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Chairman's Letter Managing Director's Report Glossary of Technical Terms Corporate Governance Statement Directors' Report Auditors' Independence Declaration Financial Report Independent Audit Report ASX Additional Information

Dear Shareholders.

It is my pleasure to present to shareholders this first Annual Report since Kentor Gold Ltd's successful listing on the Australian Stock Exchange and Hook forward to your ongoing support of the Company's activities. The A\$6m raised through the IPO in March 2005 has allowed Kentor to consolidate its position in the Kyrqyz Republic as a responsible and reliable exploration company. As described in the prospectus. Kentor is applying the funds raised to the exploration of the Company's tenements and the generation of projects with the prime objective of the discovery and development of profitable gold and base metal deposits in both the Kyrgyz Republic and other prospective parts of the Tien Shan belt in Central Asia.

Ertash is the most advanced project in the Kentor portfolio and is a major focus of the Company's exploration activity. Much of the technical work program during the year under review has been in gaining a better understanding of the Akbel prospect, located in the Ertash licence some nine kilometres along strike from the existing Centerra Gold Inc. owned Kumtor mine.

Kentor has established a camp at Akbel (4,000m altitude) and is fortunate to be able to utilise the all weather public access road to within a few kilometres of the site for the transport of materials and equipment. It is pleasing to report that a drill rig is now on site and drilling has commenced. A number of drill targets have been identified and both the camp and rig are winterised with the intention that drilling will continue throughout winter should results warrant on-going work.

The Company's exploration focus, however, is not only on the Ertash Licence. As a result of following up reconnaissance targets generated in 2004, drill targets have been identified at Uzunbulak. Furthermore, encouraging mineralisation has been identified at Barkol. Both warrant further investigation.

Your Company's technical management team place great value on integrated data analysis and, in combination with massive Soviet era data, advanced exploration technology is now being applied in the systematic identification and prospectivity of targets in the high potential Tien Shan belt.

Equally important to Kentor is its close working relationship with the Kyrgyz Geophysical Expedition which provides valuable logistical and technical support. Australian and Soviet trained geoscientists work side by side in this important synergistic relationship.

Many shareholders will be aware that following a popular uprising earlier this year, an internationally supervised election took place in the Kyrgyz Republic on 10 July 2005. The newly elected government. under President Bakiev, has already made clear its intention to welcome direct foreign investment and has placed minerals exploration and mining as priority industries, to be encouraged and supported. With support from the World Bank, the new government is proceeding with a re-structuring of the country's mining legislation and administration.

Being conscious of their not inconsiderable responsibilities as Directors, an Audit and Compliance Committee as well as a Remuneration Committee have been established. The Board is also well conscious of its responsibilities under the ASX's ten point Code of Corporate Governance. Continuous disclosure is of prime importance and, in this regard, shareholders will be kept informed of important developments that affect the Company, as and when they occur.

I would like to thank David Royle and his team for the excellent work which they have performed in the transition of Kentor from an unlisted to a listed entity on the ASX. Both the Board and management now look forward to being able to report on positive outcomes for the benefit of shareholders in the near future.

Yours faithfully

John Barr AM Chairman

managing director's report
Exploration activities

INTRODUCTION

Systematic generative exploration is the driver of Kentor's Inture

Kentor's vision is to build wealth for its shareholders through the discovery and development of highly profitable gold and base metal deposits in and around the Central Asian region. The Company's primary focus is the discovery of multi-million ounce orogenic gold, intrusion hosted gold and porphyry style gold-copper deposits in the Kyrayz seament of the Tien Shanmetallogenic belt of Central Asia. The Tien Shan is host to some of the world's largest gold deposits, including the Murentau Mine (170 million ounces) in Uzbekistan and the Kumtor Mine (12 million ounces) in the Kyrgyz Republic, yet it remains under-explored, in terms of using modern exploration technology, relative to other major gold provinces of the world (Figure 1). This has provided Kentor with an opportunity to be one of the first groups to assess the mineral wealth of the region in a modern way, thus increasing the chance of discovery by cost-effective, smart exploration.

Kentor is well established in some of the most prospective mineral districts of the Kyrgyz Republic (Figure 2), and now has granted title over 3,546 km². This is a large area that fits well with its exploration approach.

Key exploration tenements include:

1. The Ertash Licence with over 80 km strike of the multi-million ounce Kumtor trend.
1. Uzunbulak and Barkol Licences strategically located in the Talas porphyry copper-gold belt which is emerging as a significant exploration play.
1. The Kyldoo Licence immediately adjacent to the producing Makmal Gold Mine.

Exploration activities for the year have concentrated on geological, geophysical and geochemical assessment of all of Kentor's projects in the Kyrgyz Republic as well as generating new projects via regional generative studies to add to the project pipeline.

In particular this work has advanced and upgraded the prospectivity at Ertash and Uzunbulak Project areas where a number of attractive drill targets have been defined for drill testing.

The opportunity for Kentor in the Kyavz Republic is to apply its particular matem exploration approvable an under-explored bell that has a demostrated world-class pedigree for gold and porphyry and related coaper-gold deposits

EXPLORATION APPROACH

The opportunity for Kentor in the Kyrgyz Republic is to apply its particular modern exploration approach to an under-explored belt that has a demonstrated world-class pedigree for gold and porphyry and related copper-gold deposits.

The key objective to Kentor's exploration approach is to 'turn over projects'. This means the continual generation and securing of high quality projects, testing these in the initial phase, and holding only the best projects that fit the Company's criteria for nossible discovery.

To generate projects, Kentor uses an extensive, proprietary database that has been built up over a number of years. This is a valuable asset for exploration and provides Kentor with a competitive advantage.

Once suitable targets have been identified using Kentor's generative process, they are rapidly assessed in the field by experienced local and expatriate-led field teams. If they meet Kentor's exploration criteria, the targets are secured by exploration tenement for subsequent follow-up exploration.

As well as the all-important database. Kentor uses innovative and modern-day exploration techniques. It has been one of the pioneers in introducing these to the Kyrgyz Republic. They include:

Industry-leading satellite image processing and interpretation, in particular, imagery from the ASTER satellite. This can be used for the interpretation of geology and, after specialist processing, for targeting areas of mineral alteration (an indicator of possible mineralisation).
Integrated, multi-layer Geographic Information System (GIS) analysis of the database, aimed at rapidly focusing exploration on the most prospective areas. It is also used in an ongoing way to assist in assessing exploration results.
Stream sediment geochemistry using the Bulk Leach Extractable Gold (BLEG) technique, which enables rapid assessment of stream sediment shedding down from exploration target areas. Judgments can then be made about the aold and copper potential of these areas without the need for extensive ground traversing.
Mobile Metal Ion (MMI) soil geochemistry, a rapid technique designed to detect metal at the surface above buried deposits, hence giving clues to their existence (commonly referred to as 'looking through cover'). MMI has demonstrated the ability to detect mineral deposits covered by glacial moraines, like those common in parts of the Kyrgyz Republic. The technique has opened up much greater areas for Kentor for cost-effective exploration than previously available using conventional methods.
The use of pioneering Induced Polarisation (IP) geophysical equipment (full wave form receiving) and data processing, through consultants Search Exploration Services of Adelaide.

OUR PEOPLE

Kentor has the core expertise to discover major gold deposits. Kentor's Board of Directors and management deliver a strong balance of exploration, mining and corporate expertise. Executive Director Hugh McKinnon has lived in the Kyrgyz Republic for 8 years and heads Kentor's Bishkek office with Orozbai Tohtonazarov, the General Director of CJSC Kentor and a Director of the Kyrgyz Geophysical Expedition ("KGE").

Supporting the management group, CJSC Kentor's Bishkek office has seven staff providing year-round support, and during the exploration field season, this increases by up to 60 KGE staff and contractors including geologists, geophysicists. surveyors, field assistants, drivers and medical staff

In addition to Kentor management, Global Ore Discovery Pty Ltd ("Global Ore") and AUSMEC Geoscience of Brisbane provide consulting services to Kentor including state-of-the-art target generation. Global Ore also assist with supervision of in-country fieldwork during the summer field season.

Over the last three years Kentor has developed a synergy and productive relationship between the in-depth local knowledge of Kyrgyz Soviet-trained geoscientists and western, internationally experienced geoscientists with track records of discovery.

The Company has gained recognition in the Kyrgyz Republic since listing. Director and Country Manager, Hugh McKinnon has taken on the role of Chairman of the Minerals and Exploration division of the International Business Council, a body that represents business interests in the Kyrayz Republic and actively consults and lobbies government on behalf of its members. Also of note is the number of properties that have been brought to Kentor by independent parties. So far this year five have been evaluated and although none have met the Company's criteria for involvement, it is encouraging that Kentor is being recognised as a serious potential exploration partner in the country and we expect that in time we will see properties that meet Kentor's requirements.

Technical ability. strong business skills, depth of local operating experience, internal team work and access to a vast store of technical data are keys to our SUCCESS

Kentor's success depends both on agaresive exploration around the Kumtor Mine and dedicated arenfields exploration elsewhere in the Kyroyz Republic

EXPLORATION PROJECTS

Ertash

Ertash is the most advanced project at present in the Kentor portfolio, and is a major focus for the Company. Systematic exploration over the last two field seasons has progressively upgraded its potential for the discovery of a gold deposit. The work has culminated in the identification of multiple drilling targets at the Akbel and Choloktor Prospects. These targets are regarded as having an excellent chance of providing Kentor with drill intersections of previously unknown gold mineralisation.

Kentor has title to prospective ground stretching for over 80km along two parallel mineralised trends. One of these is the Kumtor Trend that hosts the Kumtor Mine, a premier gold mine of Central Asia (Figure 1). Kentor's licence covers strike extensions both to the northeast and southwest outside the Kumtor Mine property.

The second trend is the Beshmoinok-Kurgaktepchi mineralised trend, which hosts multiple known gold occurrences. None of these have been drill tested as yet.

The Kumtor Mine property, owned by Centerra Gold Inc, contains a series of multi-million ounce gold deposits stretching for 12km along the Kumtor Fault Zone. Kentor's Ertash Licence covers over 80km strike extensions of this key structure and the target black shale host stratigraphy.

Kentor has identified several outcropping and inferred buried gold prospects. These have been defined by a combination of gold in rock and soil samples. geophysical (IP) character, and the location of favourable structures, host rocks and hydrothermal alteration (Figure 3).

The more advanced prospects of Akbel and Choloktor lie along a southwest extension of the Kumtor Trend (Figure 4). Recent geophysical (IP and ground magnetics), MMI geochemical and geological surveys have identified buried geological features that are interpreted to be prospective for Kumtor-style black shale-hosted gold mineralisation.

The 2005 Field Program

Work was focussed on the Akbel and Choloktor Prospects and comprised IP and ground magnetic geophysical surveying, MMI soil sampling and detailed geological mapping.

Results of the Akbel 2005 MMI soil extension sampling revealed several new gold anomalies in the northeastern part of the grid. The results also provide additional evidence of the repeatability of the MMI geochemical technique and Kentor's sampling procedure, thereby enhancing our confidence in the results in this area.

A Pole-dipole IP survey was carried out to test a 5km long, buried extension of the Kumtor Fault Zone, from the Centerra Gold Inc property boundary to the main Akbel MMI soil gold anomalies (Figure 5). In addition, four lines of IP geophysics were completed further to the west over the Tarasu and Achik-Tash target areas at Choloktor.

Assessment of the Akbel IP (and detailed ground magnetic) data suggests that the highly conductive zones outlined in the survey represent a continuation of the Kumtor Mine black shale (carbonaceous) host stratigraphy that extends into the Kentor licence under glacial moraine cover (Figure 5). The overall thickness of the conductive zone is encouraging in an exploration sense, and suggests that the interpreted shale horizons are quite thick, possibly representing fault repetitions. Within this zone, a series of laterally continuous chargeable and moderately conductive zones are interpreted to be sulphide-rich bodies in or adjacent to the shale horizons, a necessary feature of the gold deposits of the Kumtor type. The chargeable zones are large, being 400-1000m long and 100-400m wide. Computer modelling of the depth below surface of the zones indicates they are 80-300m deep, well within drilling and mining parameters.

Significantly, the surface trace of the chargeable zones partially overlaps certain MMI soil gold anomalies. The favoured interpretation of this relationship is that the MMI anomalies represent up-dip dispersion of gold from gold-sulphide mineralised rock at depth. These are the high-priority drilling targets at Akbel.

Holes to be drilled first are located within the vicinity of an interpreted kink or possible jog in the Akbel Fault. This area lies along strike and within the interpreted black shale horizon and is characterised by a coincident IP chargeability anomaly (non resistive in part) with a magnetic low adjacent to a large (100m x 400m) discrete MMI gold soil anomaly.

It is worth noting that several magnetic lows (depletion related to hydrothermal afteration) are also associated with the chargeable bodies, a feature characteristic of the Kumtor ore bodies.

Although small parts of the area have been subjected to drilling previously by Teck and the Soviets, none of the chargeable zones identified by Kentor have been tested. Previous drilling was either located away from the zones or terminated above them.

Kentor management is highly encouraged by the interpreted presence of the Kumtor host black shale stratigraphy in the area of the Akbel MMI gold anomalies. The interpreted sulphide-rich bodies within the shale offer several significant targets that will be systematically drilled over the remainder of 2005 and into 2006.

The processing and interpretation of data from the four IP traverses in the Choloktor area has also identified potential drill targets. These comprise chargeable zones coincident with both resistivity lows and MMI soil gold anomalies, at Tarasu and Achik-Tash.

Elsewhere in the Ertash Licence, reconnaissance geological mapping and geochemical sampling at Beshmoinok, 10km south of the Kumtor mine, have been completed. Along the 15km zone of interest, four gold anomalous catchments were followed up with detailed BLEG stream sediment and rock sampling. Further work will be planned when rock and stream geochemistry results have been evaluated.

In addition to the prospects described above, Kentor is systematically evaluating the remote, southeast sector of the Ertash Licence using reconnaissance stream sampling and prospecting techniques. Neither Soviet nor expatriate explorers have evaluated the area previously.

Kensu

The Kensu Licence (169km²) is located to the northeast of Ertash, and was selected as a conceptual play following integrated assessment of Soviet-era data and ASTER satellite imagery.

ASTER data processing for mineral alteration, linearnent interpretation and regional geology assessment indicated that there are gold exploration targets of the Kumtor style within the area. These have a similar strong alteration signature to Kumtor (as shown in ASTER imagery) and are hosted in similar age (Vendian) shales. They also lie on a splay or an analogous structure parallel to the one that controls the Kumtor mineralisation.

Reconnaissance investigations, comprising BLEG stream sediment sampling and prospecting, have been completed over the entire property. Further work will be planned when rock and stream geochemistry results have been evaluated.

Hrummlak

The Uzunbulak Licence (108km²) is located along the Talas-Kemin metallogenic belt in the north-western corner of Kyrovz Republic (Figure 6), and is a direct outcome of Kentor's ongoing project generation program, The project has rapidly developed from a raw discovery in late 2004 to the point where, by the end of the 2004-2005 financial year, Kentor has identified highly encouraging porphyry copper-gold targets ready for drill testina.

Kentor's work at Uzunbulak in the 2005 field season has focused on a 5km belt of copper-gold porphyry mineralisation identified by both Soviet-era and previous Kentor exploration. Most of the 2005 program was carried out in the 2.5km long south-eastern part of the belt where exploration potential is considered more favourable. The program comprised soil and rock geochemistry, geological mapping, ground magnetic surveying, and interim assessment of results.

Results of work to date have enhanced the prospectivity of the area by confirming the significance of known mineralised areas, and defining new targets for further exploration. Summary assay results are shown on Figure 6.

Mineralisation and alteration were found to be focused within a specific package of intrusive porphyries along the sediment-intrusive contact. The better copper-gold values in the geochemistry tend to correlate with zones of pervasive potassic alteration and intense quartz vein stockwork. Mineralisation is structurally controlled, a feature common in many Central Asian porphyry copper-gold deposits.

Integrated assessment of multi-layered datasets generated from both 2004 and 2005 work by Kentor and Soviet-era exploration, in particular soil and rock geochemistry, has lead to the identification of four discrete target areas (Figure 6).

Targets 'A' and 'C' are newly defined and lie adjacent to previously known mineralisation. Kentor management is encouraged by the copper-gold tenor and size potential that these targets offer. Target 'A' is a roughly circular zone 500m across and 'C' is 500m x 200m in size. In particular, Target 'A' is considered to represent a more classic zoned porphyry system associated with a central intrusive phase surrounded by target mineralisation. Also, Target 'A' lies within a regional dilational structural setting. Highly anomalous surface rock and soil geochemistry forms an annular zone around a magnetic low inferred to be the core intrusive stock. These findings and interpretations are consistent with the porphyry model favoured by the Company.

Given the positive outcomes of the first part of the 2005 program. Kentor intends to carry out drill testing of priority targets.

Barkol

The Barkol Licence (334km²) is another direct outcome of Kentor's project generation activities in the second half of 2004 and, like Uzunbulak, is located along the Talas-Kemin metallogenic belt in the north-western corner of Kyrgyz Republic (Figure 7).

Recent reconnaissance exploration by Kentor has identified a new zone of outcropping copper-gold mineralisation at the Upper Chungur Prospect in the north-western part of the licence (Figure 7). Here, two separate styles of mineralisation have been recognised - selective replacement of conglomerate with sulphide material and semi-massive sulphide lodes in shale. Initial rock sampling in an area of poor bedrock exposure, measuring approximately 350 x 200m, returned encouraging analysis values ranging from 0.5 to 15 g/t gold and 0.2 to 0.6% copper from 10 samples. Grid-based soil sampling is underway, which is aimed at better defining the size and significance of the mineralised system.

Pchan (Kyldoo)

CJSC Kyldoo, a Kyrgyz registered company jointly owned 50% each by CJSC Kentor (Kentor's operating company in Kyrgyz Republic) and Perseus Mining Ltd ("Perseus"), had its Pchan Licence (130km²) renewed during the year on amended boundaries. Perseus is manager for the project.

Three new priority exploration target areas have been identified from a study undertaken by Kentor that reassessed historical exploration data (comprising Soviet era, soil and rock geochemistry and geological mapping) integrated with satellite image interpretation (Figure 8).

All three areas are regarded as Makmal-style gold targets (Makmal is a skarn-type deposit adjacent to the Kyldoo Project and has produced over a million ounces of gold).

Target "A" comprises a 4km long zone, in calcareous rocks, strategically located 4km due west of, and along strike from, the operating Makmal Gold Mine. Six separate gold-bearing zones have been delineated within the target area, with anomalous gold in these zones being indicated by either soil geochemistry or the presence of known mineral occurrences. Follow up geological mapping and rock sampling is planned to determine the significance of this area.

Target "B", Iving in the central part of the Pchan (Kyldoo) Licence, has five specific gold and base metalanomalous zones delineated in a 2000m x 1000m area. Follow-up soil geochemical sampling in 2005 by Perseus has focused on testing this area. Results are pending.

Target "C" consists of thrust slices of Carboniferous limestone and calcareous sediments, with an inferred underlying intrusive body. It has potential for Makmal-style gold mineralisation and requires initial testing by stream sediment sampling. This will be carried out towards the end of the 2005 summer field season.

Karahaita

Reconnaissance stream sampling and target assessment over the Karabalta Licence (681km²) in 2005 have been completed, with 152 BLEG stream sediment and 91 rock samples submitted for analysis (Figure 9), Initial field assessment has failed to find the porphyry style copper-gold mineralisation interpreted from desktop studies. However, gold and base metal-bearing veins in the Jarkonush Prospect area offer the main hope of significant mineralisation.

Further work will be planned when rock and stream geochemistry results are received and evaluated.

Bakaitash

Results of reconnaissance sampling during 2005 returned disappointing results in the Bakaitash Licence area. The potential for gold and copper-gold mineralised systems attractive to Kentor has been downgraded, and accordingly, the Bakaitash Licence will be relinguished. This relinguishment is consistent with Kentor's objective to 'turn over projects' by rapidly assessing them, and where applicable, surrendering ones that do not meet the Company's exploration criteria.

Karasu

This area was found to contain minor quartz veins and some low-level gold geochemistry, however, large mineralised systems sought by Kentor were not indicated. A decision was made to relinquish the Company's interest in the Karasu PL.

Project Generation

Kentor is pursuing an on-going regional project generation and acquisition program in the Kyrgyz Republic, which focuses on belts of mineralisation with established pedigrees for multi-million ounce gold and gold-copper deposits.

Targeting is driven by a multilayered GIS approach, incorporating extensive Soviet-era geochemical, geophysical and geological data, and Kentor's ASTER satellite image processing and interpretation.

The budget for generation also allows for initial evaluation of projects, while any further exploration that may be warranted would then be assessed and prioritised within Kentor's overall exploration program.

The Sulvukta Licence (238km²) in south-western Kyrovz Republic was granted on 2 August 2005, and is a direct outcome of the 2005 generative program (Figure 2). It represents a conceptual play for porphyry copper-goldmagnetite mineralisation within a 3000m diameter magnetic high zone. This zone is coincident with a circular topographic low and contains rocks that are anomalous in copper and gold. A field party has been dispatched to commence initial evaluation.

glossary of technical terms

GLOSSARY OF TECHNICAL TERMS

allevium Recent surface sediments laid down by water. alteration The change in the mineral composition of a rock, commonly due to hydrothermal activity. alteration zone A zone in which rock-forming minerals have been chemically changed. ASTER Advanced Soacehorne Thermal Emission and Reflection Radiometer is an imaging instrument that is flying on Terra, a satellite launched in December 1999 as part of NASA's Earth Orbiting System base-metal. A non-precious metal, usually referring to copper, lead and zinc. Batholithic A large, generally discontinuous plutonic mass BLEG Bulk Leach Extractable Gold a chemical analysis technique. Carbonaceous shale Black shale with significant content of carbon Carboniferous A period of geological time approximately from 295 Ma to 355 Ma. complex. An assemblage of rocks of various ages and origins intricately mixed tegether. congtomerate A sedimentary rock formed by the cemeraling together of water-rounded pebbles, distinct from a breccia. Devonian A period of geological time approximately from 355 Ma to 410 Ma. diamond drilling Bolary drilling technique using diamond set or impregnated bits, to cut a solid, continuous core sample of the rock. The core sample is retrieved to the surface, in a core barrel, by a wire line. Diorite An idneous rock of intermediate composition dip The angle at which any planar feature is inclined from the horizontal. g, g/t gram, grams per tenne. 615 Geographic Information System. A system devised to present spatial data in a series of compatible and interactive layers. granitoids. A general term to describe coarse-grained, fetsic intrusive platonic rocks, resembling granite, intermediate laneous rocks whose composition is intermediate between felsic and mafic rocks. IP survey induced Polarization survey - an electrical geophysical survey technique measuring the magnetic feed spontaneously induced in a volume of rock by the application of an electric current. This technique is often used to identify disseminated sulphide deposits. LandSat imagery Reflective light data of the earth's surface collected by the LandSat satellite and commonly processed to enhance particular features. Includes the visible and invisible light spectrums. Ma Million vears ago. magnetic anomalies Zones where the magnitude and orientation of the earth's magnetic field differs from adjacent areas. mannetic survey. Systematic collection of readings of the earth's magnetic field. The data are collected on the surface or from aircraft. massive sulphides. Rock containing abundant sulphides that constitutes close to 100% of the rock mass. metamorphosed Mineralogical, structural and textural adjustment due to changes from the environment in which rocks were originally deposited. MMI Mobile Metal lon is an advanced exploration technique for locating mineral deposits Maz Million oences Neoproterozoic An era of geological time approximately from 544 Ma to 1000 Ma. Ordovician An era of geological time approximately from 435 Ma to 500 Ma. orogenic Adiectival form of orogeny. orogeny. The process of formation of mountains, including thresting, folding & faulting. oxida Pertaining to weathered or oxidised rock. percussion A method of drilling where the rock is broken into small chips by a hammering action. Permian An era of geological time approximately from 248 Ma to 295 Ma. plunge The attitude of a line in a plane which is used to define the orientation of fold hinges, mineralised zones and other structures. Porphyritic Descriptive of igneous rocks containing relatively large crystals set in a finer-grained groundmass. pph, ppm Parts per billion, parts per million (quantitative equivalent of g/t). pyrite A common iron sulphide mineral with the chemical formula FeS2. RC drilling Reverse Circulation drilling - a method of rotary drilling in which the sample is returned to the surface, using compressed air, inside the innertabe of the drift-rod. A more accurate drilling technique than simple percussion drilling, the RC technique minimises contamination. Riphean A subdivision of the Neoproterozoic, around 650-850 Ma. Sericite A white, fine-grained mica, usually formed as an alteration product of various silicates in metamorphic rocks and the wall rocks of ore deposits. shear zone A zone in which rocks have been deformed primarily in a ductile manner in response to applied stress. siticified The alteration or replacement of primary minerals by silica. Silarian An era of geological time approximately from 410 Ma to 435 Ma. skarn A thermally metamorphosed implae limestone. soil sampling The collection of soil specimens for mineral analysis. stockwork. A network of fassially) quartz veintets produced during pervasive brittle fracture. stream sampling The collection of stream sediments for mineral analysis. strike The direction or bearing of a geological structure on a fevel surface, perpendicular to the direction of dip. t. tpa Metric tonne, teames per aratura. Thrust fault A fault with a dip of 45^e or less, on which the hanging-wall appears to have moved upwards relative to the footwall. Triassic Applied to the first period of the Mesozoic era. 203Ma to 248Ma. Vendian A subdivision of the Neoproterozoic, around 544-650

CORPORATE GOVERNANCE STATEMENT

This statement outlines the main Corporate Governance practices that were introduced during the financial vear.

The Board of Directors of Kentor Gold Limited is responsible for the overall corporate governance of the Company, quiding and monitoring the business and affairs of Kentor Gold Limited on behalf of the shareholders by whom they are elected and to whom they are accountable.

With the listing of the Company on the Australian Stock Exchange in March 2005, the Corporate Governance Statement has been introduced in order to comply with the Australian Stock Exchange's Corporate Governance Council's "Principles of Good Corporate Governance and Best Practice Recommendations". The Corporate Governance Statement must contain specific information and also report on the Company's adoption of the Council's best practice recommendations on an exception basis, whereby disclosure is required of any recommendations that have not been adopted by the Company, together with the reasons that they have not been adopted. The Company's corporate governance principles and policies are therefore structured with reference to the Corporate Governance Council's best practice recommendations, which are as follows:

Lay solid foundations for management and oversight; $1.$
$2.$ Structure the Board to add value:
promote ethical and responsible decision making: $3.$
Safeguard integrity in financial reporting; $\mathcal{A}$
$5.$ Make timely and balanced disclosures;
Respect the rights of shareholders; 6.
Recognise and manage risk; $7.$
1. Encourage enhanced performance;
$9.$ Remunerate fairly and responsibly;
1. Recognise the legitimate interest of stakeholders.

The Board has established a Corporate Governance Charter, which includes procedures for compliance with the ASX Listing Rule continuous disclosure requirements, trading in the Company's securities, the management of risk, and a Code of Conduct. Kentor Gold Limited's corporate governance practices were in place throughout the year ended 30 June 2005 and were fully compliant with the Corporate Governance Council's best practice recommendations.

For further information on corporate governance policies adopted by Kentor Gold Limited, refer to the Corporate Governance section at the Company's website: www.kentorgold.com.

Structure of the Board

The skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report is included in the Director's Report under the section headed "Directors". Directors of Kentor Gold Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with the exercise of their independent judgement.

In the context of director independence, to be considered independent, a non-executive director may not have a direct or indirect material relationship with the Company. The Board has determined that a material relationship is one which has, or has the potential to, impair or inhibit a director's exercise of judgement on behalf of the Company and its shareholders.

In accordance with the definition of independence above, the following directors of Kentor Gold Limited are considered to be independent:

Name	Position
WHJBarr	Chairman, Non-Executive Director
A E Daley	Non-Executive Director

Mr Daley is considered to be an independent director notwithstanding that under the ASX Principles of Good Corporate Governance he would not be considered independent due to his employment with Investor Resources Limited, a material professional adviser to the Company.

There are procedures in place, agreed by the Board, to enable directors, in furtherance of their duties, to seek independent professional advice at the Company's expense.

The term in office held by each director in office at the date of this report is as follows:

Name	Term in Office
WHJBarr	10 months
A E Daley	10 marsths
D Z Royle	1 year 6 months
H McKinnon	7 years 4 months

To ensure that the Board is well equipped to discharge its responsibilities, it has quidelines for the operation of the Board, the nomination and selection of directors and remuneration of the directors and key executives.

Audit & Compliance Committee

The Board has established an Audit & Compliance Committee, operating under the Charter incorporated within the Company's Corporate Governance Charter. It is the Board's responsibility to ensure that an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes. This includes the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information as well as non financial considerations. The Board delegated the responsibility for the establishment and maintenance of a framework of internal control and ethical standards for the management of the consolidated entity to the Audit and Compliance Committee.

The Audit and Compliance Committee also provided the Board with additional assurance regarding the reliability of financial information for inclusion in the financial statements. The Board established an Audit Committee comprising A E Daley (Chairman of the Committee and independent non-executive director) and W H J Barr (independent non-executive director), supported where necessary by appropriate external consultants and advisors. Both Messrs Daley and Barr have had many vears experience in the financial management of public companies.

Certification of Financial Statements

With effect from the financial year ending 30 June 2005, the Managing Director and the Chief Financial Officer have provided a statement to the Board that, in their view, the Company's financial statements present a true and fair view of the Company's financial position at that date, and are based on a sound system of internal control.

Corporate Governance Charter

The Board has established a Corporate Governance Charter, which includes procedures for compliance with the ASX Listing Rule continuous disclosure requirements, trading in the Company's securities, the management of risk, and a Code of Conduct. A copy of the Corporate Governance Charter can be found on the Company's website.

Remuneration

Details of the Company's remuneration policy and the total remuneration, including monetary and nonmonetary components, payable to each Director and specified executive is included in Note 21 of the financial statements.

A full discussion of the Company's remuneration philosophy and framework and the remuneration received by directors and executives in the current financial year is included in the Remuneration Report, which is contained within the Directors' Report (page 32).

The Board is responsible for determining and reviewing compensation arrangements for the directors themselves and executive team. The Board has established a Remuneration Committee, comprising the two non-executive directors. Members of the Remuneration Committee are A E Daley (Chairman of the Committee and independent non-executive director) and W H J Barr (independent non-executive director).

directors' report

Your directors submit their report for the year ended 30 June 2005.

DIRECTORS

The names and details of the Company's directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.

John Barr AM MAICD Non-Executive Chairman Appointed 10 November 2004

John Barr has had a long involvement with the Australian minerals and metals industry having been Manacing Director of Metallgesellschaft's Australian subsidiary since the company's inception in 1974. until his retirement in 1994. He is a Director of Iluka. Resources Limited and a former Director of Acacia Resources Ltd, Oxiana Limited, and Transurban City Link Ltd. In August 2005 he retired as Chairman of Utilities of Australia Pty Ltd. a major unlisted infrastructure investment fund.

Other Current Directorships of Listed Companies Illuka Resources Limited.

Former Directorships of Listed Companies in last toree years Oxiana Limited, Transurban City Link Ltd.

Andrew Daley BSc (Hons)(Mining) Non-Executive Director .
Appointed 10
November 2004

Andrew Daley is a mining engineer and resources finance executive. Andrew spent several years. working on mining projects in Africa before. relocating to Australia as Senior Engineer with Fluor Australia in 1981. Since then he has had a long career in international investment banking and held senior positions with NAB, Barclays, and Chase Manhattan, He is a Chartered Engineer, a former Director of Oxiana Limited, a Director of Pan-Australian Resources Limited, Dragon Mining NL. Gladstone Pacific Nickel Ltd (listed on AIM), a Member of IOM3 and a Fellow of the Australasian Institute of Mining and Metallurgy.

Other Current Directorships of Listed Companies Pan Australian Resources Limited, Dragon Mining NL, Gladstone Pacific Nickel Ltd.

Former Directorships of Listed Companies in last three years None.
...................................

Hugh McKinnon BEna (Minina) Executive Director Appointed 28 May 1998

Hugh McKinnon has been involved in the mining industry in Australia, Africa, and Asia for 30 years in activities randing from exploration ventures to mine. production. Since early 1996 he has worked on mining and exploration projects across Central Asia from Tajikistan to Mongolia, with a particular interest in the Kyrgyz Republic. Hugh speaks competent Russian

Other Current Directorships of Listed Companies None.

Former Directorships of Listed Companies in last three years None.

David Royle BSc (Hons) (Geology) Managing Director Appointed 1 March 2004

David Royle has extensive international experience in exploration for precious metals, base metals and diamonds with major multinational resource companies over the past 30 years. He has a track record for the discovery of a number of significant minerals deposits through grass roots exploration. He is a Fellow and CP of the Australasian Institute of Mining and Metallurgy and Fellow of the Society of Economic Geologists.

Other Current Directorships of Listed Companies None.

Former Directorships of Listed Companies in last three years.

None.

Charles Hider Non-Executive Director

Mr Hider was appointed a director on 28 May 1998 and resigned on 17 November 2004.

Brent Cook

Non-Executive Director

Mr Cook was appointed a director on 4 July 2003 and resigned on 10 November 2004.

COMPANY SECRETARY

John Rawling B.Comm, CA	Mr Rawling is a chartered accountant with more than 20 years experience in the chartered accounting profession, statutory corporations and international and ASX listed companies. He was appointed as company secretary and chief financial officer on 1 April 2005. Mr Rawling is currently also company secretary and chief financial officer of ASX listed EQITX Limited.
Gilbert Rogerson	Mr Rogerson was appointed as company secretary on 22 June 1998 and resigned on 17 January 2005.
Christopher Bain	Mr Bain was appointed as company secretary on 17 January 2005 and resigned on 1 April 2005.

Interests in the shares and options of the company and related bodies corporate

At the date of this report, the interest of the directors in the shares and options of Kentor Gold Limited were:

Name of Director	Ordinary Shares	Options over Ordinary Shares
W.H.J. Barr	HH)
A E Dalev	381.470	174.690
H McKinnon.	2,064.627	033.334
D.Z. Povie	833.951	। ମେନ ରମ

EARNINGS PER SHARE

Basic earnings per share	$(2.93)$ cents
Diluted earnings per share	$(2.93)$ cents

CORPORATE INFORMATION

Cornorate Structure

Kentor Gold Limited is a Company limited by shares that is incorporated and domiciled in Australia. Kentor Gold has prepared a consolidated financial report incorporating the entities that it controlled during the financial year and which are outlined in note 11 of the financial statements.

Principal Activities

The principal activity of the economic entity during the financial year was exploration for gold and base metals in the Kyrgyz Republic.

Employees

The consolidated entity employed 10 employees as at 30 June 2005 (2004: 9 employees).

CONSOLIDATED RESULTS

The loss for the consolidated entity after income tax was \$779,530 (2004; loss of \$631,616).

DIVIDEMDS

No dividends in respect of the current financial year have been paid, declared or recommended for payment.

OPERATING AND FINANCIAL REVIEW

Group Overview

Kentor Gold Limited was established in May 1998 for the purpose of exploring for and developing gold properties in the Kyrayz Republic.

Exploration Overview

Please refer to the Managing Director's Report for details of exploration activities undertaken during the financial year.

Financial Overview

Onerating Results for the Year

The loss for the consolidated entity after income tax was \$779.530 (2004; loss of \$631.616). This result was in line with expectations and is consistent with information as provided in the prospectus dated 31 January 2005 and reflected:

costs associated with managing the exploration program; and
corporate overheads associated with statutory and requiatory requirements following listing on the Australian Stock Exchange during the year.

Review of Financial Condition

During the year, the Company raised \$6.45 million (net of capital raising costs) by way of share placements in August 2004, September 2004 and October 2004 as well as the initial public offer of securities and listing of the Company's shares on the Australian Stock Exchange and options exercise in March 2005. At the end of the financial year, a large proportion of the funds from the IPO were held by the Company as cash investments, with the 2005 field season in the Kyrgyz Republic due to commence early in the new financial year. The Company strives to maximise the return on these funds by investing surplus funds and minimising expenditure on corporate overheads

Cash Flows

The cash flows of the Company consist of: in the case of the foreign controlled entity, payments to employees and suppliers for exploration activities on tenements held: and the maintenance of the corporate head office which manages existing projects as well as costs involved in investigating new exploration opportunities.

CAPITAL RAISINGS / CAPITAL STRUCTURE

During the year under review, the Company raised \$6.45 million (net of capital raising costs) to fund the exploration of the Company's tenements and project generation in the Kyrgyz Republic and other prospective areas of the Tien Shan belt in Central Asia consistent with the Company's Kyrgyz exploration program, as well as to provide working capital for the Company.

Placement

The Company undertook three share placements in the first half of the financial year:

3,119,090 shares were issued on 12 August 2004 at an issue price of \$0.11 per share to raise \$343,100
4,526,636 shares were issued on 23 September 2004 at an issue price of \$0.11 per share to raise \$497,930 and
1,363,636 shares were issue on 4 October 2004 at an issue price of \$0.11 per share to raise \$150,000.

Share Consolidation

At the General Meeting held on 25 October 2004, members passed a special resolution to consolidate the share capital on the basis of 1 share for every 3 shares on issue.

Initial Public Offer

The Company issued a prospectus dated 31 January 2005 offering 12,000,000 shares for subscription at an issue price of \$0.50 per share to raise \$6 million. The offering was successfully completed and the Company's shares were listed on 17 March 2005 by the Australian Stock Exchange.

Grant of Options

Upon the execution of employment contracts, the Company granted the 2,266,667 options to Hugh McKinnon and David Royle as follows:

Duration		Number	In Escrow	Frereise Price
	30 days after ceasing employment	846.667	12 846,667 until 17 March 2007	\$0.625
30 days after ceasing employment		710.000	710 000 until 17 March 2007	-80.75
	30 days after ceasing employment	710.000	710,000 until 17 March 2007	\$0.875

Shares issued as a result of the exercise of Options

500,000 shares were issued at an issue price of \$0.21 per share on 23 March 2005 as a result of the exercise of 500,000 options issued by the Company.

Summary of Shares / Options on Issue 30 June 2005

As a result of the issue of shares and options, the Company has 34,651,132 ordinary shares and 9,686,225 options on issue. The options are broken down as follows:

Expiry Date	Mumher	In Escrow	Exercise Price
On or before 1 August 2005	$-466,668$	~466,668 until 17 March 2007 ~	-\$0.21
On or before 1 April 2006	66.667	N/a	\$0.21
On or before 1 April 2006	1,232,887.	1,032,887 until 17 March 2007	\$0.30
On or before 1 July 2006	386.668	333.334 until 17 March 2007	\$0.30
On or before 1 March 2007	4.666.668	1,841,357 until 17 March 2007	\$0.45
On or before 1 July 2007	333.333	333.333 until 17 March 2007	\$0.625
On or before 1 July 2008	266.667	266,667 until 17 March 2007	\$0.75

Duration	Number	In Escrow	Exercise Price
30 days after ceasing employment	-846.667 -	846.667 until 17 March 2007.	\$0.625
30 days after ceasing employment	710.000	710.000 until 17 March 2007	80.75
30 days after ceasing employment	710.000	710,000 until 17 March 2007	\$0.875

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Shareholders' equity increased to \$9,089,007 from \$2,640,629, an increase of \$6.448.378 as result of the share placements and initial public offer of ordinary shares as detailed above. At a general meeting of members of Kentor Gold Limited held on 25 October 2004, shareholders resolved to change the Company type from a public no liability company to a public company limited by shares and to change the Company name from Kentor Gold NL to Kentor Gold Limited. The Company subsequently applied to the Australian Stock Exchange to have its shares listed. This took place on 17 March 2005.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

No matter or circumstance has arisen since 30 June 2005 which has significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity, in subsequent financial years.

LIKELY DEVELOPMENTS AND EXPECTED RESILLTS

The Board of Directors intends to continue with the exploration program in the Kyrgyz Republic as outlined in the prospectus dated 31 January 2005. Further details of the Company's prospects are included in the report on exploration projects which forms part of the Managing Director's Report.

As the Company is listed on the Australian Stock Exchange, it is subject to the continuous disclosure requirements of the ASX Listing Rules which require immediate disclosure to the market of information that is likely to have a material effect on the price or value of Kentor Gold Limited's securities.

ENVIRONMENTAL REGIN ATION

The consolidated entity's operations are not subject to any significant environmental regulations under either Commonwealth or State legislation.

MEETINGS OF BIRECTORS

The number of meetings of the Directors held during the year and the number of meetings attended by each Director were as follows:


		Attended	Neld
Gurrant Biractors
	A E Daley
		40
	HMcKinnon		12
Former Directors	CAMFlider

Committee membership

The Board of Directors established both the Audit and Compliance Committee and the Remuneration Committee on 17 January 2005. The members of the committees are the independent directors, Andrew Daley (Chairman) and John Barr. One meeting of the Audit and Compliance Committee was held during the year, and it was attended by both members.

агмингаатнан керакт

Remuneration Philosophy

The Board of Directors of Kentor Gold Limited is responsible for determining and reviewing compensation arrangements for the directors, the chief executive officer and the executive team. The Board's remuneration policy is to ensure that the remuneration package properly reflects the person's duties and responsibilities, with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms, including cash and fringe benefits such as motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost to the Company.

To assist in achieving these objectives, the Board intends to link the nature and amount of executive officers' emoluments to the Company's financial and operational performance. No formal plan has been adopted at this time.

Employment Agreements are entered into with Executive Directors and Specified Executives. The current employment contract with the Managing Director runs until its termination date of 31 December 2006, unless terminated by the Managing Director who may give three month's notice. The employment contract with the Executive Director runs until its termination date of 31 December 2006, unless terminated by the Executive Director who may give four month's notice. The Specified Executive has a contract which provides for one month's notice. Contracts do not provide for any additional termination benefits.

Remuneration Committee

The Remuneration Committee of the Board of Directors of the Company is responsible for determining and reviewing compensation arrangements for the directors and executives.

Ramuneration Structure

In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct.

Non-Executive Director Remuneration

Objective

The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.

Structure

The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination was in the constitution adopted on 19 October 2004 which approved an aggregate remuneration of \$150,000 per year.

The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The board considers advice from external consultants as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process.

Each director receives a fee for being a director of the Company. Directors who are called upon to perform extra services beyond the director's ordinary duties may be paid additional fees for those services.

Non-executive directors have long been encouraged by the board to hold shares in the company, it is considered good governance for directors to have a stake in the company on whose board he or she sits.

The remuneration of non-executive directors for the period ending 30 June 2005 is detailed in Table 1 on page 35 of this report.

Senior Executive Bemuneration

Obiective

The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Company and so as to:

Feward executives for company, business unit and individual performance against targets set by reference to appropriate benchmarks:
align the interests of executives with those of shareholders;
link reward with the strategic goals and performance of the Company; and
ensure total remuneration is competitive by market standards.

Structure

In determining the level and make-up of executive remuneration, the Board obtained independent advice from external consultants on market levels of remuneration for comparable executive roles. It is the Board's policy that employment contracts are entered into with the all senior executives.

Variable Remuneration Long Term Incentives

Obiective

The objectives of long term incentives are to:

Fecognise the ability and efforts of the employees of the Company who have contributed to the success of the Company and to provide them with rewards where deemed appropriate;
provide an incentive to the employees to achieve the long term objectives of the Company and improve the performance of the Company; and
attract persons of experience and ability to employment with the Company and foster and promote loyalty between the Company and its employees.

Structure

No formal plan has been implemented at this time, It is expected that long term incentives granted to senior executives will be delivered in the form of options in accordance with an Employee Share Option Plan. At the commencement of each financial year, the Company and each senior executive will agree upon a set of financial and non-financial objectives related to the senior executive's job responsibilities. The objectives will vary but all will be targeted to relate directly to the Company's business and financial performance and thus to shareholder value.

Employment Contracts

David Rovie

By an employment agreement dated 6 December 2004, the Company and Mr David Royle have agreed the terms of his employment including inter alia:

Mr Royle is engaged to provide services in the capacity of Managing Director commencing on 1 January 2004 for a period of 24 months, renewable by mutual agreement in the October prior to expiry of the agreement, for a further period of 12 months at an annual salary of \$140,000 with annual increases.
A restraint on Mr Royle undertaking employment in the Kyrayz Republic for a period of 6 months after termination.
An obligation on Mr Royle to maintain confidentiality in respect of proprietary information obtained during employment.
The grant of 1,366,667 options to a company associated with Mr Royle in 3 tranches:
a) 546,667 options exercisable at \$0,625
b) 410,000 options exercisable at \$0.75
c) 410,000 options exercisable at \$0.875

The options are not transferable and may be exercised at any time during employment and for 30 days after cessation of employment, after which they lapse. They will not be quoted.

The Company will consider further bonuses based on the contribution of Mr Royle to Company milestones and the then circumstances of the Company.

Hugh McKinnon

By an employment agreement dated 1 December 2004, the Company and Mr Hugh McKinnon have agreed the terms of his employment including inter alia:

Mr McKinnon is engaged to provide services in the Kyrgyz Republic in the capacity of Executive Director and Country Manager for a term ending on 31 December 2006, renewable by mutual agreement in the March prior to expiry of the agreement, for a further period of 12 months at an annual salary of \$100,000 with annual review. His place of employment is in the Kyrgyz Republic.
A restraint on Mr McKinnon undertaking employment in the Kyrgyz Republic for a period of 6 months after termination.
An obligation on Mr McKinnon to maintain confidentiality in respect of proprietary information obtained during employment.
The grant of 900,000 options to a company associated with Mr McKinnon in 3 tranches:
a) 300,000 options exercisable at \$0,625
b) 300,000 options exercisable at \$0.75
c) 300,000 options exercisable at \$0.875

The options are not transferable and may be exercised at any time during employment and for 30 days after cessation of employment, after which they lapse. They will not be quoted.

Remuneration of Directors and Executives

Table 1. Director remuneration for the year ended 30 June 2005

		Primary	Post Employment	Equity	Total
		Salary & Fees	Superannuation	Options -
Specified Directors
-WHJBarn	2005	17,419	1.568		18,987
en Jaco A E Daley	2004 2005 2004	9575			9.575
H McKinnon	$-2005$	86,000		$-20,160$	106.160
D Z Royle	.2004 2005 2004	72,000 120.000 50.000	10.800 4.500	22.140	72,000 152.940 54.500
C A M Hider	.2005 .2004
K B Cook	2005 2004
Total Remuneration: Specified Directors
	2005 2004	232.994 122 000	12.368 4.500	42.300	287.662 126 500

Table 2. Remuneration of the specified executive for the year ended 30 June 2005.

Total Remuneration: Specified Executives
	,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	MUNI 411111111

Table 3. Options granted as part of remuneration for the year ended 30 June 2005

Options were granted as follows:

	$0$ Z Royle	H McKinnon
Grant Date	.6. December 2004	- 1 December 2004
Grant Number	546.666 399 410 000 n. 11 410.000	300.000 199 300 000 W. 10 300 000
Vesting Date Service Service	6 December 2004	1 December 2004 .
Value per option at grant date	\$0.625 \$0.75 Billion JU 50.875	90625 \$075 W. u 50875
- Exercise Number - James	Not applicable	Not applicable
Value per ciption at exercise date	Not applicable	Not applicable.
Value at date option lapsed.	Not applicable.	Not applicable.
% of remuneration	14%	19%

Options granted as part of senior management remuneration have been valued using the Binomial option pricing model, which takes account of factors including the option exercise price, the current level and volatility of the underlying share price, the risk-free interest rate, expected dividends on the underlying share, current market price of the underlying share and the expected life of the option.

INDEMAIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

The Company has entered into Deeds of Indemnity with the Directors and the Company Secretary, indemnifying them against certain liabilities and costs to the extent permitted by law.

The Company has also agreed to pay a premium in respect of a contract insuring the Directors and Officers of the Company. Full details of the cover and premium are not disclosed as the insurance policy prohibits the disclosure.

CORPORATE GOVERNANCE

In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Kentor Gold Limited adhere to strict principles of corporate governance. The Company's corporate governance statement is described on page 21 of this Annual Report.

AHDITOR INDEPENDENCE AND NON-AHDIT SERVICES

The directors received the declaration included on page 38 of this annual report from the auditor of Kentor Gold Fimited.

Non-Audit Services

No non-audit services were provided by the entity's auditor, MSI Ragg Weir.

This report has been made in accordance with a resolution of the Directors.

l. Lu

WH I RARR Director

Melbourne, 28 September 2005

(Septembris 1977)
Septembris 1977

H McKinnon Director

Level 2, 50 Burwood Road Level 2, 50 Burwood Road
Rawthom Vic 3122
PO Box 325 Hawshom Vic 3122
Tel: (03) 9819-4011
Fax: (03) 9819-6780
Web: www.raggweir.com.au Email: [email protected]

AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF KENTOR GOLD LIMITED

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2005 there has been:

no contraventions of the auditor independence requirements as set out in the Corporations Act $(i)$ 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit. $(ii)$

WEAR Camp Weit MSI RAGG WEIR CHARTERED ACCOUNTANTS

سالمكسك Þ

L.S. WONG PARTNER

Melbourne 28 September 2005

Companies and any other participal property and property and particle FOR THE YEAR ENDED 30 JUNE 2005

		Consolidated		Parent Entity
	Note	2005 \$	2004 \$	2005 Ŝ	2004 \$
Revenue from ordinary activities		114,852	2,905	114,445	2,905
Employment related costs		(253, 977)	(89, 677)	(208, 199)	(54,500)
Depreciation and amortisation expense		(35, 977)	(14, 242)	(10, 290)	(973)
Office expenses		(55,054)	(26, 653)	(36, 290)	(14, 927)
Travel related expenses		(94,066)	(29, 560)	(75, 302)	(21, 743)
Administrative expenses		(178, 724)	(61, 836)	(159, 960)	(57, 927)
Provision for diminution of investments		(14, 251)		(14, 251)
Write-down of amount receivable from foreign controlled entity					(715,503)
Provision for write-down of amount receivable from foreign controlled entity				(623, 428)
Exploration and evaluation costs written off		(207, 161)
Provision for write-down of exploration and evaluation costs		(206, 775)
Other expenses from ordinary activities		(65, 685)	(77, 082)	(20, 649)	(6,925)
Foreign exchange gain/(loss)		217,288	(335, 471)	(109, 107)	(14, 639)
Total expenses from ordinary activities	3	(894, 382)	(634, 521)	(1,257,476)	(887, 137)
Loss from ordinary activities before income tax expense		(779, 530)	(631, 616)	(1, 143, 031)	(884, 232)
Income tax benefit relating to ordinary activities	4
Net loss from ordinary activities after income tax expense		(779, 530)	(631, 616)	(1, 143, 031)	(884, 232)
Net loss/(gain) attributable to outside equity interests		53,362	(50, 523)
Net loss attributable to members of Kentor Gold Limited		(726, 168)	(682, 139)	(1, 143, 031)	(884, 232)
Share issue costs		(647, 652)	(69, 025)	(647, 652)	(69, 025)
Total changes in Equity other than those resulting from transactions with owners as owners attributable to members of Kentor
Gold Limited		(1,373,820)	(751, 164)	(1,790,683)	(953, 257)
Basic earnings per Share (cents per share) Diluted earnings per Share (cents per share)	5 5	(2.93) (2.93)	(3.94) (3.94)

OYATRUMA'Y BUT AY O BUHARQIYA DI BISO BUT EBB AS AT 30 JUNE 2005

		Consolidated		Parent Entity
	Note	2005	2004	2005	2004
		S	S	S	S
Current Assets
Cash assets		5,455,623	677,941	5,315,482	514,075
Receivables	6	116,508	46,722	24,450	24,425
Other	7	41,295		41,295
Total Current Assets		5,613,426	724,663	5,381,227	538,500
Non-Current Assets
Receivables	8			1,552,318	962,879
Property, plant and equipment	9	133,448	96,133	23,232	24,738
Deferred exploration and evaluation costs	10	1,283,036	368,226
Other financial assets	11		14,251	27,135	41,386
Intangible assets	12	2,528	5,552	1,570	1,570
Total Non-Current Assets		1,419,012	484,162	1,604,255	1,030,573
Total Assets		7,032,438	1,208,825	6,985,482	1,569,073
Current Liabilities
Payables	13	(173, 654)	(33, 557)	(126, 698)	(30, 306)
Provisions	14	(14, 670)		(14, 670)
Total Current Liabilities		(188, 324)	(33, 557)	(141, 368)	(30, 306)
Total Liabilities		(188, 324)	(33, 557)	(141, 368)	(30, 306)
Net Assets		6,844,114	1,175,268	6,844,114	1,538,767
Equity
Parent Entity Interest Contributed equity	15	9,089,007	2,640,629	9,089,007	2,640,629
Accumulated losses	16	(2, 124, 258)	(1,398,090)	(2,244,893)	(1, 101, 862)

Total parent entity interest in equity		6,964,749	1,242,539	6,844,114	1,538,767
Total outside equity interest	17	(120, 635)	(67, 271)
Total Equity		6,844,114	1,175,268	6,844,114	1,538,767

CTATEMENT OF CASHEMIST FOR THE YEAR ENDED 30 JUNE 2005

		Consolidated		Parent Entity
	Note	2005 S	2004 S	2005 \$	2004 \$
Cash Flows From Operating Activities
Payments to suppliers and employees		(578, 656)	(285, 953)	(540, 295)	(210, 654)
Interest received		114,037	2,023	113,954	2,023
Interest paid		(17)		(17)
Net Cash Flows Used in Operating Activities	18(a)	(464, 636)	(283, 930)	(426, 358)	(208, 631)
Cash Flows From Investing Activities
Payment of exploration costs		(1, 138, 746)	(505, 331)
Purchase of plant and equipment		(68, 348)	(94, 263)	(500)	(25, 711)
Proceeds from sale of shares			25,012		25,012
Payment for investment in shares			(14, 251)		(14, 251)
Loan to foreign controlled entity				(1,221,147)	(804, 934)
Other		(4,582)	(1,284)	(4,582)	(1,524)
Net Cash Flows Used in Investing Activities		(1, 211, 676)	(590, 117)	(1,226,229)	(821, 408)
Cash flows From Financing Activities
Proceeds from issue of ordinary shares		7,096,030	1,110,529	7,096,030	1,110,529
Share issue costs		(642, 036)		(642,036)
Net Cash Flows From Financing Activities		6,453,994	1,110,529	6,453,994	1,110,529
Net Increase in Cash Held		4,777,682	236,482	4,801,407	80,490
Cash at the beginning of the financial year		677,941	441,459	514,075	433,585
Cash at the end of the financial year	18(b)	5,455,623	677,941	5,315,482	514,075

alegation in the control compared in the search of the control of the state of the state of the state of the s
The state of the state of the state of the state of the state of the state of the state of the state of the st FOR THE YEAR ENDED 30 JUNE 2005

Note	Contents
1.	Summary of Significant Accounting Policies
2.	Revenue from Ordinary Activities
3.	Expenses and Losses/(Gains)
4.	Income Tax
5.	Earnings per Share
6.	Receivables Current
7.	Other Current Assets
8.	Receivables Non-Current
9.	Property, Plant and Equipment
10.	Deferred Exploration and Evaluation Costs
11.	Other Financial Assets
12.	Non-Current Intangible Assets
13.	Payables Current
14.	Provisions Current
15.	Contributed Equity
16.	Accumulated Losses
17.	Outside Equity Interest
18.	Statement of Cash Flows
19.	Expenditure Commitments
20.	Subsequent Events
21.	Employee Benefits and Superannuation Commitments
22.	Director and Executive Disclosures
23.	Auditor's Remuneration
24.	Related Party Disclosures
25.	Segment Information
26.	Financial Instruments
27.	Impact of Adopting Australian Equivalents to IFRS
28.	Contingent Liabilities and Contingent Assets

Note 1. Summary of Significant Accounting Policies

(a) Basis of Accountino

The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 including applicable Accounting Standards. Other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) have also been complied with

The financial report has been prepared in accordance with the historical cost convention.

(b) Changes in Accounting Policies

The accounting policies adopted are consistent with those of the previous year.

(c) Principles of Consolidation

A controlled entity is any entity controlled by Kentor Gold Limited. Control exists where Kentor Gold Limited has the capacity to dominate the decision-making in relation to the financial and operating policies of another entity so that the other entity operates with Kentor Gold Limited to achieve the objectives of Kentor Gold Limited. A list of controlled entities is contained in Note 11 to the financial statements.

All inter-company balances and transactions between entities in the economic entity, including any unrealised profits or losses, have been eliminated on consolidation. Where controlled entities have entered or left the economic entity during the year, their operating results have been included from the date control was obtained or until the date control ceased. Outside interests in the equity and results of the entities that are controlled are shown as a separate item in the consolidated financial report.

(d) Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Interest Income

Control of the right to receive the interest payment.

Asset Sales

The gross proceeds from asset sales are included as revenue of the consolidated entity. The profit or loss on disposal of assets is brought to account at the date an unconditional contract of sale is signed.

faxes ${p}$

Income Tax

Tax-effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated on the accounting profit after allowing for permanent differences. To the extent timing differences occur between the time items are recognised in the financial statements and when items are taken into account in determining taxable income, the net related taxation benefit or liability, calculated at current rates, is disclosed as a future income tax benefit or a provision for deferred income tax. The net future income tax benefit relating to tax losses and timing differences is not carried forward as an asset unless the benefit is virtually certain of being realised.

Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST except:

where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position.

Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

Note 1. Summary of Significant Accounting Policies (continued)

Foreian Currency $(f)$

Transactions

Transactions in foreign currencies of entities within the consolidated entity are translated into Australian currency at the rate of exchange in effect at the date of each transaction. At balance date, amounts payable and receivable in foreign currencies are translated to Australian currency at rates of exchange current at that date. Resulting exchange differences are brought to account in the Statement of Financial Performance for the year.

Cash and Cash Equivalents $\left( 0 \right)$

Cash on hand and in banks and short term deposits are stated at nominal value.

For the purposes of the Statement of Cash Flows, cash includes cash on hand and in banks, and money market investments readily converted to cash, net of outstanding bank overdrafts.

$(h)$ Receivables

All debtors are recognised and carried at priginal invoice amount less a provision for any uncollectible debts. Collectibility of debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised where some doubt as to full collection exists.

Exploration and Evaluation Assets $\left(\right)$

Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not vet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full against operating results in the year in which the decision to abandon the area is made.

When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Recoverable Amount of Non-Current Assets $(i)$

The recoverable amount of an asset is the net amount expected to be recovered through the net cash inflows arising from its continued use and subsequent disposal.

The carrying values of non-current assets are reviewed every six months to determine whether they exceed their recoverable amounts. Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is written down to its recoverable amount. Where net cash inflows are derived from a group of assets working together, recoverable amount is determined on the basis of the relevant group of assets.

In determining the recoverable amount of non-current assets the expected net cash flows have not been discounted to their present values.

Property, Plant and Equipment $(k)$

i) Acquisition

Items of property, plant and equipment are initially recorded at cost and depreciated as outlined below.

ii) Depreciation of Property, Plant and Equipment

Property, plant and equipment are depreciated on a straight line basis at rates based upon the expected useful lives of these assets. The expected useful lives of these assets are 3-6 years (2004: 3-6 years).

Note 1. Summary of Significant Accounting Policies (continued)

$(1)$ Leases

Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership.

Operating Leases

The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight line basis.

Contingent rentals are recognised as an expense in the financial year in which they are incurred.

Finance Leases

Leases which effectively transfer substantially all of the risks and benefits incidental to ownership of the leased item to the proup are capitalised at the present value of the minimum lease payments and disclosed as property, plant and equipment under lease. A lease liability of equal value is also recognised. The consolidated entity has no finance leases as at 30 June 2005.

(m) Investments

i) Interests in Subsidiaries-Controlled Entities

Investments in controlled entities are carried in the Company's financial report at the lower of cost and net asset value of the subsidiary. Dividends and distributions are brought to account in the Company's Statement of Financial Performance when they are declared by the controlled entities.

ii) Other Financial Assets

Investments in listed shares are carried at the lower of cost and recoverable amount.

$(n)$ Joint Ventures

Interests in joint venture entities are brought to account using the equity method. Under this method, the investment in joint venture entities is initially recognised at its cost of acquisition and its carrying value is subsequently adjusted for increases or decreases in the investor's share of post-acquisition results and reserves of the joint venture entity. The investment is carried at the lower of cost and recoverable amount in the accounts of the parent entity.

$(0)$ Intangibles

Patents and licences are carried at cost and amortised on a straight-line basis over their useful lives, but not exceeding 20 years.

$(0)$ Payables

Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the consolidated entity. Payables to related parties are carried at the principal amount, Interest, when charged by the lender, is recognised as an expense on an accrual basis.

$(f)$ Contributed Equity

Issued and paid up capital is recognised at the fair value of the consideration received by the Company.

Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction in the share proceeds received.

Employee Benefits $(s)$

Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, and long service leave.

Liabilities arising in respect of wages and salaries, annual leave, and any other employee benefits expected to be settled within 12 months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash

Note 1. Summary of Significant Accounting Policies (continued)

outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the market vield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used.

Employee benefit expenses and revenue arising in respect of the following categories:

a. Wages and salaries, non-monetary benefits, annual leave, long service leave and other leave benefits; and
b. Other types of employee benefits

are recognised against profits on a net basis in their respective categories.

The value of the equity based compensation scheme described in Note 21 is not being recognised as an employee benefits expense.

$(t)$ Earnings per Share ("EPS")

Basic EPS is calculated as net profit attributable to members, adjusted to exclude costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted EPS is calculated as net profit attributable to members, adjusted for:

Costs of servicing equity (other than dividends) and preference share dividends;
. The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
Other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares

divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

Comparatives $(u)$

Where necessary, comparatives have been reclassified and repositioned for consistency with current year disclosures.

	Consolidated		Parent Entity
Note 2. Revenue from Ordinary Activities	2005 S	2004 S	2005 S	2004 \$
Revenue from non-operating activities Interest - Other persons/corporations	114.852	2.905	114.445	2.905
Total revenue from non-operating activities	114.852	2.905	114.445	2.905
Total Revenues from Ordinary Activities	114.852	2.905	114.445	2.905

NOTES TO THE FRIANCIAL STATERENTS (CONTINUED)

		Consolidated			Parent Entity
		2005	2004	2005	2004
	Note 3. Expenses and Losses/(Gains)	\$	\$	\$	\$
(a)	Expenses
	Depreciation	32,953	10,462	10,290	973
	Amortisation	3,024	3.780
	Interest expense - Other persons/corporations	23		23
	Operating lease rentals
	- minimum lease payments	16,626	6,927	16,626	6,927
(b)	Losses/(Gains)
	Foreign Exchange Loss/(Gain) on revaluation of
	USD loan receivable from foreign controlled entity			(109, 107)	14,639
	Net exchange difference recognised on translation
	of foreign controlled entity	217,288	(335, 471)
(a)	Note 4. Income Tax The prima facie tax, using tax rates applicable in the country of operations, on operating loss differs from the income tax provided in the financial statements as follows:
	Prima facie tax benefit on loss from ordinary
	activities	233,859	189,485	342,909	265,270
	Tax effect of permanent differences - provision for diminution of investments	(4,275)		(4,275)
	- provision for diminution of receivables			(187, 028)
	- write-off loan to subsidiary				(214, 651)
	- provision for exploration costs write-down	(62, 033)
	- capital raising costs allowance	43,672	4,813	43,672	4,813
	- foreign currency losses	65,186	(100, 641)	(32, 732)	(4, 392)
	Timing differences and tax losses not brought to
	account	(276, 409)	(93, 657)	(162, 546)	(51,040)
	Income tax benefit attributable to ordinary activities			ù,
(b)	Income tax losses Future income tax benefit arising from tax losses not brought to account at reporting date as the benefit is not regarded as virtually certain	228,435	145,512	133,104	102,896
	This future income tax benefit will only be obtained if:

future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised; ${i}$

the conditions for deductibility imposed by tax legislation continue to be complied with; and $\overline{4i}$

(iii) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.

	Consolidated
Note 5. Earnings per Share The following reflects the income and share data used in calculating basic and diluted earnings per share: Net $loss(S)$	2005 \$(779.530)	2004 \$ (631, 616)
Diluted earnings per share (cents per share)	(2.93)c	(3.94)c
Weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share	26.624.831	16.012.623

Diluted earnings per share is calculated after classifying all options on issue remaining unconverted at 30 June 2005 as potential ordinary shares. As at 30 June 2005, the Company has on issue 9,686,225 options over unissued capital and has incurred a net loss. As the notional exercise price of these options is greater than the current market price of the shares they have not been included in the calculations of diluted earnings per share.

	Consolidated		Parent Entity
	2005	2004	2005	2004
Note 6. Receivables – Current	S	S	£
Deposits	1.524	1.524	1.524	1.524
GST receivable (net)	22.926	22.019	22,926	22,019
Other receivables	92.058	23.179		882
	116.508	46,722	24.450	24.425

Terms and conditions relating to the above financial instruments

Other receivables are non interest bearing and have repayment terms between eight and ninety $(3)$

days.

Details of the terms and conditions of related party receivables are set out in Note 24. $(i)$

Note 7. Other Current Assets

Prepayments	41,295		41,295
	41,295		41,295
Note 8. Receivables – Non Current Amount receivable from foreign controlled entity			2,175,746	962.879
Less provision for diminution		۰	(623,428)
			1,552,318	962,879
Note 9. Property, Plant and Equipment
Plant & equipment, at cost	184.894	122.184	8.670	7,444
Less accumulated depreciation	(68, 307)	(43,518)	(2.299)	(173)
Total plant and equipment	116,587	78,666	6,371	7,271
Computer equipment & software	24,166	16.608	24,166	16,608
Less accumulated depreciation	(8,087)	(489)	(8,087)	(489)
Total computer equipment & software	16.079	16.119	16.079	16,119
Low value pool items	1.659	1.659	1.659	1.659
Less accumulated depreciation	(877)	(311)	(877)	(311)
Total low value pool items	782	1.348	782	1,348
	133.448	96,133	23,232	24,738

Reconciliation of carrying amount of property, plant & equipment at beginning and end of the current financial year.

	Plant & Equipment & low value pool	Consolidated Computer Equipment & Software	Total	Plant & Equipment & low value pool	Parent Entity Computer Equipment & Software	Total
Balance at beginning of financial	80,014	16,119	96,133	8,619	16,119	24,738
year
Additions	62.710	7.558	70.268	1,226	7.558	8.784
Depreciation expense	(25,355)	(7,598)	(32,953)	(2.692)	(7.598)	(10.290)

Balance at end of financial year	117.369	16.079	133.448	7.153	16.079	23.232
			Consolidated		Parent Entity
			2005	2004	2005	2004
			S	S	\$	\$
Note 10. Deferred Exploration and Evaluation Costs
Balance at beginning of financial year			368,226	248,889
Additional expenditure carried forward			1,328,746	119,337
Write-off during financial year			(207, 161)
Provision for licence areas to be relinquished			(206.775)			÷
Balance at end of financial year			1,283,036	368,226		÷

Ultimate recovery of deferred exploration and evaluation costs is dependent upon success in exploration and evaluation or sale or farmout of the exploration interests.

Deferred Exploration and Evaluation Costs include expenditure amounting to \$22,948 incurred at the Pchan licence area through the joint venture entity CJSC Kyldoo, in which the consolidated entity has a 40% interest.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

	Consolidated		Parent Entity
	2005	2004	2005	2004
		\$		S
Note 11. Other Financial Assets - Non Current
Investment in foreign controlled entity (i)			27.135	27.135
Shares in Action Hydrocarbons Ltd (ii)	14.251	14.251	14.251	14.251
Provision for diminution	(14, 251)		(14.251)
		14.251	27.135	41.386

Details of investment in foreign controlled entity are: $\langle \rangle$

	Country of	2005	2004
	Incorporation	% Held	% Held
CJSC Kentor	Kyrgyz Republic	80%	80%

Action Hydrocarbons Ltd is an Australian unlisted public company which has been placed into $(ii)$ liquidation and the investment has been fully provided for.

Note 12. Intangible Assets
Preliminary costs at cost	1.570	1.570	1.570	1.570
Geological information & licences at cost	9,303	9,303	×
Less accumulated amortisation	(8,345)	(5,321)	×
	2.528	5.552	1.570	1.570
Note 13. Payables - Current
Trade creditors	106.814	28.280	63.098	25.724
Other creditors	66.840	695	63.600
Amounts payable to related entities
- Director		200	$\overline{\phantom{a}}$	200
- Director related entities		4.382		4.382
	173,654	33.557	126.698	30.306

Terms and conditions relating to the above financial instruments:

$(i)$ Trade creditors are non-interest bearing and are usually settled on 30 day terms.

$(ii)$ Other creditors are non-interest bearing and have an average term of 30 days.

	Nate 14. Provisions - Current Employee benefits	21	14,670		14,670
(a)	Note 15. Contributed Equity Issued and paid up capital
	Ordinary shares fully paid		9,089,007	2,640.629	9,089,007	2,640,629
(b)	Movements in shares on issue
		2005			2004
Details			Number of Shares Issued	Issued Capital \$	Number of Shares issued	issued Capital \$
	Beginning of the financial year		57,443,974	2,640,629	44.964.628	1,530,100
	Movements during the year - share placements - share consolidation - initial public offer - exercise of options Less: costs of share issues		9,009,362 (44,302,204) 12,000,000 500,000	991,030 6,000,000 105,000 (647, 652)	12,479.346	1,179,554 (69,025)
	Closing balance		34,651,132	9,089,007	57,443,974	2,640.629

Note 15. Contributed Equity (continued)

Capital Transactions

The following share movements took place during the financial year:

on 12 August 2004, 3, 119, 090 ordinary shares were issued at 11 cents per share.
. on 23 September 2004, 4,526,636 ordinary shares were issued at 11 cents per share.
on 4 October 2004, 1,363,636 ordinary shares were issued at 11 cents per share.
at the General Meeting held on 25 October 2004, members passed a special resolution to consolidate the share capital on the basis of 1 share for every 3 shares on issue.
pursuant to the prospectus dated 31 January 2005, 6,000,000 ordinary shares were issued on 15 March 2005 as part of an initial public offer of shares which resulted in the Company listing on the Australian Stock Exchange.
on 23 March 2005, 500,000 ordinary shares were issued pursuant to the exercise of 500,000 options with an exercise price of 21 cents per share.

The purpose of the issues was to provide working capital to fund the exploration of the tenements and project generation in the Kyrgyz Republic and other prospective parts of the Tien Shan bett in Central Asia consistent with the Company's Kyrgyz exploration program.

Ordinary Shares

Ordinary shares have the right to receive dividends as declared and, in the event of winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.

(d) Share Options

Options Over Ordinary Shares

At the end of the financial year, there were 9,686,225 unissued ordinary shares in respect of which the following unlisted options were outstanding:

Expiry date	Number	in Escrow	Exercise price
On or before 1 August 2005	466,668	466,668 until 17 March 2007	\$0.21
On or before 1 April 2006	66.667	n/a	\$0.21
On or before 1 April 2006	1,232,887	1,032,887 until 17 March 2007	\$0.30
On or before 1 July 2006	386,668	333,334 until 17 March 2007	\$0.30
On or before 1 March 2007	4,666,668	1,841,357 until 17 March 2007	\$0.45
On or before 1 July 2007	333,333	333,333 until 17 March 2007	\$0.625
On or before 1 July 2008	266,667	266,667 until 17 March 2007	\$0.75

In addition, 2.266.667 executive options were issued in accordance with employment contracts as follows:

Duration	Number	in Escrew	Exercise price
30 days after ceasing employment	846.667	846.667 until 17 March 2007	\$0.625
30 days after ceasing employment	710.000	710,000 until 17 March 2007	\$0.75
30 days after ceasing employment	710.000	710,000 until 17 March 2007	\$0.875

Since 30 June 2005 no further options have been issued and no options have been exercised. The Company has an obligation to a contractor. Global Ore Discovery, in the event of renewal of its contract for 2006, to issue 266.667 options at an exercise price of \$0.875.

NOTES TO THE FRIANCIAL STATERERTS (CONTINUED)

	Consolidated		Parent Entity
	2005	2004	2005	2004
Note 16. Accumulated Losses (a) Accumulated Losses Accumulated losses	\$	S	S	\$
at the beginning of the financial year	(1.398.090)	(715, 951)	(1, 101, 862)	(217, 630)
Net loss attributable to members of Kentor Gold
Limited	(779, 530)	(631, 616)	(1, 143, 031)	(884, 232)
Net (profit)/loss attributable to outside equity interest	53,362	(50, 523)	$\tilde{\phantom{a}}$	×.
Accumulated losses at the end of the financial year	(2.124.258)	(1.398,090)	(2, 244, 893)	(1.101.862)

(b) Franking Credits

There are no franking credits available for the subsequent financial year.

Note 17. Outside Equity Interest

Outside equity interests in controlled entities comprises:
Contributed equity	6.784	6.784
Accumulated losses	(127, 419)	(74.055)
	(120.635)	(67.271)

Note 18. Statement of Cash Flows

$(a)$ Reconciliation of loss from ordinary activities after tax to net cash flows from operations

Loss from ordinary activities after tax	(779, 530)	(631, 616)	(1, 143, 031)	(884, 232)
Non cash flows in operating result
Depreciation of property, plant and equipment	32,953	10,462	10,290	973
Amortisation of intangible assets	3.024	3,780
Provision for annual leave	14,670		14,670
Provision for diminution of investments	14.251		14.251
Foreign exchange translation (gain)/loss	(217, 288)	335,471	109,107	14,639
Write-down of advance to subsidiary				715,503
Provision			623,428
Exploration costs written off	207,161
Provision for write-down of exploration and	206,775
evaluation costs
Changes in assets and liabilities
Decrease/(Increase) in receivables	131,081	(22, 901)	42.202	(22, 901)
Increase/(Decrease) in payables	(77, 733)	20.874	(97, 275)	(32,613)
Net cash used in operating activities	(464, 636)	(283.930)	(426,358)	(208,631)
Reconciliation of cash
Cash balance comprises:
Cash on hand and at call	5,455,623	677,941	5,315,482	514,075
Closing cash balance	5,455,623	677,941	5,315,482	514,075

$(c)$ Financing Facility

The group has no available finance facilities at balance date.

$(d)$ Non-Cash Financing and Investing Activities

The group did not have any non-cash financing activities during the year.

$(b)$

	Consolidated		Parent Entity
	2005	2004	2005	2004
	J
ituva Pammitmamte

Note 19. Expenditure Commitments

The company has no expenditure commitments at the end of the financial year, except under tenement licences in the Kyrgyz Republic where the controlled entity is required to rehabilitate each licence area to its original state prior to any exploration works.

Note 20. Subsequent Events

No matters or circumstances have arisen since the end of the financial year that have significantly affected or may have a significant effect on the financial operations of the consolidated entity, the financial performance of those operations or the financial position of the consolidated entity in the subsequent financial year.

Note 21. Employee Benefits and Superannuation Commitments

Employee Benefits

The aggregate employee benefit liability is comprised
af:
Accrued salaries, wages, fees and on-costs	30.942	-	27.856
Provisions (current)	14.670		14.670	$\mathbf{r}$
	45.612	-	42.526

Executive Ontions

Executive directors of Kentor Gold Limited, David Royle and Hugh McKinnon, were both granted options over unissued shares of the Company under the terms of their employment contracts. The options were issued as part of consideration for services to be provided, will not be quoted on the ASX, cannot be transferred and are exercisable at any time during the employment of the executives and for 30 days after cessation of employment.

Information with respect to the number of options granted is as follows:

	2005		2004
	Number of options	Weighted average exercise price	Number of options	Weighted average exercise price
Balance at beginning of year			÷
- granted	2,266,667	SO.74
- lapsed/exercised		$\mathbf{a}$	÷	$\mathbf{r}$
Balance at end of year	2.266.667	SO.74

Note 21. Employee Benefits and Superannuation Commitments (continued)

Executive Options (continued)

i) Options held at the beginning of the reporting period

Nil

ii) Options granted during the reporting period

No. of Options	Grant Date	Vesting Date	Expiry Date	Weighted average exercise price
546.667	6 December 2004	6 December 2004	n/a*	\$0.625
410.000	6 December 2004	6 December 2004	$n/a^*$	\$0.75
410.000	6 December 2004	6 December 2004	$n/a^*$	\$0.875
300.000	1 December 2004	1 December 2004	$n/a^*$	\$0.625
300.000	1 December 2004	1 December 2004	$n/a^*$	\$0.75
300.000	1 December 2004	1 December 2004	$n/a*$	\$0.875

* The options have no expiry date except, in the event of the cessation of employment, 30 days after the date of cessation of employment.

iii) Options lapsed during the reporting period

Nil

iv) Options held at the end of the reporting period

No. of Options	Grant Date	Vesting Date	Expiry Date	Weighted average exercise price
546.667	6 December 2004	6 December 2004	n/a*	\$0.625
410.000	6 December 2004	6 December 2004	n/a*	\$0.75
410,000	6 December 2004	6 December 2004	n/a*	\$0.875
300.000	1 December 2004	1 December 2004	$n/a*$	\$0.625
300.000	1 December 2004	1 December 2004	$n/a^*$	\$0.75
300.000	1 December 2004	1 December 2004	$n/a*$	\$0.875

$\star$ The options have no expiry date except, in the event of the cessation of employment, 30 days after the date of cessation of employment.

No Executive Options were exercised during the year ended 30 June 2005.

Superannuation

The consolidated entity contributes in accordance with the Government Superannuation Guarantee legislation.

Note 22. Director and Executive Disclosures

(a) Details of Specified Directors and Specified Executives

Specified Directors 61

W.H.J. Barr	Chairman (non-executive)	appointed on 10 November 2004
A.E. Daley	Director (non-executive)	appointed on 10 November 2004
H. McKinnon	Executive Director (executive)
D.Z. Royle	Managing Director (executive)
C.A.M. Hider	Director (non-executive)	resigned on 17 November 2004
B. Cook	Director (non-executive)	resigned on 10 November 2004
Specified Executives (ii)
J.W. Rawling	Company Secretary/CFO	appointed 1 April 2005

Note 22. Director and Executive Disclosures (continued)

(b) Remuneration of Specified Directors and Specified Executives

Remuneration Policy $\theta$

The Board of Directors of Kentor Gold Limited is responsible for determining and reviewing compensation arrangements for the directors and executives. The Board's remuneration policy is to ensure that the remuneration package properly reflects the person's duties and responsibilities, with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executives. Such officers will be given the opportunity to receive their base emolument in a variety of forms, including cash and fringe benefits such as motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost to the company.

To assist in achieving these objectives, the Board links the nature and amount of executive officers' emoluments to the company's financial and operational performance. All directors and executives will have the opportunity to qualify for executive options under an Executive Share Option Plan which will provide incentives where specified performance criteria are met. The plan has not yet been formalised by the Board.

$(ii)$ Remuneration of Specified Directors and Specified Executives

		Primary	Post Employment	Equity	Total
		Salary & Fees	Superannuation	Options
		S	\$	S	Ŝ
Specified Directors
W.H.J. Barr	2005	17,419	1,568		18,987
	2004
A.E. Daley*	2005	9,575			9,575
	2004
H. McKinnon	2005	86,000		20,160	106,160
	2004	72,000			72,000
D.Z. Royle	2005	120,000	10,800	22,140	152,940
	2004	50,000	4,500		54,500
C.A.M. Hider	2005
	2004
B. Cook	2005
	2004
Total Remuneration: Specified Directors
	2005	232,994	12,368	42,300	287,662
	2004	122,000	4,500		126,500
J.W. Rawling	2005	16,055	1,445		17,500
	2004
Total Remuneration: Specified Executives
	2005	16,055	1,445		17,500
	2004

* Directors fees were paid to Dalenier Enterprises Pty Ltd. a company which is controlled by Andrew Daley

Note 22. Director and Executive Disclosures (continued)

(c) Remuneration Options: Granted and vested during the year

No options were issued or vested during the year.

(d) Share issued on exercise of remuneration options

No shares were issued on the exercise of remuneration options during the year.

(e) Option holdings of Specified Directors and Specified Executives

Unlisted options held by Specified Directors and Specified Executives. Details of options are contained in Note 14

	Balance 1 July 2004	Granted as remuneration	Options Exercised/ (Lapsed)	Net Change Other	Balance 30 June 2005	Vested and exercisable at 30 June 2005
Specified Directors
A E Daley	$\mathbf{r}$		$\mathbf{r}$	174.690	174.690	174.690
H. McKinnon	133.334	900,000	$\mathbf{r}$	٠	1.033.334	1.033.334
D.Z. Rovie	1.000.000	1.366.667	(500.000)	÷	1.866.667	1.866.667
Total	1,133,334	2.266.667	(500.000)	174.690	3.074.691	3.074.691

Shareholdings of Specified Directors and Specified Executives $(f)$

Ordinary Shares held in Kentor Gold Limited	Balance 1 July 2004 No.	Granted as remuneration No.	On exercise of Options No.	Net Change Other No.	Balance 30 June 2005 No.
Specified Directors
W H J Barr				50.000	50.000
A E Daley	1.144.410		۰.	(762.940)	381,470
H McKinnon	6,193,880	۰	$\blacksquare$	(4, 129, 253)	2.064,627
D Z Royle	1,001.849		500,000	(667.898)	833,951
C A M Hider	9,012,488		÷.	$*(9.012,488)$
K B Cook	111.622		÷	$*(111,622)$
Specified Executives
J W Rawling	$\blacksquare$			5.000	5.000
Total	17.464.249		500,000	(14,629,201)	3.335.048

* Shareholdings removed upon resignation as a director.

All equity transactions with specified directors and specified executives other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm's length.

(g) Other transactions and balances with Specified Directors and Specified Executives

Transactions with Specified Directors

Legal services at normal commercial rates totalling \$23,300 (2004; \$nil) were provided by Charles Hider & Associates Pty Ltd, of which Charles Hider is a director. At year end no amount remained outstanding (2004: \$nil).

Corporate advisory services at normal commercial rates totalling \$87,075 (2004: \$nil) were provided by Investor Resources Ltd, a company with which Andrew Daley is associated. At year end no amount remained outstanding (2004: \$nil).

Consulting services at normal commercial rates totalling \$12,164 (2004: \$nil) were provided by John Barr prior to the listing of the Company on 17 March 2005. At year end no amount remained outstanding.

Consulting services at normal commercial rates totalling \$6,274 (2004: \$nil) were provided by Dalenier Enterprises Pty Ltd, a company which is controlled by Andrew Daley, prior to the listing of the Company on 17 March 2005. At year end no amount remained outstanding. As described in Note 22(b)(ii), directors fees payable to Andrew Daley are also paid to Dalenier Enterprises Pty Ltd.

There were no transactions with Specified Executives.

	Consolidated		Parent Entity
	2005	2004	2005	2004
Note 23. Auditors' Remuneration	S	S	S	\$
Amounts received or due and receivable by MSI Ragg Weir for:
audit or review of the financial statements of j) the entity and any other entity in the economic entity	19.350	4.370	19.350	4.370
Remuneration of other auditors of controlled entity audit or review of the financial statements of 掛
controlled entity	459	400	÷.

Note 24. Related Party Disclosures

The Directors during the financial year were: $(a)$
Current Directors William Henry John Barr AM (appointed 10 November 2004) Andrew Edward Daley (appointed 10 November 2004) Hugh McKinnon David Zouch Rovie

Former Directors Charles Andrew Moir Hider (resigned 17 November 2004) K. Brent Cook (resigned 10 November 2004) lan Desborough Ennis alternate for Charles Hider (terminated 10 November 2004)

(b) Information on remuneration and retirement benefits of Directors is disclosed in Note 21.

Directors' shareholding $(c)$

At year end, the current Directors held directly and indirectly, 3.330.048 shares (2004: 8.340.139) and 3.074.691 options (2004: 1,133,334) in the Company.

Directors acquired the following shares and options during the year:

. Mr W H J Barr acquired 30,000 shares on 24 January 2005 at \$0.33 and a further 20,000 shares at \$0.50 under the prospectus dated 31 January 2005.
. Mr A E Daley acquired 97,050 options exercisable at \$0.45 on or before 1 March 2007 on 30 November 2004 at \$0.24 and a further 77,640 options exercisable at \$0.45 on or before 1 March 2007 on 1 March 2005.
. Mr H McKinnon was granted 900,000 options on 1 December 2004 under the terms of his contract of employment.
. Mr D Z Royle was granted 1.366.667 options on 6 December 2004 under the terms of his contract of employment and acquired 500,000 shares on 23 March 2005 upon the exercise of 500,000 options.
(d) Other related party transactions:

There were no related party transactions other than those described in Note 22(q).

Ultimate Parent: $(e)$

Kentor Gold Limited is the ultimate Australian parent company.

Note 25. Seament Information

Seament products and locations

The consolidated entity operates in one business segment (for primary reporting) being mineral exploration and two geographical segments (for secondary reporting) being Australia and the Kyrgyz Republic. This is consistent with the previous accounting period.

Seament accounting policies

Revenues are attributable to geographic areas based on the location of the assets producing the revenues. Segment accounting policies are the same as the consolidated entity's policies described in Note 1. During the financial year, there were no changes in segment accounting policies that had a material effect on the segment information.

	Revenue		Segment Assets		Acquisition of segment assets
Geographical segments	2005	2004	2005	2004	2005	2004

Australia	114.445	2.905	5.404.298	580,507
The Kyrgyz Republic	814	-	.628.140	628.318	÷
Total	115.259	2.905	1.032.438	.208.825

Note 26. Financial Instruments

$(a)$ Credit Risk Exposures

The maximum exposure to credit risk, excluding the value of any collateral or other security at balance date, to recognised financial assets is the carrying amount of those assets, net of any provisions for doubtful debts, as disclosed in the statement of financial position and notes to the financial statements.

The economic entity does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the economic entity.

$(b)$ Interest Rate Risk Exposures

The consolidated entity's exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and financial liabilities is set out in the following table:

		Weighted	Floating	Fixed interest maturing in:		Non-
	Note	average interest rate	interest rate \$	vear or less \$	over 1 to 5 years \$	5 years or more S	interest bearing R	Total S
2005
Financial assets
Cash and deposits	18(b)	5.2%	5.455.623					5,455,623
Receivables	ĥ	N/A					116,508	116,508
			5.455.623	$\overline{\phantom{a}}$			116,508	5.572.131
Financial liabilities
Payables	13	N/A					(173, 654)	(173, 654)
Net financial assets/(liabilities)			5.455.623				(57, 146)	5,398,477
2004
Financial assets
Cash and deposits	18(b)	5.0%	677.941					677,941
Receivables	6	N/A		٠			46.722	46.722
			677.941				46.722	724.663
Financial liabilities
Payables	13	N/A		۰			(33.557)	(33, 557)
Net financial assets/(liabilities)			677.941				13.165	691.106

N/A - not applicable for non-interest bearing financial instruments

$(c)$ Net Fair Values

All financial assets and liabilities have been recognised at the balance date at lower of cost and realisable value which approximates their net fair value.

Note 27. Impact of Adopting Australian Equivalents to IFRS

Kentor Gold Limited is preparing and managing the transition to Australian Equivalents to International Financial Reporting Standards (AlFRS) effective for financial periods commencing 1 January 2005. The adoption of AlFRS will be reflected in the Company's financial statements for the year ending 30 June 2006 and the half-year ending 31 December 2005.

On first time adoption of AIFRS, comparatives for the corresponding prior period are required to be restated. The majority of AIFRS transitional adjustments will be made retrospectively against opening accumulated losses as at 1 July 2004.

The Company's management, along with its auditors, has assessed the significance of the expected changes and is preparing for their implementation. An AIFRS committee has been established to oversee and manage the economic entity's transition to AIFRS.

The Directors are of the opinion that the key material differences in the Company's accounting policies on conversion to AIFRS and the financial effect of these differences, where known, are as follows. Users of the financial statements should note, however, that the amounts disclosed could change if there are any amendments by Standard-setters to the current AIFRS or if interpretation of the AIFRS requirements changes from the continuing work of the Company's AIFRS committee.

Income Tax

A "balance sheet" approach will be adopted under AIFRS, replacing the "statement of financial performance" approach currently used by Australian companies. The "balance sheet" method recognises deferred tax balances when there is a difference between the carrying value of an asset or liability, and its tax base. Any initial adjustments to calculate deferred tax assets and liability balances on transition using the new basis will be made through opening balances of retained earnings. On transition, the financial effect of this impact is assessed as nil.

Equity-based compensation benefits

The Company does not currently recognise an expense for options issued to staff, executives and directors. On adoption of AIFRS, the Company will recognise an expense for all share-based remuneration, including deferred shares and options, and will amortise those expenses over the relevant vesting periods. This will result in additional expenses being recorded and therefore lower earnings. There will be an initial negative impact on earnings when retrospective adjustments are made for options that have not vested by 1 January 2005. For the year ended 30 June 2005, an additional expense of \$42,300 will be recognised in employment related costs and loss before tax will be increased by \$42,300.

Intangible Assets

Under AIFRS an intangible asset can only be recognised if it is probable that the expected future economic benefits that are attributable to the asset will flow to the Company.

On transition, the capitalised "Preliminary Costs" will not meet these criteria. The financial effect of this impact will be to reduce intangible assets by \$1,570 in the parent entity and \$2,528 in the consolidated entity, increase opening accumulated losses at 1 July 2004 by \$1,570 in both the parent entity and the consolidated entity and increase expenses for the year ended 30 June 2005 by \$958 in the consolidated entity.

Impairment of Assets

The Company currently assesses the amount of impairment of assets by determining the recoverable amount on the basis of undiscounted cash flows. Under AASB 136 Impairment of Assets the Company will be required to determine the recoverable amount as the bigher of fair value less costs to sell and value in use (which is determined using discounted cash flows). In the future it is likely that this change in policy and basis for calculation will lead to more impairment losses being recognised and therefore greater volatility in future earnings.

On transition, the financial effect of this impact is assessed as nil.

Note 27. Impact of Adopting Australian Equivalents to IFRS (continued)

Investment in Foreign Operations

Translation to the Presentation Currency

Under AASB 121 The Effects of Changes in Foreign Exchange Rates the results and financial position of an entity with a foreign functional currency are translated into a different presentation currency (i.e. Australian Dollars) using the following procedures:

assets and liabilities shall be translated at the closing rate at balance date:
income and expenses shall be translated at exchange rates at the dates of the transactions (an average rate may be used if reasonable): and
all resulting exchange differences shall be recognised as a separate component of equity. $\bullet$

These exchange differences are not recognised in profit or loss because the changes in exchange rates have little or no direct effect on the present and future cash flows from operations. When the exchange differences relate to a foreign operation that is consolidated but not wholly-owned, accumulated exchange differences arising from translation and attributable to minority interests are allocated to, and recognised as part of, minority interest in the consolidated balance sheet.

On transition, the \$217,288 gain relating to the net exchange difference recognised on translation of the foreign controlled entity for the vear ended 30 June 2005 will be reclassified to a new section of equity labelled "Foreign exchange relating to foreign controlled entity". The loss for the year ended 30 June 2005 will increase by \$217,288.

Net Investment in a Foreian Operation

Under AASB 121 The Effects of Changes in Foreign Exchange Rates a monetary item for which settlement is neither planned nor likely to occur in the foreseeable future is, in substance, a part of the entity's net investment in that foreion operation, and is accounted for as described below. Such monetary items may include long-term receivables or loans. They do not include trade receivables or trade pavables.

Exchange differences arising on a monetary item that forms part of a reporting entity's net investment in a foreign operation will be recognised in profit or loss in the separate financial report of the reporting entity or the individual financial report of the foreign operation as appropriate. In the consolidated financial report such exchange differences shall be recognised initially in a separate component of equity and recognised in profit or loss on disposal of the net investment.

On transition, the \$109,107 foreign exchange loss on revaluation of the US dollar loan receivable from the foreign controlled entity for the year ended 30 June 2005 will be reclassified to a new section of equity labelled "Foreign exchange relating to foreign controlled entity". The loss for the year ended 30 June 2005 will decrease by \$109,107.

Extractive Industries

Under AIFRS the exploration and evaluation phase is accounted for under AASB 6 Exploration for and Evaluation of Mineral Resources, which continues to follow the previous standard's "area of interest" approach.

On transition, the financial effect of this impact is assessed as nil.

Note 28. Contingent Liabilities and Contingent Assets

No contingent liabilities or contingent assets existed at the reporting date except under tenement licences in the Kyrgyz Republic where the controlled entity is required to rehabilitate each licence area to its original state prior to any exploration works.

In accordance with a resolution of the Directors of Kentor Gold Limited, we state that:

1. In the opinion of the Directors:
a. the financial statements and notes of the company and of the consolidated entity are in accordance with the Corporations Act 2001, including:
- i. Giving a true and fair view of the company's and consolidated entity's financial position as at 30 June 2005 and of their performance for the year ended on that date; and
- ii. complying with Accounting Standards and the Corporations Regulations 2001.
b. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
1. This declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2005.

On behalf of the Board

e du

WHJBARR Director

Melbourne, 28 September 2005

l
Ma^ndaria

H McKinnon Director

Level 2, 50 Burwood Road Rawthom, Vic 3122 PO Box 325 Hawshorn Vic 3122 Tel: (03) 9819-4011 Fax: (03) 9819-6780
Web: www.raggweir.com.au Email: [email protected]

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF KENTOR GOLD LIMITED

Scope

The financial report and directors' responsibility

The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and thedirectors' declaration for Kentor Gold Limited (the company) and the consolidated entity, for the year ended 30 June 2005. The consolidated entity comprises both the company and the entity it controlled during that year.

The directors of the company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.

Audit Approach

We conducted an independent audit in order to express an opinion to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards, in order to provide reasonable assurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgment, selective testing, the inherent limitations of internal control and the availability of persuasive rather thanconclusive evidence. Therefore, an audit cannot quarantee that all material misstatements have been detected.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company's and the consolidated entity's financial position, and of their performance as represented by the results of their operations and cash flows.

We formed our audit opinion on the basis of these procedures, which included:

examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and
assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors.

While we considered the effectiveness of management's internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.

Independence

In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

In accordance with ASIC Class Order 05/83, we declare to the best of our knowledge and belief that the auditor's independence declaration set out on page 10 of the financial report has not changed as at the date of providing our audit opinion.

Audit Opinion

In our opinion, the financial report of Kentor GoldLimited is in accordance with:

the Corporations Act 2001, including: $\mathbf{a}$
giving a true and fair view of the company's andconsolidated entity's financial position as at 30 June 2005 and of $(i)$ their performance for the year ended on that date; and
complying with Accounting Standards in Australia and the Corporations Regulations 2001; and $(ii)$
other mandatory professional reporting requirements in Australia. ħ.

WEA Capa Weit MSI RAGG WEIR CHARTERED ACCOUNTANTS

L.S. WONG PARTNER

Melbourne 28 September 2005

$\mathbb{R}$

Additional information required by the Australian Stock Exchange Ltd Listing Rules and not disclosed elsewhere in this report is as follows. The information is current as at 31 August 2005.

TWENTY LARGEST SHAREHOLDERS

	Name of Holder	No. of Ordinary Shares Held	Percentage of Issued Capital
	Citicorp Nominees Pty Limited	3,435,924	$9.92%$ .
2.	Graham Tuckwell	2 2 2 5 6 7 3	6.42%
-3	Exploration Partners 2000 LP	$2,126,167$ .	6.14%
4.	Hugh McKinnon	2.064.627	5.96%
5	Poolette Holdings (Vic) Pty Ltd.	-1,900,000	5.48%
6.	D&D Nominees Pty Ltd	1,243,000	3.59%
	Natalia Tihomirova	898,028	$2.59%$ .
8.	Zouch Resources Pty Ltd	833951	2.41%
-9	Professor Michael Gross	783,334	2.26%
10	Westpac Custodian Nominees Limited	700.000	2.02%
-11	Co-opr8 Investments PLC	688,854	1.99%
$12-$	Hooper Baille Industries Pty Ltd	653 030	1.88%
13.	Frank Hudson	600,000	1.73%
14.	Garry John Lloyd	600 000	1.73%
15.	HSBC Custody Nominees (Australia) Limited	588,000	$1.70\%$ .
16 ₁	Bronwyn Burgess	534 162	1.54%
17	Sand Cort Investments Pty Ltd	534,162	1.54%
181	lan Desborough Ennis & Gwenda Louise Ennis	500.000	1.44%
19	JP Morgan Nominees Australia Limited	500,000	1.44%
20.	Edwina Margaret Pribyl	482.117	1.39%
	- TOTAL	21,891,029	63.18%
	Share on issue as at 31 August 2005	34.651.132

SUBSTANTIAL SHAREHOLDERS

Substantial shareholders as advised to the Company are set out below:

Name	No. of Ordinary	Percentage of
	Shares Held	Issued Capital
Commonwealth Bank of Australia and its subsidiaries	3.968.924	1.45%
Graham Tuckwell	2225.673	6.42%
Exploration Partners 2000 LP	$-2.126.167$	6.14%
Charles Allen Moir Hider	2114.419	6.10%
Huah McKinnon	.064.627	5.96%

DISTRIBUTION OF MEMBER HOLDINGS

Size of Holding	No. of Holders	Listed Ordinary Shares No. Of Shares
~…………………………………………………………………………………………………	expertise.	- 1.500 No and the
1001-5000	153.	604 881
$-10.000$ $-10.000$	80	681.904
10.001 100.000	100	3769641
$-100.000$ and over $\Box$	-53	29,593,206
Total Holders	388	34.561.132

There are 4 shareholders holding less than a marketable parcel of shares.

VOTING RIGHTS

All shares carry one vote per share without restriction.

UNLISTED OPTIONS ON ISSUE

As at 31 August 2005, a total of 9,219,557 options, which are not listed on the Australian Stock Exchange. remain outstanding as follows:

. 66,667 options exercisable on or before 1 April 2006 at an exercise price of \$0.21 each:
- 1.232.887 options exercisable on or before 1 April 2006 at an exercise price of \$0.30 each;
. 386,668 options exercisable on or before 1 July 2006 at an exercise price of \$0.30 each:
4.666.668 options exercisable on or before 1 March 2007 at an exercise price of \$0.45 each:
333,333 options exercisable on or before 1 July 2007 at an exercise price of \$0.625 each;
266,667 options exercisable on or before 1 July 2008 at an exercise price of \$0.75 each.

In addition, 2,266,667 executive options have been issued to executives David Royle and Hugh McKinnon as follows:

Exercise: Price	D Z Royle
Exercisable at \$0.625		546.667
Exercisable at \$0.75%		410.000	300.000
Exercisable at \$0.875		410.000	300,000
Total	ាទក កស		ാന മാ

These executive options are fully vested, are not transferable and are exercisable at any time during the employment of the executive and for 30 days after the executive ceases employment, after which time they lapse.

TENEMENT SCHEDULE

Tenement Number	Licensed Holder	Name & Area of Subject of Licence	Area - km ²	Current Beneficial Interest
- Au-11-03.	CJSC Kentor	Ertash Area, Issykul Oblast, Djetyoguz Region	-1,790.0.	$80\%$ (1)
A121803	CJSC Kentor	Kensu Area, Issykul Oblast, Tyup Region.	168.4	80% (1)
: Au-237-04	CJSC Kentor	Uzunbulak Area, Talas Oblast, Talas Region	$-108.0$ .	$-80\%$ (1)
$A + 238.04$	CJSC Kentor	Barkol Area, Talas Oblast, Talas Region	334.0	80% (1)
Au-239-04	√CJSC Kentor⊹	Karabalta Area, Chui Oblast, Panfilov Region	$-681.0$	$180\%$ (1) $\frac{1}{2}$
ADBB(3)	CJSC Kenton	Bakaitash Area, Talas Oblast, Talas Region	970	80% (3)
$AD194$	CJSC Kentor	Sulyukta Area, Batken Oblast, Leilak Region.	238.0	$80\%$ $(1)$
$A + B + 04$	CJSC Kyldoo	Pchan Area, Jalalabad Oblast, Toguztoro Region.	130 D.	40% (2)

Notes

(1) CJSC Kentor owns 100% of these licences. CJSC Kentor is an 80% owned subsidiary of Kentor Gold Limited.
(2) Each of CJSC Kentor (in which Kentor Gold Limited has an 80% interest) and Perseus Mining Limited has an entitlement to a 50% interest in CJSC Kyldoo.
(3) The Bakaitash Licence will be relinquished at the end of the field season on completion of a final report to the Kyrgyz State Agency for Geology and Mineral Resources.

corporate directory

directors

CHARMAN John Barr, AM

MANAGING DIRECTOR David Royle

EXECUTIVE DIRECTOR Hugh McKinnon

NON-EXECUTIVE DIRECTOR Andrew Dalev

company secretary

John Rawling

registered office

Kentor Gold Ltd Level 3 15 Queen Street Melbourne VIC 3000

TELEPHONE 03 9621 1344 FACSIMILE 03 9621 1544 EMAIL [email protected] WEBSITE www.kentorgold.com

solicitors

Rawling & Company BDO House 563 Bourke Street Melbourne VIC 3000

auditors

MSI Ragg Weir Level 2 50 Burwood Road Hawthorn VIC 3122

bankers

National Australia Bank Limited Level 2, 330 Collins Street Melbourne Victoria 3000

financial adviser

Investor Resources Limited Level 3 15 Queen Street Melbourne VIC 3000

share registry

Link Market Services Limited Level 4 333 Collins Street Melbourne VIC 3000

stock exchange listing

The Company is listed on the Australian Stock Exchange Limited ASX Code: KGL

www.kentorgold.com

K KENTOR GOLD LTD

Cylstered office

Australia

Egale 15 Queen Street
MFI BOURNE, VIC 3000
Telephone: (61) 3 9621 1344
Email: [email protected]

Kyrayz Pepublic

Rodevan ElandrizzaS/2 ENTRACTE KARY REPUBLIC Telephone 996 (312) 621389
Facsimile: 996 (312) 665759 Enal kenozzofralito

AI assistant

KGL RESOURCES LIMITED — Annual Report 2005

65179_rns_2005-10-06_a832ab7c-338a-47d1-813a-9d199fe609e5.pdf

KENTOR GOLD LTD

contents

managing director's reportExploration activities

INTRODUCTION

EXPLORATION APPROACH

OUR PEOPLE

EXPLORATION PROJECTS

Ertash

The 2005 Field Program

Kensu

Hrummlak

Barkol

Pchan (Kyldoo)

Karahaita

Bakaitash

Karasu

Project Generation

glossary of technical terms

GLOSSARY OF TECHNICAL TERMS

CORPORATE GOVERNANCE STATEMENT

Structure of the Board

Audit & Compliance Committee

Certification of Financial Statements

Corporate Governance Charter

Remuneration

directors' report

DIRECTORS

Brent Cook

COMPANY SECRETARY

Interests in the shares and options of the company and related bodies corporate

EARNINGS PER SHARE

CORPORATE INFORMATION

Cornorate Structure

Principal Activities

Employees

CONSOLIDATED RESULTS

DIVIDEMDS

OPERATING AND FINANCIAL REVIEW

Group Overview

Exploration Overview

Financial Overview

Onerating Results for the Year

Review of Financial Condition

Cash Flows

CAPITAL RAISINGS / CAPITAL STRUCTURE

Placement

Share Consolidation

Initial Public Offer

Grant of Options

Shares issued as a result of the exercise of Options

Summary of Shares / Options on Issue 30 June 2005

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

LIKELY DEVELOPMENTS AND EXPECTED RESILLTS

ENVIRONMENTAL REGIN ATION

MEETINGS OF BIRECTORS

Committee membership

агмингаатнан керакт

Remuneration Philosophy

Remuneration Committee

Ramuneration Structure

Non-Executive Director Remuneration

Objective

Structure

Senior Executive Bemuneration

Obiective

Structure

Variable Remuneration Long Term Incentives

Obiective

Structure

Employment Contracts

David Rovie

Hugh McKinnon

Remuneration of Directors and Executives

INDEMAIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

CORPORATE GOVERNANCE

AHDITOR INDEPENDENCE AND NON-AHDIT SERVICES

KGL RESOURCES LIMITED Annual Report 2005

managing director's report
Exploration activities

alegation in the control compared in the search of the control of the state of the state of the state of the s
The state of the state of the state of the state of the state of the state of the state of the state of the st FOR THE YEAR ENDED 30 JUNE 2005