TGL.L Regulatory News (TGL)

Touchstone Gold Limited (TSX:TCH; AIM:TGL)

 ("Touchstone Gold" or the "Company)

 Results for the years ended December 31, 2013 and 2012

London, April 1, 2014 ―Touchstone Gold reported its financial results for the years ended December 31, 2013 and 2012. The consolidated financial statements for the years ended December 31, 2013 and 2012 and notes thereto, as well as the Management's Discussion and Analysis and the Annual Information Form are available at www.sedar.com and www.touchstonegold.com. Unless otherwise noted, all financial information is expressed in US dollars.

Highlights

§ For the year ended December 31, 2013 the Company recorded a net loss of $18,720,512 or $0.09 per share compared with a loss of $10,171,565 or $0.08 per share for the year ended December 31, 2012.

§ As previously announced and outlined in the interim update announcement on September 20 2013, the Board undertook a number of measures to significantly reduce overall working capital requirements as it considered funding and strategic opportunities. The Company currently is not involved in any exploration expenditure, and does not have any exploration programmes planned in the short term. Additionally, none of the current directors receive any cash remuneration, and other corporate overhead has been reduced significantly.

The Board has been reviewing a number of options with the objective to secure financing that will provide a stronger platform for future growth. Following extensive consideration, the Board has concluded that in the absence of additional funding, the Company will be unable to meet its obligations with respect to scheduled payments to vendors of its concession contracts. In the event that Touchstone does not make these required payments, the concession contracts could be ceded back to the vendors and Touchstone may lose all or part of its interest in those of the concessions to which the non-payment relates.

The Company continues to be engaged in a number of strategic conversations with the intention of reviewing possible transactions that might be accretive in value for all shareholders. A further announcement will be made as appropriate.

§ As previously announced during 2013, the Company commenced its Stage 4 drilling program as well as identified a new target zone (the "Bern" zone). The program was to focus on three zones; the 1141 Zone, Tagual Zone and the Bern zone, however, only the 1141 zone saw drilling. Additionally, the Company achieved positive results from metallurgical tests conducted on several samples, Pepas #1 and Pepas #2. Initial results indicated recoveries from 87.9% to 95% gold in floatation concentrate with Cyanide leaching providing recoveries ranging from 40.5% to 90.7%.

As previously announced, during 2013, the Company made a surface discovery of a new gold zone 350m west of the Pepas and Filodehombre trends.

For further information please contact:

Touchstone Gold Limited

Consolidated Financial Statements

For the years ended December 31, 2013 and 2012

Presented in U.S. dollars except for per share amounts

MANAGEMENT'S RESPONSIBILITY

FOR CONSOLIDATED FINANCIAL STATEMENTS

All of the information in the accompanying 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.

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 consolidated financial statements to satisfy itself that management is properly discharging its responsibilities to the Directors, who approve the consolidated financial statements.

(signed) "Fraser Buchan" (signed) "Brian Morales"

Fraser Buchan Brian Morales

Member of Audit Committee Chief Financial Officer

Toronto, Canada

March 31, 2014

Independent Auditor's Report

To the Shareholders of

Touchstone Gold Limited

We have audited the accompanying consolidated financial statements of Touchstone Gold Limited and its subsidiaries (the Company), which comprise the consolidated statements of financial position as at December 31, 2013 and December 31, 2012 and the consolidated statements of operations, comprehensive loss, shareholders' equity and cash flows for the years ended December 31, 2013 and December 31, 2012 and the related notes, which comprise a summary of significant accounting policies and other explanatory information.

Management's responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards (IFRS), and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2013 and December 31, 2012 and its financial performance and its cash flows for the years ended December 31, 2013 and December 31, 2012 in accordance with IFRS.

Emphasis of matter

Without qualifying our opinion, we draw attention to Note 1 in the consolidated financial statements, which describes matters and conditions that indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern.

(Signed) "PricewaterhouseCoopers LLP"

Chartered Accountants, Licensed Public Accountants

Toronto, Ontario, Canada

March 31, 2014

TOUCHSTONE GOLD LIMITED

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in U.S. Dollars)

TOUCHSTONE GOLD LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in U.S. Dollars)

TOUCHSTONE GOLD LIMITED

 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Expressed in U.S. Dollars)

TOUCHSTONE GOLD LIMITED

 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Expressed in U.S. Dollars)

TOUCHSTONE GOLD LIMITED

 CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. Dollars)

TOUCHSTONE GOLD LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in U.S. Dollars)

NOTE 1 - NATURE OF OPERATIONS AND GOING CONCERN

Touchstone Gold Limited ("Touchstone Gold") and its wholly-owned subsidiaries, which are noted below, (collectively "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 29 June 2009 and existed under the provisions of British Virgin Islands Companies Act, 2004, as Company number 1536599. On 7 September 2012, after the approval of a resolution by the Company's shareholders, the Company was redomiciled via a continuance of the Company from the British Virgin Islands to the province of Ontario, Canada, where a majority of the Board of Directors and the Company's officers are located. The registered head office of the Company is #200-83 Yonge Street, Toronto, Ontario Canada.

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. Additionally, the consolidated financial statements have been prepared using the historical cost basis except for certain financial instruments, which are measured in accordance with the policies described below. The financial year-end for Touchstone Gold is December 31.

Going concern: The Company has incurred a loss in the current period and prior periods. Additionally the Company has an accumulated deficit and a cash balance of $12,025. Further, given weakening in the financing market for junior resource companies and the material uncertainty of not having sufficient funds in place to conduct operations there is significant doubt in the Company's ability to continue as a going concern and, accordingly, the ultimate use of accounting principles applicable to a going concern. The Company's ability to continue as a going concern is dependent upon its obtaining additional financing and eventually achieving profitable production in the future. The Company continually evaluates its various options in order to address its financing needs. It is management's intent to continue as a going concern, however, there can be no assurance that the Company's financing activities will continue to be successful or sufficient. These consolidated financial statements do not include the adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The adjustments may be material.

Statement of Compliance: These consolidated financial statements are audited and have been prepared 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 consolidated financial statements of the Company for the years ended December 31, 2013 and 2012, have been prepared by management, reviewed by the Audit Committee and approved and authorized for issue by the Board of Directors on March 31, 2014.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING CHANGES AND RECENT ACCOUNTING PRONOUNCEMENTS

SIGNIFICANT ACCOUNTING POLICIES

Functional and presentation currency: All monetary references expressed in the financial statements and the notes thereto are in United States dollars. The functional currency of Touchstone Colombia, Saint Miguel S.A.S and Concesiones United Gold S.A.S is the Colombian peso. The remaining entities in the consolidated group have a functional currency of U.S. dollars. All financial information has been presented in U.S. dollars.

Items included in the financial statements of each of the Company's consolidated entities are measured using the currency of the primary environment in which the entity operates.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of operations and comprehensive income.

The results and financial position of Touchstone Colombia, San Miguel S.A.S and Concesiones United Gold S.A.S are translated as follows:

· assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that financial period end;

· income and expenses for each statement of operations and comprehensive income are translated at average exchange rate, unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions;

· equity transactions are translated using the rate of exchange on the date of the transactions; and

· all resulting exchange differences are recognized in Other Comprehensive Income.

Use of Estimates:The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The assets and liabilities which require management to make significant estimates and assumptions in determining carrying values include, but are not limited to, mineral interests, provision for income taxes and share-based payments.

The areas where management has made significant judgments include:

Reserves and resources

Proven and probable reserves are the economically mineable parts of the Company's measured and indicated mineral resources, demonstrated by a feasibility study. The Company estimates its proven and probable reserves and measured and indicated and inferred mineral resources based on information compiled by appropriately qualified persons. The information related to the geological data on the size, depth shape of the ore body requires complex geological judgments to interpret the data. The estimation of future cash flows based on proven and probable reserves is based on factors, which include but are not limited to, foreign exchange rates, commodity prices, future capital requirements and production costs and geological assumptions and judgments made in estimating the size and grade of the ore body and engineering assumptions based on the mining and processing methods to be used. Changes in proven and probable reserves, measured and indicated and inferred resources may impact carrying values of property plant and equipment and mineral interests and the recognition of deferred tax amounts.

Deferred taxes

The Company recognizes the deferred tax benefit related to deferred income and resource tax assets to the extent recovery is probable. Assessing the recoverability of deferred income tax assets requires management to make significant estimates of future taxable profit and the income tax rate at which the future tax assets will be realized. To the extent that future cash flows, taxable profit and income tax rates differ significantly from estimates, the ability of the Company to realize deferred tax assets could be impacted. In addition, future changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods from deferred income and resource tax assets.

Share-based payments expense

The recognition of share-based payments expense is based on factors which require management to make estimates on factors such as volatility and forfeiture rates. Changes in the estimates may have a material impact on the amount of share-based payments expense.

Basis of consolidation: The consolidated financial statements comprise the accounts of Touchstone Gold, the parent company and its wholly-owned controlled subsidiaries, after the elimination of all material intercompany balances and transactions.

Subsidiaries are all entities (including special purpose entities) over which the Company, either directly or indirectly, has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Where the group does not directly hold more than one half of the voting rights, significant judgment is used to determine whether control exists. These significant judgments include assessing whether the group can control the operating policies through the group's ability to appoint the majority of directors to the board. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group until the date on which control ceases.

The accounts of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company. A list of subsidiaries are noted below.

(1) Touchstone Atlantis Mining Inc. is a wholly owned direct subsidiary, of the Company, which in turn owns 100% of Placencia Corp, which in turn owns Saint Miguel Mining S.A.S and Concesiones United Gold S.A.S.

(2) Touchstone Gold Holdings is a wholly owned direct subsidiary of the Company which directs Touchstone Colombia.

Financial Instruments:Financial instruments are classified into one of the following five categories: fair value through profit or loss assets or liabilities, held to maturity investments, loans and receivables, available for sale financial assets or other financial liabilities. Fair value through profit or loss financial instruments are measured at fair value and all gains and losses are included in net income in the period in which they arise. Available for sale financial instruments are measured at fair value upon initial recognition and at fair value at each reporting period, with revaluation gains and losses included in accumulated other comprehensive income until the instruments are derecognized or impaired. Loans and receivables, investments held to maturity and other financial liabilities are measured at amortized cost using the effective interest method.

The Company's financial instruments consist of cash and cash equivalents, accounts receivable, deposits, trade accounts payable and accrued liabilities, and derivative liabilities. Cash and cash equivalents are classified as fair value through profit or loss, and are measured at fair value at initial recognition and at each reporting date. Accounts receivable are designated as loans and receivables and accounted for at amortized cost on initial recognition and at each reporting date. Trade accounts payable, accrued liabilities and income taxes payable are classified as other financial liabilities and accounted for at amortized cost upon initial recognition and at each reporting date. The Company's non-functional currency denominated common share purchase warrants are considered derivative instruments and were measured at fair value on initial recognition. Changes in fair value at each reporting date is recognized in the consolidated statement of operations.

IFRS requires disclosures about the inputs to fair value measurements including their classification within a hierarchy that prioritize the inputs to fair value measurements.

The three levels of the fair value hierarchy are:

· Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;

· Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

· Level 3 - Inputs that are not based on observable market data.

Cash and Cash Equivalents: Cash and cash equivalents include demand deposits held with banks and highly liquid investments with remaining maturities of three months or less at acquisition date. For purposes of reporting cash flows, the Company considers all cash accounts that are not subject to withdrawal restrictions or penalties to be cash and cash equivalents.

Property, Plant and Equipment: Property, plant and equipment are stated at historic cost. The Company has the following sub-categories of equipment with useful lives and depreciation methods as follows:

· Machinery and equipment - 10 years, 10% per year

· Office equipment - 10 years, 10% per year

· Computer and communication equipment - 5 years, 20% per year

· Fleet and transportation equipment - 5 years, 20% per year

The cost of assets sold, retired, or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts. Expenditures for maintenance and repairs are charged to expense as incurred.

Exploration Costs:Exploration costs are incurred in gathering the information necessary to determine whether a particular property can become a commercially viable operating mine and include costs to determine whether a property adjacent to a property with Proven and Probable Reserves has Proven and Probable Reserves, whether Inferred Resources can be classified as Measured and Indicated Resources, or whether Measured and Indicated Resources can be converted to Proven and Probable Reserves. These costs are expensed as incurred. When it has been determined than an exploration property can be economically developed as a result of establishing Proven and Probable Reserves, costs incurred prospectively to develop the property and place it into commercial production are classified as development costs and capitalized as they are incurred until the asset is ready for its intended use.

Costs to acquire mineral properties as part of an asset acquisition are capitalized and represent the property's fair value at the time it was acquired.

Interest cost is capitalized for qualifying assets during the period in which the asset is being installed and prepared for its intended use. Capitalized interest cost is amortized on the same basis as the related asset. No interest costs were capitalized for the periods ended 31 December 2013 and 2012.

Impairment of non-financial assets: The carrying amount of the Company's property plant and equipment is reviewed at a minimum each reporting period to determine if there is any indication of impairment. If indicators of impairment exists, the fair value less costs to sell of the asset is estimated and compared to the carrying value to determine the extent of the impairment and is recorded in the statement of operations and comprehensive income.

The recoverable amount of assets is the greater of an asset's fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years.

Income Taxes: Deferred taxation is recognised using the liability method, on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. However, the deferred taxation is not recognised for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred taxation is determined using tax rates (and laws) that have been enacted or substantially enacted by reporting date and are expected to apply when the related deferred taxation asset is realised or the deferred taxation liability is settled.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Loss per Share:The Company calculates the dilutive effect on loss per share based on the use of the proceeds that could be obtained upon exercise of options and warrants. It assumes that the proceeds would be used to purchase common shares at the average market price during the period. For loss per share, the dilutive effect has not been presented, as it would prove to be anti-dilutive. Basic loss per common share is calculated using the weighted-average number of common shares dilutive outstanding during the period. Dilutive loss per share includes the impact of dilutive instruments.

Share-based Payments:The fair value of share options under the employee share incentive schemes and other equity instruments granted to Company's employees is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and expensed over the period during which the employee becomes unconditionally entitled to the equity instruments. The total amount to be expensed is determined by reference to the fair value of the options granted, excluding the impact of any non-market service and performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest.

The fair value of the instruments granted is measured using generally accepted valuation techniques, taking into account the terms and conditions upon which the instruments are granted. At each reporting date, the entity revises its estimates of the number of options that are expected to vest based on the non-marketing vesting conditions. It recognises the impact of the revision to original estimates, if any, in the statement of operations and comprehensive income, with a corresponding adjustment to equity. When share options are cancelled by the Company, the unrecognized expense is recognized immediately in the statement of operations. The proceeds received, net of any directly attributable transaction costs, are credited to share capital when the options are exercised.

ACCOUNTING CHANGES

On January 1, 2013, the Company adopted the following standards and amended standards

•IFRS 10 Consolidated Financial Statements,

•IFRS 11 Joint Arrangements,

•IFRS 12 Disclosure of Interests in Other Entities,

•IAS 27 Separate Financial Statements, and

•IAS 28 Investments in Associates and Joint Ventures

The adoption of these standards did not have an impact on the Company's statement of financial position, statement of operations and statement of cash flows.

On January 1, 2013, the Company adopted IFRS 13 Fair Value Measurement, which provides guidance on how fair value should be applied where its use is already required or permitted by other IFRS standards, and includes a definition of fair value and is a single source of guidance on fair value measurement and disclosure requirements or use with all IFRS standards. This standard also requires additional disclosure about fair value measurement. As a result of adopting IFRS 13, the Company has provided the additional disclosures in these consolidated financial statements. The adoption of IFRS 13 by the Company did not require adjustments to the valuation techniques used by the Company to measure fair value and did not result in measurement adjustments.

RECENT ACCOUNTING PRONOUNCEMENTS

In October 2010, the IASB issued IFRS 9 "Financial Instruments" ("IFRS 9") which proposes to replace IAS 39 "Financial Instruments: recognition and measurement". The replacement standard establishes two primary measurement categories for financial assets as well as establishes criteria for the classification of financial assets within the measurement category based on business model and cash flow characteristics and eliminates held to maturity, available-for-sale, and loans and receivable categories.

In November 2013, the IASB issued an amendment to IFRS 9 which includes a new hedge model that aligns accounting more closely with risk management, as well as enhancements to the disclosures about hedge accounting and risk management. Additionally the previously mandated effective date of IFRS 9 of January 1, 2015, has been removed. Entities may apply IFRS 9 before the IASB completes the amendments, but are not required to. The Company will evaluate the impact of the change to its financial statements based on the characteristics of its financial instruments at the time of adoption.

NOTE 3 -ACQUISITIONS

Atlantis

On 10 September 2012, the Company completed the acquisition of all of the issued and outstanding common shares of Atlantis Gold Mines Corp. ("Atlantis"). Atlantis was the owner of certain gold exploration projects, located in Colombia.

The acquisition was completed pursuant to a three-cornered amalgamation, whereby a wholly-owned subsidiary of the Company amalgamated with Atlantis to form Touchstone Atlantis Mining Inc. All of the holders of Atlantis Shares received one common share of the Company for each Atlantis Share held. The Company issued a total of 59,108,300 shares in respect of the acquisition. Additionally, the Company assumed 6,975,000 Atlantis warrants outstanding. The warrants are exercisable for one common share of the Company at an exercise price of C$0.60 and expired on 15 November 2013.

The Atlantis portfolio encompasses a similar geological setting to the Company's Rio Pescado project. Previous exploration has identified several prospective targets for gold mineralization.

The cost of the acquisition is noted in the table below.

Bolivar

On 5 March 2012, the Company entered into an option agreement with a private company to acquire a 90% interest in four mining concessions, over a total area of 57 square kilometres that together comprise the important Santa Rosa Project located in the well-known gold mining district in the south of the Bolivar Department, Colombia.

If the Company does not make the scheduled payments, the concession contracts were ceded back to the vendors.

El Cinco

On 5 November 2012, the Company completed the acquisition of a 60% interest in the El Cinco property, through a wholly-owned subsidiary of the Company, which took effect on 2 November 2012, through the issue of 4,089,762 shares and an issue of a short-term convertible unsecured promissory note to the vendor for C$250,000, which was repaid by December 31, 2012. The total cost of the acquisition was $1,020,728.

NOTE 4 -PROPERTY, PLANT AND EQUIPMENT, NET AND MINERAL INTERESTS

During 2013, the Company closed its offices in Colombia and has no ongoing operating of administrative functions. As a result, the Company has recorded an impairment charge of $372,144 equal to the carrying value of its equipment and other assets.

Mineral interests

During the year ended December 31, 2013, the Company identified the recent and continued decline in metal prices as well as the tightening of financing conditions for exploration stage companies as indicators of impairment. As a result of the identification of these indicators, the Company assessed the carrying amount as well the recoverable amount of mineral interests in the statement of financial position. Based on the Company's existing cash and the cash required to undertake an exploration program as well as uncertainty regarding the future plans, the Company has recorded an impairment of $14,653,501. The mineral interest was initially acquired as a result of the acquisition of Atlantis Gold Mines Corp. as well as the acquisition of the El Cinco property.

NOTE 5 - RELATED PARTY TRANSACTIONS

Compensation of Directors and management

For the years ended December 31, 2013 and 2012, the Company paid $251,616 and $283,164, respectively, in salaries and consulting costs to the Chief Executive Officer and Chief Financial Officer of the Company. Included in the amount for December 31, 2013 is an amount related to severance for the Chief Executive Officer of C$85,000. During the third quarter of 2013 the Company ceased paying salaries to all employees of the Company.

For the years ended December 31, 2013 and 2012, the Company incurred $357,828 and $1,396,760, respectively in geologic consulting costs and supply reimbursements to a Company owned and controlled by John Nicholson, an officer of the Company. These transactions were in the normal course of operations and all transactions are measured at the exchange amount, which is the amount agreed to by the related parties and is recorded in professional and consulting fees. During the time Mr. Nicholson served as an officer of the company he received no direct salary or compensation. A total of $326,246 was owing at December 31, 2013 (December 31, 2012 - $55,723).

For the years ended December 31, 2013 and 2012, the Company paid $49,492 and $117,673, respectively in fees to a Director of the Company.

A total of $182,581 and $1,354,746 in share-based payment expense was recognized in respect of options granted to Officers and Directors of the Company for the years ended December 31, 2013 and 2012, respectively.

Subsequent to December 31, 2013, the former Chairman and a Company indirectly controlled by Ilyas Khan, a director of the Company subscribed to deferred units. Additionally, debt incurred by a Company controlled by Ilyas Khan converted payables incurred on behalf of the Company into shares. See note 6 for additional details.

Commitments

In 2009, the Company entered into a contract with an employee of the Company for the purchase of a mining interest payable over a five year period as of the date of the registration of the mining interest on behalf of the Company. The total payable under the contract is $587,500. Approximately $50,000 has been paid under this contract.

Under the contract, the Company reserves the right to continue the agreement based on the results obtained from exploration, economical assessment and construction. At any time while the contract is in force the agreement may be terminated by the Company with no further payments required.

NOTE 6 - SHARE CAPITAL AND CAPITAL MANAGEMENT, STOCK OPTIONS AND SHARE-BASED PAYMENTS

Share capital

The Company is authorized to issue an unlimited number of shares with no par value.

Private Placement

In December 2012, the Company raised approximately $5.5 million in gross proceeds through the issuance of 34,427,500 units as a result of a private placement. Each Unit consists of one common share and one-half of one common share purchase warrant. Each whole common share purchase warrant entitles the holder thereof to acquire one additional common share of Touchstone at an exercise price of 15 pence per share until December 6, 2014. Additionally, as part of the private placements a total of 1,664,375 warrants ("broker warrants") were issued to the agents and arm's length parties. The broker warrants have the same terms as the common share purchase warrants.

The increase to share capital as a result of the private placement is as follows:

The following tables denote the movement in share capital and warrants to December 31.

Subsequent to 31 December 2013, the Company has issued 6,457,177 deferred units at a price of 0.932 pence of which 0.230 was to be received on closing, with the balance to be paid when called upon by the Directors of the Company. The deferred units will automatically convert into common shares of the Company on a one-for-one basis once fully paid.  The deferred unites were subscribed equally between Robert Buchan and ECK Partners Holdings Limited, which is beneficially owned by Ilyas Khan. Additionally, the Company has converted £20,000 in outstanding payables owed to ECK Partners Holdings Limited, a related party that had incurred expenditures on behalf of the Company, into 2,146,616 common shares of no par value in the capital of the Company at a deemed price of 0.932 pence per share.

Subsequent to 31 December 2013, the Company raised £100,000 through the subscription for 19,916,351 new ordinary shares of no par value each in the Company (the "Subscription Shares") at a price of 0.5021 pence per Subscription Share (the "Subscription Price") by new investors (the "Subscription"). Touchstone has also paid transaction fees in respect of the Subscription pursuant to which it has issued 2,810,921 new ordinary shares of no par value at the same terms as the Subscription Shares.

The warrants assumed as part of the acquisition of Atlantis have an exercise price of C$0.60, expire on November 15, 2013 and are denominated in Canadian dollars. As the Company's functional currency is the US dollar, the fair value of the warrants is reflected as a derivative liability in the statement of financial position. The warrants were valued using a Black-Scholes valuation with a risk free interest rate of 0.5% an expected life of 1.2 years, a share price of 12.05p and a volatility of 65%, which is based on a historic volatility of the Company's shares. Changes in the fair value of the warrants are reflected in the statement of operations. During the year ended December 31, 2013, these warrants expired.

The warrants issued in respect of the private placement have an exercise price of 15p, expire on December 6, 2014 and are denominated in pound sterling. As the Company's functional currency is the US dollar, the fair value of the warrant is reflected as a derivative liability in the statement of financial position. The warrants were initially valued using a Black-Scholes valuation with a risk free interest rate of 0.5% an expected life of 2 years, a share price of 9p and a volatility of 65%, which is based on a historic volatility of the Company's shares. Changes in the fair value of the warrants are reflected in the statement of operations.

The broker warrants issued to the agents and other arm's length parties in respect of the private placement have an exercise price of 15p, expire on December 6, 2014. The broker warrants issued in respect of the private placement were initially valued using a Black-Scholes valuation with a risk free interest rate of 0.5% an expected life of 2 years, a share price of 9p and a volatility of 65%, which is based on a historic volatility of the Company's shares.

The Company has recorded a warrant reserve on the statement of financial position, which represents the allocated fair value of the warrants which are determined to be equity instruments.

Stock options

During the year ended December 31, 2013, no options were issued and 7,300,000 forfeited.

During the year ended December 31, 2012, a total 12,784,043 options were cancelled and as a result, the associated expense with the options that had not been previously recognized of $506,454 was recognized in the statement of operations.

In December 2012, the Company granted 16,066,840 options to primarily to Directors, Officers, employees and consultants of the Company. The options have an exercise price of 11p, with half of the options vesting immediately and the remaining half vesting on the one year anniversary of the grant date and have no other vesting conditions.

The options were valued using a Black-Scholes valuation with a weighted average risk free rate of 0.5% an expected life of ten years, an average share price of 9p and a volatility of 65%, which is based on the historic volatility of the Company's shares. The fair value of one option was approximately 6p.

As at December 31, 2013, the following options were outstanding.

A total of 8,766,840 options were exercisable at December 31, 2013.

Capital management

The Company includes equity, comprised of issued Ordinary 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 operating and administrative expenditures.

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 to other externally imposed capital requirements.

NOTE 7 - 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.

The Company's primary source of additional liquidity is financing transactions. The Company's primary use of cash to December 31, 2013 was exploration and evaluation expenses at the Rio Pescado project as well as general and administrative expenses.

The following are the maturities, excluding interest payments, reflecting undiscounted future cash disbursements of the Company's financial liabilities based on the year ending December 31, 2013.

Additionally, the Company has certain discretionary payments related to its properties, which will have to be made to maintain an interest in those properties.

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. The Company's cash requirements are dependent on the level of operating activity, a large portion of which is discretionary. Should management decide to increase its operating activity more funds, than what is currently in place would be required. It is not possible to predict whether financing efforts will be successful or sufficient in the future. At December 31, 2013, the Company had $12,025 (December 31, 2012 - $4,087,940) in cash and cash equivalents. Additionally, the Company had $160,000 in deposits.

Currency risk:The Company's expenditures are incurred in Colombian peso, British pounds, U.S. dollars and Canadian dollars. The results of the Company's operations are subject to currency transaction risk. The Company mitigates foreign exchange risk through forecasting its foreign currency denominated expenditures and maintaining an appropriate balance of cash in each currency to meet the expenditures. 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 will affect the results of the Company. A 10% change in foreign exchange rates would have an immaterial impact.

Credit risk:Credit risk is the risk of loss associated with a counterparty's inability to fulfill its payment obligations. As at December 31, 2013 the Company's credit risk is primarily attributable to cash, receivables and deposits. At December 31, 2013, the majority of the Company's cash was held with a reputable bank with a Standard and Poor's investment rating of AA-.

Interest rate risk:Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company's most significant interest rate risk arises from its investments in cash equivalents. However, the maturity on these investments is less than ninety days, thereby mitigating the exposure to the impact of changing interest rates. As at December 31, 2013, the Company had $nil (December 31, 2012 - $100,000) in Banker's Acceptances. The effect of a 1% increase in interest rates would have resulted in an immaterial impact in forecasted interest income.

Fair Values: The Company's cash and cash equivalents, receivables and accounts payables and accrued liabilities all had fair values which approximate their carrying values, are expected to be realized within the next financial year. The fair value of the warrant liability is based on quoted market prices for comparable contracts and represents the amount the Company would have received from, or paid to, a counterparty for an equivalent contract. The warrant liability is considered Level 2 in the fair value hierarchy.

The fair value of the warrant liability is re-measured to fair value at December 31, 2013 based on the market prices for the Company's share price, interest rates and foreign exchange rates.

NOTE 8 -INCOME TAXES

No income tax expense was recognized for the years ended December 31, 2013 and 2012.

A reconciliation of the differences between the statutory Canadian income tax rate and the Company's effective tax rate is as follows:

During the years ended December 31, 2013, and 2012, the Company's long-term Canadian effective tax rate was 26.5%.

The total temporary differences for which a benefit has not been recognized is $31,100,000 (December 31, 2012 - $16,024,000). This is comprised off of non-capital losses $7,680,000 (December 31, 2012 - $4,305,000), share issuance costs of $1,366,000 (December 31, 2012 - $2,028,000), and mineral interest and equipment of $22,054,000 (December 31, 2012 - $9,691,000). The tax benefit of the unused tax losses and deductible temporary differences have not been recognized in the financial statements due to the unpredictability of future earnings.

The Company has $975,000 in non-capital losses to apply against future taxable income in Canada and expires in 2030, $1,414,000 in non capital losses which expire in 2031, $3,249,000 which expire in 2032 and $1,234,000 which expire in 2033.

NOTE 9 -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 years ended December 31, 2013 and 2012.

As a result of the losses for the years ended December 31, 2013 and 2012, there is no dilutive effect of options and warrants.

NOTE 10 - SEGMENT INFORMATION

The Company operates in one reportable operating segment, being the development of mineral properties in Colombia. The Company also has an administrative office in Toronto, Canada. In order to determine reportable operating segments, the chief operating decision maker reviews various factors including geographical location, quantitative thresholds and managerial structure. Currently the Company's reportable segment is geographic. Segmented information is as follows:

As at December 31, 2013, the total corporate liabilities amounted to $437,949 (December 31, 2012 - $1,363,473).

The amounts reported above are allocated based on the location where the amounts are incurred.

NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES

In 2009, the Company entered into a contract with an employee of the Company for the purchase of a mining interest payable over a five year period as of the date of the registration of the mining interest on behalf of the Company. The total payable under the contract is $587,500 of which approximately $50,000 has been paid by December 31, 2013.

In 2009, the Company entered into a contract for the purchase of a mining interest payable over a five year period as of the date of the registration of the mining interest on behalf of the Company. The total payable under the contract is $2,000,000 of which approximately $300,000 has been paid by December 31, 2013.

Under the contract, the Company reserves the right to continue the agreement based on the results obtained from exploration, economical assessment and construction. At any time while the contract is in force the agreement may be terminated by the Company with no further payments required.

If the Company does not make the scheduled payments, the concession contracts were ceded back to the vendors.

Touchstone Gold Limited

MANAGEMENT'S DISCUSSION AND ANALYSIS

For the years ended December 31, 2013 and 2012

Presented in U.S. dollars except for per share amounts

FORWARD-LOOKING STATEMENT

The following discussion of the results of operations, financial condition and cash flows of Touchstone Gold Limited and its wholly-owned subsidiaries (collectively the "Company") was prepared as at March 31, 2013 and should be read in conjunction with the Company's consolidated financial statements for the three and years ended December 31, 2013 and 2012 prepared in accordance with International Financial Reporting Standards ("IFRS") as well as the annual information form. All amounts disclosed are in United States dollars unless otherwise stated.

This Management's Discussion and Analysis contains "forward‑looking statements" which may include, but are not limited to, statements with respect to the future financial or operating performance of the Company and its projects, the estimation of mineral resources, capital, operating and exploration expenditures, costs and timing of the development of new acquisitions, costs and timing of future exploration, requirements for additional capital, government regulation of mining operations, environmental risks, reclamation expenses, title disputes or claims, limitations of insurance coverage and the timing and possible outcome of regulatory matters. Often, but not always, forward‑looking statements can be identified by the use of words such as "plans," "expects," "is expected," "budget," "scheduled," "estimates," "forecasts," "intends," "anticipates," or "believes" or variations (including negative variations) of such words and phrases, or statements that certain actions, events or results "may," "could," "would," "might" or "will" be taken, occur or be achieved. Forward-looking statements are based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable at the date that such statements are made. Forward‑looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward‑looking statements. Such factors include, but are not limited to, the factors discussed in the section entitled "Business environment and Risks". Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward‑looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward‑looking statements contained herein are made as at the date of this management discussion and analysis. 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. Accordingly, readers should not place undue reliance on forward‑looking statements. The Company does not undertake to update any forward-looking statements except as required by applicable securities laws.

OVERVIEW

The Company was incorporated under the laws of the British Virgin Islands on June 29, 2009 and existed 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 September 7, 2012, after the approval of a resolution by the Company's shareholders, the Company was redomiciled via a continuance of the Company from the British Virgin Islands to the province of Ontario, Canada, where a majority of the Board of Directors and the Company's officers are located.

The Company is listed on the AIM under the ticker TGL and on the Toronto Stock Exchange under the ticker TCH.

SUMMARY

§ For the year ended December 31, 2013 the Company recorded a net loss of $18,720,512 or $0.09 per share compared with a loss of $10,171,565 for the years ended December 31, 2013.

§ During 2013, the Company commenced its Stage 4 drilling program as well as identified a new target zone (the "Bern" zone). The program was to focus on three zones; the 1141 Zone, Tagual Zone and the Bern zone, however, only the 1141 zone saw drilling. Additionally, the Company achieved positive results from metallurgical tests conducted on several samples, Pepas #1 and Pepas #2. Initial results indicated recoveries from 87.9% to 95% gold in floatation concentrate with Cyanide leaching providing recoveries ranging from 40.5% to 90.7%.

§ During 2013, the Company made a surface discovery of a new gold zone 350m west of the Pepas and Filodehombre trends.

§ During the year ended December 31, 2013 the Company's President and Chief Executive Officer, David Wiley resigned. In addition, Lord Clanwilliam Patrick James Gillford also resigned from the Company's Board of Directors.

§ Subsequent to December 31, 2013, Franz Forrester was appointed COO and joined the Board of Directors following the resignation of Robert Buchan and Paul Cowley.

§ Subsequent to 31 December 2013, the Company has issued 6,457,177 deferred units at a price of 0.932 pence of which 0.230 was to be received on closing, with the balance to be paid when called upon by the Directors of the Company. The deferred units will automatically convert into common shares of the Company on a one-for-one basis once fully paid. Additionally, the Company has converted £20,000 in outstanding payables owed to ECK Partners Holdings Limited, a related party that had incurred expenditures on behalf of the Company, into 2,146,616 common shares of no par value in the capital of the Company at a deemed price of 0.932 pence per share.

§ Subsequent to 31 December 2013, the Company raised £100,000 through the subscription for 19,916,351 new ordinary shares of no par value each in the Company (the "Subscription Shares") at a price of 0.5021 pence per Subscription Share (the "Subscription Price") by new investors (the "Subscription"). Touchstone has also paid transaction fees in respect of the Subscription pursuant to which it has issued 2,810,921 new ordinary shares of no par value at the same terms as the Subscription Shares.

GOING CONCERN AND OUTLOOK

The Company has incurred a loss in the current period and prior periods. Additionally the Company has an accumulated deficit and a cash balance of $12,025. Further, given weakening in the financing market for junior resource companies and the material uncertainty of not having sufficient funds in place, to conduct operations there is significant doubt in the Company's ability to continue as a going concern and, accordingly, the ultimate use of accounting principles applicable to a going concern. The Company's ability to continue as a going concern is dependent upon its obtaining additional financing and eventually achieving profitable production in the future. The Company continually evaluates its various options in order to address its financing needs. It is management's intent to continue as a going concern, however, there can be no assurance that the Company's financing activities will continue to be successful or sufficient.

RESULTS OF OPERATIONS

On September 20 2013, the Company announced that the Board undertook a number of measures to significantly reduce overall working capital requirements as it considered funding and strategic opportunities. The Company currently is not involved in any exploration expenditure, and does not have any exploration programmes planned in the short term. Additionally, none of the current directors receive any cash remuneration, and other corporate overhead has been reduced significantly.

The Board has been reviewing a number of options with the objective to secure financing that will provide a stronger platform for future growth. Following extensive consideration, the Board has concluded that in the absence of additional funding, the Company will be unable to meet its obligations with respect to scheduled payments to vendors of its concession contracts. In the event that Touchstone does not make these required payments, the concession contracts could be ceded back to the vendors and Touchstone may lose all or part of its interest in those of the concessions to which the non-payment relates.

The Company continues to be engaged in a number of strategic conversations with the intention of reviewing possible transactions that might be accretive in value for all shareholders.

Operating Activity

For the years ended December 31, 2013 and 2012, the Company incurred exploration expenditures of $1,901,678 and $4,363,258, respectively not including geologist consulting costs and supply reimbursements. During 2013, the Company commenced its Stage 4 drilling program as well as identified a new target zone (the "Bern" zone). The program focused on the 1141 Zone.

In addition to the exploration expenditures noted above, for the years ended December 31, 2013, and 2012, the Company incurred $357,828 and $1,396,760, respectively in geologic consulting costs and supply reimbursements.

The decrease for the year ended December 31, 2013 compared with December 31, 2012, was primarily due to the fact that during 2012, the Company was utilising three drills during its drill program. The use of fewer drills resulted in lower exploration expenditures. Additionally, as noted above, the Company ceased its exploration program during the year.

A breakdown of exploration expenditures for the years ended December 31, 2013 and 2012 is noted in the table below.

In addition to the exploration expenditures noted above, for the years ended December 31, 2013, and 2012, the Company incurred $357,828 and $1,396,760, respectively in geologic consulting costs and supply reimbursements.

Impairment

During 2013, the Company closed its offices in Colombia. As a result, the Company has recorded an impairment charge of $372,144 equal to the carrying value of its equipment and other assets.

During the year ended December 31, 2013, the Company identified the recent and continued decline in metal prices as well as the tightening of financing conditions for exploration stage companies as indicators of impairment. As a result of the identification of these indicators, the Company assessed the carrying amount as well the recoverable amount of mineral interests in the statement of financial position. Based on the Company's existing cash and the cash required to undertake an exploration program as well as uncertainty regarding the future plans, the Company has recorded an impairment of $14,653,501. The mineral interest was initially acquired as a result of the acquisition of Atlantis Gold Mines Corp. as well as the acquisition of the El Cinco property.

Share-based payment expense

During the years ended December 31, 2013, the Company incurred $381,109 compared with $2,383,284 for the year ended December 31, 2012. The decrease was due to the reversal of previously recognized share-based payment expense for unvested options as a result of their forfeiture. Additionally, during 2012, the Company cancelled the majority of the options for which an expense had not been recognized. As a result, the share-based payment expense in year ended December 31, 2012 primarily reflects the accelerated expensing of these options.

Professional and consulting fees

Professional and consulting fees were $841,746 and $2,320,817, respectively for the years ended December 31, 2013 and 2012. Professional and consulting fees were lower in the current year periods as a result of a lower level of operating and corporate activity.

Travel

Travel for the year ended December 31, 2013 was $151,944 compared with $206,369 for the year ended December 31, 2012. Travel expenses were reduced as a result of the suspension of the Company's exploration activities and a reduction in corporate activity.

Salaries

During the latter part of the year ended December 31, 2013, the Company stopped paying salaries in an effort to reduce costs and no longer incurs any cash salary expense. For the year ended December 31, 2013, salaries expense was $365,827 compared with $391,284 for the year ended December 31, 2012. Salaries expense in 2013 includes severance expense of C$130,000 as a result of a reduction in headcount.

Other operating costs

Other operating costs include non-refundable value added taxes paid during the period. Other operating costs were $180,020 and $394,643 for the years ended December 31, 2013 and 2012, respectively. Other operating costs were lower than the same periods in the prior year as a result of a decrease in corporate activity.

Foreign exchange and Financial and other income

During the years ended December 31, 2013, the Company recognized a foreign exchange loss of $193,179, primarily on the revaluation of cash as the US dollar strengthened relative to the Canadian dollar and British pound. The Company incurred a foreign exchange gain of $51,949 for the year ended December 31, 2012, a result of the weakening of the US dollar compared with the Canadian dollar and British pound.

During the year ended December 31, 2013 the Company recognized a gain on the change in the fair value of the derivative liability as the derivative liability decreased during the year.

Net loss,

For the year ended December 31, 2013 the Company recorded a net loss of $18,720,512 or $0.09 per share compared with a loss of $10,171,565 for the years ended December 31, 2012.

Quarterly review