SolGold Regulatory News (SOLG)

Annual Report

CONTENTS & DIRECTORY

CORPORATE INFORMATION 3

CHAIRMAN'S STATEMENT 4

OPERATIONS REPORT 6

INTEREST IN TENEMENTS 26

RISKS AND UNCERTAINTIES 27

FINANCIAL REVIEW 29

DIRECTORS AND COMPANY SECRETARY 30

DIRECTORS' REPORT 32

INDEPENDENT AUDITORS' REPORT 37

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 39

CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION 40

CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY 41

CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS 42

NOTES TO THE FINANCIAL STATEMENTS 43

DIRECTORS

Cameron Wenck (Non-Executive Chairman)

Nicholas Mather (Chief Executive Officer)

Brian Moller (Non-Executive Director)

Dr Robert Weinberg (Non-Executive Director)

John Bovard (Non-Executive Director)

COMPANY SECRETARY

Karl Schlobohm

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

United Kingdom

NOMINATED ADVISOR

RFC Corporate Finance Ltd

Level 14, 19-31 Pitt Street

Sydney NSW 2000, Australia

BROKER

Fairfax IS

46 Berkeley Square

Mayfair

London W1J 5AT

United Kingdom

BANKERS

Macquarie Bank Ltd (Brisbane Branch)

300 Queen Street, Brisbane QLD 4000

Australia

SOLICITORS

Fox Williams

10 Dominion Street

London EC2M 2EE

United Kingdom

AUSTRALIAN SOLICITORS

Hopgood Ganim

Level 8, Waterfront Place

1 Eagle Street,

Brisbane QLD 4000, Australia

REGISTRARS

Computershare Investor Services plc

The Pavilions, Bridgwater Road

Bristol BS99 7NH

United Kingdom

Dear Fellow Shareholder

Over the past 12 months, your company successfully diversified its bank of mineral resource assets by securing an exploration license over a highly prospective area over Fauro Island, in the Solomons, and with acquisitions of two encouraging "nearer term" gold projects in Queensland, Australia. This has de-risked your Company's gold exploration profile, yet still offers strong upside on the highly prospective exploration program on Guadalcanal Island in the Solomon Islands, which continues to develop with the sound financial and technical backing of Newmont Mining Corporation ("Newmont").

Our Joint Venture with Newmont continues as before, but with Newmont now as operator. This has the advantage that it frees up some of our key personnel to concentrate on our 100% Company-owned prospective targets on Fauro Island, while still being able to remain confident of the future management of field and exploration work (including drilling) in and around our copper-gold porphyry targets on Guadalcanal Island. These targets have been the subject of intense work over the last year to gather more important geological data which forms a sound information platform for the drilling program. In other words, a clear pipeline of carefully researched and defined targets has been established and this now becomes the subject of the Guadalcanal Venture drilling program presently underway. Earlier this year, Newmont formalised its budgeted spend in excess of A$5m on exploration (effectively bringing it forward) and we are pleased that much of this is destined to go into the aggressive drilling program which commenced at Chikora on 19th August. Newmont's focus on testing the drill targets at Chikora should be followed by further drilling work to advance the Mbetilonga and Kuma projects and we expect further regional reconnaissance sampling within the Central prospecting licence. Clearly, the Guadalcanal Venture continues to rank as an important element of Newmont's global exploration efforts. We look forward to seeing results.

During the year, your Company was granted an exploration license over a 70 km2 highly prospective area on Fauro Island. Like Guadalcanal Island, Fauro Island is situated on the Rim of Fire, but lies 80 km south-east of the famous Bougainville deposit in PNG. The northern peninsula of Fauro Island is the remnant rim of a volcano and our geologists believe it represents a gold rich high level variant sitting above a porphyry system similar to Bougainville, and with similar mineralogy and geological setting to the giant 40m oz Lihir deposit. An airborne Electromagnetic (EM) Survey covering an area of 800 line kilometres, over 75 km2 was completed in February. This followed encouraging results, from stream sediment sampling conducted by our geologists, who identified highly anomalous gold samples (some showing gold values up to 169 grams per tonne and with gold visible to the naked eye). Work to date has identified numerous gold prospects, and further trenching, mapping and drilling is planned in the near future. The license over Fauro Island is owned 100% by your Company, and as a Lihir lookalike, holds potential to host a world class gold deposit.

During the past year, Solomon Gold successfully acquired two companies holding promising exploration projects in Queensland, Australia. The first acquisition, Acapulco Mining Pty Ltd, holds extensive tenements over a project area in and around Mt Perry of 1,344 km2, located four hours drive northwest of Brisbane and about 15km from Lihir Gold's 1 million oz Mt Rawdon mine. The project area is located on the intersection of strong regional geological features which host porphyry gold copper molybdenum potential. Extensive mapping and sampling has identified several drill targets which have yielded potentially economic results. Drilling of these geological systems has yielded both high grades and long intersections of medium grade mineralisation to date, so further drilling programs are planned in 2010/11.

The second acquisition, Central Minerals Pty Ltd, holds exploration licences covering 3,670 km2 over a strike length of 200km on the eastern margin of the Bowen Basin in Central Queensland, approximately 150km west of the port of Gladstone. The key target is the Mt Rannes project which lies on the eastern faulted edge of the coal rich Bowen Basin, in an environment favourable for the introduction of mineral bearing granitic intrusions and related volcanic centres. Your Company recently announced its Maiden Resource Estimate for its Crunchie Prospect which forms part of the broader Rannes Project. Crunchie has an inferred Mineral Resource of 5.6Mt at 1.12g/t equivalent gold for 201,648oz of contained equivalent gold (0.20g/t equ. Au cut‐off grade). A series of multiple prospects have been identified in close proximity to the Crunchie Prospect, providing excellent potential for a significant expansion of the existing resource inventory. At the Rannes Project, core drilling has revealed mineralisation similar in texture and chemistry as well as similar structural settings to the Carlin Style deposits in Nevada, USA. Magnetic interpretation and soil sample results indicate numerous other targets immediately adjacent to Crunchie and these, in turn, augment other nearby prospects in the Rannes Central area. The encouraging intersections yielded in the past at Porcupine, Kauffmans and Crackling Rosie, are expected to define further resources within the next six months.

The drilling programs at Fauro in the Solomon Islands, and at Rannes and Mt Perry in Queensland will be funded by the recently announced capital raising of approximately $24 million, due to settle following a shareholder's meeting called for 8 November 2010 to approve an increase in the Company's authorised capital. The re-rating of the Company's share price on AIM following the release of initial results from Fauro precipitated institutional investor interest in the Company, which in turn drove the success of the raising.

The developments over the past 12 months provide your Company an opportunity to grow and mature into an integrated gold explorer, developer, and miner with prospects that range from lower risk, more advanced prospects proceeding to resource definition in Queensland (and which offer the possibility of bringing new gold assets into production more quickly), through to the high risk, high reward projects of the Solomon's like Guadalcanal Island (in JV with Newmont) and the exciting Fauro Island project. The acquisition and creation of new, interesting and highly prospective mineral projects, coupled with the key appointments of Mr John Bovard to the Board and Mr Alex Thin as the Company's Chief Operating Officer, during the year, provide a strong and more diversified platform for growth of the company. We look forward to realization of the value these developments should bring in the future.

Cameron Wenck

Chairman

3 November, 2010

The South Pacific Applied Geoscience Commission in 2001 concluded that "Solomon Islands is perhaps the most prospective Pacific island country for minerals after Papua New Guinea (PNG)."

Company and Project Summary

History and Company Profile

Solomon Gold plc ("Solomon Gold" or the "Company") was admitted to trading on the AIM Board (AIM Code: SOLG) of the London Stock Exchange on 10 February 2006 after completing a £5million capital raising. Solomon Gold's original exploration projects are located in Solomon Islands and the discovery of a world class copper and gold mine on the south west Pacific Rim of Fire, in the shadow of some of the world's largest gold mines; Ok Tedi (50Moz), Bougainville (50Moz), Grasberg (160Moz) and Lihir Island (40Moz) was and remains a focus for the Company.

At the time of listing it held four tenements (Mbetilonga, Sutakiki, Central and Koloula) collectively referred to as the Guadalcanal tenements in the Solomon Islands. Additionally, Kuma was granted in November 2006 (it was an application at the time of listing) and became part of the Guadalcanal tenements. In September 2007 the Florida tenement was granted and East Guadalcanal in May 2008. The Fauro tenement was granted in November 2009.

On the 5 March 2009, Solomon Gold entered into a joint venture agreement whereby Newmont Ventures Limited, a subsidiary of Newmont Mining Corporation ("Newmont") (NYE: NEM), one of the world's largest gold companies, committed to an exploration expenditure program of up to US$12million over five-years (31 March 2014) to earn up to a 70% interest in the Guadalcanal Joint Venture ("GJV"). The GJV comprises the Company's Guadalcanal tenements, Mbetilonga, Sutakiki, Central, Koloula and Kuma. The GJV is in the second year, whereby Newmont must spend US$6million by 31 March 2012 in order to have a 51% legal and beneficial interest in the GJV. As at 30 June 2010 Newmont had expended US$3,443,921. On the 1 April 2010 Newmont assumed management of the GJV.

Solomon Gold's tenements in the Solomon Islands are held in wholly owned subsidiary Australian Resource Management (ARM) Pty Ltd ("ARM").

In late 2009 and early 2010, the Company acquired two Queensland based exploration companies. The acquisition of Acapulco Mining Pty Ltd ("Acapulco") was completed in late 2009 and Central Minerals Pty Ltd ("Central") in early 2010. These companies had projects that are more directed towards resource definition, where exploration costs are approximately one third of those in the Solomon Islands.

The acquisition of Acapulco and Central has derisked and diversified the Company's asset base with the addition of the Australian gold projects at Rannes (Central) situated near to Newcrest's (70kozpa attributed production) Cracow Mine and Mt Perry (Acapulco) close to Lihir's Mt Rawdon Mine (1.2Moz resource).

Mt Perry and Rannes provide targets at each for the discovery of at least 2Moz gold Inferred Resource in bulk disseminated and Carlin style gold systems. Exploration drilling at Rannes and Mt Perry has already returned potentially economic gold and silver intersections, and both projects are characterised by extensive exploration licences and in the case of Rannes defines a new Carlin style province over 200km long.

On the 7 June 2010, Solomon Gold announced a 200koz contained equivalent gold maiden resource at its gold and silver Crunchie Prospect ("Crunchie"), which is within the Rannes Project. Five prospects in the Rannes Project area; Crunchie, Homestead, Kauffmans, Cracklin Rosie and Porcupine Pie, have been subject to first pass drilling by Central and previous explorers, with potentially economic intersections in all five.

The Company has an exploration base at Gympie in south-east Queensland from which it manages the exploration effort of the two Queensland gold projects. In the Solomon Islands the Company has an operational base in the capital Honiara, as well as a newly constructed staging post in Gizo (approximately 380km / 240miles northwest of Honiara) for easier access to the Fauro Project. The corporate office is in Brisbane, Queensland, Australia.

The Company's structure is summarised in Figure 1. Table 1 summarises Solomon Gold's Exploration Projects. Figure 2 shows the location of the Queensland tenements and Figure 3 the location of the Solomon Island tenements.

Corporate Objectives

The overall objective of the Company is to create shareholder value through the discovery, development and production of world-class mineral deposits including but not limited to copper, gold and silver, with a key focus in the Solomon Islands and Queensland, Australia.

To facilitate achievement of this objective the Company will:

·; Target at least 1Moz to 2Moz targets at each of its Queensland projects.

·; Target large gold copper targets in Solomon Islands of similar or greater size to other projects in the south west Pacific Rim of Fire.

·; Adopt a systematic approach to exploration.

·; Seek to maximise in-ground expenditure as a proportion of the total budget.

·; To secure additional exploration projects by new tenements and/or farm-in agreements.

·; Continue to review 'value accretive' opportunities that are presented.

Solomon Gold aims to deliver, over the next five years, on its strategy to become an integrated copper and gold explorer, developer and miner in the South West Pacific and Australia.

Exploration Strategy

The Company's strategy is to become an integrated copper-gold-silver explorer, and ultimately developer and miner in the South West Pacific Region and Queensland, Australia.

The company's detailed exploration strategy includes the following elements:

·; Magnetics to identify intrusive.

·; Soil geochemistry to identify anomalies areas.

·; Reconnaissance drilling to confirm mineralised and economic zones.

·; Drilling to define economic recourses.

Solomon Gold has proven expertise both in management and board levels to discover, develop and produce copper, gold, silver and any other associated value adding mineral.

Key Project Attributes

A summary of the key attributes for each of the Company's' four project areas is presented in the following pages.

Figure 1 : Solomon Gold Corporate Structure

Table 1 : Solomon Gold Exploration Projects

Figure 2 : Location of the Queensland tenements

Figure 3 : Location of the Solomon Island tenements

Project Summary

Fauro Island Project

Location : 380km northwest of the Capital Honiara, Solomon Islands

Ownership : 100% owned

Tenement Area : 70km2

Primary Targets : Epithermal Gold and associated minerals

Highlights:

·; Indications of a significant high grade gold and silver mineralisation similar in style to Lihir Island in Papua New Guinea ("PNG"), epithermal sulphide gold mineralisation.

·; Rim of Fire setting, 80km south-east of Bougainville deposit in PNG.

·; 35km2 of mineralised volcanic rim.

·; A number of intrusive systems and associated magnetic and electromagnetic anomalies including: Ballyorlo, Kiovakase, Meriguna, Bataha, Ballteara, Piru and Masamasa.

·; Kiovakase prospect yields up to 169g/t gold and 0.16% copper, now defined over a 700m by 1,500m zone.

·; Meriguna prospect yields up to 173g/t gold and 0.35% copper, with trench results; BK1; 7m at 17.1 g/t Au (incl. 2m @ 53.6 g/t Au and 1m @ 97.6 g/t Au) and GHT1; 6m at 7.4 g/t Au (incl. 1m @ 20.4 g/t Au). Now defined over a 700m by 1,500m zone.

·; Ballyorlo prospect yields up to 0.43% molybdenum and 0.2% copper.

·; Alluvial gold potential.

·; Planning and track access advanced for drilling at Fauro planned for late 2010.

The 100% owned Prospecting Licence on Fauro Island Project ("Fauro Project") was granted on 20 November 2009 for a period of three years. The licence may be renewed for a further four years after this term and then a mining lease may be applied for by the Company. The Prospecting Licence covers the northern peninsula of Fauro Island, as well as Piru and Masamasa Islands, 5km to the east.

The Fauro Project covers 15km2 of mineralised volcanic rim on the western side and a further 20km2 on the eastern side, over Piru and Masamasa Islands, which are subject to approval of an extension to the current Fauro Prospecting Licence. The Fauro Project area covers the remnant rims of a volcano which gave off silica and gold rich mineral fluids as the volcano waned. These fluids soaked into porous and absorbent volcanic rubble known as breccias and agglomerates and precipitated gold and sulphide minerals. Copper and molybdenum sulphide mineralisation are evident in porphyry bodies in the core of the volcanic complex. Alluvial gold is known to be common in the streams draining the Fauro prospects on the western side of the volcanic rim.

The Fauro Project lies 82km south east of the giant copper gold mine on Bougainville in neighbouring PNG, and Solomon Gold's geologists believe that the project represents a gold rich high level variant of a mineral system similar to Bougainville. Geologically, management believes the Fauro Project's best comparison however is with the giant 40Moz gold Lihir deposit, 560km to the north-west in PNG. Lihir and Fauro show similar mineralogy and geological settings. Management believes the Fauro Project has the potential to host a world class gold deposit with geological similarities to Lihir.

During the initial exploration program in early 2010, samples taken of silicified volcanic host rocks had gold values up to 169g/t (+5oz/t), some samples showing gold visible to the naked eye. New sample results reported on 14 and 24 September 2010, confirm and extend the known mineralisation.

Solomon Gold has identified the airborne electromagnetic ("EM") technique to be particularly useful diagnostic tool in the rapid and efficient identification of buried silicified deposits of gold ores in mineral systems related to volcanism at the Fauro Project. Accordingly, a survey was completed over the Fauro Project, covering 35km2 of total land area, in April 2010. Ten intrusive systems and associated EM anomalies were identified including 15km2 of the western rim with nine targets all supported by extensive mapping and sampling. The key prospects are Ballyorlo, Kiovakase, Meriguna, Bataha and Ballteara, see Figure 4. Piru and Masamasa Islands on the eastern side of the volcanic rim also have strong anomalous EM and magnetic signatures. Sampling over these Islands is expected to take place during the last quarter of 2010.

The second ground based exploration work recommenced on the Fauro Project in early August 2010 to test the nine identified electromagnetic anomalies, with BLEG (Bulk Leach Extractable Gold : A geochemical sampling / analysis tool used during gold exploration to accurately measure fine grained gold), trench and rock sampling.

The exploration work has and will continue to test the nine identified electromagnetic anomalies. The sampling to date, has outlined high grade gold targets (sampled at up to 169g/t gold) lying above porphyry systems at Meriguna and Kiovakase and a copper gold molybdenum porphyry system underlying surface gold mineralisation at Ballyorlo in the south of the exploration licence area. At Ballteara and Bataha on the north-western extension of the Fauro volcanic rim, the younger Masamasa Volcanics overlie the rich gold zone and gold mineralisation, up to 1.75g/t gold has been detected in sampling. Two unnamed prospects further to the north (Northern Fauro) are yielding high order stream sediment anomalism (identified with BLEG sampling) up to 400 parts per billion ("ppb") gold, but the source of this has not yet been discovered.

Based on results to date, the Ballyorlo prospect is interpreted as a high tonnage copper molybdenum porphyry system target, whilst Kiovakase and Meriguna are high grade epithermal (high level) gold prospects with associated metal credits overlying the porphyry systems (see Figure 5).

Figure 6, 7 and 8 details the gold, copper and Molybdenum results respectively. Tables 2, 3 and 4 summarises all gold, copper and Molybdenum respective assay results from each of the prospects taken since Solomon Gold was granted the Fauro Island tenement in November 2009. More detail about the other metals is outlined below.

Ballyorlo : A total of 57 samples were taken over the Ballyorlo prospect, with encouraging copper and molybdenum results and additional gold credits. 44 samples returned copper grades greater than 0.01%, the three highest results being 0.17%, 0.19% and 0.20%. Twelve results were more than 0.03% (300ppm) Molybdenum at Ballyorlo. The three highest molybdenum grades were 0.31%, 0.32% and 0.43%.

Ballyorlo has a porphyry signature, with copper molybdenum and gold credit potential.

Kiovakase : Fifty-four samples were taken over the Kiovakase prospect. Fourteen of the samples were greater than 10g/t gold with the highest three samples returning assay results of 18g/t, 161g/t and 169g/t. There were 40 copper assay results greater than 0.01%, of which two were greater than 0.1% (0.14% and 0.16%). Silver was present in all the samples results, the highest being 166g/t, 181g/t and 190g/t.

Kiovakase has an epithermal or high level gold signature, similar to the Lihir Island geology, deposited over the top of a porphyry system which is evident in the magnetic survey.

Hornbill : A total of 70 samples were taken over the Hornbill prospect. Seven samples were between 5g/t and 10g/t gold and nine samples greater than 10g/t gold. The highest three gold assay results were 69.4g/t, 97.6g/t and 139g/t. Of the 70 samples taken, 56 returned copper grades greater than 0.01%. The three highest copper results were 0.14%, 0.21% and 1.16%. Silver was present in 67 of the samples, the highest being 47.3g/t, 168g/t and 567g/t.

Two trenches dug at Hornbill returned encouraging bulk gold results. At BK1; 7m at 17.1 g/t gold (incl. 2m at 53.6 g/t Au and 1m at 97.6 g/t Au) and at GHT1; 6m at 7.4 g/t gold (incl. 1m at 20.4 g/t Au).

Hornbill has an epithermal gold signature and the copper mineralisation suggests potential for a copper porphyry system at depth underneath the gold zone.

Meriguna : Forty-three samples have been taken at Meriguna. There were five assay results greater than 5g/t gold, ranging from 5.33g/t to 173g/t. Silver was present in all the samples, the three highest results were 20.4g/t, 36.7g/t and 69.1g/t. Copper was greater than 0.01% in 35 samples. The highest copper results were 0.04%, 0.06% and 0.11%.

Meriguna has an epithermal gold signature and like the nearby Hornbill Prospect, the copper mineralisation indicates a copper porphyry target underneath the gold zone and coincident with the magnetic feature.

Hornbill and Meriguna have now been combined to be called Meriguna. The Meriguna system is over 700m by 1,500m in size.

Ballteara : A total of 21 samples were taken from Ballteara. The highest gold assay result was 1.75g/t gold. Five samples returned above 0.5g/t gold, indicating a higher grade epithermal gold target concealed beneath the capping Masamasa Volcanics covering Ballteara and Bataha. Five samples returned silver grades greater than 1g/t, the highest being 7.9g/t. The two highest copper results were 0.18% and 0.11% and eight samples were greater than 0.01%. The high anomalous copper is indicative of a concealed porphyry copper gold target in this location.

Further exploration work is required at Ballteara, which will be carried out in the imminent exploration program.

Northern Fauro

Only three samples were taken from the Northern Fauro prospect. The gold results were up to 0.38g/t gold, 8.6g/t silver and trace copper in one sample. The source of rich stream sediment samples up to 400ppb gold from the northern tip of Fauro Island have not been determined. Further exploration work is required to detect the source mineralisation. This will be carried out, during the ongoing exploration program.

The third exploration campaign commenced in late September and will revisit prospects from the August campaign, as well as the two northern Fauro prospects, Piru Island and Masamasa Island.

With the data from the airborne electromagnetic and magnetic survey and the three ground based exploration programs completed to date, drill targets have been identified and prioritised. Drilling is planned to commence in late 2010. Preparations are well underway sourcing a suitable contractor and preparing for drilling.

Table 2 : Gold Assay Results

* Expected gold cut-off grade

Table 3 : Copper Assay Results

** Expected copper cut-off grade

Table 4 : Molybdenum Assay Results

*** Expected molybdenum cut-off grade

Figure 4 : Fauro Prospects

Figure 5: Epithermal gold and copper gold porphyry emplacement model

Figure 6: Fauro Prospect gold samples results on the aeromagnetics

Figure 7: Fauro Prospect copper samples results on the aeromagnetics

Figure 8: Fauro Prospect Molybdenum samples results on the aeromagnetics

Guadalcanal Joint Venture

Location : 30km south of the Capital Honiara, Solomon Islands

Ownership : Newmont earning to 70%

Tenement Area : 327km2

Primary Targets : Porphyry Copper Gold

Highlights:

·; 300km2 of prime copper gold ground on the Pacific Rim of Fire.

·; Newmont earning up to 70% by spending US$12million by 5 March 2014.

·; The 2010 Guadalcanal Exploration program of A$5.2million to include 3,000m of drilling, which commenced in August 2010.

·; Potential for world class copper gold deposit similar to Bougainville, Grasberg or Ok Tedi.

·; EM survey identified strong target features at Vuanimaho and Vuramindi (Mbetilonga), similar to 5Moz Au Martabe deposit in Indonesia.

·; 15km2 mineral system with high grade copper occurrences at Kuma.

·; High grade copper over 1km2 at Hambusimaloso (Mbetilonga).

·; High grade skarn discovery at Sutakiki 32m at 9.45g/t gold in drillhole SK011.

·; High order gold anomalies in Mbina, Koloula and Kuma headwaters.

·; Strong local relationships

The geology of the project area on Guadalcanal is considered analogous to that on Bougainville where the giant Panguna Mine is located. Andesitic volcanic piles located parallel to the Rim of Fire have been intruded by younger diorite and porphyry bodies. Intrusions and mineralisation have been preferentially localised on north north-east zones of weakness known as transform faults. One of these runs through the Koloula - Sutakiki intrusive centre and another through the Mbetilonga exploration area, on Solomon Gold's tenements. The project area was originally selected as containing the most interesting porphyry targets on Guadalcanal and was acquired after extensive reviews and research in 1995.

Between 1995 and 1998, reconnaissance field map sampling and airborne magnetics and radiometrics were conducted by ARM. Data from these programs formed the base data for the programs implemented since 2005. Work ceased between 1998 and 2005 due to civil unrest in the Solomon Islands. However, during its initial work period, the ARM management team developed an unrivalled record of successful liaison with the local Solomon Islanders. This record is the basis for the Company's ongoing and unprecedented access arrangements in the field.

Over the period from 2005 to 2008 the Company set about an intensive program of fieldwork involving detailed mapping and sampling of known prospects. The strategy culminated in a concentration of effort on drill testing which resulted in some significant and some spectacular intersections such as at Valehailali, Sutakiki, where 32m at 9.45g/t gold was encountered in a peripheral skarn system. Whilst this was a spectacular result, this activity resulted in a diversion of effort from the main thrust of locating a large porphyry system and thus in 2009, the Company entered into the Joint Venture with Newmont, the GJV. The aim of this initiative was to refocus the exploration program from the diversionary high grade vein search to porphyry exploration.

The current exploration program is focussing on a 3,000m drilling campaign which commenced 19 August 2010 on the copper gold porphyry targets at the Chikora and Levisivisi Prospects (Koloula project area). Geological mapping will be conducted on the Mbetilonga and Kuma projects and regional reconnaissance sampling on the Central prospecting licence to assist with drill target definition for those areas.

Further drill target delineation at Chikora is underway in order to provide steady preparation for continuous drilling. A ground pole-dipole IP program will be conducted over the area to identify chargeability anomalies, particularly at the Levisivisi Prospect which will identify regions of strong copper sulphide in the host porphyry rock, following high grade copper discoveries in 2009. Additional rock saw channel sampling is also planned at the Chikora, Levisivisi, Vurakara and Kolohaipoto areas, to further define drill targets.

At Mbetilonga, geological mapping will be carried out and will be supported by ASD analysis (Advanced Spectral Device: a handheld device used in the field to analyse samples for their mineral assemblage, especially regarding altered clays), BLEG, soil and trench sampling of the high ranking targets. This work will identify the drill targets at Mbetilonga. Principal targets at Mbetilonga are the strong electromagnetic resistor at Vuanimaho, and the copper rich zones at Hambusimaloso.

Exploration at Kuma will involve geological mapping and will be supported by ASD analysis, channel sampling, soil sampling and completion of the BLEG program which was commenced in 2009.

The Central prospecting licence work program will involve completion of the BLEG program commenced in 2009.

The Sutakiki prospect licence remains a lower priority, given higher ranking targets elsewhere. Time permitting during this current approved program, work may involve a technical review of the Tabarora / Valehailala mineralised systems.

See figure 9 for the location of the Guadalcanal Venture projects.

Figure 9 : Guadalcanal Joint Venture Tenements

Figure 10 : Drilling at Sutakiki, Guadalcanal Joint Venture

Other Solomon Island Projects

Ngella Project, Florida Island (100% Solomon Gold)

The Ngella prospecting licence is located approximately 30km north of Honiara on Florida Island (see Figure 11). The area was selected by the Company as a lateritic nickel target, after the identification of nickeliferous ultrabasic rocks in the area. Solomon Gold geologists have identified a 5km2 area underlain by weathered ultrabasic rocks with visible nickel oxides and silicate mineralisation characteristic of the saprolite or lower horizon in a nickel laterite prospect.

On 10 December 2008, the Company announced a maiden resource of 1.7Mt at a grade of 0.6% nickel and 0.06% cobalt at the Ngella Project, within Florida. Based on mineralisation at higher grades persisting at depth in most of the test pits dug to date a target of a total 5.4Mt at a grade of 1.0% nickel and 0.1% cobalt has been outlined. Further extensions are prognosed to the south. The Company is encouraged by the presence of platinum in the mineralised zones with anomalous palladium. Best results to date have included 2.02% nickel, 0.23% cobalt and 0.15g/t platinum and 0.11g/t palladium. It is planned to complete a further drilling program to up-grade the previous resource.

A one week field trip was undertaken in June 2010 to investigate the potential for gold mineralisation at targets generated from a desktop study completed during the year. A porphyritic hornblende quartz diorite was located and nine BLEG samples were taken from all streams draining the diorite. The results were encouraging with gold assay results of between 0.052ppm and 0.655ppm and further field work will be undertaken in 2011.

East Guadalcanal Project, Guadalcanal Island (100% Solomon Gold)

The East Guadalcanal prospecting licence is located on the eastern end of the island of Guadalcanal (see Figure 11). Tectonically, the area is part of an east-west trending mountain range that was formed as a result of the subduction of the Indo-Australian plate under the Pacific plate, just south of the island and is still very active.

The Marau Ultrabasic, that outcrops over this area in an east-west direction over a distance of about 18km have the potential of hosting significant deposits of lateritic nickel and other associated metallic deposits. These laterites have a distinctive photogeological tone since they are dominantly vegetated with fern and light shrubs. International Nickel Southern Exploration Ltd prospected for lateritic nickel on this area in 1970 but had to abandon this tenement due to very strong resistance from the local landowners. As such, these laterites have never been investigated in detail to this present day, though preliminary investigations by both the Government Geological Survey and International Nickel Southern Exploration Ltd have found the area to have encouraging physical and geologic features that are worth investigating.

The Marau Ultrabasics, from which the laterites are, generated outcrops over a distance of about 18km in an east-west direction but from vegetation patterns there is potential of locating further outcrops of this ultrabasic.

Figure 11 : Location of Florida and East Guadalcanal projects

Central Rannes

Location : 140km west of Gladstone, Queensland, Australia

Ownership : 100% owned

Tenement Area : 1,102 sub-blocks (3,306km2)

Primary Targets : Carlin Style Gold

Highlights:

·; Maiden Inferred Mineral Resource of 5.6Mt at 1.12g/t equivalent gold for 201,648oz of contained equivalent gold (0.20g/t equivalent Au cut‐off grade) for the Crunchie.

·; Subsequent drilling has extended Crunchie to the east into the El Dente Prospect, where mineralisation is not closed off.

·; A series of multiple prospects in close proximity to the Crunchie, providing excellent potential for a significant expansion of the existing resource inventory.

·; 200km long exploration licences on a new Carlin style gold trend.

·; Central Queensland region historic 10Moz production.

·; 120km north of Cracow Mine (70% Newcrest), 0.86Moz Reserve /100kozpa.

·; Drill intersections of 86m at 1.50g/t gold at Kauffmans.

·; Drill intersections of 128m at 1.15g/t gold, 86m at 1.36g/t gold at Porcupine Pie.

·; Cooper and Police Camp Creek prospects extend over 7km long each.

The Rannes Project, part of the Company's 100% owned Central Minerals Pty Ltd, is located in Queensland. The project comprises a series of prospects; Crunchie, Homestead, Kauffmans, Cracklin Rosie and Porcupine Pie.

On the 7 June 2010, Solomon Gold announced a Maiden Inferred Mineral Resource at Crunchie. The estimate is 5.6Mt at 1.12g/t equivalent Au for 201,648oz of contained equivalent gold (79,219oz Au and 7,921,883oz Ag), based on a 0.20g/t equivalent Au minimum cut-off grade. The estimate was completed by Hellman & Schofield Pty Ltd, an independent geological consultancy and has been classified as Inferred for reporting under the JORC Code for Reporting of Mineral Resources and Ore Reserves widely accepted as a standard for professional reporting purposes.

At Rannes, mineralisation similar in texture and chemistry, as well as structural settings to that on the Carlin trend has been identified and substantiated with drilling (see Figure 12). Solomon Gold acquired Central in February 2010 and in doing so consolidated a 200km length of exploration ground prospective for Carlin style gold mineralisation. The zone lies on the eastern faulted edge of the coal rich Bowen Basin, in an environment favourable for the introduction of mineral bearing granitic intrusions and related volcanic centres.

The Carlin style gold mineralisation was typed near the town of Carlin in Nevada, USA in the early 1980s. It occurs as the result of low temperature solutions precipitating gold, silver and sulphide minerals in limey, magnesian and carbonaceous sediments, which have first been made porous by acid solutions emanating from nearby intrusions and fragmentation from fault activity. The mineralisation occurs in long structural corridors known as trends, such as the famous Carlin and Battle Mountain trends in the USA, which host in excess of 200Moz of gold as past production and current resources. The trends are important features which are the focus of the intrusions, faulting and mineralisation. This model has been something of a holy grail for gold explorers all over the world.

Five known and closely clustered prospects, collectively referred to as 'Central Rannes' (see Figure 13); Crunchie, Homestead, Kauffmans, Cracklin Rosie and Porcupine Piehave been drilled to date, with results which show long intersections of potentially economic gold mineralisation. The Company intends to continue its aggressive program on the project. A detailed airborne magnetic survey has identified a series of structures which would be interpreted as mineralised features which in the Carlin style environment would present significant gold targets.

The Cracow Gold Mine, substantially owned and operated by Newcrest lies some 120km south of the Rannes project area and produces approximately 100kozpa gold from a 0.86Moz gold Reserve. The epithermal character of the rich veins at Cracow is thought to represent the tenor of gold mineralisation possible at depth underneath the high level systems at Rannes. Accordingly, interpretation of existing airborne magnetic data and sensitive geochemical surveying techniques are planned for the project area as a broad scale targeting technique in the next 12-months.

The on-going drilling program at Crunchie has been designed to find extensions to the resource or adjacent repetitions. Vertical holes CRU58 (4m at 1.28g/t Au, 81.8g/t Ag and 2.56g/t Au eq.) and CRU59 (6m at 0.61g/t Au, 47.1g/t Ag and 1.35g/t Au eq.) have located extensions to Crunchie, towards the El Dente Prospect where the mineralisation is open and thickening to the north.

The latest drilling at Homestead was designed to test two targets; firstly an old gold open-pit mine, and secondly to confirm the interpreted south westerly pitch of separate mineralisation 200m to the north, in hole HOM43 30m at 2.83g/t gold equivalent, including 14m at 5.17g/t gold equivalent from a depth of 32m.. In the second case, encouraging intersections of silica / clay / sulphide mineralisation greater than 100m were noted in two holes along strike. The first two holes assayed 36m at 0.62g/t Au, 16.7g/t Ag and 12m at 0.75g/t Au, 18.9g/t Ag.

Kauffmans

At Kauffmans, excellent results have been intersected, including 86m at 1.50g/t gold and 15.1g/t silver in hold KAU13, and 40m at 1.69g/t gold and 25g/t silver in hole KAU6. The best results were from drill hole KAU8, being 4m at 7.21g/t gold equivalent (7.04g/t gold and 10.8g/t silver). The Kauffmans results are particularly encouraging in that there are several shoots that can be incorporated into a single open pit. At this time, the deposit is unclosed by drilling in all directions.

Drilling at Porcupine Pie has demonstrated that the resource discovered by previous explorers does indeed extend to the surface, albeit at lower grades and narrower thicknesses; POR6 (36m at 0.5g/t Au, 6.2g/t Ag, incl. 16m at 1.0g/t Au, 10.7g/t Ag) and POR7 (22m at 0.88g/t Au, 9.9g/t Ag).

Drilling at Cracklin Rosie has demonstrated a low sulphidation epithermal system in a similar stratigraphic position to Crunchie with much less ambient sulphide content. Results to date include CLK2 (32m at 0.8g/t Au, 7.5g/t Ag), CLK3 (10m at 1.2g/t Au, 4.9g/t Ag, incl. 2m at 2.7g/t Au, 7.0g/t Ag) and CLK4 (12m at 0.9g/t Au, 6.3g/t Ag and 30m at 1.0g/t Au, 9.2g/t Ag). Bulk grades to date are about 1g/t gold with little silver, but this occurs over good widths, which is potentially easily mined.

The immediate drilling program is currently focussing at Crunchie, Homestead, Kauffmans, as well as Brother. The objective is to step-out from areas of known gold mineralisation so that resources can be defined, or enlarged which will compliment the already defined Crunchie Resource.

Follow up of potassium radiometric anomalies has been successful in identifying extensive new zones of gold mineralisation at Spring Creek and Pinnacles to the southeast and north of Police Camp creek. These still need to be followed up.

Table 5 : Crunchie Inferred Resource Estimate

·; Average density of 2.9t/m3 for sulphide, 2.7t/m3 for oxide; minor rounding errors; significant figures quoted do not imply precision and are used to minimise round‐off errors.

·; The metal prices utilised are based on the cumulative average for 2010 year to-date (a five month period) for the London PM fix of both metals. Gold US$1,134.82/oz and silver US$17.4371/oz. This equates to a Gold equivalent ratio, Gold to Silver of 1 to 65.

Figure 12 : Carlin Style Gold Mineralisation

Figure 13 : Location of Rannes Prospects

Mt Perry

Location : 130km east-north-east of Gympie, Queensland, Australia

Ownershi : 100% owned

Tenement Area : 246 sub-blocks (738km2)

Primary Targets : Porphyry and Vein Gold

Highlights:

·; Geochemical surveys undertaken at Augustine, Nickos Reward and Spring Creek have defined new targets.

·; Spring Creek is defined as a significant drill target. An initial hole has been drilled on the edge of the strongest and widest surface gold mineralisation, named Spring Pig.

·; Three elongate breccias to the south of Nickos Reward and nine gold mineralised vein targets east of Augustine have firmed as drill targets with numerous rock chip values circa 4g/t Au.

·; 60 historic named mines, numerous other diggings.

·; Adjacent to a currently producing mine, owned by Lihir Gold (Mt Rawdon) operational for over 10-years and producing gold at a rate of over 100kozpa.

·; Eastern Queensland has been host to some of Australia's most significant gold mining operations, including Mt Morgan which produced 8Moz up to 1970, when it closed.

The Mt Perry Goldfield (see Figure 14), located in south east Queensland, a four-hour drive from Brisbane, is host to more than 60 named (and numerous other unnamed) historic mines and workings. The area lies adjacent to Lihir Gold's 100kozpa Mt Rawdon Gold Mine on the intersection of two major geological fault structures; the Mt Perry and Darling Lineaments. Several high grade vein style and lower grade high tonnage porphyry style gold targets have already been identified by mapping sampling, geophysics and exploration drilling.

The exploration work has yielded recent, significant gold discoveries from drilling in a low risk environment adjacent to existing gold mining operations in Queensland. The project at Mt Perry in particular provides the opportunity to define deposits in excess of several million ounces of gold through strongly disseminated mineralised intrusive related porphyry systems. New structural controls to mineralisation, as a persistent north-north-west fracture system, have been recently recognised in the Mt Perry project area.

The mineralised target zones at Mt Perry extend over a 20km north-easterly corridor from Augustine West in the south west to the New Moonta mines in the north-east. Sulphide mineralised breccias with variable gold, silver and base metals, with occurrences of uranium characterise the Augustine to New Moonta trend. Copper-molybdenum porphyries with gold and zinc anomalous halos lie in the south of the project area and merge with the 7km long strongly mineralised Chinamans Creek - Reids Creek - Spring Creek - Regans target immediately to the north. In the northern part of the project area, gold mineralisation is characteristically low in sulphide minerals and similar in style to gold rich intrusives of north-west America.

Extensive airborne magnetic and electromagnetic surveys have been conducted over the area, together with detailed soil and rock chip sampling and mapping programs. This has been followed by drilling programs conducting first pass reconnaissance drilling on numerous targets. The Company is prioritising the targets and will commence drilling on the highest priority.

Solomon Gold has identified potential for the definition of more than 1Moz gold in the Chinamans Creek system, extending in a number of parallel mineralised shear and reef systems over a 7km by 2km zone. Upper Chinaman Creek consists of at least three sub-parallel gold bearing structures, the B-B, Welcome and Spring Creek zones which are characterised by variable veining, silicification and pyritisation that appear to be related to porphyry dykes that trend from the Mt Rawdon Mine area, 13km to the south-east on the Rawdon Fault. Numerous outcrops and historic workings have yielded high grade gold assays of up to 181g/t Au (6oz/t Au), while soil gold anomalies remain open at the +100 ppb level, with frequent zones above 1g/t gold in soils.

An airborne electromagnetic and magnetic survey completed over the Augustine - New Moonta and Regans - Chinamans Creek trends in 2006 was recently reprocessed and reinterpreted. 17 strong resistors were identified and targeted as porphyry copper and gold targets.

The first pass holes at Spring Gully intersected sulphide breccias and minor epithermal veins around altered porphyry dykes. The best result was in hole SPG6, which included 24m at 0.79g/t Au, including 8m at 1.74g/t Au.

Confirmation surface sampling has proved very successful in defining an open zone of strong gold within multiple structures currently named Spring Pig (lying between Spring Creek and Flying Pig mines). The zone is greater than 100m wide and appears to extend for several hundred metres and has the strongest and largest soil geochemical anomaly for gold, of all the Mt Perry prospects.

Further work has been carried out around the Augustine and Nickos Reward prospects. Nine gold mineralised veins at Augustine and three gold mineralised breccia zones at Nickos Reward have been identified and drilling will commence immediately on these targets. Results from historic drill holes at Augustine were AUS6 (13m at 2.3g/t Au, 31.4g/t Ag, 0.25% Cu incl. 2m at 9.1g/t Au) and AUS7 (7m at 3.1g/t Au, 23.4g/t Ag, 6.16% Cu). The gold bearing breccias at Augustine South have been traced for approximately 600m to the south west, and new vein - breccia systems have been located to the east; Rocky Creek, Thornbill, One Tree and Wattle Bird. Outstanding rock chip values of up to 40g/t gold have come from these linear breccia zones, which are up to 10m wide and 400m long.

Figure 14 : Location of Mount Perry Prospects

Other Queensland Projects

Normanby Gold Project (100% Solomon Gold)

The Normanby Gold Project is part of Acapulco, located 120km north-west of Mackay, see Figure 2. The Project comprises two tenements comprising 12 sub-blocks (36km2). An additional tenement adjacent to the current tenements, is currently under application, totalling 60 sub-blocks (180km2).

A limited drilling program using a lightweight rig has discovered economic grades and widths of gold and copper mineralisation at Mount Flat Top with best intersections of 42m at 1.16 g/ t Au and 34m at 1.22 g/t Au. The steep terrain prevented a more intensive evaluation which will require a more powerful drill and better access tracks. The mineralisation has the geological features of a porphyry copper system with a high gold to copper ratio. Repetitions and extensions are indicated nearby, and copper gold silver and molybdenum showings along strike are under application.

Clermont Gold Project (100% Solomon Gold)

Clermont Gold Project is located 220km south-west of Mackay (see Figure 2) and comprises 125 sub-blocks (380km2).

The purpose of exploration at Clermont is to locate the hard rock source of alluvial gold that is widely distributed in the Miclere goldfield 25 km north of Clermont. The areas of potential have widespread post mineral cover that obscures most of the bedrock.

Areas of regolith predating the cover were sampled and several gold arsenic antimony anomalies were defined. Five areas were subject to first pass drilling, and the best results came from the Niagara prospect. This drilling, along with ground magnetic surveys has defined a north south trending zone of mineralised porphyry dykes, veins and breccias that is approximately 50m wide. The grades are increasing under shallow post mineral cover to the south, away from the original regolith anomaly and drilling target.

The known mineralised body is to be further defined by drilling and repetitions are to be sought by drilling in adjacent areas along strike.

Cracow West Project (100% Solomon Gold)

The Cracow West Gold Project is located 260km north-west of Gympie (see Figure 2) and comprises one granted tenement of 50 sub-blocks (150km2) and one application of 70 sub-blocks (210km2). The application is considered to be the more important of the two, lying adjacent to the Newcrest's Cracow tenement.

Only preliminary stream sediment geochemical surveys have been done on the granted tenement. This work has identified an extensive area of antimony tellurium anomalism with some lesser gold in streams that drain the westerly extensions of the Cracow goldfield. This is considered encouraging as the Cracow lodes have an antimony tellurium association. Work will commence in this area upon the granting of the application.

Auburn Gold Project (100% Solomon Gold)

The Auburn Gold Project is located 175km west-south-west of Gympie (see Figure 2) and comprises 100 sub-blocks (300km2). The project was acquired for the purpose of locating the source of gold - antimony anomalous epithermal vein float within ancient Tertiary drainages that originate in the area. The drainages are also anomalous for platinum, most likely derived from poorly outcropping gabbros known in the application area.

The project area is to be prospected using stream and rock geochemistry and the epithermal floaters will be followed to their apparent source.

INTERESTS IN TENEMENTS

RISKS AND UNCERTAINTIES

The Directors consider that the factors and risks described below are the most significant.

Funding risks

On 5th March 2009, the Company announced its definitive Venture Agreement with Newmont Ventures Limited, a subsidiary of Newmont Mining Corporation (NYSE:NEM) ("Newmont"), under which Newmont can earn 51% of the project area by expending US$6 million within three (3) years, and may elect to expend a further US$6 million within a further two (2) years to earn a further 19% to reach 70%. It is possible that results and circumstances may dictate a departure from the existing work plans and expenditure budgets from time to time, and it is possible that Newmont may elect to terminate its participation in the Venture prior to its full term.

The ability of the Group to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions as well as the business performance of the Group. The development and exploration of the Group's properties may require substantial additional financing. Failure to obtain such financing may result in delaying or indefinite postponement of exploration, development or production on any or all of the Group's properties or even a loss of property interest. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favourable to the Group. If additional financing is raised by the Group through the issuance of securities from treasury, control of the Group may change and security holders may suffer dilution.

General exploration and extraction risks

There is no certainty that the Company will identify commercially mineable reserves in the Tenements. The exploration for, and development of, mineral deposits involves significant uncertainties and the Company's operations will be subject to all of the hazards and risks normally encountered in such activities, particularly given the terrain and nature of the activities being undertaken. Although precautions to minimise risks will be taken, even a combination of careful evaluation, experience and knowledge may not eliminate all of the hazards and risks.

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. Furthermore, there can be no guarantee that the estimates of quantities and grades of gold and minerals disclosed will be available for extraction and sale.

Tenements and regulatory environment

The Company's exploration licences for its tenement interests on the island of Guadalcanal in the Solomons are either in the process of being renewed, or are about to have renewal applications lodged. In Queensland, several tenement interests are under application. The Company is not aware of any reason why any applications or renewals will not be granted. There is no guarantee that if any company within the Group applies in the future 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 the Group are subject to various laws governing prospecting, development, production, taxes, labour standards and occupational health, site safety, toxic substances, environmental and other matters in both the Solomon Islands, and in Queensland, Australia. Although the Directors believe that the Group'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.

Native Title Risk

The effect of the Federal Native Title Act (NTA) is that existing and new tenements in Queensland held by the Company or its subsidiaries, may be affected by native title claims and procedures.

The Company has not undertaken the historical, legal or anthropological research and investigations at the date of this report that would be required to form an opinion as to whether any existing or future claim for native title could be upheld over a particular parcel of land covered by a tenement.

There is a potential risk that a determination could be made that native title exists in relation to land the subject of a tenement held or to be held by the Company or its subsidiaries which may affect the operation of the Company's business and development activities. In the event that it is determined that native title does exist or a native title claim is registered, the Company may need to comply with procedures under the NTA in order to carry out its operations or to be granted any additional rights such as a mining lease. Such procedures may take considerable time, involve the negotiation of significant agreements, may involve a requirement to negotiate for access rights, and require the payment of compensation to those persons holding or claiming native title in the land which is the subject of a tenement. The administration and determination of native title issues may have a material adverse impact on the position of the Company and its business.

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 Company.

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.

Title matters

Whilst the Company has the benefit of granted Prospecting Licenses (PL's) and Exploration Permits (EPM's) 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 the Group may lose all or part of its interest in those Tenements to which the defect relates.

The grant and future renewals of PLs and EPMs, as the case may be, are governed by the requirements and restrictions set out in the relevant mining related legislation of the Solomon Islands, and the State of Queensland, Australia. Whilst the Company believes it is entitled to rely upon all the actions of the relevant Governmental Departments and Ministers, compliance with the requirements and restrictions under the relevant legislation may be open to differing interpretations which, in the case of an adverse interpretation, may have a material adverse effect on the Group's title.

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.

Landowner issues

In the case of mining and exploration operations in Solomon Islands, there is a complex land tenure structure and while the group'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.

Access agreements with landowners are either in place, or are in the process of being renewed. Based on the Group's long history and association with landowners, the Directors are not aware of any reason why access will be impeded or discontinued.

Sovereign risk and civil disobedience

The Group intends to continue to make a 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.

FINANCIAL REVIEW

The year ended 30 June 2010 was a strategically important one for the Company as it substantially expanded its operations and exploration upside via the acquisition of the two Queensland gold exploration companies, and the granting of the Prospecting Licence for the Company's 100% owned project on Fauro Island in the Solomons. Subsequent exploration results led to a recent re-rating of the Company's share price, which precipitated a successful raising of approximately $24 million announced in late October 2010 from institutional and professional investors. The raising is due to settle following a shareholder's meeting called for 8 November 2010 to approve an increase in the Company's authorised capital from £2,000,000 to £5,000,000.

Results

The Company incurred a loss of $2,192,989 for the year, including exploration expenses written off during the year of $567,415. Given that the Company is still at the exploration phase of its development, this is in line with expectations.

Statement of Financial Position

As at 30 June 2010, the Company had net assets of approximately $32 million, an increase of approximately $13 million over the previous financial year. This increase was largely associated with the acquisition of the two Queensland gold exploration companies, and the capitalisation of exploration expenditure by the Company during the year.

The only interest-bearing debts incurred by the Company include the $1 million Convertible Note repayable to D'Aguilar Gold by February 2011 (associated with the acquisition of Central Minerals) and minor leasing facilities secured over the leased assets.

Cash Flow

Our cash expenditure for the year was approximately $5.68 million, including the repayment of borrowings. Cash of approximately $4.45 million was received by the Company from interest income, cash acquired with the two Queensland gold exploration company acquisitions, and the issue of securities. Accordingly, the net cash outflow of the Company for the year was approximately $1.23 million.

Cash of approximately $2.6 million was invested by the Company on exploration expenditure during the year.

Post Balance Sheet Events

On 12 July 2010, the Company issued 33,089,099 shares to investors pursuant to a placement at $0.09, raising a total of A$2,839,145 before costs.

On 22 October 2010, the Company announced that it had successfully raised approximately $24m through the impending issue of 54,017,153 shares at a price of approximately $0.45 from institutional and private investors. The placement is due to settle following a shareholder's meeting called for 8 November 2010 to approve an increase in the Company's authorised capital from £2,000,000 to £5,000,000.

Outlook

As a consequence of the Company's October 2010 raising, its exploration program and administrative budget will be underwritten for the next twelve to eighteen months, meaning further significant exploration of its 100% owned projects in Queensland, and on Fauro Island in the Solomons. The work to be conducted in Queensland will focus on the expansion of the Company's maiden resource previously announced, whilst the exploration program at Fauro Island will include an initial drilling campaign commencing in December 2010, designed to test drill targets identified by the work undertaken to date.

Newmont continue to fund and manage the Guadalcanal Joint Venture on the island of Guadalcanal in the Solomons, and continued drill testing of targets identified by previous work will continue for the foreseeable future.

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

RFC Corporate Finance Limited ("RFC") and Fairfax IS act as Nominated Advisor and Broker to the Company respectively.

Equity

Since the date of the last Annual Report, the Company has issued the following equities:

On 8 July 2009 the company issued 8,310,378 shares to investors pursuant to a placement at A$0.164 raising a total of A$1,362,902 before costs.

On 17 July 2009, the Company issued 400,000 shares at a price of A$0.178 to key staff as part of their remuneration arrangements.

On 13 November 2009, the Company issued 21,428,571 shares to investors pursuant to a placement at $0.14, raising a total of A$3,000,000 before costs.

On 22 December 2009, the Company issued 49,600,000 shares to the vendors of Acapulco Mining Pty Ltd at A$0.123 pursuant to a scrip-based acquisition arrangement (refer Note 23 for further details).

On 19 February 2010, the Company issued 37,200,000 shares to the vendors of Central Minerals Pty Ltd at A$0.126 pursuant to a scrip-based acquisition arrangement (refer Note 23 for further details).

On 27 April 2010, the Company issued 1,300,000 options to the COO pursuant to his employment arrangements. The options vested on 1 July 2010, and are exercisable at £0.10 through to 30 June 2011.

On 27 April 2010, the Company issued 96,197 shares at a price of A$0.13 to a key supplier as part of a commercial arrangement for the payment of their services.

At year end, the Company had a total of 193,266,272 shares and 6,376,670 options on issue.

On 12 July 2010, the Company issued 33,089,099 shares to investors pursuant to a placement at $0.09, raising a total of A$2,839,145 before costs.

At the date of this report, the Company had a total of 226,355,371 shares and 6,376,670 options on issue.

The Board consists of one Executive Director and four Non-Executive Directors.

Cameron Wenck

(Non-Executive Chairman)

Cameron Wenck (50), appointed 22 November 2005, is a financial adviser and company Director with over 20 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 (54), 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 Limited and a non-executive Director of ASX-listed companies Bow Energy Limited, AusNiCo Limited and Mt Isa Metals Limited.

Brian Moller

(Non-Executive Director)

Brian Moller (51), 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 Limited and Platina Resources Limited, and the non-executive Chairman of ASX-listed AusNiCo Limited.

Dr Robert Weinberg

(Non-Executive Director)

Rob Weinberg (63), appointed 22 November 2005, gained his doctorate in geology from Oxford University in 1973. He has more than 35 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 and also a Fellow of the Institute of Materials, Minerals and Mining.

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 the ASX listed Kasbah Resources Limited and Medusa Mining Limited, a company listed on the ASX, AIM and TSX.

John Bovard

(Non-Executive Director)

John Bovard (64), appointed 2 November 2009, is a civil engineer with over 40 years experience in mining, heavy construction, project development and corporate management throughout Australia. His career to date has included roles as CEO of public companies and both Executive and Non-Executive Directorships. He holds a Bachelors Degree in Civil Engineering, is a Fellow of the Australasian Institute of Mining and Metallurgy, and a Fellow of the Australian Institute of Company Directors.

Mr Bovard is currently the Non-Executive Chairman of the ASX-listed Mt Isa Metals Limited and Pacific Enviromin Limited. Other roles within the past five (5) years have included acting as the interim CEO of Australian Solomons Gold Ltd (April 2007 to January 2008) and the Non-Executive Chairman of Axiom Mining Ltd (June 2006 to April 2007). From March 2002 to June 2006, Mr Bovard acted as the CEO of Asia Pacific Resources Ltd (listed on the TSX) developing a large potash resource in Thailand. Other Directorships have included Danae Resources NL (Managing Director) and Greenwich Resources Plc, both through to early 2006.

He was also Project Manager for the $A800 million Phosphate Hill Fertiliser Project for Western Mining Corporation (WMC) situated south of Mount Isa in Queensland, Australia. Other previous project experience includes managing the construction of the Porgera Mine in Papua New Guinea, the Super Pit expansion at Kalgoorlie, and the development of the Bronzewing Gold Mine in Western Australia. He was previously the General Manager of the giant OK Tedi porphyry Copper Gold Mine. Mr Bovard's corporate profile, together with his extensive experience in south west Pacific mining operations and construction is considered to be of great value to Solomon Gold Plc.

COMPANY SECRETARY

Karl Schlobohm

(Company Secretary and Chief Financial Officer)

Karl Schlobohm (42) has over twenty (20) years experience in the accounting profession across a wide range of businesses and industries. He has previously been contracted into CFO roles with ASX-listed resource companies Discovery Metals Limited and Meridian Minerals Limited, and as Company Secretary of ASX-listed Linc Energy Limited, Agenix Limited, Discovery Metals Limited and Global Seafood Australia Limited.

Mr Schlobohm is a Chartered Accountant and holds Bachelor Degrees in Commerce and in Economics, and a Masters Degree in Taxation.

Mr Schlobohm is also contracted to act as the Company Secretary / CFO of the ASX-listed D'Aguilar Gold Limited and AusNiCo Limited.

DIRECTORS' REPORT

The Directors present their annual report and audited financial statements for the year ended 30 June 2010.

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 the Solomon Islands and Queensland, Australia. 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 Report.

The principal activity of the Company is that of a holding company.

BUSINESS REVIEW

During the past year, Solomon Gold successfully acquired two companies holding promising exploration projects in Queensland, Australia. The first acquisition, Acapulco Mining Pty Ltd, holds extensive tenements over a project area in and around Mt Perry of 1,344 km2, located four hours drive northwest of Brisbane and about 15km from Lihir Gold's 1 million oz Mt Rawdon mine. Acapulco was acquired by Solomon Gold on a scrip-for-scrip basis, issuing a total of 49.6 million shares to the vendors of Acapulco. Further details are contained in the Operations Report, and in Note 23.

The second acquisition, Central Minerals Pty Ltd, holds exploration licences covering 3,670 km2 over a strike length of 200km on the eastern margin of the Bowen Basin in Central Queensland, approximately 150km west of the port of Gladstone. Central Minerals was acquired by Solomon Gold on a scrip-for-scrip basis, issuing a total of 37.2 million shares to the vendors of Central Minerals. Further details are contained in the Operations Report, and in Note 23.

A detailed review of the Group's business and future developments is set out in the Operations Report and Financial Review.

The principal risks and uncertainties facing the group at its present stage of development are given under Risks and Uncertainties.

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. At the reporting date, the Group had a net current liability position of $1,577,146, inclusive of the Convertible Note held by D'Aguilar Gold and repayable by 19 February 2011. However, on 22 October 2010, the Company announced a substantial capital raising of approximately A$24 million. The raising is due to settle following a shareholder's meeting called for 8 November 2010 to approve an increase in the Company's authorised capital from £2,000,000 to £5,000,000. This capital, together with the fact that Newmont has agreed to fund the exploration work being undertaken on the Guadalcanal project under the terms of the Venture Agreement executed between the two parties, means that the Company has sufficient working capital to fund its own operations, including the exploration of those Solomon Island tenement areas held outside of the Newmont Guadalcanal Venture, together with its tenements in Queensland, Australia. It should be noted that the current working capital levels will not be sufficient to bring the Company's projects into full 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 its projects.

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$2,192,989 (2009:A$1,239,497).

CHANGES IN SHARE CAPITAL DURING 2010

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. The review of the business with reference to key performance indicators is set out in the Operations Report 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 of financial risk management objectives and policies, and exposure of the group to financial risks are provided in Note 19 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 71 days (2009: 49 days) worth of purchases in Group trade creditors and 24 days (2009: 71 days) worth of purchases in Company trade creditors.

SUBSEQUENT EVENTS

On 12 July 2010, the Company issued 33,089,099 shares to investors pursuant to a placement at $0.09, raising a total of A$2,839,145 before costs.

On 22 October 2010, the Company announced that it had successfully raised approximately $24m through the impending issue of 54,017,153 shares at a price of approximately $0.45 from institutional and private investors. The placement is due to settle following a shareholder's meeting called for 8 November 2010 to approve an increase in the Company's authorised capital from £2,000,000 to £5,000,000.

DIRECTORS AND DIRECTORS' INTERESTS

The Directors who held office during the period were as follows:

*John Bovard was appointed Non-Executive Director 2 November 2009

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 direct and indirect interests in the ordinary shares and unlisted options of the Company as shown in the tables below.

No options were issued to Directors during the year.

No options were held by John Bovard during the year.

MAJOR SHAREHOLDERS

The following parties represented the top 10 shareholders in the Company as at 27 October 2010.

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 Revised Combined Code issued by the Financial Reporting Council in June 2008 (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 four 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 material 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, 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' and key management's 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 650,000 in total, or just under 0.3% 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 2010 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 in Solomon Islands and Queensland, and is chaired by John Bovard, 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 (2009: 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 Directors' 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, elected to prepare the group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and have also elected to prepare the parent company financial statements in accordance with those standards.

Under company law the Directors must not approve the financial statements unless they are satisfied that they 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;

·; state whether the financial statements have been prepared in accordance with IFRSs as adopted by the European Union;

·; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company and the group will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and 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 2006. They are also responsible for safeguarding the assets of the company and 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 3 November 2010 and signed on its behalf.

Karl Schlobohm

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 financial statements of Solomon Gold plc for the year ended 30 June 2010 which comprise the consolidated statement of comprehensive income, the consolidated and company statements of financial position, consolidated and company statements of changes in equity, consolidated and company statements of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. 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

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

Scope of the audit

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group's and the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.

Opinion on financial statements

In our opinion:

·; the financial statements give a true and fair view of the state of the group's and parent company's affairs as at 30 June 2010 and of the group's loss for the year then ended;

·; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

·; the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 2006; and

·; the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Emphasis of matter - availability of project finance

In forming our opinion, which is not qualified, we have considered the adequacy of the disclosures made in note 1(b) to the financial statements concerning the requirement for the group to raise further funding if it is to bring its exploration projects into the development stage. If the group is unable to secure such additional funding to develop its projects further, this may have a consequential impact on the recoverability of the carrying value of the related exploration assets and the investment of the parent company in its subsidiaries. No adjustments have been made in the financial statements to reflect changes to asset carrying values that may be necessary should the company be unsuccessful in raising further finance.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

·; adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

·; the parent company financial statements are not in agreement with the accounting records and returns; or

·; certain disclosures of Directors' remuneration specified by law are not made; or

·; we have not received all the information and explanations we require for our audit.

David Pomfret (Senior statutory auditor)

For and on behalf of PKF (UK) LLP, Statutory auditors

London, UK

3 November 2010

Registered Number 5449516

The financial statements were approved and authorised for issue by the Board and were signed in its behalf on 3 November 2010.

Brian Moller

Director

Consolidated Statement of changes in equity

Company Statement of changes in equity

Non cash transactions

During the year, the group acquired Acapulco Mining Pty Limited and Central Minerals Pty Limited. The consideration was satisfied by issue of shares. Further details have been provided in Note 23.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

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 and company financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') 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 2006 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, going concern and availability of project finance

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 statement of comprehensive income for the parent company has not been presented as permitted by section 408 of the Companies Act 2006.

In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in discrete tranches. At the reporting date, the Group had a net current liability position of $1,577,146, inclusive of the Convertible Note held by D'Aguilar Gold and repayable by 19 February 2011. However, in October 2010, the Company announced a substantial capital raising of approximately A$24 million. The raising is due to settle following a shareholder's meeting called for 8 November 2010 to approve an increase in the Company's authorised capital from £2,000,000 to £5,000,000. This capital, together with the fact that Newmont has agreed to fund the exploration work being undertaken on the Guadalcanal project under the terms of the Venture Agreement executed between the two parties, means that the Company has sufficient working capital to fund its own operations, including the exploration of those Solomon Island tenement areas held outside of the Newmont Guadalcanal Venture, together with its tenements in Queensland, Australia. It should be noted that the current working capital levels will not be sufficient to bring the Company's projects into full 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 its projects.

(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.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income 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 rates at 30 June 2010 were £0.56860/A$1.0 and SBD$7.10920/A$1.0 (30 June 2009: £0.48702/A$1.0, SBD$6.14330/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 year end are translated into Australian dollars at the foreign exchange rate ruling at that date. Any resultant foreign exchange currency translation amount is taken to the profit and loss.

The functional currency of the subsidiaries in Australia is considered to be Australian Dollars (A$). The functional currency of the subsidiary in Solomon Islands is considered to be Solomon Islands Dollars (SBD$). The assets and liabilities of the entities are translated to the group presentation currency at rates of exchange ruling at the balance sheet date. Income and expense items are translated at average rates for the period. Any exchange differences are taken directly to reserves. On disposal of an entity, cumulative deferred exchange differences are recognised in the income statement as part of the profit or loss on sale.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE 1 ACCOUNTING POLICIES (Continued)

(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 statement of comprehensive income as an expense as incurred.

(iii) Depreciation

Depreciation is charged to the statement of comprehensive income 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 statement of comprehensive income.

(f) Intangible assets

Deferred exploration and evaluation costs

Costs incurred in relation to the acquisition of, or application for, a tenement area are capitalised where there is a reasonable expectation that the tenement will be acquired or granted. Where the Company is unsuccessful in acquiring or being granted a tenement area, any such costs are immediately expensed.

All other 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 their nominal amount less provision for impairment.

(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 statement of financial position.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE 1 ACCOUNTING POLICIES (Continued)

(i) Impairment

Whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable the 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. Shares were also issued to third parties as consideration for goods or services. Shares are recorded at their market value at the time of their issue. Option instruments 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. The fair value of an option instrument is estimated using the Black-Scholes valuation model. The estimated life used in the model represents management's best estimate of the effects of non-transferability, exercise restrictions and behavioural considerations.

(ii) Retirement benefits

The Group operates a defined contribution pension scheme. Contributions payable for the year are charged to the statement of comprehensive.

(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 their nominal value.

(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) Other income

Other income is recognised in the statement of comprehensive income as it accrues.

(p) Expenses

(i) Financing costs

Financing costs comprise interest payable on borrowings calculated using the effective interest rate method.

(ii) Finance income

Interest income is recognised in the statement of comprehensive income as it accrues, using the effective interest method.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE 1 ACCOUNTING POLICIES (Continued)

(q) 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 liability 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.

(r) Segment reporting

The Group has applied IFRS 8 Operating Segments from 1 July 2009. Previous reporting of segment information was based on the geographical locations of the Group's operations. As of 1 July 2009 the Group determines and presents operating segments based on information that is internally provided to the Board of Directors, who are the Group's chief operating decision makers.

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. An operating segment's operating results and asset position are reviewed regularly by the Board to make decisions about resources to be allocated to the segment and assess its performance, for which discrete financial information is available.

Segment results that are reported to the Board include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate office assets, head office expenses, and income tax assets and liabilities. Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation and disclosure aspects, there is no impact on earnings per share.

(s) Business Combinations

Business combinations occur where an acquirer obtains control over one or more businesses and results in the consolidation of its assets and liabilities.

Business combinations are accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The acquisition method requires that for each business combination one of the combining entities must be identified as the acquirer (i.e. parent entity). The business combination will be accounted for as at the acquisition date, which is the date that control over the acquiree is obtained by the parent entity. At this date, the parent shall recognise, in the consolidated accounts, and subject to certain limited exceptions, the fair value of the identifiable assets acquired and liabilities assumed. In addition, contingent liabilities of the acquiree will be recognised where a present obligation has been incurred and its fair value can be reliably measured.

The acquisition may result in the recognition of goodwill or a gain from a bargain purchase. The method adopted for the measurement of goodwill will impact on the measurement of any non-controlling interest to be recognised in the acquiree where less than 100% ownership interest is held in the acquiree.

The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements. Consideration may comprise the sum of the assets transferred by the acquirer, liabilities incurred by the acquirer to the former owners of the acquiree and the equity interests issued by the acquirer.

Fair value uplifts in the value of pre-existing equity holdings are taken to the statement of comprehensive income. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profit or loss.

Included in the measurement of consideration transferred is any asset or liability resulting from a contingent consideration arrangement. Any obligation incurred relating to contingent consideration is classified as either a financial liability or equity instrument, depending upon the nature of the arrangement. Rights to refunds of consideration previously paid are recognised as a receivable. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or a liability is remeasured each reporting period to fair value through the statement of comprehensive income unless the change in value can be identified as existing at acquisition date.

All transaction costs incurred in relation to the business combination are expensed to the statement of comprehensive income.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE 1 ACCOUNTING POLICIES (Continued)

(t) Project Financing / Farm-outs

The Group, from time to time, enters into funding arrangements with third parties in order to progress specific projects. The Group accounts for the related exploration costs in line with the terms of the specific agreement.

(u) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership are transferred to entities in the Economic Entity, are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses on a straight-line basis over the period of the lease.

(v) 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 statement of comprehensive income

As permitted by Section 408 of the Companies Act 2006, the statement of comprehensive income of the Company has not been separately presented in these financial statements. The Company's loss for the year was A$1,533,619 (2009:A$968,832).

(ii) Subsidiary investments

Investments in subsidiary undertakings are stated at cost less impairment losses.

(w) Changes in accounting policies

The Group has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board ('IASB') that are relevant to its operations and effective for accounting periods beginning 1 July 2009.

The following standards have been applied by the group from 1 July 2009:

·; IAS 1 (Revised) Presentation of financial statements

·; IFRS 8 Operating segments

·; IFRS 3 Business combinations

The adoption of IFRS 3 has resulted in recognition of acquisition costs during the year of $337,570 in the statement of comprehensive income.

The adoption of IAS 1 (Revised) and IFRS 8 had no material effect on the profit or loss or the financial position of the Group as these standards deal with disclosures only.

Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the accounting periods commencing 1 July 2009 but are not applicable to the group and had no impact on these financial statements.

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.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE 2 SEGMENT REPORTING

The Group has applied IFRS 8 Operating Segments and its associated amending standards from 1 July 2009. Previous reporting of segment information was based on the geographical locations of the Group's operations. As of 1 July 2009 the group determines and separately reports operating segments based on information that is internally provided to the Board of Directors, who are the Group's chief operating decision makers.

The Group has outlined below the separately reportable operating segments, having regard to the quantitative threshold tests provided in IFRS 8, namely that the relative revenue, asset or profit / (loss) position of the operating segment equates to 10% or more of the Group's respective total. The Group reports information to the Board of Directors along company lines. That is, the financial position of Solomon Gold and each of its subsidiary companies is reported discreetly, together with an aggregated Group total. Accordingly, each company within the Group that meets or exceeds the threshold tests outlined above is separately disclosed below. The financial information of the subsidiaries that do not exceed the thresholds outlined above, and are therefore not reported separately, are aggregated as Other Subsidiaries.

Acapulco Mining Pty Limited and Central Minerals Pty Limited joined the Group on 21 December 2009 and 19 February 2010 respectively.

Geographical information

The group had no revenue during the year.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE 3 LOSS BEFORE TAX

NOTE 4 STAFF NUMBERS AND COSTS

The average number of persons employed (including Directors) during the year, analysed by category, was as follows: