TGL.L Regulatory News (TGL)

30 September 2011

Touchstone Gold

Interim Report for the half year ended 30 June 2011

Touchstone Gold Limited ("Touchstone Gold" or the "Company") (AIM: TGL) is pleased to announce its results for the half year ended 30 June 2011. The Company's Interim report is also available on the Company's website at www.touchstonegold.com. Unless otherwise noted, all financial information is expressed in U.S. dollars.

Highlights

·; In June 2011, the Company successfully raised gross proceeds of £10,000,000 through a placing of 37,037,038 shares in conjunction with its admission to trading on the AIM market of the London Stock Exchange

·; The Company began its Stage 3 summer exploration program, which as previously reported, has resulted in the identification of further target areas and the expansion of existing zones of mineralization

·; At 30 June 2011, the Company had a cash balance of approximately $14.2 million

·; The Company recorded a net loss of $4,758,957 or $0.07 per share for the six months ended 30 June 2011, compared with a net loss of $834,485 or $0.02 per share for the comparable period in the prior year

·; Cash used in operating activities was $1,782,531 for the six months ended 30 June 2011, compared with $916,002 for the six months ended June 30, 2010

Commenting on the interim results, David Wiley, Director and Chief Executive Officer said:

"The first six months of 2011 marked a transformational period for the Company, with the admission to AIM in conjunction with the Company's first initial public placing of shares and the beginning of the Company's summer exploration program, which has produced promising results to date. The IPO proceeds have provided the Company with the funds to continue with an aggressive drilling program for theremainder of 2011, including drilling of the new targets identified. The Company's land package is currently under-explored, with less than 10% of the concession area drilled to date. With the promising results from the summer campaign and the cash available, we hope to identify additional areas of mineralization during the next phase of exploration."

Interim Report for the half year ended 30 June 2011

Operational Review

In June 2011, the Company began its Stage 3 summer exploration campaign, which included geophysical surveys and geochemical analysis including soil and stream sediment sampling. With an upgraded drill rigs on site, 14 shallow surface diamond drill holes have been drilled since June, representing over 1,800 metres.

As previously reported, the Stage 3 campaign has produced promising results to date with the expansion of existing zones of mineralization and the identification of three new target areas. Work is underway to identify further additional areas of mineralization. Initial grades continue to be high and close to surface. The first set of assay results collected from the initial holes drilled at Filodehambre intersected 14.07g/t Au over 8.4 metres and demonstrated continuity of the vein.

Drill results from the first seven holes are noted in the table below.

* previously disclosed

**All samples collected were analysed utilizing ACME Analytical Labs of Vancouver BC., Canada and were subject to a 36 element ICP-MS analysis. Over limit samples were subject to gravimentric analysis.

Further assay results from the current drilling campaign are expected in early October.

Stream Sediment Sampling

Additionally, an extensive stream sediment sampling programme has been carried out on the property. Analytical results from the sample range from a background of 5ppb gold to a high of 2,800 ppb gold (2.8g/t Au). The survey successfully identified creek drainages which contained areas of known mineralization and also identified several other creek drainages with no known historic showings. Follow up prospecting in these newly identified drainage areas has resulted in the discovery of quartz float, the source of which has yet to be determined. Historically there has been extremely close correlation between the occurrence of quartz float and gold mineralization.

Soil Sampling

Analytical results of the soil sampling vary from background to a high of 760 ppb Au. The results have confirmed the areas of previously known mineralization and additionally, have outlined a number of anomalous areas that warrant further investigation.

As a result of the exploration programme, three new areas have been identified approximately doubling the Company's mineralized area. The prospective new zones, Tagual South, Tagual Central and Tagual North (Fig. 1) demonstrate many of the same characteristics as the previously identified Pepas, North Pepas and Filodehambre areas. One of the three new zones, Tagual South has received preliminary results from the prospecting programme, indicating grades of up to 8.6 g/t Au.

For figure one please click on the link below:

http://www.rns-pdf.londonstockexchange.com/rns/2528P_-2011-9-29.pdf 

 Results of the first seven trenches from Taugual South are noted in the table below.

* previously disclosed

**All samples collected were analysed utilizing ACME Analytical Labs of Vancouver BC., Canada and were subject to a 36 element ICP-MS analysis. Over limit samples were subject to gravimentric analysis.

Prospecting

Prospecting of the Rio Pescado project area has been limited to the western portion of the property due to currently limited access. To date, 60 rock grab samples have been collected from quartz float and sub crop on the property including the area underlain by the Tagual South gold soil geochemical anomaly. Preliminary results from the prospecting programme in the Tagual South area has been very encouraging with values up to 8.6 g/t gold being obtained from subcrop.

Ground Geophysics

All of the geophysics has been completed and preliminary results for the entire survey are in for both Induced Polarization (IP) and ground magnetics. More detailed results will be forthcoming once leveling has been completed on the data. Preliminary interpretation of the IP however would suggest the areas of known mineralization are occurring on the flanks of chargeability highs. Indications are that several newly defined areas, previously untested have been outlined which also correlate well with coincidental gold soil anomalies. The ground magnetics has defined several northwesterly and northeasterly structural features. The extent of these features are still yet to be determined

Permits

As a result of the recent exploration successes outside of those areas of known mineralization, Touchstone Gold is currently in the process of applying for both water permits and environmental permits to allow for drilling of these newly identified targets. These new zones have resulted in a significant increase in the number of targets that will be drilled in the coming months.

Financial Summary

During the six months ended 30 June 2011, the Company spent $1,289,984 on exploration, not including costs incurred by geological consultants.

The Company recorded a net loss of $4,758,957 or $0.07 per share for the six months ended 30 June 2011, compared with a net loss of $834,485 or $0.02 per share for the comparable period in the prior year. The losses for the six months ended 30 June 2011 were primarily related to exploration expenditures of $1,289,984, non-cash share-based payment expense of $1,824,122 and professional and geological consulting fees.

Cash used in operating activities was $1,782,531 for the six months ended 30 June 2011, compared with $916,002 for the comparable period in 2010. The primary uses of cash during the period were exploration and general and administrative expenditures.

During the six months ended 30 June 2011, a total of 6,841,666 stock options were granted to Directors, Officers and employees of the Company.

At 30 June 2011, the Company had cash of $14,193,591. Substantially, all of the Company's cash is held at a reputable bank with a Standard and Poor's investment rating of AA-.

Mr. John Nicholson, P.Geo has reviewed and approved the technical information contained within this announcement in his capacity as a qualified person, as required under the AIM rules. Mr. Nicholson is chief geologist of the Company and is a Fellow of the Royal Geographical Society, has a B.Sc. from the University of British Columbia, and has been an accredited member of the Association of Professional Engineers and Geoscientists since 1992. Mr. Nicholson is supervising the work programmes on the Rio Pescado Project.

For further information please contact:

Touchstone Gold

David Wiley Tel. +1 647 260 1247

Chief Executive Officer

Collins Stewart Europe Limited

John Prior Tel. +44 20 7523 8350

Adam Miller Tel. +44 20 7523 8350

Merlin

Ian Middleton Tel. +44 20 7726 8400

Anca Spiridon Tel. +44 20 7726 8400

About Touchstone Gold

Touchstone is a gold exploration company and the 100% owner of the Rio Pescado Project in Colombia, comprising four concessions over a total area of 39km2 in the highly prospective Segovia Gold Belt. With a philosophy of creating value by the systematic exploration and development of the Group's existing assets as well as the acquisition of suitable exploration and development mineral projects, the Group's long-term intention is to build a significant gold exploration and production company.

FORWARD-LOOKING STATEMENTS

Certain information set forth in this Interim Report contains "forward-looking statements" and "forward-looking information" under applicable securities laws. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements which include management's assessment of Touchstone's future plans and operations and are based on Touchstone's current internal expectations, estimates, projections, assumptions and beliefs, which may prove to be incorrect. Some of the forward-looking statements may be identified by words such as "expects" "anticipates", "believes", "projects", "plans", and similar expressions. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause Touchstone's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Touchstone undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.

Touchstone Gold Limited (formerly Touchstone Investment Holdings Limited)

Interim Unaudited Consolidated Financial Statements

For the six months ended June 30, 2011 and 2010

MANAGEMENT'S RESPONSIBILITY

FOR CONSOLIDATED FINANCIAL STATEMENTS

All of the information in the interim financial report and the accompanying unaudited interim consolidated financial statements of Touchstone Gold Limited is the responsibility of management. The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards. Where necessary, management has made judgments and estimates in preparing the consolidated financial statements, and such statements have been prepared within acceptable limits of materiality. The financial information contained elsewhere in interim financial report has been reviewed to ensure that it is consistent with the consolidated financial statements.

Management maintains appropriate systems of internal control given its size to give reasonable assurance that its assets are safeguarded, and the financial records are properly maintained.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control and exercises this responsibility principally through the Audit Committee. The Audit Committee meets with management to review the unaudited consolidated financial statements to satisfy itself that management is properly discharging its responsibilities to the Directors, who approve the consolidated financial statements.

TOUCHSTONE GOLD LIMITED

INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in U.S. Dollars)

TOUCHSTONE GOLD LIMITED

INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in U.S. Dollars)

TOUCHSTONE GOLD LIMITED

INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Expressed in U.S. Dollars)

TOUCHSTONE GOLD LIMITED

INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Expressed in U.S. Dollars)

TOUCHSTONE GOLD LIMITED

INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. Dollars)

TOUCHSTONE GOLD LIMITED

INTERIM UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended June 30, 2011 and 2010

(Presented in U.S. dollars except per share amounts)

NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Touchstone Gold Limited ("Touchstone Gold") and its wholly-owned subsidiaries ("the Company") is an exploration stage company engaged in the exploration and development of gold properties in Colombia.

Touchstone Gold was incorporated under the laws of the British Virgin Islands on June 29, 2009 and exists under the provisions of British Virgin Islands Companies Act, 2004, as Company number 1536599. The Company's registered office is Akara Building, 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands.

On 6 June 2011, the Company's directors and shareholders approved a share re-organisation described in further detail in note 5. All per share amounts have been restated to reflect the share re-organisation.

On 7 June 2011, the Company completed a placing of new ordinary shares at a price of 27 pence, raising a total of approximately £10,000,000 (U.S. $16,442,000). Additionally, 586,106 broker warrants were issued as part of the placing.

These consolidated financial statements have been prepared using International Financial Reporting Standards ("IFRS") applicable to a going concern, which assumes that assets will be realized and liabilities will be settled in the normal course of business as they become due. The financial year-end for Touchstone Gold is December 31.

Statement of Compliance: These interim consolidated financial statements are unaudited and have been prepared in accordance with IAS 34 "Interim Financial Reporting‟ ("IAS 34") using accounting policies consistent with the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and Interpretations of the International Financial Reporting Interpretations Committee ("IFRIC").

The interim condensed consolidated financial statements of the Company for the six months ended June 30, 2011, and 2010, have been prepared by management, reviewed by the Audit Committee and approved and authorized for issue by the Board of Directors on September 27, 2011.

There have been no changes in the Company's significant accounting policies from the year ended December 31, 2010.

NOTE 2 - CASH AND CASH EQUIVALENTS

As at December 31, the Company had the following cash and cash equivalents:

NOTE 3 -PROPERTY, PLANT AND EQUIPMENT, NET

NOTE 4 - RELATED PARTY TRANSACTIONS

Compensation of Directors and management

During the six month periods ended 30 June 2011, and 30 June 2010, the Company paid $58,771 and $nil, respectively, in salaries to officers of the Company.

During the six month periods ended 30 June 2011, and 30 June 2010, the Company incurred $139,402 and $66,787, respectively, in consulting fees to current and former Officers and Directors of the Company.

Additionally, during the six months ended 30 June 2011, a total of 3,666,665 options were issued to Directors of the Company. Please see note 5 for additional details.

NOTE 5 - SHARE CAPITAL AND CAPITAL MANAGEMENT, STOCK OPTIONS AND SHARE-BASED PAYMENTS

Share capital

The Company is authorized to issue an unlimited number of shares.

On 7 June 2011, the Company completed a placing of new ordinary shares at a price of 27 pence, raising a total of approximately £10,000,000. Additionally, 586,106 broker warrants were issued as part of the placing, as compensation. The warrants have an exercise price of 27 pence and are exercisable until 7 June 2014.

In June, 2011, the shareholders of the Company passed a written resolution to approving the following: 

·; a consolidation of all of the issued and outstanding Ordinary shares of the Company on the basis of one post consolidation share for each 40 pre-consolidation shares. The result of the resolution was that the issued and outstanding shares was reduced from 124,919 to 3,123;

·; immediately following the consolidation, reclassification of the 3,123 ordinary shares into 2,630 A shares and 493 B shares;

·; immediately following the share consolidation and reclassification, the issue of 13,307 bonus A shares for each existing A share held and 64,218 bonus B shares for each existing B share, the result of which was that the aggregate number of shares issued and outstanding was then 66,666,667;

·; immediately following the bonus issue, the reclassification of both the A shares and B shares into 66,666,667 Ordinary Shares; and

·; the cancellation of the warrants issued in October 2010.

As a result of the resolution described above, the share reserve premium made of $2,109,324 on the shares issued in October 2011 and $890,677 allocated to the warrants issued in October 2011 was reclassified to share capital.

In October 2010, the Company issued 19,724 warrants which had a term of one year, exercisable into one common share of the Company at an exercise price of $190.13. In valuing the warrants the Company used an interest rate of 0.21%, a volatility of 95% and a dividend yield of nil. As noted above, these warrants were cancelled in June 2011.

The following tables denote the movement in share capital and warrants.

In determining the fair value of the warrants issued in June 2011, the Company used a share price of 27 pence, a risk free interest rate of 0.5%, an expected life of three years and a volatility of 101%.

Stock options

During 2010, the Company issued 12,081 stock options which expire on December 31, 2012. Following the reorganization described above, the stock options were amended so that 6,446,667 options were in issue. The stock options are fully vested and have an exercise price of 27 pence and expire in June 2014.

On 6 June 2011, as a result of the adoption of an Option plan, the Company issued 3,666,666 options, of which 1,666,667 options have an exercise price equal to the Placing Price, and 1,999,999 options have an exercise price equal to the weighted average price of the Ordinary shares in the first five days immediately following Admission. The options expire on 6 June 2021 and vest over a period of 3 years.

As at 30 June 2011, the following options were outstanding

Of the options outstanding 6,447,378 are exercisable.

During the six months ended 30 June 2011, the Company recognized share based payment expense of $1,824,122 based on a weighted average fair value of the options of 19.59 pence. In determining the fair value of the options the Company used a black-scholes valuation with weighted average risk free interest rate of 0.5%, a weighted average expected life of 4.5 years, an average share price of 27 pence and a volatility of 101%. In determining the volatility, the Company used the historic volatility of comparable companies. The options issued have a fair value of £0.20.

Subsequent to the 30 June 2011, the Company issued 3,175,000 options to management and employees of the Company. The options have an exercise price of 27 pence and expire on 6 June 2021 and vest over a period of 3 years.

Capital management

The Company includes equity, comprised of issued common shares, options and warrants and deficit, in the definition of capital. The Company's primary objectives when managing capital are to safeguard the Company's ability to fund the exploration and development of its gold properties in Colombia.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size and stage of the Company is reasonable. The Company is not subject other externally imposed capital requirements.

NOTE 6 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS

The Company has exposure to liquidity risk and foreign currency risk. The Company's risk management objective is to protect cash flow and, ultimately, shareholder value. Risk management strategies, as discussed below, are designed and implemented to ensure the Company's risks and the related exposure are consistent with the business objectives and risk tolerance.

Liquidity Risk: Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages its liquidity by ensuring that there is sufficient capital to meet short and long-term business requirements, after taking into account cash flows from operations and the Company's holdings of cash, cash equivalents, and short-term investments. The Company also strives to maintain sufficient financial liquidity at all times in order to participate in investment opportunities as they arise, as well as to withstand sudden adverse changes in economic circumstances.

Management forecasts cash flows for its current and subsequent fiscal years to predict future financing requirements. Future requirements may be met through a combination of credit and access to capital markets. At 30 June 2011, the Company had $14,193,591 (31 December 2010 - $1,997,085) in cash and cash equivalents

Currency Risk: The Company's expenditures are incurred Colombian peso, British pounds, U.S. dollars and Canadian dollars. The results of the Company's operations are subject to currency transaction risk. As the Company's reporting currency is the U.S. dollar, fluctuations in the Colombian peso, British pound and Canadian dollar relative to the U.S. dollar a 10% change in foreign exchange rates would have an impact of approximately $142,000:

Credit risk: Credit risk is the risk of loss associated with a counterparty's inability to fulfill its payment obligations. As at 30 June 2011, the Company's credit risk is primarily attributable to cash. At 30 June 2011, cash was held with a reputable bank with a Standard and Poor's investment rating of AA-.

Fair Values: The Company's cash and cash equivalents, receivables and payables all had fair values which approximate their carrying values.

NOTE 7 -LOSS PER SHARE

The following table details the weighted average number of outstanding common shares for the purposes of computing basic and diluted loss per common share for the six months ended 30 June 2011, and 30 June 2010.

As noted previously, as a result of the share re-organisation, the Company has re-stated basic and diluted shares outstanding.

As a result of the losses for the six months ended 30 June 2011 and 2010, there is no dilutive effect of options and warrants.