KGL RESOURCES LIMITED — Annual Report 2005

Mar 15, 2005

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KENTOR GOLD N.L.

A.B.N. 52 082 658 080

AND CONTROLLED ENTITY

FINANCIAL REPORT FOR THE YEAR ENDED 30TH JUNE 2004

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KENTOR GOLD N.L.

A.B.N. 52 082 658 080

AND CONTROLLED ENTITY

CONTENTS

Directors' Report Directors' Declaration Statement of Financial Performance Statement of Financial Position Statement of Cash Flows Notes to the Financial Statements

Auditor's Report

$\sim$

DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2004

The directors present their report on the company and its controlled entity for the financial vear ended 30th June 2004.

DIRECTORS

The names of the directors in office at any time during or since the end of the vear are:

Charles Allen Moir Hider (Chairman - resigned 10 November 2004) David Royle (Managing Director)(appointed 1 March 2004) Hugh McKinnon Robin Clive Wightman (Resigned 4 July 2003) K Brent Cook (Appointed 4 July 2003 - resigned 10 November 2004) Ian Ennis (Alternate for Mr. C.A.M. Hider - appointment terminated 10 November 2004) Heather Joyce Wightman (Alternate for Mr. H. McKinnon) Heather Joyce Wightman (Alternate for Mr. R.C. Wightman - appointment terminated 4 July 2003) John Barr - appointed 10 November 2004 Andrew Daley - appointed 10 November 2004

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

PRINCIPAL ACTIVITIES

The principal activity of the economic entity during the financial year is the exploration for gold and base metals.

No significant change in the nature of these activities occurred during the year.

OPERATING RESULTS

The consolidated loss of the economic entity for the financial year after providing for income tax and eliminating outside equity interests is \$631,616.

DIVIDENDS

No dividends were paid during the year and no recommendation is made as to dividends.

REVIEW OF OPERATIONS

During the year, the economic entity continued its exploration program in the Kyrgyz Republic.

SIGNIFICANT CHANGES

For the year ended 30 June 2004, the following share and option issues took place:

• (A) 17 October 2003 1,000,000 options to acquire ordinary shares at 10 cents each expiring on 1 July 2006 were issued to directors or director related entities on the authority of a meeting of shareholders held on 17 October 2003.
• (B) 17 October 2003 1,400,000 options to acquire ordinary shares at 7 cents each expiring on 1 August 2005 were issued to directors or director related entities on the authority of a meeting of shareholders held on 17 October 2003.
• (C) 17 October 2003 160,000 options to acquire ordinary shares at 10 cents each expiring on 1 July 2006 were issued to a former director on the authority of a meeting of shareholders held on 17 October 2003.
• (D) 27 October, 2003 750,000 ordinary shares were issued at 7 cents per share
• (E) 16 December 2003 334,867 ordinary shares were issued at 7 cents per share

DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2004 (CONTINUED)

SIGNIFICANT CHANGES (Continued)

• (F) 16 December, 2003 111,622 ordinary shares were issued at 7 cents per share to a director
• (G) 23 January, 2004 520,652 options to acquire fully paid shares at 10 cents each expiring on 1 April, 2006 were issued
• (H) 7 April, 2004 1,082,857 ordinary shares were issued at 7 cents per share
• (I) 20 April, 2004 10,000,000 ordinary shares of 10 cents each were issued as partly paid to 3 cents per share
• (J) 20 April, 2004 5,000,000 options to acquire fully paid shares at 15 cents each expiring on 1 March, 2007 were issued
• (K) 20 April, 2004 2,000,000 options to acquire fully paid shares at 15 cents each expiring on 1 March, 2007 were issued
• (L) 20 April, 2004 200,000 options to acquire fully paid shares at 7 cents each expiring on 1 April, 2006 were issued
• (M) 20 April, 2004 600,000 options to acquire fully paid shares at 10 cents each expiring on 1 April, 2006 were issued
• (N) 17 June, 2004 a further 3.50 cents per share was received on 10,000,000 partly paid shares, making them partly paid to 6.50 cents per share
• (O) 30 June 2004 a further 3.50 cents per share was received on 10,000,000 partly paid shares, making them fully paid to 10 cents per share.
• (P) 29 June 2004 200,000 ordinary shares were issued at 10 cents per share

A General Meeting of members was held on 25 October 2004. A resolution was passed to:

• (a) change its company type from a public no liability company to a public company limited by shares; and
• (b) change its name from Kentor Gold NL to Kentor Gold Ltd

No other significant changes in the state of affairs of the company occurred during the financial period.

FUTURE DEVELOPMENTS

Likely developments in the operations of the economic entity and the expected results of those operations have not been included in this report as the directors believe, on reasonable grounds, that the inclusion of such information would be likely to result in unreasonable prejudice to the economic entity.

AFTER BALANCE DATE EVENTS

After balance date, \$991,029.82 of additional capital has been raised for working capital purposes since 30 June 2004 by the issue of 9,009,362 shares at 11 cents each. A General Meeting of members was held on 25 October 2004. A special resolution was passed at this meeting to consolidate the share capital on the basis of every 3 shares be converted to 1 share.

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KENTOR GOLD N.L. A.B.N. 52 082 658 080 AND CONTROLLED ENTITY

DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2004 (CONTINUED)

INFORMATION ON DIRECTORS

Mr Hider was previously a Senior Partner at Rigby Cooke, Solicitors, Charles Hider Melbourne, and a Barrister and Solicitor since 1959. He has had extensive experience in Australia and South East Asia in respect of both minerals and oil. He is presently the Chairman of Landex Realty Limited, (an unlisted public company) and Action Hydrocarbons Limited (also an unlisted public company). He was formerly a director of Geo2 Limited, St Barbara Mines Ltd and a number of other resource companies.

Interest in shares

9,012,488 ordinary shares in Kentor Gold N.L. and options to acquire a further 1,100,000 ordinary shares. - Note: 5,526,569 options to ordinary shares expired 1 July 2003

Mr Royle is the Managing Director of the company and has extensive David Royle international experience in exploration for precious metals, base metals and diamonds with major multinational resource companies over the past 30 years. He holds a Bachelor of Science degree with honours from the University of New England and is a Fellow of The Australian Institute of Mining and Metallurgy and the Society of Economic Geologists.

Interest in shares

1,001,849 ordinary shares in Kentor Gold N.L. and options to acquire a further 3,000,000 ordinary shares

Hugh McKinnon Mr McKinnon has been a mining engineer with over twenty-five years experience in the management and development of many operations and exploration programs in Australia, Africa and Central Asia. He is also a director of Action Hydrocarbons Limited (an unlisted public company).

Interest in shares 6,193,880 ordinary shares in Kentor Gold N.L and options to acquire a further 400,000 ordinary shares - Note: 13,450,000 options to ordinary shares expired 1 July 2003

Robin Wightman Mr Wightman is an independent businessman with experience in the development of business ventures in China as well as in the sports and leisure industries in Australia. He is a director of Action Hydrocarbons Limited (an unlisted public company), and is married to Mrs Heather Wightman.

Interest in shares Nil - Options to acquire160,000 ordinary shares

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KENTOR GOLD N.L. A.B.N. 52 082 658 080 AND CONTROLLED ENTITY

DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2004 (CONTINUED)

INFORMATION ON DIRECTORS (Continued)

Mr Cook is a non-executive director of the company. He is a mineral K Brent Cook exploration analyst and investment advisor with 25 years experience in the mining industry focussed on the economic evaluation of mineral exploration, development and mining properties and companies located in over 50 countries and encompassing virtually all global environments. He holds a Bachelor of Science degree from Utah State University. Interest in shares 111,622 ordinary shares in Kentor Gold N.L. and options to acquire a further 400,000 ordinary shares. Mr Ennis is involved in the mining industry with particular emphasis on lan Ennis business development and marketing of mineral processing technology internationally. He graduated with a Mineral Processing Diploma in 1991. He is also a Director of Action Hydrocarbons Limited (an unlisted public company) and has wide experience in gold mining. Interest in shares 3,704,875 ordinary shares in Kentor Gold N.L. and options to acquire a further 500,000 ordinary shares - Note: 3,655,125 options to ordinary shares expired 1 July 2003 Mrs Wightman has been a company director for over fifteen years. She Heather Wightman is married to Mr Wightman, a former director of the company, and has been involved in the administration of sporting bodies. She is also a director of Action Hydrocarbons Limited (an unlisted public company). Interest in shares Nil Mr Barr has had a long involvement with the Australian minerals and John Barr metals industry having been Managing Director of Metallgesellschaft's Australian subsidiary since the company's inception in 1974 until his retirement in 1994. He is Chairman of Utilities of Australia Pty Ltd, a major infrastructure investment fund, a Director of Iluka Resources Limited and a former Director of Oxiana Limited. Interest in shares Nil

DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2004 (CONTINUED)

INFORMATION ON DIRECTORS (Continued)

Andrew Daley

Mr Daley is a mining engineer and resources finance executive. Mr Daley spent several years working on mining projects in Africa before relocating to Australia as Senior Engineer with Fluor Australia in 1981. In late 1983 he joined the National Australia Bank resources project finance team in Melbourne. Since then he has been Executive Director and State Manager of NAB's Investment Bank in Sydney, head of Barclays Australia's resource team in Sydney, Director of Chase Manhattan's project finance team in Melbourne and more recently Director of Barclays Capital mining team in London. He is a Chartered Engineer, a former Director of Oxiana Limited, a Director of Pan Australian Resources Limited, a Member of IOM3 and a Fellow of the Australasian Institute of Mining and Metallurgy.

Interest in shares

1,144,410 ordinary shares in Kentor Gold N.L. and options to acquire a further 291,149 ordinary shares

MEETINGS OF DIRECTORS

During the financial year, 1 meeting of directors was held and attended by the following directors:

	Meetings
	Attended
CAM Hider
H McKinnon
R Wightman
H Wightman (Alternate for R Wightman) 1

In addition, 13 circulatory resolutions were issued for ratification by all directors.

DIRECTORS' EMOLUMENTS

Mr Hugh McKinnon receives a remuneration of \$72,000 per annum. Mr David Royle received remuneration of \$50,000.

ENVIRONMENTAL ISSUES

The economic entity, at this stage, operates only as an exploration company, and only in the Kyrgyz Republic. Accordingly, its environmental issues are covered by the laws of that country. No drilling operations had commenced at 30 June 2004. There have been no breaches of any environmental requirements or laws.

DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2004 (CONTINUED)

DIRECTORS' AND AUDITOR'S INDEMNIFICATION

The economic entity has not, during or since the end of the financial year, in respect of any person who is or has been a director or auditor of the economic entity or of a related body corporate:

• indemnified or made any relevant agreement for indemnifying against a liability, including costs and expenses in successfully defending legal proceedings; or
• paid or agreed to pay a premium in respect of a contract insuring against a liability for the costs or expenses to defend legal proceedings.

OPTIONS

1,400,000 options to acquire ordinary shares were issued to directors or director related entities during the year, exercisable at 7 cents each on or before 1 August 2005.

200,000 options to acquire ordinary shares were issued during the year, exercisable at 7 cents each on or before 1 April 2006

1,120,652 options to acquire ordinary shares were issued during the year, exercisable at 10 cents each on or before 1 April 2006.

160,000 options to acquire ordinary shares were issued to a former director during the year, exercisable at 10 cents each on or before 1 July 2006.

1,000,000 options to acquire ordinary shares were issued to directors or director related entities during the year, exercisable at 10 cents each on or before 1 July 2006.

7,000,000 options to acquire ordinary shares were issued during the year, exercisable at 15 cents each on or before 1 March 2007.

No person entitied to exercise the options had or has any right by virtue of the options to participate in any share issue of any other body corporate.

No shares have been issued by virtue of the exercise of an option during the year or to the date of this report. 28,981,632 options to acquire ordinary shares expired on 1 July 2003. There are 14,880,652 unissued ordinary shares for which options are outstanding at the date of this report.

DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2004 (CONTINUED)

PROCEEDINGS ON BEHALF OF COMPANY

No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings.

The company was not a party to any such proceedings during the year.

Dated at Melbourne this 22 day of December 2004 Signed in accordance with a resolution of the Board of Directors,

. . . . . . . . . . . . . . JOHN BARR DIRECTOR

÷

KENTOR GOLD N.L. A.B.N. 52 082 658 080 AND CONTROLLED ENTITY

DIRECTORS' DECLARATION

The directors of the company declare that:

• the financial statements and notes are in accordance with the Corporations Act 2001: 1
• comply with Accounting Standards and the Corporations Regulations 2001; and $(a)$
• give a true and fair view of the financial position as at 30 June 2004 and of the $(b)$ performance for the year ended on that date of the company;
• In the directors' opinion, there are reasonable grounds to believe that the Company will 2. be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors,

Dated this $2\lambda^{v^{\lambda}}$ day of December 2004 Jan JOHN BARR DIRECTOR

Rain . atensis
Sekolah ö. Single Co

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KENTOR GOLD NL A.B.N. 52 082 658 080 AND CONTROLLED ENTITY

STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30TH JUNE 2004

		Economic Entity		Parent Entity
	Note	2004 s	2003	2004	2003
CLASSIFICATION OF EXPENSES BY NATURE Revenues from ordinary activities Other expenses from ordinary activities Foreign Exchange Gain/(Loss)	2 2 3	2.905 (964, 030) 329.509	16.974 (40.051) (157, 737)	2.905 (872, 498) (14.639)	211 (16, 764) (48,476)
Loss from ordinary activities before income tax expense Total changes in equity other than those	3	(631, 616)	(180, 814)	(884, 232)	(65,029)
resulting from transactions with owners as owners		(631, 616)	(180, 814)	(884, 232)	(65,029)

The accompanying notes form part of these financial statements.

بعاطية كالمقاربة والمستخرجة

P. T.

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KENTOR GOLD NL A.B.N. 52 082 658 080 AND CONTROLLED ENTITY

STATEMENT OF FINANCIAL POSITION
AS AT 30TH JUNE 2004

		Economic Entity		Parent Entity
	Note	2004	2003	2004	2003
		s	\$	s	\$
CURRENT ASSETS				514,075	433,585
Cash assets	6	677,941	441,459		25,012
Receivables	7	46,722	47,549	24,425
TOTAL CURRENT ASSETS		724,663	489,008	538,500	458,597
NON-CURRENT ASSETS			248,889	1,004,265	915,222
Other financial assets	8	382,477	12,330	24,738
Property, plant and equipment	9	96,133		1,570	1,570
Intangible assets	10	5,552	9,332
TOTAL NON-CURRENT ASSETS		484,162	270,551	1,030,573	916,792
TOTAL ASSETS		1,208,825	759,559	1,569,073	1,375,389
CURRENT LIABILITIES Payables	11	33,557	63 206	30,306	62,919
TOTAL CURRENT LIABILITIES		33,557	63,206	30,306	62,919
- 戦が演説 歌う - 「やし」 - 「 TOTAL LIABILITIES		33,557	63.206	30,306	62,919
NET ASSETS		1,175,268	696.353	1,538,767	1.312,470
经细胞科
EQUITY
Contributed equity	12	2,640,629	1,530,100	2,640,629	1,530,100
Accurriciated losses	5	(1,398,090)	(715, 951)	(1, 101, 862)	(217, 630)
Outside Equity Interest	13	(67, 271)	(117, 796)
Constitution TOTAL EQUITY		1,175,268 /	696,353	1,538,767	1.312.470
كالاد وينابلون

The accompanying notes form part of these financial statements.

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KENTOR GOLD NL A.B.N. 52 082 658 080 AND CONTROLLED ENTITY

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30TH JUNE 2004

	Economic Entity		Parent Entity
	2004 s	2003 \$	2004 s	2003 \$
CASH FLOW FROM OPERATING ACTIVITIES
Payment to Suppliers and employees	(285, 953)	4,716	(210, 654)	24,005
Interest Received	2,023		2,023
Net Cash (used in) / provided by operating activities	(283,930)	4,716	(208, 631)	24,005
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for Exploration Costs	(505, 331)	(148, 839)
USD Funds provided to subsidiary			(554, 876)	(38, 581)
AUD Funds provided to subsidiary			(250, 058)	(135, 339)
Disposal of Minor Items		930
Payment for Intangibles		(2)
Payment for Property, Plant & Equipment	(94, 263)		(25, 711)
Proceeds on Disposal of Property, Plant & Equipment		12.321		11,839
Payment for Bond - Brisbane Office	(1,524)		(1,524)
Payment for Investments	(14, 251)		(14, 251)
Proceeds from Action Hydrocarbons Ltd	25,012	21,868	25,012	21,868
Proceeds received/(provided) to Other Debtors	240	(3,698)
Payment to Related Parties		(1, 118)		(1, 118)
25.35 Net Cash used in investing activities	(590, 117)	(118,538)	(821, 408)	(141, 331)
TART
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from share issue	1,110,529	522.155	1,110,529	522, 155
老板的
Net Cash provided by financing activities 翻滚地	1,110,529	522 155	1,110,529	522, 155
Net increase in cash held	236,482	408.333	80,490	404.829
Cash at beginning of year	441,459	33.126	433,585	28,756
Cash at end of year	677,941	441.459	514,075	433,585

The accompanying notes form part of these financial statements,

प्राप्त स्थापना अ

An Bhrainn an Chui

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KENTOR GOLD NL A.B.N. 52 082 658 080 AND CONTROLLED ENTITY

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30TH JUNE 2004

	Economic Entity		Parent Entity
	2004	2003	2004	2003
	1	\$	S	\$
Notes to the Statement of Cash Flows
Reconciliation of Cash
Cash at the end of financial year as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of Financial Position as follows.
Cash on Hand	1 677,940	1 441,458	514,074	433.584
Cash at Bank
	677,941	441,459	514,075	433,585
Reconciliation of Net Cash provided by Operating Activities to profit from ordinary activities after Income Tax
Operating loss after income tax	(631, 616)	(180.814)	(884, 232)	(65,029)
Depreciation	10,462	4,803	973
Amortisation of Intangible Assets	3,780	1,541
Foreign Exchange Translation Loss	(329, 509)	140,763	14,639	48 265
Write-down of advance to subsidiary	715,503		715,503
Changes In Assets and Liabilities:
(Decrease) Increase in trade and other creditors (Increase) in receivables	(29, 649) (22, 901)	38,423	(32, 613) (22, 901)	40.769
Cash flows from operations	(283, 930)	4,716	(208, 631)	24,005

The accompanying notes form part of these financial statements.

The State of America

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2004

Statement of Significant Accounting Policies 1

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Urgent Issues Group Consensus Views and other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

The financial report covers the economic entity of Kentor Gold N.L. and controlled entities, and Kentor Gold N.L. as an individual parent entity. Kentor Gold N.L. is a company incorporated and domiciled in Australia.

The financial report has been prepared on an accruals basis and is based on historical costs and does not take into account changing money values or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets.

The following is a summary of the material accounting policies adopted by the economic entity in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

(a) Principals of Consolidation

A controlled entity is any entity controlled by Kentor Gold N.L. Control exists where Kentor Gold N.L. 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 N.L. to achieve the objectives of Kentor Gold N.L. A list of controlled entities is contained in Note 18 to the financial statements.

All inter-company balances and transactions between entities in the economic entity, including any unrealized profits or losses, have been eliminated on consolidation. Walle

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 rdate 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.

$\ell(b)$ Income Tax

The economic entity adopts the liability method of tax-effect accounting whereby the
thicome tax expense is based on the profit from ordinary activities adjusted for any 紧接紧permanent differences.

▒ Timing differences, which arise due to the different accounting periods in which items of revenue and expense are included in the determination of accounting profit and taxable income, are brought to account as either a provision for deferred income tax or as $\frac{d}{dt}$ future income tax benefit at the rate of income tax applicable to the period in which the benefit will be received or the liability will become payable.

Future income tax benefits are not brought to account unless realisation of the asset is sessured beyond any reasonable doubt. Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of realisation of the benefit.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2004

(c) Investments

....----------
Non-current investments are measured on the cost basis. The carrying amount of investments is reviewed annually by directors to ensure it is not in excess of the recoverable amount of the investments. The recoverable amount is assessed from the quoted current market value for shares in listed companies or the underlying net assets for other non-listed corporations. The expected net cash flows from investments have not been discounted to their present value in determining the recoverable amounts.

(d) Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation.

Property

Freehold land and buildings are measured on the fair value basis, being the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction. It is the policy of the economic entity to have an independent valuation every three years, with annual appraisals being made by the directors.

The revaluation of freehold land and buildings has not taken account of the potential capital gains tax on assets acquired after the introduction of capital gains tax.

Plant and equipment

Plant and equipment are measured on the cost basis. Ñô∴

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount of those assets. The recoverable $\frac{1}{2}$ and $\frac{1}{2}$ is assessed on the basis of expected net cash flows which will be received from the assets' employment and subsequent disposal. The expected net cash flows theve not been discounted to present values in determining recoverable amounts.

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised leased. assets, but excluding freehold land, are depreciated on straight line basis over their estimated useful lives to the economic entity commencing from the time the asset is held ready for use. Properties held for investment purposes are not subject to a depreciation charge.

(e) Employee Benefits

Contributions are made by the economic entity to an employee superannuation fund and are charged as expenses when incurred.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2004

$\overline{\text{(f)}}$ Cash

---..
For purposes of the statement of cash flows, cash includes deposits at call with financial institutions and other highly liquid investments with maturity within less than 3 months which are readily convertible to cash on hand at the investor's opinion and are subject to an insignificant risk of changes in value, and borrowings which are integral to the cash management function and which are not subject to a term facility.

(g) Revenue

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

All revenue is stated net of the amount of goods and services tax (GST).

(h) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the assets or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.

Preliminary Expenses

Preliminary expenses have been carried forward to be written off in the first year of princome received from trading.

(i) Exploration and Development Expenditure

Exploration, evaluation and development 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 yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves. BASE

Accumulated costs in relation to an abandoned area are written off in full against profits 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.

REFOTOIGN Currency Transactions and Balances

Foreign currency transactions during the year are converted to Australian currency at the rates of exchange applicable at the dates of the transactions. Amounts receivable and payable in foreign currencies at balance date are converted at the rates of exchange ruling at that date.

The gains and losses from conversion of assets and liabilities, whether realised or imrealised, are included in profit from ordinary activities as they arise.

The assets and liabilities of the overseas controlled entities, which are intergrated, are translated in accordance with AASB 1012 Foreign Currency Translation, and the operating results are translated using the average exchange rate for the year. Gains End losses arising on translation are taken directly to the profit and loss statement.

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بالمتحادث والمحادث

KENTOR GOLD NL A.B.N. 52 082 658 080 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 2004

$\sim 10$

		Economic Entity		Parent Entity
		2004	2003	2004	2003
		\$	5	\$	\$
	Revenue and Expenses
	Operating Revenues	2,905		2,905
	Interest		16,974		211
	Other revenue
					211
		2,905	16,974	2,905
	jásíró,
	Operating Expenses
	Depreciation	10,462	4,803	973
	Amortisation	3,780	1,541
	Audit Remuneration	4,770	3,302	4,370	2.442
	Capital Raising Costs		11,194		11,194
	Consulting Services	15,825	3,977	15,825	3,977
	Legal Costs	25,675		25,675 10,892
	Professional Fees	10,892		7,565
	Rental 2	7,565 50,000		50,000
	Salaries M.	21,743	(2,849)	21.743	(2,849)
	う存置する Write Down of Loan to Subsidiary	715,503		715,503
	Offerencies	97,815	18,083	19,952	2,000
		964,030	40,051	872,498	16,764
	Author Remuneration
	Remuneration of the auditor of the parent entity for: 11 100 Of reviewing the financial report	4,370	2,442	4,370	2,442
	Remulteration of other auditors of subsidiaries for:
	antiling of reviewing the financial reports of	400	860
J.	2011 Tom Ordinary Activities
	First Fig.mordinary activities before
	seen a Dicompense has been
	KING THE PART OF STREET
	日の敷除の
	The Cole Change Loss on revaluation of
	ED Man Receivable from foreign controlled entity			14,639	48,476
	Commoe difference recognised on translation
	Brothon controlled entity	(329, 509)	157,737
	COLLECTIVE Expense
	se was income tax benefits are not brought to account, the
	the probability only be realised if the conditions for New York out in Note 1 occur.
			381,282	987,316	103,084
		1,012,898

$\sim 10^7$

منتشر من المستشفى الأول الأول الأول الأول الأول الأول الموسيقين

$\mathbf{Q}$ $\frac{d}{dt}$

$\sim$

KENTOR GOLD NL A.B.N. 52 082 658 080 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2004

	Economic Entity		Parent Entity
	2004	2003	2004	2003
	5	\$	\$	\$
Accumulated Losses
Accumulated losses at the beginning of the	(715,951)	(558.293)	(217, 630)	(152,601)
financial year
Net loss attributable to members	(631, 616)	(180, 814)	(884, 232)	(65.029)
of the company Net (Profit) / loss attributable to Outside Equity Interest	(50, 523)	23,156
Accumulated losses at the end of the
financial year	(1,398,090)	(715,951)	(1, 101, 862)	(217, 630)
ille Mer
Cash Assets Cash on Hand		1	1
Cash at Bank	677,940	441,458	514,074	433,584
	677,941	441,459	514,075	433,585
Resilvables 网络威廉斯
Los (Unsequed) - Action Hydrocarbons Limited		25,012		25,012
circu Eccelyable	22,297	22,537
ser condige	22,019		22,019
Britz Brisbane Office	1,524		1,524
EXPRESIDE Olding Tax	882		882
	46,722	47,549	24,425	25,012
ALCOVERINGIAL Assets
NET SURFENT En Praise Expenditure
sums sained forward in respect of areas of interest
by we oration and evaluation phases	368,226	248,889
verblacet Receivable from foreign controlled entity			773,786	233,549
It BA on Receivable from foreign controlled entity 1 Changes in foreign controlled entity			189,093	654,538
. Finited in Action Hydrocarbons Limited			27,135 14,251	27,135
	14,251
	382,477	248,889	1,004,265	915,222

$\mathcal{L}$ $\frac{2}{\pi}$

b

KENTOR GOLD NL ABN 52082658080 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 2004

		Economic Entity		Parent Entity
		2004 Ŝ.	2003 s	2004 \$	2003 \$
Property, Plant and Equipment
Plant & Equipment		122,184	46.187	7.444
Less: Accumulated Depreciation		43,518	33.857	173
		78,666	12,330	7,271
		16,608		16,608
Computer Equipment & Software Less: Accumulated Depreciation		489		489
		16,119		16,119
Low Value Pool Items Less: Accumulated Depreciation		1,659 311		1,659 311
		1,348	÷	1.348
Total Plant and Equipment		96,133	12,330	24,738
Movement in Carrying Amounts:
Movement in the carrying amounts for
sach class of property, plant and
equipment between the beginning and the
end of the current financial year
	Freehold		Plant and	Motor
	Land	Buildings	Equipment	Vehicles	Total
Economic Entity	\$	S	s	s	s
Balance at beginning of the year			12.330		12,330
Additions			94.265		94.265
Depreciation expense		ä,	(10.462)	$\blacksquare$	(10, 462)
Carrying amount at the end
ot the year			96.133		96.133
		ł.
	Freehold		Plant and	Motor
	Land	Buildings	Equipment	Vehicles	Total
Parent Entity	$\overline{\mathbf{5}}$	s	\$	5	\$
Balance at beginning of the year				ä,
Additions		$\overline{\phantom{0}}$	25,711	$\overline{a}$	25,711
Depreciation expense			(973)	$\ddot{\phantom{1}}$	(973)
Carrying amount at the end
of the year			24,738		24,738

$\sim$

an-se

e de la provincia de la constitución de la constitución de la constitución de la constitución de la constitució

$\sim$ $\frac{1}{2}$

KENTOR GOLD NL A.B.N. 52 082 658 080 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2004

		Economic Entity		Parent Entity
		2004	2003	2004	2003
		\$	\$	s	$\frac{3}{2}$
10	Intangibles Assets
	Preliminary Expenses (at cost)	1,570	1,570	1,570	1,570
	Geological Information & Licenses	3,982	7762
		5,552	9.332	1,570	1,570
11	Payables CURRENT Trade Creditors Unsecured loans from director related entities	28,280 4,382	58.624 4 3 8 2	25,724 4,382	58,337 4,382
	Unsecured Ioans - Director Provision for Income Tax	200 695	200	200	200
		33,557	63,206	30,306	62.919

$\mathcal{L}_{\text{max}}$

$\sim$

त एक्ट्राइस भारत एक्ट्रेलिया केन्द्रिय एक्ट्रिकेट एक्ट्राइस के बाद प्रान्त संस्कृत के साथ भागात एक्टर पर भागि

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2004

		Economic Entity		Parent Entity
		2004 5	2003	2004	2003
12	Contributed Equity Paid Up Capital: 57,443,974 (2003 - 44,964,628) Fully Paid Ordinary Shares	2,640,629	1,530,100	2,640.629	1,530,100
	At the beginning of the reporting period Shares issued during the period (as listed below) Transaction costs relating to share issues	1,530,100 1 179 554 (69, 025)	1,007,945 522.155	1,530,100 1,179,554 (69.025)	1.007.945 522.155
		2 640 629	1,530,100	2.640.629	1 530 100

During the year the following capital transactions occurred:

• (A) 17 October 2003 1,000,000 options to acquire ordinary shares at 10 cents each expiring on 1 July 2006 were issued to directors or director related entities on the authority of a meeting of shareholders held on 17 October 2003.
• (B) 17 October 2003 1,400,000 options to acquire ordinary shares at 7 cents each expiring on 1 August 2005 were issued to directors or director related entities on the authority of a meeting of shareholders held on 17 October 2003.
• (C) 17 October 2003 160,000 options to acquire ordinary shares at 10 cents each expiring on 1 July 2006 were issued to a former director on the authority of a meeting of shareholders held on 17 October 2003.
• (D) 27 October, 2003 750,000 ordinary shares were issued at 7 cents per share
• (E) 16 December 2003 334,867 ordinary shares were issued at 7 cents per share
• (F) 16 December, 2003 111,622 ordinary shares were issued at 7 cents per share to a director
• (G) 23 January, 2004 520,652 options to acquire fully paid shares at 10 cents each expiring on 1 April, 2006 were issued
• (H) 7 April, 2004 1,082,857 ordinary shares were issued at 7 cents per share
• 20 April, 2004 10,000,000 ordinary shares of 10 cents each were issued as partly paid to 3 cents per share
• (J) 20 April, 2004 5,000,000 options to acquire fully paid shares at 15 cents each expiring on 1 March, 2007 were issued
• (K) 20 April, 2004 2,000,000 options to acquire fully paid shares at 15 cents each expiring on 1 March, 2007 were issued
• (L) 20 April, 2004 200,000 options to acquire fully paid shares at 7 cents each expiring on 1 April, 2006 were issued
• (M) 20 April, 2004 600,000 options to acquire fully paid shares at 10 cents each expiring on 1 April, 2006 were issued
• (N) 17 June, 2004 a further 3.50 cents per share was received on 10,000,000 partly paid shares, making them partly paid to 6.50 cents per share
• (O) 30 June 2004 a further 3.50 cents per share was received on 10,000,000 partly paid shares, making them fully paid to 10 cents per share.
• (P) 29 June 2004 200,000 ordinary shares were issued at 10 cents per share.

×, $\overline{a}$ $\ddot{\phantom{1}}$ $\ddot{\phantom{a}}$

$\left{ \right.$

15

والمستحدث والمتحول والمرابي وسيدوه فالمراجع المتحدة فيستريك المتحدة

$\sqrt{ }$

KENTOR GOLD NL A.B.N. 52 082 658 080 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2004

	Economic Entity		Parent Entity
	2004	2003	2004	2003
Outside Equity Interest
Outside Equity Interest comprises
Share Capital	6.784	6,784
Reserves			$\blacksquare$
Retained Profits/(Losses)	(74, 055)	(124, 580)	-	۰.
	(67, 271)	(117, 796)	÷
			---------------

Directors' and Executives' Remuneration 14

(a) Names and positions held of parent entity directors at any time during the financial year

Parent Entity Directors

	Charles Allen Moir Hider	Chairman - resigned 10 November 2004
David Royle		Managing Director - appointed 1 March 2004
Hugh McKinnon
	Robin Clive Wightman	Resigned 4 July 2003
K Brent Cook		Appointed 4 July 2003 - resigned 10 November 2004
lan Ennis		Alternate for Mr. C.A.M. Hider - terminated 10 November 2004
	Heather Joyce Wightman	Alternate for Mr. H. McKinnon
	Heather Joyce Wightman	Alternate for Mr. RC Wightman - terminated 4 July 2003
John Barr		Appointed 10 November 2004
Andrew Daley		Appointed 10 November 2004
	(b) Parent Entity Directors' Remuneration Income paid or payable to all directors of the parent entity
by the parent entity			122.000	36.000
	Number of directors whose income from the parent entity
	was within the following bands:
$$0 - $9,999$			5	4
\$30,000 - \$39,999				1.
\$50,000 - \$59,999			1
\$70,000 - \$79,999			1
	Parent Entity Related Party Transactions
	Transactions between parent entity related parities are on
	normal commercial terms and conditions no more favourable
	than those available to other persons unless otherwise stated.
	PARENT ENTITY DIRECTOR RELATED ENTITIES
	Action Hydrocarbons Limited - a company in which Messrs
	CAM Hider, ID Ennis, H McKinnon, RC Wightman, and Mrs
	HJ Wightman are directors - for net movement in loan funds
	relating to payments for exploration and other costs.			26,528

Charles Hider & Associates - a company in which Mr. C.A.M. Hider is a director, received funds for the provision of legal advice and services during the year.

$\alpha$

25,000

$\ldots$ . $\ldots$

ć,

KENTOR GOLD NL A.B.N. 52 082 658 080 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2004

		Economic Entity 2004	2003	Parent Entity 2004	2003
15 -	Parent Entity Related Party Transactions (continued)
	Shares in Action Hydrocarbons Limited - a company in which Messrs CAM Hider, ID Ennis, H McKinnon, RC Wightman, and Mrs HJ Wightman are directors - as a result of a circulatory resolution of directors dated 30 June 2004 it was agreed Kentor Gold NL would accept shares in Action Hydrocarbons Limited in full and final satisfaction of the debt owed at 30 June 2004.			14.251

The names of the directors who have held office during the year are: Messrs CAM Hider, ID Ennis, H McKinnon, RC Wightman and HJ Wightman (appointed 4 February 2002).

16 Financial Instruments

(a) Interest Rate Risk

The economic entity's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on those financial assets and liabilities, is as follows:

	Floating		Non		Total Carrying Amount			Weighted Average
	Interest		Interest		as per		Effective
Financial Instruments	Rate		Bearing		Statement of Financial			Interest Rate
					Position
	June	June	June	June	June	June	June	June
	2004	2003	2004	2003	2004	2003	2004	2003
	\$	\$	s	s	\$	s	٠,	٧.
(i) Financial Assets
Cash at Bank	677.941	441.459			677 941	441,459	5.0	5.0
Receivables			46.722	47 549	46722	47.549
Total Financial Assets	677,941	441,459	46.722	47.549	724 563	489,008
(ii) Financial Liabilities
Trade Creditors			28.280	58.524	28,280	58,624
Other Payables			5.277	4.582	5.277	4.582
Total Financial Liabilities			33.557	63.206	33.557)	63,205

(b) Credit Risk

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.

(c) Net Fair Values

The net fair values of financial assets and liabilities approximate their carrying value. No financial assets and financial liabilities are readily traded on organised markets in standardised form other than listed investments: Financial assets where the carrying amount exceeds net fair values have not been written down as the economic entity intends to hold these assets to maturity.

The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in the statement of financial position and in the notes to the financial statements.

$\mathbf{r}$ $\frac{1}{2}$ $\bar{\mathbb{Z}}$

$\mathbf{I}$

$\mathbf{\hat{f}}$

KENTOR GOLD NL A.B.N. 52 082 658 080 AND CONTROLLED ENTITY

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2004

	Economic Entity		Parent Entity
	2004	2003	2004	2003
------ . . .	----	__

17 Advance to Subsidiary

The directors of the parent company have reviewed the AUD Advance to the subsidiary JSC Kentor to establish the recoverability of such advances.

During the review, an amount of \$715,502 has been written-off and is included in the Statement of Financial Performance.

Controlled Entities 18

	Country of Incorporation	Percentage Owned (%)
		2004	2003
Parent Entity: Kentor Gold N.L.	Australia	$\mathbf{r}$
Subsidiaries of Kentor Gold N.L.
Closed Joint-Stock Company Kentor	The Kyrgyz Republic	80%	80%

19 Company Details

The registered address and principal place of business of the parent entity is:

Kentor Gold N.L. Suite 405 Level 4, Toowong Tower 9 Sherwood Road Toowong Old 4066

ASX MELB LISTINGS DEPT

LEVEL 2, 50 BURWOOD ROAD, HAWTHORN

P.O. Box 325, Hawthorn, Victoria 3122, Australia Tel ~613 9819 4011 Fax +613 9819 6780 Web www.raggwair.com.au Email raggweir@raggweir.com.au

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF KENTOR GOLD NL

Scope

$16/03$

Ķ

We have audited the financial report of Kentor Gold NL for the financial year ended 30 June 2004. The financial report comprises the Statement of Financial Position, Statement of Financial Performance. Statement of Cash Flows, accompanying notes to the financial statements and the directors' declaration for the year ended 30 June 2004.

The company's directors are responsible for the financial report.

Chartered Accountants

We have conducted an independent audit of the financial report in order to express an opinion on it to the members of Kentor Gold NL. Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards and other mandatory professional reporting requirements and statutory requirements in Australia so as to present a view which is consistent with our understanding of the company's financial position and performance as represented by the results of it's operations and cash flows.

The audit opinion expressed in this report has been formed on the above basis.

Qualification

The operations of the subsidiary are funded by loans from the parent entity as indicated in Note 7 to the financial statements. As the subsidiary is in a net asset deficiency position this means that there is a diminution in the carrying value of the loans receivable from and investment in the subsidiary as stated in the parent company's accounts. The Company has recognised the diminution in value and written down the carrying amount of loans receivable by \$715,503. In our opinion a further writedown or provision of \$296,228 should have been recognised in the accounts of the Company. Had this been done the Company accounts would show a loss for the year of \$1,180,460, an accumulated loss of \$1,398,089 and non current receivables of \$666,652.

Qualified Audit Opinion

In our opinion, except for the effects on the financial report of the matters referred to in the qualification paragraph the financial report of Kentor Gold Ltd is in accordance with:

• a. 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 $2004$ and of their performance for the year ended on that date; and
• ii. complying with Accounting Standards in Australia and the Corporation Regulations 2001; and

b. other mandatory professional reporting requirements in Australia.

Kagg hlei

MSI RAGG WEIR CHARTERED ACCOUNTANTS

G.D. WOOD PARTNER

1949 - 1949 - 1949 - 1949 - 1949 - 1949 - 1949 - 1949 - 1949 - 1949 - 1949 - 1949 - 1949 - 1949 - 1949 - 194

Melbourne: 22 December 2004