, several unusual risks. These hazards and risks include unusual and unexpected geological formations, rock falls, landslides, flooding and other climatic conditions, aircraft or boat accidents and injury or death in civil unrest any one of which could result in damage to, or destruction of, the Company's facilities, damage to life or property, environmental damage or pollution and legal liability which could have a material adverse impact on the business, operations and financial performance of the Company. Although precautions to minimise risk will be taken, even a combination of careful evaluation, experience and knowledge may not eliminate all of the hazards and risks. There are no key man insurance policies taken out on any of the Company's personnel.
The Company's exploration models and the bases for its search for potential resources are subject to variation or alternate interpretation from time to time as a result of the receipt of new exploration data and interpretation thereon which may not be evident to the Company or the Directors at the date of this document.
The targets identified by the Company's personnel and consultants, are based on current experience and modelling and all available data. There is no guarantee that surface sample grades of any metal or mineral taken in the past will persist below the surface of the ground.
As is common with all exploration ventures, there is also uncertainty and therefore risk associated with the Company's operating parameters and costs which can be difficult to predict and are often affected by factors outside the Company's control. Few properties which are explored are ultimately developed into producing assets. There can be no guarantee that the estimates of quantities and grades of gold and minerals disclosed will be available for extraction and sale. With all natural resources operations there is uncertainty and, therefore, risk associated with operating parameters and costs resulting from the scaling up of other extraction methods tested in pilot conditions. Natural resources exploration is speculative in nature and there can be no assurance that any potential mineral deposits will be discovered.
Project development risks
If the Company discovers a potentially economic resource or reserve there is no assurance that the Company will be able to develop a mine thereon, or otherwise commercially exploit such resource or reserve. Further, there can be no assurance that the Company will be able to manage effectively the expansion of its operations or that the Company's current personnel, systems, procedures and controls will be adequate to support the Company's operations as operations expand. Any failure of management to manage effectively the Company's growth and development could have a material adverse effect on the Company's business, financial condition and results of operations. There is no certainty that all or, indeed, any of the elements of the Company's current strategy will develop as anticipated.
Operational considerations
The Company's operational targets are subject to the completion of planned operational goals on time and according to budget and are dependent on the effective support of the Company's personnel, systems, procedures and controls. Any failure of these may result in delays in the achievement of operational targets with a consequent material adverse impact on the business, operations and financial performance of the Company.
The locations of all of the Company's current exploration activities dictate that climatic conditions have an impact on operations and, in particular, severe weather, including cyclones, could prevent access to the Tenements and disrupt the delivery of supplies, equipment and fuel. It is therefore possible that exploration and extraction activity levels might fluctuate. Unscheduled interruptions to the Company's operations due to mechanical or other failures, or industrial relations-related issues, or problems with the supply of goods or services could have a serious impact on the financial performance of those operations. Being located on the Pacific ''Rim of Fire'', Solomon Islands are exposed to the risk of damage from earthquakes and tsunami.
Operations in Solomon Islands will expose the Company's staff, contractors and consultants to a variety of tropical diseases and related risks. These include but are not limited to malaria and other numerous skin diseases. The Company may be exposed to liabilities as a result of this.
To save unnecessary cost, the Company has terminated the helicopter services agreement with the Contractor without penalty.
There are also operational risks associated with frequent power outages that occur in Solomon Islands' capital, Honiara. These regular outages make the transacting of business in Solomon Islands difficult, and may have an adverse impact on the ability of the Company to achieve its objectives in a timely manner.
Personnel
The Company has a small management team and the loss of any key individual could affect the Group's business. Additionally, the Company will be required to secure other personnel to facilitate its exploration programme on each of the Tenements. Any inability to secure appropriate or retain current personnel may have a materially adverse impact on the business and operations of the Company. With the reduction in the intensity of the drilling campaign, the Company has reduced the full and part-time employees and contractors to a necessary minimum and plans to engage field assistance when necessary to effect approved field work campaigns.
Economic, political, judicial, administrative, taxation or other regulatory factors
The Company may be adversely affected by changes in economic, political, judicial, administrative, taxation or other regulatory factors, in the areas in which the Company (through its subsidiary ARM) operates and holds its major assets.
No assurance can be given as to the future policies of any new Government that might be elected. Any policy changes of any new Government may have a material adverse impact on the business, operations and financial performance of the Company.
Tenements and regulatory environment
ARM tenements 02/05, 03/05 and 04/05 were recently renewed for 2 years. A period of 8 months was added to the tenure of PL 05/05 Sutakiki to 10/7/2009. There is no guarantee that if ARM applies for a mining lease in respect of minerals it has discovered within the Tenements that it will be granted one. The grant of a mining lease is subject to the exercise of ministerial discretion and no guarantee can be given as to the favourable exercise of any such discretion. There is no guarantee of the terms of any mining lease. The exploration and extraction activities of ARM are subject to various laws governing prospecting, development, production, taxes, labour standards and occupational health, site safety, toxic substances, environmental and other matters. Although the Directors believe that ARM's exploration activities are currently carried out in accordance with all applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing or future rules and regulations will not be applied in a manner which could limit or curtail exploration, production or development. Amendments to current laws and regulations governing operations and activities of exploration and extraction, or more stringent implementation thereof, could have a material adverse impact on the business, operations and financial performance of the Company.
Title matters
Whilst the Company has the benefit of granted PLs and has diligently investigated its title to, and rights and interests in, the Tenements, there is no absolute guarantee that such title, rights and interests will be held valid in the event of any undetected defects. If a defect does exist it is possible that ARM may lose all or part of its interest in those Tenements to which the defect relates.
The grant and future renewals of PLs, as the case may be, are governed by the requirements and restrictions set out in the Mining Act. Whilst the Company believes it is entitled to rely upon all the actions of the Minerals Board and the Minister as being valid, compliance with the requirements and restrictions under the Mining Act may be open to differing interpretations which, in the case of an adverse interpretation, may have a material adverse effect on the Company's title.
Volatility of prices of gold and copper
The market prices of gold and copper are volatile and are affected by numerous factors which are beyond the Company's control. These include international supply and demand, the level of consumer product demand, international economic trends, currency exchange rate fluctuations, interest rates, inflation, global or regional political events and international events as well as a range of other market forces. Sustained downward movements in gold or copper prices could render less economic, or uneconomic, some or all of the exploration activities to be undertaken by the Group.
Currency fluctuations
The future value of the Ordinary Shares may fluctuate in accordance with movements in the foreign currency exchange rates. For example, it is common practice in the mining industry for mineral production revenue to be denominated in USD, although some but not all of the costs of exploration production will be incurred in USD and not all of the ore or metal obtained from the Tenements will be sold in USD denominated transactions.
Uninsured risks
The Company, as a participant in exploration and potential extraction activities, may become subject to liability for hazards that cannot be insured against or against which it may elect not to be so insured because of high premium costs. Furthermore, the Company may incur a liability to third parties (in excess of any insurance cover) arising from negative environmental impact or other damage or injury.
Additional requirements for capital
Substantial additional financing may be required if the Company is to be successful pursuing its ultimate strategy. No assurances can be given that the Company will be able to raise the additional finance that it may require for its anticipated future operations. Copper and gold prices, environmental rehabilitation or restitution, revenues, taxes, transportation costs, capital expenditures, operating expenses and geological results and the political environment are all factors which will have an impact on the amount of additional capital that may be required. Any additional equity financing may be dilutive to investors and debt financing, if available, may involve restrictions on financing and operating activities. There is no assurance that additional financing will be available on terms acceptable to the Company or at all. If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations or anticipated expansion, forfeit its interest in some or all of the Tenements, incur financial penalties or reduce or terminate its operations.
Landowner issues
In the case of mining and exploration operations in Solomon Islands, there is a complex land tenure structure and while ARM's PLs and Access Agreements entitle it to explore for the duration of the term of each PL, the existing legislative framework only provides for limited forms of negotiation between the landowners/community leaders on the one hand and mining companies on the other. It is also incumbent on the Director of Mines and the mining tenement holder to identify which landowners and community leaders they need to negotiate with. The Company does not guarantee that the identifications made to date and upon which the Access Agreements are currently based may not be contested. As a consequence there may be unexpected difficulties experienced in progressing a promising resource into a commercial mining operation.
The Company has also procured Access Agreements for areas within the Tenements after the grant of the Tenement. Whilst the Company believes that it is entitled to rely upon the same to conduct exploration within these areas, no assurance can be given that there may not be some future challenge to the Company's ability to do so.
Whilst the Company has the Access Agreements with landowners covering the majority of the prospective areas identified by the Company within the Tenements, its ability to carry out exploration in the residual areas will require additional access agreements to be entered into. The ability of the Company to secure the benefits of all of the access agreements is dependent upon, inter alia, the contracting parties' willingness to perform and discharge their obligations thereunder. There may be legal and commercial limitations in respect of enforcement of contractual rights. Additionally, the Company will not be permitted to explore in areas nominated by the landowners as reserved or protected areas under section 4(2) of the Mining Act. Whilst the Company is actively seeking to liaise with landowners to identify relevant reserved or protected areas, some considerable uncertainty exists as to the precise location of these areas, the identification of which requires the input of the indigenous population. The inability of the Company to identify these areas, or a claim by landowners that reserved or protected areas exist over areas identified by the Company as prospective, may have a material adverse effect on the ability of the Company to conduct its exploration programme in the manner identified in this document.
Access agreements have been recently renewed for the tenements PL's, 02/05, 03/05 and 04/05.
Sovereign risk and civil disobedience
The Company intends to make significant investment of capital in Solomon Islands. The conduct of exploration and mining-related activities and the investment of capital and placement of personnel in Solomon Islands are potentially subject to a degree of sovereign risk and civil disobedience generally. A decay in law and order in Solomon Islands may expose the Company to un-budgeted costs delays and other potential damage and loss.
Environmental risks
Inherent with mining operations is an environmental risk. The legal framework governing this area is constantly developing. Thus the Company is unable to fully ascertain any future liability that might arise from new law or regulation although such regulation is typically strict and may impose severe penalties.
The proposed activities of the Company, as with any exploration, may have environmental impact which may result in unbudgeted delays, damage, loss and other costs and obligations including, without limitation, rehabilitation and/or compensation. Additionally, there is a risk that the Company's operations and financial position may be adversely affected by the actions of environmental groups or any other group or person opposed in general to the Company's activities and in particular the proposed exploration and mining by the Company within Solomon Islands.
Taxation
In addition to the normal level of corporation tax imposed on all companies, mining companies are required to pay government royalties, indirect taxes and other imposts which generally relate to revenue or cash flows. Industry profitability can be affected by changes in government taxation policies.
ARM carries on business in Solomon Islands and will be subject to income and other taxes in that country. The rates of taxation that may apply to ARM on income and other profits may be higher than the rates that apply in the United Kingdom or Australia. No guarantee can be given that these rates will not vary.
FINANCIAL REVIEW
Equity
On 18 December 2007 the Company completed a placing of 17,500,000 ordinary shares at 18 pence per share for a cash consideration of £3,150,000 (A$7,233,270 less share issue costs of A$130,819).
On 23 August 2007, 700,000 unlisted share options in Solomon Gold plc were cancelled as a result of employee resignations.
On 31 December 2007 the Company issued 1,380,000 unlisted share options to management and staff of the Company. The options were issued free of charge and are exercisable at prices between 25 pence and 75 pence per ordinary share. The period during which these share options can be exercised is between 31 December 2007 and 31 December 2010.
On 31 December 2007 the Company also granted 500,000 unlisted share options for nil consideration to RFC Corporate Finance Limited ("RFC"), the Company's nominated advisor ("NOMAD"). RFC were appointed as NOMAD on 8 November 2007. These share options were granted at an exercise price of 20 pence per ordinary share and can be exercised up to 8 November 2010.
On 31 January 2008 the Company issued 1,000,000 unlisted share options to directors of the Company. The options were issued free of charge and are exercisable at prices between 25 pence and 75 pence per ordinary share. The period during which these share options can be exercised is between 31 January 2008 and 31 December 2010. Further details of these options are set out in the Directors Report.
On 27 May 2008 the Company issued 400,000 unlisted share options to employees of the Company. The options were issued free of charge and are exercisable at prices between 25 pence and 75 pence per ordinary share. The share options can be exercised up to 31 December 2010.
At 30 June 2008 the Company had 44,325,001 ordinary shares, 4,969,997 unlisted options and 326,400 unlisted warrants on issue.
At the date of this report, the Company had 55,991,668 ordinary shares, 4,969,997 unlisted options and 326,400 unlisted warrants on issue.
Financial Controls and Risk Management
The Board regularly reviews the risks to which the Group is exposed and ensures through Board Committees and regular reporting that these risks are managed and minimised as far as possible. The Audit Committee is responsible for the implementation and review of the Group's internal financial controls and financial risk management systems.
Nominated Advisors and Brokers
On 8 November 2007 the Company appointed RFC Corporate Finance Limited ("RFC") and Hanson Westhouse Limited to act as Nominated Advisor and Broker to the Company respectively.
DIRECTORS
The Board consists of one Executive Director and three Non-Executive Directors.
Cameron Wenck
(Non-Executive Chairman)
Cameron Wenck (47), appointed 22 November 2005, is a financial adviser and company director with 18 years' experience in the financial services industry. Earlier in his career he worked for the London stockbrokers Scrimgeour Vickers and chartered accountants PricewaterhouseCoopers. He has a Bachelor of Commerce, a Diploma of Financial Planning, is a Fellow of the Australian Society of Accountants and a Certified Financial Planner.
Nicholas Mather
(Chief Executive Officer)
Nicholas Mather (51), appointed 11 May 2005, graduated in 1979 from the University of Queensland with a B.Sc. (Hons, Geology). He has over 25 years' experience in exploration and resource company management in a variety of countries. His career has taken him to numerous countries exploring for precious and base metals and fossil fuels. Nicholas Mather has focused his attention on the identification of and investment in large resource exploration projects.
He was managing director of BeMaX Resources NL (an ASX-listed company) from 1997 until 2000 and instrumental in the discovery of the world class Ginkgo mineral sand deposit in the Murray Basin in 1998. As an executive director of Arrow Energy NL (also ASX-listed) until his resignation in 2004, Nicholas Mather drove the acquisition and business development of Arrow's large Surat Basin Coal Bed Methane project in south-east Queensland. He was managing director of Auralia Resources NL, a junior gold explorer, before its USD23 million merger with Ross Mining NL in 1995. He was a non-executive director of Ballarat Goldfields NL until 2004, having assisted that company in its recapitalisation and re-quotation on the ASX in 2003.
Nicholas Mather is Chief Executive of D'Aguilar Gold Ltd, a non-executive director of ASX-listed companies Bow Energy Limited and Mt Isa Metals Limited and non-executive director of TSX-V listed Waratah Coal Inc.
Brian Moller
(Non-Executive Director)
Brian Moller (50), appointed 11 May 2005, is a corporate partner in the Brisbane-based law firm Hopgood Ganim Lawyers, the Australian solicitors to the Company. He was admitted as a solicitor in 1981 and has been a partner at Hopgood Ganim since 1983. He practices almost exclusively in the corporate area with an emphasis on capital raising, mergers and acquisitions.
Brian Moller holds an LLB Hons from the University of Queensland and is a member of the Australian Mining and Petroleum Law Association.
Brian Moller acts for many publicly-listed resource and industrial companies and brings a wealth of experience and expertise to the board, particularly in the corporate regulatory and governance areas. He is a non-executive director of ASX listed D'Aguilar Gold Ltd and Platina Resources Ltd and TSX-V listed WCB Capital Ltd.
Dr Robert Weinberg
(Non-Executive Director)
Rob Weinberg (61), appointed 22 November 2005, gained his doctorate in geology from Oxford University in 1973. He has more than 30 years experience of the international mining industry and is an independent mining research analyst and consultant. He is a Fellow of the Geological Society of London.
Prior to his current activities he was Managing Director, Institutional Investment at the World Gold Council, and a Director of Gold Bullion Securities. Previously he was a Director of the investment banking division at Deutsche Bank in London after having been head of the global mining research team at SG Warburg Securities. He has also held senior positions within Société Générale and was head of the mining team at James Capel & Co. He was formerly marketing manager of the gold and uranium division of Anglo American Corporation of South Africa Ltd.
Dr Weinberg is a non-executive Director of AIM listed Falkland Gold and Minerals Ltd, ASX listed Kasbah Resources Ltd and Medusa Mining Ltd, a company listed on the ASX, AIM and the Frankfurt Stock Exchange
SECRETARY
Mr Kevin Nagle commenced as the Secretary of the Company on 3 November 2008.
Kevin Nagle
(Company Secretary and Chief Financial Officer)
Kevin Nagle (47) has over ten years experience in the accounting profession. He has been employed in accounting roles with resource companies Mount Isa Mines and Southern Pacific Petroleum. He has also held the position of Chief Financial Officer / Company Secretary with ASX listed The Rock Building Society.
Mr Nagle is a Certified Practising Accountant and holds a Bachelor of Business (Accounting).
DIRECTORS' REPORT
The directors present their annual report and audited financial statements for the year ended 30 June 2008.
PRINCIPAL ACTIVITIES
The principal activities of Solomon Gold plc (the "Company") and its subsidiaries (together "Solomon Gold" or the "Group") are gold and mineral exploration in Solomon Islands. Details of the Group's activities, together with a description of the principal risks and uncertainties facing the Group, and the development of the business, are given in the Chairman's Statement and Operations Review.
The principal activity of the Company is that of a holding company.
BUSINESS REVIEW
A review of the Group's business and future developments is set out in the Operations review and Financial review.
LAND AND BUILDINGS
The directors are of the view that the book value and market value of land and buildings are not materially different. The land and buildings were acquired during 2007 and no independent valuation has been obtained since its acquisition.
GOING CONCERN
In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in discrete tranches. The Company has arranged two tranches of loan financing which will be sufficient to meet its needs through to March 2009. The directors are in the process of securing further additional funds to enable it to proceed with its approved plan of expenditure and to provide adequate working capital for a reasonable period thereafter. They are also in the process of finalising joint venture arrangements in connection with the Group's major copper/gold exploration project on Guadalcanal, which will provide for the funding required to advance those projects. The directors are confident that these various financial arrangements can be successfully concluded and that the Group is a going concern. In the event that the Company is unable to secure further finance it may not be able to continue as a going concern.
In addition, the funds will not be sufficient to bring the projects into development and production and, in due course, further funding will be required. In the event that the Company is unable to secure further finance either through its current arrangements with Newmont, other third parties or capital raisings, it may not be able to fully develop the project.
CURRENCY
The functional and presentational currency is Australian dollars ("A$") and all amounts presented in the Directors' Report and financial statements are presented in Australian dollars unless otherwise indicated.
RESULTS
The Group's consolidated loss for the period was A$1,603,627 (2007: A$1,201,646).
CHANGES IN SHARE CAPITAL DURING 2008
A statement of changes in the share capital of the Company is set out in note 15 to the financial statements.
KEY PERFORMANCE INDICATORS
Given the stage of the Group's operations, the Board regards the maintenance of tenure and land access arrangements, maintenance of operation capabilities and the continued collection of exploration data in order to advance the prospectivity of the project areas to be the key performance indicators in measuring the Group's success and future success. The review of the business with reference to key performance indicators is set out in the Operations and Financial Review.
DIVIDENDS PAID OR RECOMMENDED
The directors do not recommend the payment of a dividend.
FINANCIAL INSTRUMENTS
The Company does not undertake financial instrument transactions that are speculative or unrelated to the Company's or Group's activities. The Company's financial instruments consist mainly of deposits with banks, accounts payable, and loans to subsidiaries. Further details are provided in note 18 to the financial statements.
POLICY AND PRACTICE ON PAYMENT OF CREDITORS
The Group policy on the payment of creditors is to settle bills in accordance with the terms agreed with suppliers.
At the year end there were 11 days (2007: 7 days) worth of purchases in Group trade creditors and 10 days (2007: 14 days) worth of purchases in Company trade creditors.
SUBSEQUENT EVENTS
On 3 November 2008, Kevin Nagle was appointed Company Secretary and CFO.
On 19 November 2008, 11.7 million shares were placed to raise £350,000.
On 28 November 2008, Duncan Cornish resigned as Company Secretary and CFO.
On 26 November 2008, Solomon Gold finalised proposed Terms of Agreement with Newmont Ventures Limited on Guadalcanal projects.
On 8 December 2008, tenement renewals confirmed for PL02/05; PL03/05 and PL04/05 all for two years from 8 December 2008 to 7 December 2010.
On 9 December, the helicopter services agreement with the contractor was terminated without penalty.
On 17 December 2008, Samuel Holdings Pty Ltd (a related party of a Director; Nicholas Mather) entered into a loan with Solomon Gold plc for AUD$200,000.
On 17 December 2008, Samuel Holdings Pty Ltd (a related party of a Director; Nicholas Mather) entered into a commitment to cause and procure a Convertible Note by 30 January 2009 with Solomon Gold plc for GBP£221,915.
DIRECTORS AND DIRECTORS' INTERESTS
| Cameron Wenck | Non-Executive Chairman |
| Nicholas Mather | Chief Executive Officer |
| Brian Moller | Non-Executive Director |
| Robert Weinberg | Non-Executive Director |
The directors who held office during the period were as follows:
The Company has a Directors' and Officers Liability insurance policy with AFM Insurance Brokers Pty Ltd for all its directors.
The directors who held office at the end of the financial year held interests in the ordinary shares and unlisted options of the Company as shown in the tables below.
| Shares held | At 30 June 2008 | At 30 June 2007 |
| Nicholas Mather | 2,905,680 | 565,159 |
| Brian Moller | 210,518 | 92,535 |
| Cameron Wenck | 332,045 | 212,045 |
| Robert Weinberg | 82,556 | 27,000 |
On 31 January 2008, the Company issued share options exercisable at prices between 25 pence and 75 pence per ordinary share to the following directors: Nicholas Mather 500,000, Cameron Wenck 200,000, Brian Moller 150,000 and Robert Weinberg 150,000. The period during which these share options can be exercised is between 31 January 2008 and 31 December 2010.
| Share options held | At 30 June 2008 | At 30 June 2007 | Option Price | Exercise Period |
| Share options held | At 30 June 2008 | At 30 June 2007 | Option Price | Exercise Period |
| Nicholas Mather | 233,333 | 233,333 | 50p | 01/01/07 - 01/01/10 |
| 233,333 | 233,333 | 75p | 01/01/08 - 01/01/11 | |
| 233,334 | 233,334 | 100p | 01/01/08 - 01/01/11 | |
| 250,000 | - | 25p | 31/01/08 - 31/12/10 | |
| 125,000 | - | 50p | 31/01/08 - 31/12/10 | |
| 125,000 | - | 75p | 31/01/08 - 31/12/10 | |
| Cameron Wenck | 25,000 | 25,000 | 50p | 01/01/07 - 01/01/10 |
| 25,000 | 25,000 | 75p | 01/01/08 - 01/01/11 | |
| 25,000 | 25,000 | 100p | 01/01/08 - 01/01/11 | |
| 100,000 | - | 25p | 31/01/08 - 31/12/10 | |
| 50,000 | - | 50p | 31/01/08 - 31/12/10 | |
| 50,000 | - | 75p | 31/01/08 - 31/12/10 | |
| Brian Moller | 25,000 | 25,000 | 50p | 01/01/07 - 01/01/10 |
| 25,000 | 25,000 | 75p | 01/01/08 - 01/01/11 | |
| 25,000 | 25,000 | 100p | 01/01/08 - 01/01/11 | |
| 75,000 | - | 25p | 31/01/08 - 31/12/10 | |
| 37,500 | - | 50p | 31/01/08 - 31/12/10 | |
| 37,500 | - | 75p | 31/01/08 - 31/12/10 | |
| Robert Weinberg | 25,000 | 25,000 | 50p | 01/01/07 - 01/01/10 |
| 25,000 | 25,000 | 75p | 01/01/08 - 01/01/11 | |
| 25,000 | 25,000 | 100p | 01/01/08 - 01/01/11 | |
| 75,000 | - | 25p | 31/01/08 - 31/12/10 | |
| 37,500 | - | 50p | 31/01/08 - 31/12/10 | |
| 37,500 | - | 75p | 31/01/08 - 31/12/10 |
MAJOR SHAREHOLDERS
The Company had been notified of the following interests in shares held as at 12 December 2008:
| Major Shareholders | Number of Shares | % of Issued Capital |
| Samuel Holdings Pty Ltd | 5,256,140 | 9.43 |
| Tenstar Trading Limited | 4,892,433 | 8.78 |
| Barclayshare Nominees Limited | 3,706,151 | 6.65 |
| HSBC Global Custody Nominee (UK) Ltd | 2,750,000 | 4.93 |
| EVO Nominees Limited | 2,528,259 | 4.54 |
| James Capel (Nominees) Limited | 2,300,434 | 4.13 |
| L R Nominees Limited | 2,037,746 | 3.66 |
| HSDL Nominees Limited | 1,839,011 | 3.30 |
CORPORATE GOVERNANCE
In formulating the Company's corporate governance procedures the Board of Directors takes due regard of the principles of good governance set out in the Combined Code issued by the Financial Reporting Council in June 2006 (as appended to the Listing Rules of the Financial Services Authority) so far as is practicable for a company of Solomon Gold's size.
The Board of Solomon Gold plc is made up of one executive director and three non-executive directors. Cameron Wenck chairs the Board and Nicholas Mather is the Company's Chief Executive. It is the Board's policy to maintain independence by having at least half of the Board comprising non-executive directors who are free from any business or other relationship with the Group. The structure of the Board ensures that no one individual or group is able to dominate the decision making process.
The Board ordinarily meets on a monthly basis providing effective leadership and overall control and direction of the Group's affairs through the schedule of matters reserved for its decision. This includes the approval of the budget and business plan, major capital expenditure, acquisitions and disposals, risk management policies and the approval of the financial statements. Formal agendas, papers and reports are sent to the directors in a timely manner, prior to Board meetings. The Board also receives summary financial and operational reports before each Board meeting. The Board delegates certain of its responsibilities to management, who have clearly defined terms of reference.
All directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that all Board procedures are followed. Any director may take independent professional advice at the Company's expense in the furtherance of his duties.
One third of the directors retire from office at every Annual General Meeting of the Company. In general, those directors who have held office the longest time since their election are required to retire. A retiring director may be re-elected and a director appointed by the Board may also be elected, though in the latter case the director's period of prior appointment by the Board will not be taken into account for the purposes of rotation.
The Audit Committee, which meets not less than twice a year and is responsible for ensuring that the financial performance, position and prospects of the Group are properly monitored as well as liaising with the Company's auditors to discuss accounts and the Group's internal controls. The Committee is chaired by Brian Moller, the other members being Cameron Wenck and Robert Weinberg. The Audit committee has reviewed the systems in place and considers these to be appropriate.
The Remuneration Committee, which meets at least once a year and is responsible for making decisions on directors' remuneration packages, is chaired by Cameron Wenck. Brian Moller and Robert Weinberg are the other committee members.
The remuneration of the non-executive directors is determined by the executive directors who consider it essential, not withstanding the small size of the Company and the fact that it is not yet revenue earning, to recruit and retain individuals of the highest calibre for that role. Consequently they believe that it is in the interests of shareholders that non-executive directors should be provided with share options in addition to the level of fees considered affordable. The number of such options currently amounts to 725,000 in total, or less than 2% of the current issued share capital, and in the opinion of the executive directors is not of sufficient magnitude as to affect their independence.
The Board attaches importance to maintaining good relationships with all its shareholders and ensures that all price sensitive information is released to all shareholders at the same time, in accordance with London Stock Exchange rules. The Company's principal communication with its investors is through the Annual General Meeting and through the annual report and accounts and the interim statement.
The 2008 Annual General Meeting will provide an opportunity for the Chairman and/or Chief Executive Officer to present to the shareholders a report on current operations and developments and will enable the shareholders to question and express their views about the Company's business. A separate resolution will be proposed on each substantially separate issue, including the receipt of the financial statements and shareholders will be entitled to vote either in person or by proxy.
A Health, Safety, Environment and Community Committee (HSEC Committee) is responsible for the overall health, safety and environmental performance of the Company and its operations and its relationship with the local community and is chaired by Brian Moller, the other members being Nicholas Mather and Robert Weinberg.
EXECUTIVE REMUNERATION STRATEGY
Remuneration of executive directors is established by reference to the remuneration of executives of equivalent status both in terms of the level of responsibility of the position and by reference to their job qualifications and skills. The Remuneration Committee will also have regard to the terms which may be required to attract an executive of equivalent experience to join the Board from another company. Such packages include performance related bonuses and the grant of share options.
POLITICAL AND CHARITABLE CONTRIBUTIONS
The Group made no political or charitable donations in the year (2007: A$ nil).
AUDITORS
A resolution for the reappointment of PKF (UK) LLP will be proposed at the forthcoming annual general meeting.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have, as required by the AIM Rules of the London Stock Exchange, prepared the group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and have also elected to prepare the company financial statements in accordance with those standards. The financial statements are required to give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the group for that period. In preparing these financial statements the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgments and estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements and other information included in annual reports may differ from legislation in other jurisdictions.
DISCLOSURE OF AUDIT INFORMATION
In the case of each person who are directors of the Company at the date when this report is approved:
So far as they are individually aware, there is no relevant audit information of which the Company's auditors are unaware; and
Each of the directors has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of the information.
This report was approved by the board on 17 December 2008 and signed on its behalf.
Kevin Nagle
Company Secretary
Level 5, 60 Edward Street
Brisbane QLD 4000
Australia
INDEPENDENT AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF SOLOMON GOLD PLC
We have audited the group and parent company financial statements ('the financial statements') of Solomon Gold plc for the year ended 30 June 2008 which comprise the consolidated income statement and the consolidated and company balance sheets, cash flow statements and statements of changes in shareholders' equity and the related notes. The financial statements have been prepared under the accounting policies set out therein.
This report is made solely to the company's members, as a body, in accordance with section 235 of the Companies Act 1985. 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 auditors' 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 auditors
The directors' responsibilities for preparing the annual report and the financial statements in accordance with applicable law and International Financial Reporting Standards ('IFRSs') as adopted by the European Union are set out in the statement of directors' responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the information given in the directors' report is consistent with the financial statements. The information in the directors' report includes that specific information presented in the chairman's statement, operations review and financial review that is cross referenced from the principal activities and business review section of the directors' report.
In addition we report to if, in our opinion, the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed.
We read other information contained in the annual report and consider whether it is consistent with the audited financial statements. The other information comprises only the directors' report, the chairman's statement, the operations review and financial review. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the group's and company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion
In our opinion:
the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the group's affairs as at 30 June 2008 and of its loss for the period then ended;
the parent company financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 1985, of the state of the parent company's affairs as at 30 June 2008;
the financial statements have been properly prepared in accordance with the Companies Act 1985; and
the information given in the directors' report is consistent with the financial statements.
Emphasis of matter - going concern
In forming our opinion, which is not qualified, we have considered the adequacy of the disclosures made in note 1 to the financial statements concerning the group's and the company's ability to continue as a going concern. As explained in note 1 to the financial statements, the company raises finance for the group's exploration and appraisal activities in discrete tranches, and will need to raise further funds in the near future to continue with its planned exploration programme and to provide working capital. The future of the group depends on the ability of the company to raise such finance. This indicates the existence of a material uncertainty which may cast significant doubt about the company and the group's ability to continue as a going concern. If the company is unable to secure such additional funding, this may have a consequential impact on the carrying value of the related exploration assets and the investment of the parent company. The financial statements do not include the adjustments that would result if the group was unable to continue as a going concern.
PKF (UK) LLP
Registered Auditors
London, UK
17 December 2008
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2008
| Notes | Group2008 | Group2007 | |
| A$ | A$ | ||
| Revenue | - | - | |
| Cost of sales | - | - | |
| Gross profit | - | - | |
| Other income | - | 3,302 | |
| Administrative expenses | (1,810,604) | (1,552,102) | |
| Operating loss | (1,810,604) | (1,548,800) | |
| Finance income | 6 | 206,977 | 347,154 |
| Loss before and after tax | 3 | (1,603,627) | (1,201,646) |
| Loss for the period | (1,603,627) | (1,201,646) | |
| Basic and diluted loss per ordinary share | |||
| Basic and diluted | 8 | (0.0443) | (0.0448) |
CONSOLIDATED AND COMPANY BALANCE SHEETS AS AT 30 JUNE 2008
| Notes | Group2008 | Group2007 | Company2008 | Company2007 | |
| A$ | A$ | A$ | A$ | ||
| Assets | |||||
| Property, plant and equipment | 10 | 246,617 | 273,969 | 652 | 1,414 |
| Intangible assets | 11 | 14,976,454 | 6,799,726 | - | - |
| Investment in subsidiary | 9 | - | - | 16,613,720 | 10,516,194 |
| Total non-current assets | 15,223,071 | 7,073,695 | 16,614,372 | 10,517,608 | |
| Other receivables and prepayments | 13 | 326,105 | 381,724 | 157,766 | 243,997 |
| Cash and cash equivalents | 14 | 1,874,805 | 3,450,530 | 202,196 | 937 |
| Total current assets | 2,200,910 | 3,832,254 | 359,962 | 244,934 | |
| Total assets | 17,423,981 | 10,905,949 | 16,974,334 | 10,762,542 | |
| Equity | |||||
| Share capital | 15 | 1,033,527 | 631,679 | 1,033,527 | 631,679 |
| Share premium | 15 | 17,613,615 | 10,752,408 | 17,613,615 | 10,752,408 |
| Other reserves | 1,683,142 | 849,251 | 1,683,142 | 849,251 | |
| Retained loss | (3,457,595) | (1,853,968) | (3,460,706) | (1,857,699) | |
| Total equity | 16,872,689 | 10,379,370 | 16,869,578 | 10,375,639 | |
| Liabilities | |||||
| Trade and other payables | 16 | 551,292 | 526,579 | 104,756 | 386,903 |
| Total current liabilities | 551,292 | 526,579 | 104,756 | 386,903 | |
| Total liabilities | 551,292 | 526,579 | 104,756 | 386,903 | |
| Total equity and liabilities | 17,423,981 | 10,905,949 | 16,974,334 | 10,762,542 |
The financial statements were approved and authorised for issue by the Board and were signed in its behalf on 17 December 2008.
Nicholas Mather
Director
STATEMENTS OF CHANGES IN EQUITY
Group Statement of changes in shareholders' equity
| Note | Share capital A$ | Share premium A$ | Share option reserve A$ | Warrants reserve A$ | Retained loss A$ | Total A$ | |
| Balance at 30 June 2006 | 631,679 | 10,752,408 | 217,071 | 172,803 | (652,322) | 11,121,639 | |
| Loss for the period | - | - | - | - | (1,201,646) | (1,201,646) | |
| Value of options issued to directors, employees and consultants | - | - | 459,377 | - | - | 459,377 | |
| Balance 30 June 2007 | 15 | 631,679 | 10,752,408 | 676,448 | 172,803 | (1,853,968) | 10,379,370 |
| Loss for the period | - | - | - | - | (1,603,627) | (1,603,627) | |
| New share capital subscribed | 401,848 | 6,831,422 | - | - | - | 7,233,270 | |
| Share issue costs | - | (130,819) | - | - | - | (130,819) | |
| Adjustment to previous share issue costs | - | 160,604 | - | - | - | 160,604 | |
| Value of options issued to directors, employees and consultants | - | - | 833,891 | - | - | 833,891 | |
| Balance 30 June 2008 | 15 | 1,033,527 | 17,613,615 | 1,510,339 | 172,803 | (3,457,595) | 16,872,689 |
Company Statement of changes in shareholders' equity
| Note | Share capital A$ | Share premium A$ | Share option reserve A$ | Warrants reserve A$ | Retained loss A$ | Total A$ | |
| Balance at 30 June 2006 | 631,679 | 10,752,408 | 217,071 | 172,803 | (553,631) | 11,220,330 | |
| Loss for the period | - | - | - | - | (1,304,068) | (1,304,068) | |
| Value of options issued to directors, employees and consultants | - | - | 459,377 | - | - | 459,377 | |
| Balance 30 June 2007 | 15 | 631,679 | 10,752,408 | 676,448 | 172,803 | (1,857,699) | 10,375,639 |
| Loss for the period | - | - | - | - | (1,603,007) | (1,603,007) | |
| New share capital subscribed | 401,848 | 6,831,422 | - | - | - | 7,233,270 | |
| Share issue costs | - | (130,819) | - | - | - | (130,819) | |
| Adjustment to previous share issue costs | 160,604 | 160,604 | |||||
| Value of options issued to directors, employees and consultants | - | - | 833,891 | - | - | 833,891 | |
| Balance 30 June 2008 | 15 | 1,033,527 | 17,613,615 | 1,510,339 | 172,803 | (3,460,706) | 16,869,578 |
CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2008
| Group | Group | Company | Company | |||||
| Note | 2008 | 2007 | 2008 | 2007 | ||||
| A$ | A$ | A$ | A$ | |||||
| Cash flows from operating activities | ||||||||
| Operating loss | (1,810,604) | (1,548,800) | (1,609,406) | (1,357,860) | ||||
| Depreciation | 50,981 | 28,955 | 762 | 759 | ||||
| Share based payment expense | 833,891 | 459,377 | 833,891 | 459,377 | ||||
| (Increase)/decrease in other receivables and prepayments | 55,619 | (124,046) | 86,229 | (23,793) | ||||
| Increase/(decrease) in trade and other payables | 185,317 | 39,947 | (121,541) | 80,483 | ||||
| Cash used in operations | (684,797) | (1,144,567) | (810,065) | (841,034) | ||||
| Net cash outflow from operating activities | (684,797) | (1,144,567) | (810,065) | (841,034) | ||||
| Cash flows from investing activities | ||||||||
| Interest received | 206,977 | 347,154 | 6,399 | 53,792 | ||||
| Acquisition of property, plant and equipment | (23,629) | (231,735) | - | - | ||||
| Acquisition of intangible assets (exploration expenditure) | (8,176,728) | (4,597,778) | - | - | ||||
| Loans advanced to subsidiary | - | - | (6,097,526) | (8,267,309) | ||||
| Net cash outflow from investing activities | (7,993,380) | (4,482,359) | (6,091,127) | (8,213,517) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from the issue of ordinary share capital | 7,233,270 | - | 7,233,270 | - | ||||
| Payment of issue costs | (130,819) | - | (130,819) | - | ||||
| Net cash inflow from financing activities | 7,102,451 | - | 7,102,451 | - | ||||
| Net increase in cash and cash equivalents | (1,575,725) | (5,626,926) | 201,259 | (9,054,551) | ||||
| Cash and cash equivalents at beginning of period | 3,450,530 | 9,077,456 | 937 | 9,055,488 | ||||
| Cash and cash equivalents at end of period | 1,874,805 | 3,450,530 | 202,196 | 937 | ||||
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008
NOTE 1 ACCOUNTING POLICIES
The Company is a public limited company incorporated in England and Wales and is listed on the AIM market of the London Stock Exchange.
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with IFRSs and their interpretations adopted by the International Accounting Standards Board (IASB), as adopted by the European Union. They have also been prepared in accordance with those parts of the Companies Act 1985 applicable to companies reporting under IFRS.
The accounting policies set out below have been applied consistently throughout these consolidated financial statements.
(b) Basis of preparation of financial statements and going concern
The consolidated financial statements are presented in Australian dollars ("A$").
The Company was incorporated on 11 May 2005. The Group has elected, from incorporation, to prepare annual consolidated financial statement in accordance with IFRS.
A separate income statement for the parent company has not been presented as permitted by section 230(4) of the Companies Act 1985.
In common with many exploration companies, the Company raises finance for the Group's exploration and appraisal activities in discrete tranches. The Company has arranged two tranches of loan financing which will be sufficient to meet its needs through to March 2009. The directors are in the process of securing further additional funds to enable it to proceed with its approved plan of expenditure and to provide adequate working capital thereafter. They are also in the process of finalising joint venture arrangements in connection with the Group's major copper/gold exploration project on Guadalcanal. The directors are confident that these various financial arrangements can be successfully concluded and that the Group is a going concern. In the event that the Company is unable to secure further finance it may not be able to continue as a going concern.
In addition, the funds will not be sufficient to bring the projects into development and production and, in due course, further funding will be required. In the event that the Company is unable to secure further finance either through its current arrangements with Newmont, other third parties or capital raisings, it may not be able to fully develop the project.
(c) Basis of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 June each year. Control is recognised where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair value at the date of acquisition. Any excess of the cost of the acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. If the cost of the acquisition is less than the fair value of net assets of the subsidiary acquired, the difference is recognised directly in the income statement.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies into line with those used by the Group.
(ii) Transactions eliminated on consolidation
Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.
(d) Foreign currency
The Company's functional and presentational currency is Australian dollars (A$). The exchange rate at 30 June 2008 was £0.48210/A$1.0, SBD$7.33969/A$1.0 (30 June 2007: £0.42347/A$1.0, SBD$6.47947/A$1.0).
Transactions in foreign currencies are translated 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 translated into Australian dollars at the foreign exchange rate ruling at that date.
(e) Property, plant and equipment
(i) Owned asset
Items of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (see accounting policy i below).
(ii) Subsequent costs
The Group recognises in the carrying amount of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense as incurred.
(iii) Depreciation
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each item of property, plant and equipment. The estimated useful lives of all categories of assets are:.
Office Equipment 3 years
Furniture and Fittings 5 years
Motor Vehicles 5 years
Plant and Equipment 5 years
Land and Buildings 12 years
The residual value is assessed annually. Gains and losses on disposal are determined by comparing proceeds with carrying amounts and are included in the income statement.
(f) Intangible assets
Deferred exploration and evaluation costs
All costs incurred prior to obtaining the legal right to undertake exploration and evaluation activities on a project are written-off as incurred.
Exploration and evaluation costs arising following the acquisition of an exploration licence are capitalised on a project-by-project basis, pending determination of the technical feasibility and commercial viability of the project. Costs incurred include appropriate technical and administrative overheads. Deferred exploration costs are carried at historical cost less any impairment losses recognised.
If an exploration project is successful, the related expenditures will be transferred to mining assets and amortised over the estimated life of the ore reserves on a unit of production basis.
The recoverability of deferred exploration and evaluation costs is dependent upon the discovery of economically recoverable ore reserves, the ability of the Group to obtain the necessary financing to complete the development of ore reserves and future profitable production or proceeds from the disposal thereof.
(g) Other receivables and prepayments
Other receivables and prepayments are not interest bearing and are stated at amortised cost.
(h) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowing in current liabilities on the balance sheet.
(i) Impairment
Whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable an asset is reviewed for impairment. An asset's carrying value is written down to its estimated recoverable amount (being the higher of the fair value less costs to sell and value in use) if that is less than the asset's carrying amount.
Impairment reviews for deferred exploration and evaluation costs are carried out on a project-by-project basis, with each project representing a potential single cash generating unit. An impairment review is undertaken when indicators of impairment arise, typically when one of the following circumstances apply:
Unexpected geological occurrences that render the resource uneconomic;
Title to the asset is compromised;
Variations in metal prices that render the project uneconomic; and
Variations in the currency of operation.
(j) Share capital
The Company's ordinary shares are classified as equity.
(k) Employee benefits
(i) Share based payment transactions
Certain Group employees are rewarded with share based instruments. These are stated at fair value at the date of grant and this is expensed on a straight line basis over the estimated vesting period. The latter is based on the Group's estimate of shares that will eventually vest.
Fair value is estimated using either a binomial or a Black-Scholes valuation model, whichever is more appropriate to the instrument granted. The estimated life of the instrument used in the model is adjusted for management's best estimate of the effects of non-transferability, exercise restrictions and behavioural considerations.
(l) Provisions
Provisions are recognised when the Group has a legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.
(m) Trade and other payables
Trade and other payables are not interest bearing and are stated at amortised cost.
(n) Revenue
During the exploration phase, any revenue generated from incidental sales is treated as a contribution towards previously incurred costs and offset accordingly.
(o) Expenses
(i) Financing costs
Financing costs comprise interest payable on borrowing calculated using the effective interest rate method and interest receivable on funds invested.
(ii) Finance income
Interest income is recognised in the income statement as it accrues, using the effective interest method.
(p) Taxation
The charge for taxation is based on the profit or loss for the year and takes into account deferred tax. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit or loss, and is accounted for using the balance sheet method.
Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be available in the foreseeable future against which the temporary differences can be utilised.
(q) Segment reporting
A segment is a component of the Group distinguishable by economic activity (business segment), or by its geographical location (geographical segment), which is subject to risks and rewards that are different from those of other segments.
The Group currently operates in one business segment, being mineral exploration and two geographical segments, being Australia and Solomon Islands.
(r) Business combinations
Business combinations are accounted for by applying the purchase method whereby the acquirer recognises the acquiree's identifiable assets, liabilities and contingent liabilities at their fair values at the acquisition date, and also recognises goodwill, which is subsequently tested for impairment rather than amortised.
(s) Accounting policies for the Company
The accounting policies applied to the Company are consistent with those adopted by the Group with the exception of the following:
(i) Company income statement
As permitted by Section 230 of the Companies Act 1985, the income statement of the Company has not been separately presented in these financial statements. The Company's loss for the year was AS1,603,007.
(ii) Subsidiary investments
Investments in subsidiary undertakings are stated at cost less impairment losses.
(t) Changes in accounting policies
The group adopted the following standards for the first time:
IAS 1 (amendment) Presentation of Financial Statements - Capital Disclosures
IFRS 7 Financial Instruments - Disclosures
The resulting changes in disclosure are included in notes 15 and 18 respectively. There were no other impacts from the adoption of these standards.
The group has not adopted any standards or interpretations in advance of the required implementation dates. It is not expected that adoption of standards or interpretations which have been issued by the International Accounting Standards Board but have not been adopted will have a material impact on the financial statements.
NOTE 2 SEGMENT REPORTING
The Group currently operates in one business segment being mineral exploration and two geographical segments being Australia and Solomon Islands.
NOTE 3 LOSS BEFORE TAX
| Group2008 | Group2007 | |
| A$ | A$ | |
| Loss is stated after charging: | ||
| Auditors' remuneration: | ||
| Fees payable to the company's auditor for the audit of the company's annual accounts | 31,698 | 59,490 |
| Fees payable to the company's auditor and its associates for other services: | ||
| The audit of the company's subsidiaries, pursuant to legislation | - | - |
| Other services pursuant to legislation (1) | - | 28,037 |
| Tax services | 29,805 | 28,668 |
| Depreciation | 50,981 | 28,955 |
| Foreign exchange gains | 33,414 | 6,547 |
| Share based payments | 833,891 | 459,377 |
(1) Other services provided by the auditors and their associates in 2007 primarily relate to the review of Interim accounts.
NOTE 4 STAFF NUMBERS AND COSTS
The average number of persons employed (including directors) during the year, analysed by category, was as follows:
| Group 2008 | Group 2007 | Company 2008 | Company 2007 | |
| Corporate finance and administration | 13 | 11 | 5 | 5 |
| Technical | 37 | 21 | - | 1 |
| 50 | 32 | 5 | 6 |
The aggregate payroll costs of these persons were as follows:
| Group2008 A$ | Group2007 A$ | Company2008 A$ | Company2007 A$ | |
| Wages and salaries | 1,661,085 | 1,415,892 | 429,195 | 489,163 |
| Contributions to defined contribution plans | 20,928 | 34,239 | 1,407 | - |
| Share based payments | 671,993 | 459,377 | 671,993 | 459,377 |
| 2,354,006 | 1,909,508 | 1,102,595 | 948,540 |
Included within staff costs is A$1,173,315 (2007: A$876,270) which has been capitalised as part of deferred exploration costs.
NOTE 5 REMUNERATION OF KEY MANAGEMENT PERSONNEL
| Basic Annual Salary A$ | Other Benefits(1) A$ | Pensions A$ | Total Remuneration A$ | |||||
| 2008 | ||||||||
| Directors | ||||||||
| Nicholas Mather | 155,425 | 132,303 | - | 287,728 | ||||
| Brian Moller | 64,228 | 26,580 | - | 90,808 | ||||
| Cameron Wenck | 66,726 | 34,895 | - | 101,621 | ||||
| Robert Weinberg | 55,716 | 26,580 | - | 82,296 | ||||
| 342,095 | 220,358 | - | 562,453 | |||||
| Non-Directors | 406,412 | 237,928 | - | 644,340 | ||||
| TOTAL | 748,507 | 458,286 | - | 1,206,793 |
| Basic Annual Salary A$ | Other Benefits(1) A$ | Pensions A$ | Total Remuneration A$ | |||||
| 2007 | ||||||||
| Directors | ||||||||
| Nicholas Mather | 186,146 | 165,730 | - | 351,876 | ||||
| Brian Moller | 75,637 | 5,471 | - | 81,108 | ||||
| Cameron Wenck | 87,953 | 5,471 | - | 93,424 | ||||
| David Jelley | 184,615 | 165,730 | - | 350,345 | ||||
| Robert Weinberg | 61,727 | 5,471 | - | 67,198 | ||||
| 596,078 | 347,873 | - | 943,951 | |||||
| Non-Directors | 276,456 | 31,008 | - | 307,464 | ||||
| TOTAL | 872,534 | 378,881 | - | 1,251,415 |
(1) Share based payments issued.
NOTE 6 FINANCE INCOME
|
| Group 2008 A$ | Group 2007 A$ | |
| Interest income | 206,977 | 347,154 | |
| Finance income | 206,977 | 347,154 | |
NOTE 7 INCOME TAX EXPENSE
Factors affecting the tax charge for the current period
The tax credit for the period is lower than the credit resulting from the application of the standard rate of corporation tax in the UK of 28% (2007: 30%) being applied to the loss before tax arising during the year. The differences are explained below.
| Group 2008 A$ | Group 2007 A$ | |
| Tax reconciliation | ||
| Loss before tax | (1,603,627) | (1,201,646) |
| Tax at 28% (2007: 30%) | (449,016) | (360,494) |
| Effects (at 30%) of: | ||
| Capitalisation of exploration costs | (2,571,865) | (2,301,695) |
| Non-deductible expenses | 98,620 | 137,813 |
| Tax losses carried forward | 2,922,261 | 2,524,376 |
| Tax on loss | - | - |
Factors that may affect future tax charges
The Group has tax losses of A$2,922,261 (2007: A$3,027,006) carried forward which may be deductible from future taxable profits.
NOTE 8 LOSS PER SHARE
The calculation of basic loss per ordinary share on total operations is based on losses of A$1,603,627 (2007: A$1,201,646) and the weighted average number of ordinary shares outstanding of 36,222,261 (2007: 26,825,001).
There is no difference between the diluted loss per share and the basic loss per share presented as the share options in issue during the period were not considered dilutive. At 30 June 2008 there were 4,969,997 (2007: 2,389,997) share options in issue.
NOTE 9 INVESTMENTS IN SUBSIDIARY UNDERTAKINGS
| Country of incorporation and operation | Principal activity | Solomon Gold plc's effective interest | ||
| 2008 | 2007 | |||
| Australian Resource Management (ARM) Pty Ltd | Australia | Exploration | 100% | 100% |
| Solomon Operations Ltd | Solomon Islands | Exploration | 100% | 100% |
NOTE 9 INVESTMENTS IN SUBSIDIARY UNDERTAKINGS continued
| Shares A$ | Loans A$ | Investment in subsidiary undertakings Total A$ | |||
| Cost | |||||
| Balance at 30 June 2006 | 270,571 | 1,978,314 | 2,248,885 | ||
| Advances in the period | - | 8,267,309 | 8,267,309 | ||
| Balance at 30 June 2007 | 270,571 | 10,245,623 | 10,516,194 | ||
| Advances in the period | - | 6,097,526 | 6,097,526 | ||
| Balance 30 June 2008 | 270,571 | 16,343,149 | 16,613,720 | ||
| Amortisation and impairment losses | |||||
| Balance at 30 June 2006 | - | - | - | ||
| Balance at 30 June 2007 | - |
| - | - | |
| Balance 30 June 2008 | - | - | - | ||
| Carrying amounts | |||||
| At 30 June 2006 | 270,571 | 1,978,314 | 2,248,885 | ||
| At 30 June 2007 | 270,571 | 10,245,623 | 10,516,194 | ||
| At 30 June 2008 | 270,571 | 16,343,149 | 16,613,720 | ||
Details of all loans within the group made during the year are set out below:
| Shares A$ | Loans A$ | Total A$ | |
| Cost | |||
| Balance at 30 June 2006 | 270,571 | 1,978,314 | 2,248,885 |
| Advances in the period from Solomon Gold plc to ARM Pty Ltd | - | 8,267,309 | 8,267,309 |
| Balance at 30 June 2007 | 270,571 | 10,245,623 | 10,516,194 |
| Advances in the period from Solomon Gold plc to ARM Pty Ltd | - | 6,097,526 | 6,097,526 |
| Total Investment in subsidiary by the Company at 30 June 2008 | 270,571 | 16,343,149 | 16,613,720 |
NOTE 10 PROPERTY, PLANT AND EQUIPMENT
| Group | |||||||||
| Land and Buildings A$ | Plant and Equipment A$ | Motor vehicles A$ | Office equipment A$ | Furniture & Fittings A$ | Total A$ | Company A$ | |||
| Cost | |||||||||
| Balance 30 June 2006 | - | 32,318 | 30,092 | 21,069 | - | 83,479 | 2,290 | ||
| Additions | 194,000 | 15,675 | - | 7,350 | 14,710 | 231,735 | - | ||
| Balance 30 June 2007 | 194,000 | 47,993 | 30,092 | 28,419 | 14,710 | 315,214 | 2,290 | ||
| Additions | - | 8,161 | - | 15,468 | - | 23,629 | - | ||
| Balance 30 June 2008 | 194,000 | 56,154 | 30,092 | 43,887 | 14,710 | 338,843 | 2,290 | ||
| Depreciation & impairment losses | |||||||||
| Balance 30 June 2006 | - | (3,439) | (3,256) | (5,595) | - | (12,290) | (117) | ||
| Depreciation charge for the year | (5,768) | (7,912) | (6,002) | (8,246) | (1,027) | (28,955) | (759) | ||
| Balance 30 June 2007 | (5,768) | (11,351) | (9,258) | (13,841) | (1,027) | (41,245) | (876) | ||
| Depreciation charge for the year | (19,966) | (10,214) | (6,001) | (11,866) | (2,934) | (50,981) | (762) | ||
| Balance 30 June 2008 | (25,734) | (21,565) | (15,259) | (25,707) | (3,961) | (92,226) | (1,638) | ||
| Carrying amounts | |||||||||
| At 1 July 2006 | - | 28,879 | 26,836 | 15,474 | - | 71,189 | 2,173 | ||
| At 30 June 2007 | 188,232 | 36,642 | 20,834 | 14,578 | 13,683 | 273,969 | 1,414 | ||
| At 1 July 2007 | 188,232 | 36,642 | 20,834 | 14,578 | 13,683 | 273,969 | 1,414 | ||
| At 30 June 2008 | 168,266 | 34,589 | 14,833 | 18,180 | 10,749 | 246,617 | 652 | ||
NOTE 11 INTANGIBLE ASSETS
| Deferred exploration costs A$ | ||||||||
| Cost | ||||||||
| Balance 30 June 2006 | 2,201,948 | |||||||
| Additions | 4,597,778 | |||||||
| Disposals | - | |||||||
| Balance 30 June 2007 | 6,799,726 | |||||||
| Additions | 8,176,728 | |||||||
| Disposals | - | |||||||
| Balance 30 June 2008 | 14,976,454 | |||||||
| Impairment losses | ||||||||
| Balance 30 June 2007 | - | |||||||
| Provision for impairment | - | |||||||
| Balance 30 June 2008 | - | |||||||
| Carrying amounts | ||||||||
| At 1 July 2006 | 2,201,948 | |||||||
| At 30 June 2007 | 6,799,726 | |||||||
| At 1 July 2007 | 6,799,726 | |||||||
| At 30 June 2008 | 14,976,454 | |||||||
Impairment loss
During the year the Group has not considered it necessary to make a provision for impairment against any of its deferred exploration assets (2006: A$Nil). A detailed assessment of the carrying values of deferred exploration costs is provided in note 21.
NOTE 12 DEFERRED TAXATION
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following amounts. In accordance with IFRS deferred tax has been calculated at the future rate of corporation tax of 28% as Finance Act 2007 had been substantially enacted by the balance sheet date.
| Group | Group | Company | Company | |
| 2008 A$ | 2007 A$ | 2008 A$ | 2007 A$ | |
| Deductible temporary differences | 9,934 | 23,918 | - | - |
| Tax losses | 2,922,261 | 3,027,006 | 2,902,209 | 2,522,369 |
| 2,932,195 | 3,050,924 | 2,902,209 | 2,522,369 |
The deferred tax asset in respect of these items has not been recognised as future taxable profit is not anticipated within the foreseeable future.
NOTE 13 OTHER RECEIVABLES AND PREPAYMENTS
| Group | Group | Company | Company | |
| 2008 | 2007 | 2008 | 2007 | |
| A$ | A$ | A$ | A$ | |
| Other receivables | 270,932 | 345,285 | 126,206 | 213,065 |
| Prepayments | 55,173 | 36,439 | 31,560 | 30,932 |
| 326,105 | 381,724 | 157,766 | 243,997 |
NOTE 14 CASH AND CASH EQUIVALENTS
| Group | Group | Company | Company | |
| 2008 | 2007 | 2008 | 2007 | |
| A$ | A$ | A$ | A$ | |
| Bank balances | 1,869,290 | 492,272 | 202,179 | 921 |
| Call deposits | 5,515 | 2,958,258 | 17 | 16 |
| Cash and cash equivalents in the statement of cash flows | 1,874,805 | 3,450,530 | 202,196 | 937 |
NOTE 15 CAPITAL AND RESERVES
(a) Authorised Share Capital
| 2007 | 2007 | |||
| No. of shares | Nominal value £ | |||
| On incorporation - ordinary shares of £0.0001 each | 1,000,000,000 | 100,000 | ||
| Consolidated into ordinary shares of £0.01 each on 27 October 2005 | 10,000,000 | 100,000 | ||
| Creation of additional shares of £0.01 each on 27 October 2005 | 40,000,000 | 400,000 | ||
| At 30 June 2007 - Ordinary Shares | 50,000,000 | 500,000 | ||
| 2008 | 2008 | |||
| No. of shares | Nominal value £ | |||
| At 30 June 2007 - Ordinary Shares | 50,000,000 | 500,000 | ||
| Creation of additional shares of £0.01 each on 11 December 2007 | 50,000,000 | 500,000 | ||
| At 30 June 2008 - Ordinary Shares | 100,000,000 | 1,000,000 |
(b) Changes in Issued Share Capital and Share Premium
Shares issued
On 18 December 2007 the Company completed a placing of 17,500,000 ordinary shares at 18 pence per share for a cash consideration of £3,150,000 (A$7,233,270 less share issue costs of A$130,819).
For the year ended 30 June 2008:
| No. of shares | Nominal value | Share premium | Total | |
| A$ | A$ | A$ | ||
| Ordinary shares of 1p each at 30 June 2007 | 26,825,000 | 631,679 | 10,752,408 | 11,384,087 |
| Adjustment to share issue costs | - | - | 160,604 | 160,604 |
| Shares issued at £0.18 - placing 18 December 2007 | 17,500,000 | 401,848 | 6,831,422 | 7,233,270 |
| Share issue costs charged to share premium | - | - | (130,819) | (130,819) |
| Ordinary shares of 1p each at 30 June 2008 | 44,325,001 | 1,033,527 | 17,613,615 | 18,647,142 |
Adjustment to share issue costs represents amounts previously accrued for but subsequently reversed as the amount is deemed not payable.
NOTE 15 CAPITAL AND RESERVES continued
Potential issues of ordinary shares
At 30 June 2008 the Company had 4,969,997 options and 326,400 warrants outstanding for the issue of ordinary shares, as follows:
Options
| Date of grant | Exercisable from | Exercisable to | Exercise prices | Number granted | Number at 30 June 2008 |
| 10 February 2006 | 1 January 2007 | 1 January 2011 | £0.50 to £1.00 | 1,739,997 | 1,039,997 |
| 12 September 2006 | 1 January 2007 | 1 January 2011 | £0.50 to £1.00 | 650,000 | 650,000 |
| 31 December 2007 | 31 December 2007 | 31 December 2010 | £0.25 to £0.75 | 1,380,000 | 1,380,000 |
| 31 December 2007 | 31 December 2007 | 8 November 2010 | £0.20 | 500,000 | 500,000 |
| 31 January 2008 | 31 January 2008 | 31 December 2010 | £0.25 to £0.75 | 1,000,000 | 1,000,000 |
| 27 May 2008 | 27 May 2008 | 31 December 2010 | £0.25 to £0.75 | 400,000 | 400,000 |
| 5,669,997 | 4,969,997 | ||||
Warrants
| Date of grant | Exercisable from | Exercisable to | Exercise prices | Number granted | Number at 30 June 2008 |
| 13 September 2005 | 13 September 2005 | 8 September 2008 | £0.30 | 126,400 | 126,400 |
| 10 February 2006 | 10 February 2006 | 10 February 2009 | £0.50 | 200,000 | 200,000 |
| 326,400 | 326,400 | ||||
| Total contingently issuable shares at 30 June 2008 | 5,296,397 | ||||
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
Share options issued
On 23 August 2007, 700,000 unlisted share options in Solomon Gold plc were cancelled as a result of employee resignations.
On 31 December 2007 the Company issued 1,380,000 unlisted share options to management and staff of the Company. The options were issued free of charge and are exercisable at prices between 25 pence and 75 pence per ordinary share. The period during which these share options can be exercised is between 31 December 2007 and 31 December 2010.
On 31 December 2007 the Company also granted 500,000 unlisted share options for nil consideration to RFC Corporate Finance Limited ("RFC"), the Company's nominated advisor ("NOMAD"). RFC were appointed as NOMAD on 8 November 2007. These share options were granted at an exercise price of 20 pence per ordinary share and can be exercised up to 8 November 2010.
On 31 January 2008 the Company issued 1,000,000 unlisted share options to directors of the Company. The options were issued free of charge and are exercisable at prices between 25 pence and 75 pence per ordinary share. The period during which these share options can be exercised is between 31 January 2008 and 31 December 2010.
On 27 May 2008 the Company issued 400,000 unlisted share options to employees of the Company. The options were issued free of charge and are exercisable at prices between 25 pence and 75 pence per ordinary share. The share options can be exercised up to 31 December 2010.
Dividends
The directors do not recommend the payment of a dividend.
Capital Management
Given the nature of the group's current activities the entity will remain dependant on equity funding in the short to medium term until such time as the group becomes self-financing from the commercial production of mineral resources.
NOTE 16 TRADE AND OTHER PAYABLES
| Group 2008 | Group 2007 | Company 2008 | Company 2007 | |
| A$ | A$ | A$ | A$ | |
| Current | ||||
| Trade payables | 423,088 | 131,744 | 43,253 | 52,344 |
| Other payables | 60,897 | 213,185 | 4,520 | 160,604 |
| Accrued expenses | 67,307 | 181,650 | 56,983 | 173,955 |
| 551,292 | 526,579 | 104,756 | 386,903 |
NOTE 17 EMPLOYEE BENEFITS
Share-based payments
On 31 December 2007 the Company issued 1,380,000 unlisted share options to management and staff of the Company. The options were issued free of charge and are exercisable at prices between 25 pence and 75 pence per ordinary share. The period during which these share options can be exercised is between 31 December 2007 and 31 December 2010.
On 31 December 2007 the Company also granted 500,000 unlisted share options for nil consideration to RFC Corporate Finance Limited ("RFC"), the Company's nominated advisor ("NOMAD"). These share options were granted at an exercise price of 20 pence per ordinary share and can be exercised up to 8 November 2010.
On 31 January 2008 the Company issued 1,000,000 unlisted share options to directors of the Company. The options were issued free of charge and are exercisable at prices between 25 pence and 75 pence per ordinary share. The period during which these share options can be exercised is between 31 January 2008 and 31 December 2010.
On 27 May 2008 the Company issued 400,000 unlisted share options to employees of the Company. The options were issued free of charge and are exercisable at prices between 25 pence and 75 pence per ordinary share. The share options can be exercised up to 31 December 2010.
The number and weighted average exercise price of share options are as follows:
| Weighted average exercise price 2008 | Number of options 2008 | Weighted average exercise price 2007 | Number of options 2007 | |
| Outstanding at the beginning of the period | £0.75 | 2,389,997 | £0.75 | 1,739,997 |
| Lapsed during the period | £0.75 | (700,000) | - | - |
| Granted during the period | £0.40 | 3,280,000 | £0.75 | 650,000 |
| Outstanding at the end of the period | £0.52 | 4,969,997 | £0.75 | 2,389,997 |
| Exercisable at the end of the period | £0.52 | 4,969,997 | £0.50 | 796,664 |
The options outstanding at 30 June 2008 have an exercise price in the range of £0.25 pence and £1.00 pence (2007: £0.50-1.00) and a weighted average contractual life of 2.38 years (2007: 3.18 years).
Share options held by directors are disclosed in the directors' report. The total number of options held at the year end are as follows:
| Share options held at 30 June 2008 | Share options held at 30 June 2007 | Option price | Exercise periods |
| 500,000 | - | £0.20 | 31/12/07 - 08/11/10 |
| 1,390,000 | - | £0.25 | 31/12/07 - 31/12/10 |
| 1,258,331 | 796,664 | £0.50 | 01/01/07 - 31/12/10 |
| 1,258,332 | 796,665 | £0.75 | 31/12/07 - 01/01/11 |
| 563,334 | 796,668 | £1.00 | 01/01/08 - 01/01/11 |
| 4,969,997 | 2,389,997 |
NOTE 17 EMPLOYEE BENEFITS continued
The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted. This estimate is based on a Black-Scholes model which is considered most appropriate considering the effects of the vesting conditions, expected exercise period and the dividend policy of the Company.
| Fair value of share options and assumptions granted 31 December 2007 | £0.25 options | £0.50 options | £0.75 options |
| Fair value at issue date | £0.215 | £0.215 | £0.215 |
| Exercise price | £0.25 | £0.50 | £0.75 |
| Expected volatility | 106.313% | 106.313% | 106.313% |
| Option life | 3 years | 3 years | 3 years |
| Expected dividends | 0.00% | 0.00% | 0.00% |
| Risk-free interest rate (short-term) | 4.262% | 4.262% | 4.262% |
The calculation of the volatility of the share price was based on the Company's daily closing share price over the period from issue date to the date of calculation of the option valuation (18 January 2008).
| Fair value of share options and assumptions granted 31 December 2007 to RFC Corporate Finance Ltd | £0.20 options |
| Fair value at issue date | £0.215 |
| Exercise price | £0.20 |
| Expected volatility | 106.313% |
| Option life | 2.86 years |
| Expected dividends | 0.00% |
| Risk-free interest rate (short-term) | 4.262% |
The calculation of the volatility of the share price was based on the Company's daily closing share price over the period from issue date to the date of calculation of the option valuation (18 January 2008).
| Fair value of share options and assumptions granted 31 January 2008 | £0.25 options | £0.50 options | £0.75 options |
| Fair value at issue date | £0.200 | £0.200 | £0.200 |
| Exercise price | £0.25 | £0.50 | £0.75 |
| Expected volatility | 79.928% | 79.928% | 79.928% |
| Option life | 2.92 years | 2.92 years | 2.92 years |
| Expected dividends | 0.00% | 0.00% | 0.00% |
| Risk-free interest rate (short-term) | 4.28% | 4.28% | 4.28% |
The calculation of the volatility of the share price was based on the Company's daily closing share price over the period from issue date to the date of calculation of the option valuation (13 June 2008).
| Fair value of share options and assumptions granted 27 May 2008 | £0.25 options | £0.50 options | £0.75 options |
| Fair value at issue date | £0.178 | £0.178 | £0.178 |
| Exercise price | £0.25 | £0.50 | £0.75 |
| Expected volatility | 79.928% | 79.928% | 79.928% |
| Option life | 2.60 years | 2.60 years | 2.60 years |
| Expected dividends | 0.00% | 0.00% | 0.00% |
| Risk-free interest rate (short-term) | 4.93% | 4.93% | 4. 93% |
The calculation of the volatility of the share price was based on the Company's daily closing share price over the period from issue date to the date of calculation of the option valuation (13 June 2008).
NOTE 18 FINANCIAL INSTRUMENTS (GROUP AND COMPANY)
The Board of directors determines, if required, the degree to which it is appropriate to use financial instruments, commodity contracts or other hedging contracts or techniques to mitigate risks. The main risks for which such instruments may be appropriate are foreign currency risk and liquidity risk, each of which is discussed below. The main credit risk is the non-collection of other receivables which include tax (VAT, withholding tax), refunds and tenement security deposits. There were no overdue receivables at year end.
There have been no changes in financial risks from previous year.
During the period ending 30 June 2008 no trading in commodity contracts was undertaken.
Foreign currency risk
The Group has potential currency exposures in respect of items denominated in foreign currencies comprising:
Transactional exposure in respect of operating costs, capital expenditures and, to a lesser extent, sales incurred in currencies other than the functional currency of operations which require funds to be maintained in currencies other than the functional currency of operation; and
Translational exposures in respect of investments in overseas operations which have functional currencies other than Australian dollars. Currency risk in respect of non-functional currency expenditure is reviewed by the Board.
The table below shows the extent to which Group companies have monetary assets and liabilities in currencies other than the Group functional currency. Foreign exchange differences on retranslation of such assets and liabilities are taken to the income statement.
| Group 2008 | Group 2007 | |||||
| A$ | A$ | |||||
| Solomon Island dollar (SBD) | 221,054 | 146,027 | ||||
The main currency exposure relates to the effect of re-translation of the Group's assets and liabilities in Solomon Island dollar (SBD). A 1% change in the SBD/A$ exchange rate would give rise to a change of approximately A$2,000 in the Group net assets and reported earnings.
In respect of other monetary assets and liabilities held in currencies other than Australian dollars, the Group ensures that the net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances.
Liquidity risks
The company did not have any monetary assets and liabilities in currencies other than the company functional currency.
The Group and Company raises funds as required on the basis of budgeted expenditure for the next twelve months. Funds are generally raised in Capital Markets from a variety of eligible private, corporate and fund investors, or from interested third parties (including other exploration and mining companies) which may be interested in earning an interest in the project. The success of otherwise of such capital raisings is dependent upon a variety of factors including general equities and metals market sentiment, macro economic outlook, project prospectivity, operational risks and other factors from time to time. When funds are sought, the Group balances the costs and benefits of equity financing. When funds are received they are deposited with banks of high standing in order to obtain market interest rates. The Group deals with banks with high credit ratings assigned by international credit rating agencies. Funds are provided to local sites monthly, based on the sites' forecast expenditure.
Fair values
In the directors' opinion there is no material difference between the book value and fair value of any of the Group's and Company's financial instruments.
The classes of financial instruments are the same as the line items included on the face of the balance sheet and have been analysed in more details in notes to the accounts. All the group and company's financial assets are categorised as loans and receivables and all financial liabilities are measured at amortised cost.
NOTE 19 COMMITMENTS
Pursuant to a contract for the provision of a helicopter to assist in exploration and drilling, as at 30 June 2008 the Group has a commitment to pay A$743,600 (in equal monthly payments) between 12 May 2008 and 12 May 2009. The commitment relates to a minimum usage (flying hours) of the helicopter over the commitment period. The Group expects to utilise the minimum flying hours over the commitment period.
The Company has certain obligations to expend minimum amounts on exploration in tenement areas. These obligations may be varied from time to time and are expected to be fulfilled in the normal course of operations of the Company.
The commitments to be undertaken are as follows:
| Tenement Number | Commitment (A$) | Period to meet commitment |
| PL 02/05 | 1,106,773 | 10/11/05 - 10/11/08 |
| PL 03/05 | 354,269 | 10/11/05 - 10/11/08 |
| PL 04/05 | 1,106,773 | 10/11/05 - 10/11/08 |
| PL 05/05 | 485,323 | 10/11/05 - 10/11/08 |
| PL 08/06 | 419,000 | 23/11/06 - 22/11/09 |
To keep tenements in good standing, work programs should meet certain minimum expenditure requirements. If the minimum expenditure requirements are not met, the Company has the option to negotiate new terms or relinquish the tenements. The Company also has the ability to meet expenditure requirements by joint venture or farm in agreements.
NOTE 20 RELATED PARTIES
(a) Group
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.
a) Transactions with Directors and Director-Related Entities
(i) On 6 December 2005 Solomon Gold Plc has entered into a consultancy agreement with Samuel Capital Ltd ("Samuel"), an entity associated with Nicholas Mather (a director). Under this agreement, Mr Mather will act as an executive director of the Company at an annual salary of £69,500, terminable by either party giving twelve months written notice. The appointment of Samuel was for two years from the date of Admission (10 February 2006) and was recently renewed for a further two year period until 10 February 2010. Samuel provided consultancy services to the Company prior to 6 December 2006 on commercial terms. For the year ended 30 June 2008 A$155,425 was paid to Samuel (2007: A$186,146). These amounts are included in Note 5 (Remuneration of Key Management Personnel). Total amounts outstanding at year end is A$0 (2007: A$13,677)
(ii) Solomon Gold Plc has entered into an Administration and Services Agreement with D'Aguilar Gold Ltd, an entity associated with Nicholas Mather (a director) and Brian Moller (a director) whereby D'Aguilar Gold Ltd has agreed to provide certain services including the provision by D'Aguilar Gold of its premises (for the purposes of conducting the Company's business operations), use of existing office furniture, equipment and certain stationery, together with general telephone, reception and other office facilities (''Services''). In consideration for the provision of the Services, the Company shall reimburse D'Aguilar Gold Ltd for any expenses incurred by it in providing the Services. Under the terms of the Administration and Services Agreement, D'Aguilar Gold was required to provide its services for a period ending on 10 February 2008. The agreement was recently renewed for a further 12 months. The Administration and Services Agreement may be terminated upon the occurrence of an insolvency event of the other party, a failure to remedy a material breach of the Administration and Services Agreement by the other party or upon three months written notice to the other party. D'Aguilar Gold Ltd was paid A$24,989 (2007: A$17,233) for the provision of administration, management and office facilities to the Company during the year. Total amounts outstanding at year end is A$4,921 (2007: A$2,866)
(iii) Mr Brian Moller (a director), is a partner in the Australian firm Hopgood Ganim lawyers. Hopgood Ganim were paid A$228,253 (2007: A$114,018) for the provision of legal services to the Company during the year. The services were based on normal commercial terms and conditions. Total amounts outstanding at year end is A$2,234 (2007: A$2,273)
(b) Share and Option transactions of Directors are shown in the Directors Report
(b) Company
The Company has a related party relationship with its subsidiaries (see note 9), directors and other key personnel (see note 20 (a)).
NOTE 20 RELATED PARTIES continued
Subsidiaries
The Company has an investment in subsidiaries balance of A$16,613,720 which comprises funds advanced during the period of A$6,097,526 (see note 9). As the Company does not expect repayment of this amount and will not call payment until the subsidiary can adequately pay it out of working capital, this amount has been included in the carrying amount of the investment in the Parent Entity's balance sheet. The following table details transactions carried out with subsidiary undertakings:
| A$ | ||
| Balance 30 June 2006 | 2,248,885 | |
| Transactions during period | 8,267,309 | |
| Balance 30 June 2007 | 10,516,194 | |
| Transactions during period | 6,097,526 | |
| Balance 30 June 2008 | 16,613,720 | |
The Company has a professional services agreement with ARM to provide certain management services to ARM. During the period A$26,810 (2007: A$46,888) was paid to the Company for the provision of professional services.
(c) Controlling party
In the directors' opinion there is no ultimate controlling party.
NOTE 21 SUBSEQUENT EVENTS
On 3 November 2008, Kevin Nagle was appointed Company Secretary and CFO.
On 19 November 2008, 11.7 million shares were placed to raise £350,000.
On 28 November 2008, Duncan Cornish resigned as Company Secretary and CFO.
On 26 November 2008, Solomon Gold finalised proposed Terms of Agreement with Newmont Ventures Limited on Guadalcanal projects.
On 8 December 2008, tenement renewals confirmed for PL02/05; PL03/05 and PL04/05 all for two years from 8 December 2008 to 7 December 2010.
On 9 December, the helicopter services agreement with the contractor was terminated without penalty.
On 17 December 2008, Samuel Holdings Pty Ltd (a related party of a Director; Nicholas Mather) entered into a loan with Solomon Gold plc for AUD$200,000.
On 17 December 2008, Samuel Holdings Pty Ltd (a related party of a Director; Nicholas Mather) entered into a commitment to cause and procure a Convertible Note by 30 January 2009 with Solomon Gold plc for GBP£221,915.
NOTE 22 ACCOUNTING ESTIMATES AND JUDGEMENTS
Key sources of estimation uncertainty
The Audit Committee has carried out an assessment of the carrying values of deferred exploration costs and any required impairment.
Koloula PL 02/05
Exploration on Koloula PL 02/05 is still at an early stage and the drill testing of the key targets is not yet complete. Further drilling targets are likely to be identified for several localities in the tenement based on data collected by the Company and its subsidiaries in 1996 and 1997 and from 2006 to 2008. Tested drill locations have intersected mineralised zones which provide encouragement in support of the presence of a significant minerals system. There is no exploration data to hand, or access or other conditions notified or evident which have the effect of adversely affecting the prospectivity of the tenement. It is considered likely that ongoing exploration and expenditure will result in a resource or commercial arrangement in excess of the costs of such a discovery. The carrying value of A$2.8 million is considered to be unimpaired.
Central Guadalcanal PL 03/05
Exploration on Central Guadalcanal PL 02/05 is still at an early stage and the drill testing of the key targets is not yet complete. Previous rock chip channel sampling of anomalies in the tenement by previous workers and Solomon Gold's wholly owned subsidiary ARM, demonstrates potential for the presence of significant gold resources. Recent work has highlighted potential for significant copper porphyry systems. There is no exploration data to hand, or access or other conditions notified or evident which have the effect of adversely affecting the prospectivity of the tenement. It is considered likely that ongoing exploration and expenditure will result in a resource or commercial arrangement in excess of the costs of such a discovery. The carrying value of A$0.3 million is considered to be unimpaired.
Mbetilonga PL 04/05
Even allowing for the expenditure of in excess of A$0.4 million on Exploration on Mbetilonga PL 02/05, this tenement is still at an early stage and the drill testing of the key targets has not yet been completed. Five holes have been drilled into two prospects in the tenement, with inconclusive results and several targets are yet to be tested. Assay data from the first five holes are low and it is believed that the holes were drilled on the periphery of a significant mineral system. Rock types encountered in the holes are considered to indicate the presence nearby of a significant system. There is no exploration data to hand, or access or other conditions notified or evident which have the effect of adversely affecting the prospectivity of the tenement. It is considered likely that ongoing exploration and expenditure will result in a resource or commercial arrangement in excess of the costs of such a discovery. The carrying value of A$3.4 million is considered to be unimpaired.
Sutakiki PL 05/05
Exploration on Sutakiki PL 02/05 is still at an early stage however the drill testing of the key targets to date has indicated that there are both high tonnage low grade and high grade low tonnage prospects in the tenement. The results of mapping sampling and drilling programs in the tenement to date are consistent with the discovery of a significant gold and copper mineral system which may ultimately yield resources. There is no exploration data to hand, or access or other conditions notified or evident which have the effect of adversely affecting the prospectivity of the tenement. It is considered likely that ongoing exploration and expenditure will result in a resource or commercial arrangement in excess of the costs of such a discovery. The carrying value of A$7.6 million is considered to be unimpaired.
Kuma PL 08/06
Exploration on Kuma is at an early stage and the mapping and sampling phase of the program of testing of the key targets has resulted in the identification of extensive mineralised complexes which show potential to yield resources. The project area and prospects are considered to have been enhanced by the results in the nearby Sutakiki area and by the recognition of cap rocks believed to overlie a major mineral system.. There is no exploration data to hand, or access or other conditions notified or evident which have the effect of adversely affecting the prospectivity of the tenement. It is considered likely that ongoing exploration and expenditure will result in a resource or commercial arrangement in excess of the costs of such a discovery. The carrying value of A$0.2 million is considered to be unimpaired.
Florida PL 57/07
Exploration on Florida is at an early stage and work has identified prospective rocks hosting significant nickel anomalies. The carrying value of A$0.2 million is considered to be unimpaired.
East Guadalcanal PL 02/08
Exploration on East Guadalcanal is at an early stage and work has commenced. The carrying value of A$0.03 million is considered to be unimpaired.
Makira Wainoni Application
The tenement application for Makira Wainoni has been abandoned subsequent to this reporting period and the carrying value of A$1.0 thousand will be written off.
Fauro Application
Exploration on Fauro is at an early stage and tenement has not yet been granted. The carrying value of A$0.1 million is considered to be unimpaired.
Critical accounting judgements
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities are those relating to deferred exploration & evaluation expenditure and share based payments.
To view the complete 2008 Annual Report, please visit the Company's website: www.solomongold.com
Contacts:
Mr Kevin Nagle
Company Secretary
Tel: +61 7 3303 0680
Email: knagle@solomongold.com
Mr Stephen Weir
RFC Corporate Finance
Tel: +61 2 9250 0048
Email: Stephen.Weir@rfc.com.au