KGL RESOURCES LIMITED — Annual Report 2010

Mar 29, 2011

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

FINANCIAL REPORT

FOR THE YEAR ENDED 31 DECEMBER 2010

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES

ABN 52 052 658 080

Contents	Page
Directors‟ Report	2
Auditor‟s Independence Declaration	13
Directors‟ Declaration	14
Statement of Comprehensive Income	15
Statement of Financial Position	16
Statement of Cash Flows	17
Statement of Changes in Equity	18
Notes to the Financial Statements	19
Independent Auditor‟s Report	48

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

DIRECTORS’ REPORT

The directors present their report on the Consolidated entity (the Group) consisting of Kentor Gold Limited and the entities it controlled at the end of, or during, the year ended 31 Dec 2010.

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.

Names, qualifications experience and special responsibilities

John Barr AM Mr Barr has had a long involvement with the Australian minerals and metals MAICD industry having been Managing Director of Metallgesellschaft‟s Australian Non-Executive Chairman subsidiary since the company‟s inception in 1974 until his retirement in Appointed 10 November 2004 1994. He is a former Director of Iluka Resources Limited, 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.

Mr Barr is a member of the Audit and Compliance Committee and Remuneration Committee.

Other Current Directorships of Listed Companies None.

Former Directorships of Listed Companies in last three years None.

Andrew Daley BSC (HONS)(MINING) Grad Dip (GeoSc), C.Eng (UK), FAusIMM, MIOM3 Non-Executive Director Appointed 10 November 2004

Mr Daley commenced his mining career in 1970 with Anglo American on the Zambian copper belt and later worked with Rio Tinto and Conoco Minerals also in Africa. He moved to Australia with the engineering group Fluor Australia in 1981 working on new project evaluation. In 1983 Mr Daley, moved into resource project finance with National Australia Bank, Chase Manhattan and from 1999 as a Director of the Mining Team at Barclays Capital in London.

From his return to Australia in 2003 until retiring from full-time work in mid 2009 he was Director of Investor Resources Finance Pty Limited (“IRF”), a company based in Melbourne which provided financial advisory services to the resources industry globally.

Mr Daley is a member of the Audit and Compliance Committee and the Chairman of the Remuneration Committee

Other Current Directorships of Listed Companies

PanAust Limited (appointed August 2004)

Former Directorships of Listed Companies in last three years In the past three years he has also been a director of :

Dragon Mining Ltd (appointed March 2005, resigned 4 March 2010);

AIM-listed Minerva Resources Plc (appointed July 2007, resigned 15 July 2009); and

Uranex NL (appointed November 2007, resigned 27 August 2010).

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

DIRECTORS (CONTINUED)

John Taylor

BENG (CHEM) MBA Non-executive Director Appointed 28 July 2009

Mr Taylor has held senior positions in business and has had 40 years experience in the Australian and international engineering and construction industries; primarily in the resources sector. Previously, the Managing Director of Outotec (Australasia) Pty Ltd (retired 2010) and has held directorships in several ASX listed companies including Ticor Limited and privately held companies including Lurgi (Australia) Pty Ltd and Metallgesellschaft of Australia Pty Ltd.

Other Current Directorships of Listed Companies -None

Former Directorships of Listed Companies in last three years In the past 3 years he has been a director of Ausmelt Limited (appointed 1[st] February 2010, resigned 15[th] December 2010)

Simon Milroy

BENG (MINING) Managing Director Appointed 14 May 2007

Mr Milroy is a mining engineer who previously spent nearly 4 years as General Manager – Project Development and Manager Technical Services for Pan Australian Resources Limited in Laos. In those roles he was responsible for scoping and feasibility studies, evaluations of projects and companies, ore reserves and technical support of the companies operations. During that period key achievements were managing the feasibility studies and environmental and social impact assessments for the Phu Bia gold mine and the Phu Kham copper-gold mine.

Other Current Directorships of Listed Companies - None. Former Directorships of Listed Companies in last three years - None.

Hugh McKinnon

BENG (MINING) Executive Director Appointed 28 May 1998

Mr McKinnon has been involved in the mining industry in Australia, Africa, and Asia for 30 years in activities ranging 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 and is Chairman of the International Business Council in the Kyrgyz Republic.

Other Current Directorships of Listed Companies None.

Former Directorships of Listed Companies in last three years None.

COMPANY SECRETARY

Kylie Anderson

BSC. MBA (INT. BUS.) MPA, MAICD Appointed 2 January 2008

Ms Anderson has held senior financial and company secretarial roles with a number of companies in the resources sector including Felix Resources and Rio Tinto.

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

DIRECTORS (CONTINUED)

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 are:

Director	Ordinary shares	Options over ordinary shares
W HJBarr	2,076,837	1,000,000
A E Daley	2,473,018	1,000,000
H McKinnon	2,501,094	2,800,000
SMilroy	1,245,428	4,000,000
J CTaylor	4,000,006	-

MEETINGS OF DIRECTORS

The number of directors‟ meetings held during the financial year and the number of meetings attended by each director while they were a director were as follows:

	Attended	Held
Directors
W H J Barr	15	15
A Daley	15	15
J Taylor	15	15
S Milroy	15	15
H McKinnon	14	15

Committee membership and meetings

The members of the Committees are the independent directors, Andrew Daley, John Barr and John Taylor. As of the 12 Dec 2009, Mr John Taylor has been appointed as the Chairman of the Audit and Compliance Committee with Mr Andrew Daley appointed as the Chairman of the Remuneration Committee.

Two meetings of the Audit and Compliance Committee were held during the year. One meeting was attended by Mr Taylor, Mr Daley and Mr Barr. The other was attended by Mr Taylor. One meeting was held by the Remuneration Committee during the year, attended by Mr Daley and Mr Barr.

CORPORATE INFORMATION

Principal activities

The principal activity of the consolidated entity during the financial year was exploration and development of gold and base metals projects in the Kyrgyz Republic.

Employees

The consolidated entity employed 54 employees as at 31 Dec 2010 (2009: 30 employees).

DIVIDENDS

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 Kyrgyz Republic and was listed with the Australian Securities Exchange on 17 March 2005.

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

Financial overview

Operating results for the period

The loss for the consolidated entity after income tax was $6,487,708 (2009: loss of $5,423,704). This result was in line with expectations of costs associated with managing exploration and development programmes. The loss included a provision for the impairment and relinquishment of exploration assets of $3,764,347 in relation to the Savoyardy project. Kentor decided to withdraw from the Savoyardy goldantimony project in the south-east of Kyrgyz Republic, where the Company had an agreement with Manas Resources Limited to earn up to 70% of the project.

Cash flows

The cash flows of the Group consist of, payments to employees, consultants and suppliers for the development of the Andash Gold-Copper project; exploration activities on tenements held; identification of various business development opportunities and the maintenance of the corporate head office which manages existing projects as well as costs involved in investigating new exploration opportunities. Additionally, $73.1 million cash was raised through share placements and rights issues during the year.

CAPITAL RAISINGS / CAPITAL STRUCTURE

During the year, the Company raised $73,068,113 of equity (net of capital raising costs) to fund the development of the Andash Gold-Copper project, on-going exploration programmes, various business development opportunities and to provide working capital for the company. On 21[st] March 2011, Kentor announced that terms had been agreed with Macquarie Bank Limited on a Committed Letter of Offer for a US$50M debt facility to fund construction of the Andash Gold-Copper project.

Summary of shares and options on issue – 31 Dec 2010

As at the date of this report there were 1,061,592,950 (2009: 393,011,481) ordinary shares on issue and 59,611,358 (2009: 56,611,358) unissued ordinary shares in respect of which the options listed below were outstanding.

outstanding.
Expiry date/Duration	Number	Exercise price(*)
Unlisted options
31 May2012	100,000	0.5808
31 May2012	100,000	0.7808
31 May2011	100,000	0.9808
30 June2011	500,000	0.1808
21 Dec2011	36,242,126	0.1308
16Dec2012	10,769,232	0.1433
	47,811,358
Unlisted executive options
30 days afterceasing employment	300,000	0.6058
30 days afterceasing employment	300,000	0.7308
30 days afterceasing employment	300,000	0.8558
30 days afterceasing employment	1,000,000	0.1808
30 days afterceasing employment	950,000	0.2308
30 days afterceasing employment	950,000	0.2808
Earlierof 14~~th~~ Sept2014or30 days afterceasing employment	1,500,000	0.1176
Earlierof 14~~th~~ Sept2014or30 days afterceasing employment	3,500,000	0.1449
Earlier of 4~~th~~June 2015 or 30 days after ceasing employment	1,000,000	0.1818
Earlier of 4~~th~~June 2015 or 30 days after ceasing employment	1,000,000	0.1568
Earlier of 4~~th~~June 2015 or 30 days after ceasing employment	1,000,000	0.1533
	11,800,000
TOTAL	59,611,358

(*) the exercise price of unlisted share options was revised in light of the two rights issues during the 2010 financial year.

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Kentor decided to withdraw from the Savoyardy gold-antimony project in the south-east of Kyrgyz Republic, where the Company had an agreement with Manas Resources Limited to earn up to 70% of the project. A small, high grade resource has been identified at Savoyardy, and there is potential for further discoveries on the exploration licence. However, Kentor has concluded that the funds the Company would be required to expend at Savoyardy to complete the joint venture earn in, should be re-directed to other exploration and development commitments.

SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

On 21st March 2011, Kentor announced that terms had been agreed with Macquarie Bank Limited on a Committed Letter of Offer for a US$50M debt facility to complete construction of the Andash Gold-Copper project in the Kyrgyz Republic.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

The Board of Directors primary focus in FY2011 is to commence construction of a 1.5Mtpa Gold Copper concentrator plant in the Kyrgyz Republic and continue exploration and development programmes on existing tenements including Andash, Aktash and Bashkol.

ENVIRONMENTAL REGULATION

The Group‟s operations are not subject to any significant environmental regulations under either Commonwealth or State legislation.

The Group‟s Kyrgyzstan based entities are subject to the relevant laws and regulations imposed by the Kyrgyzstan government. Additionally, the Kyrgyz Republic is a contracting party to a number of international environmental conventions.

Kentor‟s projects are subject to annual reviews by the Kyrgyz government inspectors and have in all instances been found to be in full compliance.

REMUNERATION REPORT (AUDITED)

Remuneration philosophy

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.

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

Employment agreements are entered into with executive directors and other key management personnel. The current employment contract with the managing director will terminate on 31 May 2011. The employment contract with the Executive Director, Hugh McKinnon is automatically renewed for 6 months periods unless the Company gives notice of termination between 60 and 90 days prior to the expiry of the current extension period. Contracts do not provide for any additional termination benefits.

Remuneration committee

The Remuneration Committee is responsible for determining and reviewing compensation arrangements for the directors and executives.

Remuneration structure

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

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

REMUNERATION REPORT (AUDITED) (CONTINUED)

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. The current aggregate remuneration so determined is $200,000. An amount not exceeding $200,000 is divided between the directors as agreed.

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.

Executive remuneration

Objective

The company aims to reward executives with a level and mix of fixed and variable remuneration commensurate with their position and responsibilities within the company and so as to align the interests of executives with those of shareholders.

Structure

In determining the level and make-up of executive remuneration, the Board obtains 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

Objective

The objectives of long term incentives are to:

• recognise 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

The Company has implemented a long term incentive program for senior executives. This is in the form of options granted in accordance with an Employee Share Option Plan, approved by shareholders on 22 May 2008. The exercise prices of these options have been set in excess of the market price at the time of issue therefore aligning the Executives‟ ability to achieve growth in shareholder value with the executives‟ remuneration.

The Company has in place a policy that prohibits directors and employees who receive options from entering into a transaction that is designed to limit the economic risk of options that have not yet vested.

On a case by case basis some new Senior Executives are also provided with options as part of their remuneration package.

The remuneration committee is considering implementing a series of short term incentives for senior executives based on achieving agreed key performance indicators.

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

REMUNERATION REPORT (AUDITED) (CONTINUED)

Employment contracts

Executive Directors

Simon Milroy – Managing Director

Mr Milroy‟s employment agreement with the Company was renewed as of 1 July 2009. The agreed terms of his employment includes inter alia :

• Mr Milroy is engaged to provide services in the capacity of Managing Director for a term ending on 31 May 2011 at an annual salary of $320,000 (increased from $240,000 per annum effect 1 July 2010). The salary package is subject to periodic review.

• The Board will review in good faith bonuses for significant milestones having regard to the contribution of the Employee to achieving such milestones and the then circumstances of the Company

• Share options granted.

• A restraint for a period of 6 months after termination on Mr Milroy undertaking employment in the Kyrgyz Republic or within 5 kilometres of any mining tenements or applications in Uzbekistan, Kazakhstan, China or the Northern Territory of Australia in which the Company has any interest.

• Notice period of 3 months.

In early 2010, Mr Milroy was awarded a bonus of AUD$100,000 in recognition of securing the Andash Gold-Copper project for the Company. This was not based on any predetermined criteria and was paid solely at the Board‟s discretion.

Hugh McKinnon – Executive Director/Country Manager

Mr McKinnon‟s employment agreement with the Company was renewed as of 1 July 2009 as a rolling contract. The agreed terms of his employment includes inter alia :

• Mr McKinnon is engaged to provide services in the Kyrgyz Republic in the capacity of Executive Director and Country Manager. His place of employment is in the Kyrgyz Republic.

• Mr McKinnon‟s annual salary was increased to USD$200,000 effective 1 July 2010 (increased from USD$128,000 per annum).

• Mr. McKinnon is also provided with USD$1,000 per month as rental allowance.

• A restraint on Mr McKinnon undertaking employment in the Kyrgyz Republic for a period of 6 months after termination.

• Share options granted.

• Notice period 3 months.

In early 2010, Mr McKinnon was awarded a bonus of AUD$60,000 in recognition of securing the Andash Gold-Copper project for the Company. This was not based on any predetermined criteria and was paid solely at the Board‟s discretion.

Other executives

Gerard Kelly – Chief Financial Officer

Mr Kelly‟s employment agreement with the Company commenced as of 12 April 2010. The agreed terms of his employment includes inter alia :

• Mr Kelly is engaged as the Chief Financial Officer of the Company.

• Mr Kelly‟s total remuneration package is $225,000.

• Share options granted.

• Notice period of 3 months.

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

REMUNERATION REPORT (AUDITED) (CONTINUED)

Employment contracts

Other executives

Guy Cordingley – General Manager Operations

Mr Cordingley‟s employment agreement with the Company commenced as of 1 July 2010. The agreed terms of his employment includes inter alia :

• Mr Cordingley is engaged to provide services in the Kyrgyz Republic in the capacity of General Manager of the Andash Mining Company. His place of employment is in the Kyrgyz Republic.

• Mr Cordingley‟s total remuneration package is $265,000.

• Term is for 22 months, and has a notice period of 3 months.

Mr Cordingley resigned on the 18[th] March 2011.

Kelvin Russell – General Manager Corporate Finance

In June 2010, Mr Russell commenced engagement with the Company. He is employed as a consultant, with no formal employment agreement.

Remuneration of non-executive directors

John Barr

By mutual agreement approved by the board of directors, Mr John Barr is engaged to provide services as a Non-executive Director, with an annual fee of $80,000 plus $7,200 superannuation subject to annual review.

Andrew Daley

By mutual agreement approved by the board of directors, Mr Andrew Daley is engaged to provide services as a Non-executive Director through his company Dalenier Enterprises Pty Ltd, with an annual fee of $54,500 subject to annual review.

John Taylor

By mutual agreement approved by the board of directors, Mr John Taylor is engaged to provide services as a Non-executive Director with an annual fee of $54,500 subject to annual review.

In recognition of the increasing complexity of the Company and the time required of the Directors, Mr Taylor was granted 1,000,000 options on 24 June 2010, exercisable at 12.62c which represented a 50% premium to Kentor Gold‟s 5 day volume weighted average share price on the 5 days prior to approval from shareholders. These options were fully exercised on 6 October 2010.

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

REMUNERATION REPORT (AUDITED) (CONTINUED)

Remuneration of directors and executives

The directors and other key management personnel received the following compensation for their services to the company during the year.

Short-term Short- term Post employment Share- based Paymen t Total % total performanc e related %total issued as option s Salary & fees Bonus Superannuation Options Year ended 31 Dec 2010 $ $ $ $ $ % % Directors W.H.J. Barr - - 87,200 - 87,200 - - S. J. Milroy 268,000 100,000 24,000 - 392,000 25.5 - A.E. Daley 54,500 - - - 54,500 - - H. McKinnon 184,405 60,000 - - 244,405 24.5 - J C Taylor 54,500 - - 39,144 93,644 - 41.8 Other executives G Cordingley 207,160 - - 36,896 244,056 - 15.1 G Kelly 148,509 - 13,366 39,818 201,693 - 19.7 K Russell 128,333 - - 39,436 167,769 - 23.5 1,045,407 160,000 124,566 155,294 1,485,267 8.9 8.7 Short-term Post employment Share- based Payment Total % total performance related %total issued as options Salary & fees Superannuation Options Year ended 31 Dec 2009 $ $ $ $ % % Directors W.H.J. Barr - 87,200 49,849 137,049 - 36.4 S. J. Milroy 204,750 22,750 111,625 339,125 - 32.9 A.E. Daley 54,500 - 49,849 104,349 - 47.8 H. McKinnon 162,677 - 59,412 222,089 - 26.8 J C Taylor 23,293 - - 23,293 - - Other executives K. Anderson** 91,711 - - 91,711 - - 536,931 109,950 270,735 917,616 - 29.5	Short-term Short- term Post employment Share- based Paymen t Total % total performanc e related %total issued as option s Salary & fees Bonus Superannuation Options Year ended 31 Dec 2010 $ $ $ $ $ % % Directors W.H.J. Barr - - 87,200 - 87,200 - - S. J. Milroy 268,000 100,000 24,000 - 392,000 25.5 - A.E. Daley 54,500 - - - 54,500 - - H. McKinnon 184,405 60,000 - - 244,405 24.5 - J C Taylor 54,500 - - 39,144 93,644 - 41.8 Other executives G Cordingley 207,160 - - 36,896 244,056 - 15.1 G Kelly 148,509 - 13,366 39,818 201,693 - 19.7 K Russell 128,333 - - 39,436 167,769 - 23.5 1,045,407 160,000 124,566 155,294 1,485,267 8.9 8.7 Short-term Post employment Share- based Payment Total % total performance related %total issued as options Salary & fees Superannuation Options Year ended 31 Dec 2009 $ $ $ $ % % Directors W.H.J. Barr - 87,200 49,849 137,049 - 36.4 S. J. Milroy 204,750 22,750 111,625 339,125 - 32.9 A.E. Daley 54,500 - 49,849 104,349 - 47.8 H. McKinnon 162,677 - 59,412 222,089 - 26.8 J C Taylor 23,293 - - 23,293 - - Other executives K. Anderson** 91,711 - - 91,711 - - 536,931 109,950 270,735 917,616 - 29.5	Short-term Short- term Post employment Share- based Paymen t Total % total performanc e related %total issued as option s Salary & fees Bonus Superannuation Options Year ended 31 Dec 2010 $ $ $ $ $ % % Directors W.H.J. Barr - - 87,200 - 87,200 - - S. J. Milroy 268,000 100,000 24,000 - 392,000 25.5 - A.E. Daley 54,500 - - - 54,500 - - H. McKinnon 184,405 60,000 - - 244,405 24.5 - J C Taylor 54,500 - - 39,144 93,644 - 41.8 Other executives G Cordingley 207,160 - - 36,896 244,056 - 15.1 G Kelly 148,509 - 13,366 39,818 201,693 - 19.7 K Russell 128,333 - - 39,436 167,769 - 23.5 1,045,407 160,000 124,566 155,294 1,485,267 8.9 8.7 Short-term Post employment Share- based Payment Total % total performance related %total issued as options Salary & fees Superannuation Options Year ended 31 Dec 2009 $ $ $ $ % % Directors W.H.J. Barr - 87,200 49,849 137,049 - 36.4 S. J. Milroy 204,750 22,750 111,625 339,125 - 32.9 A.E. Daley 54,500 - 49,849 104,349 - 47.8 H. McKinnon 162,677 - 59,412 222,089 - 26.8 J C Taylor 23,293 - - 23,293 - - Other executives K. Anderson** 91,711 - - 91,711 - - 536,931 109,950 270,735 917,616 - 29.5
	536,931 109,950 270,735	917,616 - 29.5

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

**Company secretary Fees paid to Andersson Lyne Pty Ltd, a company controlled by Kylie Anderson.

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

REMUNERATION REPORT (AUDITED) (CONTINUED)

Options granted as part of remuneration

Executive options

4,000,000 options over unissued shares of the company were granted during the year.

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

Balance at beginning of year - granted - exercised Balance at end of year	2010 2009 Number of options Weighted average exercise price Number of options Weighted average exercise price 8,800,000 $0.25 3,800,000 $0.37 4,000,000 $0.17 5,000,000 $0.16 (1,000,000) $0.13 - -
	11,800,000 $0.15 8,800,000 $0.25

Options held at the beginning and end of the reporting year are as follows:-

No. of options	Grant date	Vesting date	Expiry date	Weighted average	Fair value at
				exercise price	grant date
At 31 Dec 2010				$	$
300,000	1 Dec 2004	1 Dec 2004	n/a*	0.6058	0.0294
300,000	1 Dec 2004	1 Dec 2004	n/a*	0.7308	0.0216
300,000	1 Dec 2004	1 Dec 2004	n/a*	0.8558	0.0162
1,000,000	30 May 2008	30 May 2008	n/a*	0.1808	0.028
950,000	30 May 2008	30 May 2008	n/a*	0.2308	0.02
950,000	30 May 2008	30 May 2008	n/a*	0.2808	0.011
1,500,000	11 Sep 2009	11 Sep 2009	11 Sep 2014	0.1176	0.0539
3,500,000	11 Sep 2009	11 Sep 2009	11 Sep 2014	0.1449	0.0499
1,000,000	4 Jun 2010	4 Jun 2010	4 Jun 2015	0.1818	0.0369
1,000,000	4 Jun 2010	4 Jun 2010	4 Jun 2015	0.1568	0.0394
1,000,000	4 Jun 2010	4 Jun 2010	4 Jun 2015	0.1533	0.0398

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

The fair value of the options was determined using a binomial model. Where relevant, the expected life used in the model has been adjusted based on management‟s best estimate for the effects of nontransferability, exercise restrictions and behavioural considerations.

1,000,000 options were exercised during the reporting period by Mr John Taylor. 1,000,000 shares were issued at the exercise price of these options and $0.1262 was paid per share. No amount remains unpaid. The value of the options on the date they were exercised was $0.0238. This value has been determined as the intrinsic value at exercise date. i.e. the market value of the shares on exercise date over the exercise price of the options.

This is the end of the audited remuneration report.

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

INDEMNIFICATION 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 in this report as the insurance policy prohibits the disclosure.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to 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 party of those proceedings.

No proceedings have been brought or intervened in on behalf of the company with leave to the court under section 237 of the Corporations Act 2001.

AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES

The auditor‟s independence declaration is included on page 13 of the financial report.

Non-audit services

No non-audit services were provided by the entity‟s auditor, BDO Audit (QLD) Pty Ltd.

This report is made in accordance with a resolution of the directors.

On behalf of the Board,

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WJ Barr AM Chairman Melbourne Dated 30[th] March 2011

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Tel: +61 7 3237 5999 Level 18, 300 Queen St Fax: +61 7 3221 9227 Brisbane QLD 4000, www.bdo.com.au GPO Box 457 Brisbane QLD 4001 Australia

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DECLARATION OF INDEPENDENCE BY A J WHYTE TO THE DIRECTORS OF KENTOR GOLD LIMITED

As lead auditor of Kentor Gold Limited for the year ended 31 December 2010, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

• the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

• any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Kentor Gold Limited and the entities it controlled during the period.

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A J Whyte Director

BDO Audit (QLD) Pty Ltd

Brisbane: 30 March 2011

BDO Audit (QLD) Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (QLD) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

13

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

DIRECTORS’ DECLARATION

The directors of the company declare that:

1. The financial statements, comprising the statement of comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows and accompanying notes, are in accordance with the Corporations Act 2001 and:

2. (a) comply with Accounting Standards and the Corporations Regulations 2001; and

3. (b) give a true and fair view of the consolidated entity‟s financial position as at 31 December 2010 and of its performance for the year ended on that date.

4. The company has included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards.

5. In the Directors‟ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

6. The remuneration disclosures included in pages 6 to 11 of the directors‟ report (as part of the audited Remuneration Report), for the year ended 31 December 2010, comply with section 300A of the Corporations Act 2001.

7. The Directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of Directors.

On behalf of the Board

==> picture [116 x 76] intentionally omitted <==

W J Barr AM

Chairman

Melbourne 30[th] March 2011

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DEC 2010

Note Revenue from continuing operations 2 Foreign exchange gains/(losses) Employee benefits expense Depreciation and amortisation expense Office expenses Travel related expenses Corporate expenses Impairment of exploration and evaluation costs 2 Due diligence costs Facility costs 2 Other expenses Loss before income tax expense 2 Income tax expense 3 Net loss from continuing operations Other comprehensive income Change in fair value of cash flow hedges 21d) Foreign currency translation differences Other comprehensive income for the year Total comprehensive income for the year Net loss attributable to: Non-controlling interest Owners of Kentor Gold Limited Total comprehensive income for the year attributable to: Non-controlling interest Owners of Kentor Gold Limited Basic and diluted earnings per share (cents per share) 4	Consolidated 2010 2009 $ $ 662,204 70,711 (12,882) (7,974) (1,277,139) (918,848) (53,626) (53,971) (76,172) (81,538) (155,867) (126,921) (1,355,316) (698,644) (4,069,503) (1,043,817) - (630,082) - (1,934,408) (3,470) 1,789
	(6,487,708) (5,423,704) - -
	(6,487,708) (5,423,704)
	(434,483) - (2,233,986) (945,178)
	(2,668,469) (945,178)
	(9,156,177) (6,368,882)
	(91,267) - (6,396,441) (5,423,704)
	(6,487,708) (5,423,704)
	(538,065) - (8,618,112) (6,368,882)
	(9,156,177) (6,368,882)
	(1.21) (4.19)

This financial statement should be read in conjunction with the accompanying notes.

15

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080 STATEMENT OF FINANCIAL POSITION AS AT 31 DEC 2010

STATEMENT OF FINANCIAL POSITION AS AT 31 DEC 2010
Current assets Note Cash and cash equivalents 15(b) Trade and other receivables 5 Prepayments Inventory Total current assets Non-current assets Property, plant and equipment 6 Exploration and evaluation assets 7 Other non-current assets 9 Total non-current assets Total assets Current liabilities Trade and other payables 10 Total current liabilities Non-current liabilities Other long-term liabilities 11 Total non-current liabilities Total liabilities Net assets Equity Parent entity interest Contributed Equity 12 Reserves 13 Accumulated losses Total parent entity interest Non-controlling interests 14 Total equity	Consolidated 2010 2009 $ $ 71,371,022 13,094,590 972,609 138,309 216,650 21,870 380,484 216,688
	72,940,765 13,471,457
	16,890,407 6,462,791 12,773,258 17,740,501 524,691 633,129
	30,188,356 24,836,421
	103,129,121 38,307,878
	(1,984,116) (963,826)
	(1,984,116) (963,826)
	- (266,277)
	- (266,277)
	(1,984,116) (1,230,103)
	101,145,005 37,077,775
	122,109,423 49,041,310 (566,025) 1,500,354 (22,314,130) (15,917,689)
	99,229,268 34,623,975 1,915,737 2,453,800
	101,145,005 37,077,775

This financial statement should be read in conjunction with the accompanying notes.

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DEC 2010

Note Cash flows from operating activities Receipts in the course of operations Payments to suppliers and employees Interest received Net cash used in operating activities 15(a) Cash flows from investing activities Purchase of plant and equipment Payment for exploration costs Payment for mine development Purchase of Subsidiary Repayment of subsidiary loan on acquisition Proceeds from Farm-in Net cash used in investing activities Cash flows from financing activities Proceeds from issue of ordinary shares Payment of share issue costs Net cash provided by financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on the balance of cash held in foreign currencies Cash and cash equivalents at the end of the financial year 15(b)	Consolidated 2010 2009 $ $ 171,019 17,842 (3,217,971) (2,036,417) 497,959 50,004
	(2,548,993) (1,968,571)
	(357,786) (14,792) (1,207,412) (1,474,145) (10,231,941) - - (1,986,810) - (15,085,484) - 113,984
	(11,797,139)(18,447,247)
	77,843,611 34,121,000 (4,773,681) (1,775,997)
	73,069,930 32,345,003
	58,723,798 11,929,185 13,094,590 1,164,059 (447,366) 1,347
	71,371,022 13,094,590

This financial statement should be read in conjunction with the accompanying notes.

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 052 658 080

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DEC 2010

Consolidated Balance at 1 January 2009 Loss for the year Foreign currency translation Total comprehensive income for the year Issue of share capital Cost of share capital issue Share-based payments Non-controlling interest on acquisition of subsidiary Balance at 31 Dec 2009 Loss for the year Foreign currency translation Hedge revaluation Total comprehensive income for the year Issue of share capital Cost of share capital issue Share-based payments Balance at 31 Dec 2010	Contributed equity Accumulated losses Foreign currency translation reserves Share-based payments reserve Hedge reserve Total parent equity Non- controlling interest Total equity $ $ $ $ $ $ $ $
	17,366,969 (10,493,985) (573,778) 143,503 - 6,442,711 - 6,442,711 - (5,423,704) - - - (5,423,704) - (5,423,704) - - (945,178) - - (945,178) - (945,178)
	- (5,423,704) (945,178) - - (6,368,882) - (6,368,882)
	34,121,000 - - - - 34,121,000 - 34,121,000 (2,446,659) - - - - (2,446,659) - (2,446,659) - - - 2,875,805 - 2,875,805 - 2,875,805 - - - - - - 2,453,800 2,453,800
	49,041,310 (15,917,689) (1,518,956) 3,019,308 - 34,623,975 2,453,800 37,077,775
	- (6,396,441) - - - (6,396,441) (91,267) (6,487,708) - - (1,787,188) - - (1,787,188) (446,798) (2,233,986) - - - - (434,483) (434,483) - (434,483)
	- (6,396,441) (1,787,188) - (434,483) (8,618,112) (538,065) (9,156,177)
	77,843,611 - - - - 77,843,611 - 77,843,611 (4,775,498) - - - - (4,775,498) - (4,775,498) - - - 155,294 - 155,294 - 155,294
	122,109,423 (22,714,130) (3,306,144) 3,174,602 (434,483) 99,229,268 1,915,737 101,145,005

This financial statement should be read in conjunction with the accompanying notes.

18

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

Note Contents

1. Summary of significant accounting policies

2. Revenue and expenses

3. Income tax 4. Earnings per share

4. Trade and other receivables –current

5. Property, plant and equipment

6. Exploration and evaluation assets

7. Subsidiaries

8. Other non-current assets

9. Trade and other payables – current

10. Other long-term liabilities 12. Contributed equity 13. Reserves

11. Non-controlling interest

12. Notes to the statement of cash flows

13. Share based payments

14. Key management personnel

15. Auditor‟s remuneration

16. Related party disclosures

17. Segment information

18. Financial instruments 22. Commitment for expenditure 23. Contingent liabilities and contingent assets 24. Subsequent events 25. Parent entity information

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KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

Kentor Gold Limited is a listed public company, limited by shares, incorporated and domiciled in Australia.

1. Summary of significant accounting policies

Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report covers the consolidated entity, Kentor Gold Limited, and its subsidiaries. Separate financial statements for Kentor Gold Limited as an individual entity are no longer presented as a consequence of a change in the Corporations Act 2001. However, limited financial information for Kentor Gold Limited as an individual entity is included in Note 25.

Accounting Standards include Australian equivalents to International Financial Reporting Standards („A-IFRS‟). Compliance with A-IFRS ensures that the financial statements and notes comply with International Financial Reporting Standards („IFRS‟).

The financial statements were authorised for issue by the directors on 30 March 2011.

Basis of preparation

The financial report has been prepared on a historical cost basis. The financial report is presented in Australian dollars. The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

(a) Adoption of new and revised Accounting Standards

No new or revised Australian Accounting Standards that have been issued but are not yet effective have been applied in the preparation of this financial report. Such standards are not expected to have a material impact on the company‟s financial report on initial application.

(b) Principles of consolidation

The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the consolidated entity, being the company (the parent entity) and its subsidiaries as defined in Accounting Standard AASB 127 Consolidated and Separate Financial Statements . A list of subsidiaries appears in note 9(i) to the financial statements. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the group.

In the company‟s financial statements, investments in subsidiaries are carried at cost less any impairment.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the group‟s equity. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the minority‟s share of changes in equity since then. Losses applicable to the minority in excess of the minority‟s interest in the subsidiary‟s equity are allocated against the interests of the group except to the extent that the minority has a binding obligation and is able to make additional investments to cover the losses.

The consolidated financial statements include the information and results of each subsidiary from the date on which the company obtains control and until such time as the company ceases to control such entity.

In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealised profits arising within the consolidated entity are eliminated in full.

(c) Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the purchase method.

On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. If, after reassessment, the fair values of the identifiable net assets acquired exceed the cost of acquisition, the deficiency is credited to profit and loss in the period of acquisition.

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KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

1. Summary of significant accounting policies (continued)

(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

Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset‟s net carrying amount.

Other income

Other revenue is recognised at the completion of the transaction when the company‟s right to receive payment has been established

(e) Income tax

Current tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax

Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and joint ventures except where the consolidated entity is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the consolidated entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

The Company is not consolidated for tax purposes.

(f) Share-based payments

Equity settled share-based payments with employees and directors are measured at the fair value of the equity instrument at the grant date. Fair value is measured by use of a binomial model. The expected life used in the model has been adjusted, based on management‟s best estimate, for the effects of nontransferability, exercise restrictions, and behavioural considerations. The fair value determined at the grant date of the share-based payments is expensed on a straight line basis over the vesting period with a corresponding increase in equity.

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KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

1. Summary of significant accounting policies (continued)

(f) Share-based payments

No expense is recognised for awards that do not ultimately vest because internal conditions were not met. An expense is still recognised for options that do not ultimately vest because a market condition was not met. Where options are cancelled, they are treated as if it had vested on the date of cancellation and any unrecognised expenses are taken immediately to the income statement. However, if new options are substituted for the cancelled options and designated as a replacement on grant date, the combined impact of the cancellation and replacement option are treated as if they were a modification.

Equity settled share-based payment transactions with other parties are measured at fair value of the goods and services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date goods or services were obtained.

(g) Goods and services tax (GST) and value added tax (VAT)

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

• where the GST and VAT incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST and VAT 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 and VAT included.

The net amount of GST and VAT 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 Cashflows on a gross basis and the GST and VAT 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 and VAT recoverable from, or payable to, the taxation authority.

(h) Foreign currency

Foreign currency transactions and balances

All foreign currency transactions during the financial year are brought to account using the exchange rate in effect at the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at reporting date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.

Foreign operations

On consolidation, the assets and liabilities of the consolidated entity‟s overseas operations are translated at exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any, are recognised in the foreign currency translation reserve, and recognised in profit or loss on disposal of the foreign operation.

Functional Currency

The functional currency of the group and the parent entity is Australian Dollars. The subsidiaries domiciled in the Kyrgyz Republic have Soms as their functional currency. The majority of transactions in the subsidiaries are transacted in the Kyrgyz Som.

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KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

1. Summary of significant accounting policies (continued)

(i) Cash and cash equivalents

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

The consolidated entity uses cash held in foreign currencies to hedge against foreign exchange risk arising on highly probably capital expenditure that will be settled in a foreign currency.

The consolidated entity documents at the time of acquiring the foreign currency the hedging relationship between hedging instrument and hedged item, including the risk management objectives and strategies for undertaking various hedge transactions. The consolidated entity also documents its assessment, both at inception and periodically, of whether the hedging instruments have been and will continue to be highly effective in offsetting changes cash flows of hedged items.

The gains or losses in respect of hedge transactions which relate to future purchases are recognised in comprehensive income and included in the measurement of the purchase to which they relate when the anticipated transaction occurs. Any gains or losses on the hedge transaction after that date are included in the profit and loss.

Hedge accounting is discontinued when the hedging instrument is sold or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity is kept in equity and is recognised when the forecast transaction is ultimately recognised. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the profit and loss for the year.

(j) Financial assets

Financial Assets

Financial assets are recognised and derecognised on trade date where purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs.

Financial assets are classified into the following specified categories: „available-for-sale‟ financial assets, and „loans and receivables‟. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Available-for-sale financial assets

Interests in subsidiaries held by the parent entity are classified as being available-for-sale and are measured at cost less impairment.

Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as „loans and receivables‟. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate.

Intercompany loan receivable

The carrying value of the inter company loan receivable is assessed with reference to the net assets of the subsidiary company that support the recovery of the loan amount.

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KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

1. Summary of significant accounting policies (continued)

(j) Financial assets (continued)

Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the financial asset have been impacted. Evidence of impairment may include balances outstanding for more than 60 days. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset‟s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Receivables are deemed to be uncollectible when there is no expectation of recovering further payment. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss as impairment looses which is included as a separate line in the Statement of Financial Performance.

With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss is recognised directly in equity.

(k) Exploration and evaluation assets

The consolidated entity applies AASB 6 Exploration For and Evaluation of Mineral Resources. 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 yet 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.

Farm In

Where the company is earning equity in a third party company through exploration expenditure (Farm-in), that expenditure is recorded as capitalised exploration costs until the requirements for the transfer of equity is met. When the requirements for transfer of equity are met, the capitalised exploration costs will be recognised as an investment in a subsidiary in the parent entity.

Farm Out

Where a third party is earning equity in one of the entity‟s subsidiaries, that expenditure is recorded as capitalised exploration expenditure and a long term liability until the requirements for transfer of equity are met. When the requirements for transfer of equity are met, the capitalised long term liability will be transferred to proceeds on sale of equity interest in a subsidiary.

24

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

1. Summary of significant accounting policies (continued)

(l) Significant accounting judgement, estimates and assumptions

The carrying amount of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of certain assets and liabilities made within the next annual reporting period are:

Exploration and Evaluation

The Board of Directors determine when an area of interest should be abandoned. When a decision is made that an area of interest is not commercially viable, all costs that have been capitalised in respect of that area of interest are written off. The Director‟s decision is made after considering the likelihood of finding commercially viable outcomes.

Going concern

Refer to note 1(u)

VAT Paid

The recovery of VAT paid is dependent on the Group incurring sufficient tax liabilities in the Kyrgyz Republic against which the VAT paid can be offset. Refer to note 10 for further detail.

(m) Impairment of non-financial assets

At each reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Goodwill, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired. An impairment of goodwill is not subsequently reversed.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

25

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

1. Summary of significant accounting policies (continued)

(n) Property, plant and equipment

i) Acquisition

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

ii) Depreciation

• Property, plant & equipment and computer 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 (2009: 3-6 years).

(o) 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.

(p) Payables

Trade payables and other accounts payable are recognised when the consolidated entity becomes obliged to make future payments resulting from the purchase of goods and services.

(q) Issued capital

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

Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued.

(r) Employee benefits

Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured reliably.

Provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the consolidated entity in respect of services provided by employees up to reporting date.

26

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

1. Summary of significant accounting policies (continued)

(s) 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.

(t)

Comparatives

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

2. Revenue and expenses (a) Revenue Interest –other persons/corporations Other revenue Total revenue (b) Profit/(loss) before income tax Loss before income tax includes the following specific expenses Depreciation and amortisation Operating lease payments – minimum lease payments Defined contribution superannuation expense (c) Significant items Due diligence costs Facility cost Impairment of exploration and evaluation costs	Consolidated 2010 2009 $ $ 662,204 50,004 - 20,707
	662,204 70,711
	(53,626) (53,971) (66,171) (40,881) (37,365) (22,750) - (630,082) - (1,934,408) (4,069,503) (1,043,817)

In the current year, the Group recognised an impairment loss of $3,764,347 in relation to the Savoyardy Project. The other impairment expenses relate to other exploration expenditure previously capitalised on other interests in the Kyrgyz Republic.

In the prior year, the facility costs is the fair value of the 36,424,126 options issued to Macquarie Bank Limited in consideration for providing a Committed Letter of Offer for a facility of USD$15,000,000 to help fund the acquisition of the Andash Project. This facility was not drawn upon as the Company raised sufficient share capital to fund the acquisition.

27

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

3. Income tax

3. Income tax (a) Income tax recognised in profit and loss Current tax expense (b) Reconciliation of prima facie income tax to income tax expense Loss before income tax expense Income tax expense/(benefit) calculated at 30% Effect of expenses that are not deductible in determining taxable profit or loss Effect of unused tax losses and tax offsets not recognised as deferred tax assets (c) Gross tax losses not recognised Prior year tax losses bought forward Current year tax losses Closing balance	Consolidated 2010 2009 $ $ - - (6,487,708) (5,423,704) (1,946,312) (1,627,111) 125,807 974,688 1,820,505 652,423
	- -
	5,013,343 4,360,920 1,820,505 652,423
	6,833,848 5,013,343

This future income tax benefit will only be obtained if:

(i) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised; (ii) the conditions for deductibility imposed by tax legislation continue to be complied with; and (iii) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.

		Consolidated
	2010	2009
4. Earnings per share	$	$
Loss attributable to the owners of Kentor Gold Limited	6,396,441	5,423,704
Basic and diluted loss per share (cents per share)	1.21	4.19
Weighted average number of ordinary shares used in the calculation of basic and
diluted loss per share	530,169,679	129,504,695

At 31 December 2010, the company had on issue 59,611,358 options (2009: 56,611,358 options) over unissued capital and has incurred a net loss. These options are anti dilutive as the group is in a loss situation, therefore the diluted loss per share is the same as the basic loss per share.

5. Trade and other receivables – current GST receivable (net) Other receivables	Consolidated 2010 2009 $ $ 735,557 109,809 237,052 28,500
	972,609 138,309

(i) Other receivables are non interest bearing and have repayment terms between eight and ninety days. (ii) No receivables are past due or impaired at year end.

28

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

6. Property, plant and equipment Year ended 31 December At 1 January, net of accumulated depreciation Additions Transfers from exploration Disposals Acquisitions through business combinations Effect of movement in exchange rate Depreciation At 31 December, net of accumulated depreciation At 31 December Cost Accumulated depreciation Net carrying amount	Consolidated Plant & Equipment 2010 Mine Development 2010 Total property plant and equipment 2010 Total property plant and equipment 2009 $ $ $ $ 6,462,791 - 6,462,791 223,718 343,861 10,509,663 10,853,524 1,954 - 779,031 779,031 - - - - (13,014) - - - 6,420,572 (1,151,313) - (1,151,313) (116,467) (53,626) - (53,626) (53,971)
	5,601,713 11,288,694 16,890,407 6,462,791
	5,894,871 11,288,694 12,183,565 6,722,418 (293,158) - (293,158) (259,627)
	5,601,713 11,288,694 16,890,407 6,462,791

The transfer from exploration in the current year of $779,031 relates to amounts capitalised in the prior year relating to the Andash feasibility study. Given the development of this project was approved during the current year this balance has been reclassified to mine development.

There was no mine development in the year ended 31 December 2009.

7. Exploration and evaluation assets Deferred exploration and evaluation assets Exploration tenements Deferred exploration and evaluation assets Balance at beginning of the year Effect of movement in exchange rate Current year expenditure Transfers to mine development Acquisition of exploration and evaluation assets through business combinations Impairment of area of interest Balance at end of the year	Consolidated 2010 2009 $ $ 5,515,999 10,483,242 7,257,259 7,257,259
	12,773,258 17,740,501
	10,483,242 4,717,880 (871,826) (578,993) 753,117 1,967,657 (779,031) - - 5,420,515 (4,069,503) (1,043,817)
	5,515,999 10,483,242

29

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

7. Exploration and evaluation assets (continued)

7. Exploration and evaluation assets (continued) Exploration tenements Balance at beginning of the year Acquisition of exploration tenements through business combinations Balance at end of the year	Consolidated 2010 2009 $ $ 7,257,259 - - 7,257,259
	7,257,259 7,257,259

Ultimate recovery of the exploration and evaluation assets is dependent upon success in development, sale or farm-out of the exploration interests.

The majority of the impairment expense recognised for the year ended 31 December 2010 represents a writedown of $3,764,347 of the Savoyardy project expenditure, which was discontinued in the current year.

The impairment recognised for the year ended 31 December 2009 represents a write-down of the Akbel area of interest.

8. Subsidiaries

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in

accordance with the accounting policy described in note 1(b).

• (i) Details of investment in foreign controlled entities are:

	Country of	2010	2009
	Incorporation	% Held	% Held
CJSC Kentor	Kyrgyz Republic	80%	80%
CJSC Kyldoo	Kyrgyz Republic	80%	80%
CJSC Epic	Kyrgyz Republic	80%	80%
Kaldora Company	British Virgin Islands	100%	100%
Tatianna Limited Company	British Virgin Islands	100%	-
Andash Mining Company LLC	Kyrgyz Republic	80%	80%

On 28 October 2010, Kentor Gold Limited incorporated Tatianna Limited Company in the British Virgin Islands. This company was dormant in the current year.

In the prior year, on 22 Dec 2009, Kentor Gold Limited acquired 100% of the issued capital of Kaldora Company. This company holds an 80% participation in the Andash Mining Company LLC.

• (ii) Details of investment in domestic controlled entity are:

Country of 2010 2009 Incorporation % Held % Held Dunmarra Uranium Ltd Australia 100% 100% 9. Other non-current assets VAT paid	Consolidated 2010 2009 $ $ 524,691 633,128
	524,691 633,128

VAT paid relates to value added tax (VAT) paid in the Kyrgyz Republic. Under the Kyrgyz Tax Code, the VAT paid can be claimed as an offset to VAT collected or other taxes such as taxes imposed on profit and service taxes. If sufficient VAT is not collected in the future or sufficient other taxes are not incurred in the Kyrgyz Republic, the VAT paid will not be recovered and will need to be written off.

30

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

Notes to the financial statements for the year ended 31 December 2010
10. Trade and other payables - current Unsecured trade payables Employee benefits	Consolidated 2010 2009 $ $ 1,816,744 881,252 167,371 82,574
	1,984,116 963,826

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

(ii) Contractual cashflows from trade and other payables approximate their carrying value.

11. Other long-term liabilities

Farm-in contribution

• 266,277

12. Contributed Equity

• (a) Issued and paid up capital

Ordinary shares fully paid

122,109,423 49,041,310

• (b) Movements in shares on issue

Details Beginning of the financial year Movements during the year:- Ordinary share issue on 20 July 2009 Ordinary share issue on 8 September 2009 Ordinary share issue on 22 September 2009 Rights issue on 30 October 2009 Ordinary share issue on 16 December 2009 Rights issue on 29 July 2010 Ordinary share issue on 4 August 2010 Share options exercised 6 October 2010 Rights issue on 15 November 2010 Ordinary share issue on 19 November 2010 Less: costs of share issues Closing balance

2010 2009 Number of Shares issued Issued capital $ Number of Shares issued Issued capital $ 393,011,481 49,041,310 95,088,129 17,366,969 - - 13,700,000 548,000 - - 12,450,000 498,000 - - 22,222,224 2,000,000 - - 34,166,512 3,075,000 - - 215,384,616 28,000,000 127,989,487 8,319,317 - - 54,951,722 4,231,283 - - 1,000,000 126,205 - - 398,097,356 51,752,656 - - 86,542,904 13,414,150 - - - (4,775,498) - (2,446,659)

1,061,592,950 122,109,423 393,011,481 49,041,310

(c) Terms and condition of issued capital

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.

Ordinary shares have no par value and the company does not have a limited amount of authorised capital.

31

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

12. Contributed Equity (continued)

(d) Share options

Options over ordinary shares

At the end of the financial year, there were 59,611,358 (31 Dec 2009: 56,611,358) unissued ordinary shares in respect of which the following options were outstanding:

Expiry date/Duration Unlisted options 31 May 2012 31 May 2012 31 May 2011 30 June 2011 21 Dec 2011 16 Dec 2012 Unlisted executive options 30 days after ceasing employment 30 days after ceasing employment 30 days after ceasing employment 30 days after ceasing employment 30 days after ceasing employment 30 days after ceasing employment The earlier of 11 Sep 2014 or 30 days after ceasing employment The earlier of 11 Sep 2014 or 30 days after ceasing employment The earlier of 4 Jun 2015 or 30 days after ceasing employment The earlier of 4 Jun 2015 or 30 days after ceasing employment The earlier of 4 June 2015 or 30 days after ceasing employment TOTAL

Number Exercise price (*) 100,000 $0.5808 100,000 $0.7808 100,000 $0.9808 500,000 $0.1808 36,242,126 $0.1308 10,769,232 $0.1433 47,811,358 300,000 $0.6058 300,000 $0.7308 300,000 $0.8558 1,000,000 $0.1808 950,000 $0.2308 950,000 $0.2808 1,500,000 $0.1176 3,500,000 $0.1449 1,000,000 $0.1818 1,000,000 $0.1568 1,000,000 $0.1533 11,800,000 59,611,358

(*) the exercise price of unlisted share options was revised in light of the two rights issues during the 2010 financial year.

13. Reserves

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising on translation of the foreign controlled entities.

Share based payments reserve

The share-based payments reserve is used to recognise the fair value of options issued to employees or service providers.

Hedge reserve

The hedge reserve records gains and losses on hedging instruments that are recognised as cash flow hedges. The gains and losses are recognised in other comprehensive income and are included in the measurement of the purchase to which they relate when the associated hedged transaction is recognised.

32

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

14. Non-controlling interests

14. Non-controlling interests Non-controlling interest in: Share Capital Foreign currency translation reserve Retained Earnings 15. Notes to the statement of cash flows (a) Reconciliation of profit/(loss) after tax to net cash flows from operations Net profit/(loss) for the year Non cash flows in operating result Depreciation expense Impairment of exploration and evaluation assets Share based payments Currency translation differences Change in operating assets and liabilities (Increase)/Decrease in receivables Increase/(Decrease) in payables (Increase)/Decrease in VAT paid (Increase)/Decrease in inventory Net cash used in operating activities (b) Cash on hand and at call Term deposits (c) Financing facility The group has no available finance facilities at balance date (2009: NIL). (d) Non-cash financing and investing activities Capital raising costs partially satisfied by issue of unlisted options	Consolidated 2010 2009 $ $ 5 5 (446,798) - 2,362,528 2,453,795
	1,915,736 2,453,800
	Consolidated 2010 2009 $ $ (6,487,708) (5,423,704) 53,626 53,971 4,069,503 1,204,127 155,294 2,205,143 12,882 (152,335) (724,022) (103,167) 793,886 272,835 (197,929) (25,441) (224,525) - (2,548,993) (1,968,571) 35,411,403 587,834 35,959,619 12,506,756 71,371,022 13,094,590 - 670,662 - 670,662

(e) Acquisition of a controlled entity

In the prior year, effective 22 Dec 2009, the parent entity acquired 100% of the share capital of Kaldora Company, a company incorporated in the British Virgin Islands, with an 80% controlling interest in Andash Mining Company LLC, a company incorporated in the Kyrgyz Republic. Andash Mining Company LLC has rights to the tenements covering the Andash Mining project, a Gold-Copper project in the Kyrgyz Republic. :

33

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

15. Notes to the statement of cash flows

(e) Acquisition of a controlled entity (continued)

The acquisition details are Consideration: Cash The net assets of Kaldora Company at acquisition date are: Cash and cash equivalents Trade and other Receivable Prepaid tax Inventory Plant and Equipment Exploration assets Exploration Tenement Non-current Receivables Trade and other payables Other non-current liabilities Fair Value of Net Assets Acquired Net cash effect Cash included in the net assets acquired Cash consideration Net cash outflow	Consolidated 2010 2009 $ $ - 17,072,462
	- 120 - 508 - 70,163 - 176,060 - 4,116,414 - 5,403,864 - 7,257,259 - 72,405 - (23,709) - (622)
	- 17,072,462
	- 168 - (17,072,462)
	- (17,072,294)

16. Share based payments

Executive options

4,000,000 options over unissued shares of the company were granted during the year and 1,000,000 were exercised.

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

Balance at beginning of year - granted - exercised Balance at end of year (*)	2010 2009 Number of options Weighted average exercise price Number of options Weighted average exercise price 8,800,000 $0.25 3,800,000 $0.37 4,000,000 $0.17 5,000,000 $0.16 (1,000,000) $0.13 - -
	11,800,000 $0.15 8,800,000 $0.25

(*) the exercise price of unlisted share options was revised in light of the two rights issues during the 2010 financial year.

34

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

16. Share based payments (continued)

Executive options (continued)

Options held at the beginning and end of the reporting year:-

No. of options	Grant date	Vesting date	Expiry date	Weighted	Fair value at
				average	grant date
				exercise price **
At 31 Dec 2010				$	$
300,000	1 Dec 2004	1 Dec 2004	n/a*	0.6058	0.0294
300,000	1 Dec 2004	1 Dec 2004	n/a*	0.7308	0.0216
300,000	1 Dec 2004	1 Dec 2004	n/a*	0.8558	0.0162
1,000,000	30 May 2009	30 May 2009	n/a*	0.1808	0.028
950,000	30 May 2009	30 May 2009	n/a*	0.2308	0.02
950,000	30 May 2009	30 May 2009	n/a*	0.2808	0.011
1,500,000	11 Sep 2009	11 Sep 2009	11 Sep 2014	0.1176	0.0539
3,500,000	11 Sep 2009	11 Sep 2009	11 Sep 2014	0.1449	0.0499
1,000,000	4 Jun 2010	4 Jun 2010	4 Jun 2015	0.1818	0.0369
1,000,000	4 Jun 2010	4 Jun 2010	4 Jun 2015	0.1568	0.0391
1,000,000	4 Jun 2010	4 Jun 2010	4 Jun 2015	0.1533	0.0398
At 31 Dec 2009				$	$
300,000	1 Dec 2004	1 Dec 2004	n/a*	0.625	0.0294
300,000	1 Dec 2004	1 Dec 2004	n/a*	0.75	0.0216
300,000	1 Dec 2004	1 Dec 2004	n/a*	0.875	0.0162
1,000,000	30 May 2009	30 May 2009	n/a*	0.20	0.028
950,000	30 May 2009	30 May 2009	n/a*	0.25	0.02
950,000	30 May 2009	30 May 2009	n/a*	0.30	0.011
1,500,000	11 Sep 2009	11 Sep 2009	11 Sep 2014	0.137	0.0539
3,500,000	11 Sep 2009	11 Sep 2009	11 Sep 2014	0.164	0.0499

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

• ** The exercise price of unlisted share options was revised in light of the two rights issues during the 2010 financial year.

The fair value of the options were determined using a binomial model. Where relevant, the expected life used in the model has been adjusted based on management‟s best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations.

Key inputs used in the calculation of the value of options issued during the year ended 31 Dec 2010 are:

Spot Price $0.086 and $0.078 Deal date 4 June 2010 and 24 June 2010 Expiry date 4 June 2015 and 24 June 2015 Volatility 70% Risk free rate 4.50%

Expected volatility was determined based on historic volatility adjusted for any expected changes to future volatility based on publicly available information.

4,000,000 options were granted during the reporting year (2009: 5,000,000). 1,000,000 options were exercised during the reporting period (2009: nil).

35

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

17. Key management personnel

Information regarding the identity of Key Management Personnel and their compensation can be found in the audited Remuneration Report contained in the Directors‟ Report. The directors are the only key management personnel.

(a) Key management personnel compensation

Short-term employee benefits Post employment benefits Share-based payments	2010 2009 $ $ 721,405 445,220 111,200 109,950 39,144 270,735
	871,749 825,905

(b) Option holdings of directors

Directors A.E. Daley W.H. J Barr H. McKinnon S.J. Milroy J Taylor Total Directors A. E. Daley W.H. J Barr H. McKinnon S.J. Milroy Total

Opening balance 1 January 2010 Granted as remuneration Options exercised/ expired Net change- other Closing balance 31 Dec 2010 Vested and exercisable at 31 Dec 2010 Vested and un- exercisable at 31 Dec 2010 1,000,000 - - - 1,000,000 1,000,000 - 1,000,000 - - - 1,000,000 1,000,000 - 2,800,000 - - - 2,800,000 1,000,000 1,800,000 4,000,000 - - - 4,000,000 2,000,000 2,000,000 - 1,000,000 (1,000,000) - - - - 8,800,000 1,000,000 (1,000,000) - 8,800,000 5,000,000 3,800,000 Opening balance 1 January 2009 Granted as remuneration Options exercised/ expired Net change- other Closing balance 31 Dec 2009 Vested and exercisable at 31 Dec 2009 Vested and un- exercisable at 31 Dec 2009 - 1,000,000 - - 1,000,000 - 1,000,000 - 1,000,000 - - 1,000,000 - 1,000,000 1,800,000 1,000,000 - - 2,800,000 - 2,800,000 2,000,000 2,000,000 - - 4,000,000 - 4,000,000 -

3,800,000 5,000,000 - - 8,800,000 - 8,800,000

(c) Shareholdings of directors

31 Dec 2010 Ordinary Shares Directors W H J Barr A E Daley H McKinnon S J Milroy J C Taylor Total	Balance 1 January 2010 Granted as remuneration On exercise of options Net change- other Balance 31 Dec 2010 Held nominally at 31 Dec 2010 No. No. No. No. No. 954,666 - - 1,122,171 2,076,837 - 733,586 - - 1,739,432 2,473,018 - 2,064,627 - - 436,467 2,501,094 - 775,555 - - 469,873 1,245,428 - 1,076,666 - 1,000,000 1,923,340 4,000,006 -
	5,605,100 - 1,000,000 5,691,283 12,296,383 -

36

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

17. Key management personnel (continued)

(c) Shareholdings of directors (continued)

31 Dec 2009 Ordinary Shares Directors W H J Barr A E Daley H McKinnon S J Milroy J C Taylor Total	Balance 1 January 2009 Granted as remuneration On exercise of options Net change- other Balance 31 Dec 2009 Held nominally at 31 Dec 2009 No. No. No. No. No. 358,000 - - 596,666 954,666 - 381,470 - - 352,116 733,586 - 2,064,627 - - - 2,064,627 - 775,555 - - - 775,555 - - - - 1,076,666 1,076,666 -
	3,579,652 - - 2,025,448 5,605,100 -

All equity transactions with directors and other key management personnel 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.

(d) Other transactions and balances with key management personnel

In 2010, Kentor committed to purchase two 6MW Ball Mills from Outotec Pty Limited for €4,656,790 and €4,613,210 respectively. Mr John Taylor, a non-executive Director of Kentor was the Managing Director of Outotec (Australasia) Pty Ltd. This transaction occurred based on normal commercial terms.

There were no other transactions with key management personnel (2009: nil)

At year end, there was no outstanding amounts payable to key management personnel (2009: nil)

Director‟s fees payable to Andrew Daley are paid to Dalenier Enterprises Pty Ltd.

	Consolidated	Consolidated
	2010	2009
	$	$
18. Auditors’ remuneration
Amounts received or due and receivable by
BDO Audit (QLD) Pty Ltd for:
audit or review of the financial statements of the entity and any
other entity in the consolidated group	56,853	25,722
Remuneration of other auditors of subsidiaries
audit or review of the financial statements of subsidiaries	6,682	2,108

37

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

19. Related party disclosures

• (a) Information on transactions with key management personnel is disclosed in Note 17.

• (b) Ultimate parent:

• Kentor Gold Limited is the ultimate Australian parent company.

20. Segment information

Description of Segments

Operating segments have been determined based on reports reviewed by the chief operating decision makers being the executive directors. This has resulted in the recognition of the following reportable segments:

Development Projects

This segment consists of projects that are in the process of being developed. The Andash Mining project was the only project in this reportable segment for the year ended 31 December 2010.

Exploration Projects

This segment consists of projects that are still in the exploration and evaluation phase.

All projects for the above reportable segments are in the Kyrgyz Republic.

Information Provided to the Executive Directors

Segment information provided to the executive directors for the year ended 31 Dec 2010 is as follows:

Year ended 31 Dec 2010	Year ended 31 Dec 2010				Development Projects	Development Projects	Exploration Projects	Total
Segment Revenue						$	$	$
Total Segment Revenue						-	7,907	7,907
Result
Segment Result						-	(4,262,110)	(4,262,110)
Assets and Liabilities
Segment assets					29,280,629		1,480,678	30,761,307
Segment liabilities					(1,795,424)		(308)	(1,795,732)
Acquisition of plant and	equipment and expenditure			on	11,134,984		253,968	879,290
exploration
Year ended 31 Dec 2009
Revenue
Total Segment Revenue					-		20,707	20,707
Result
Segment Result					-	(1,043,817)		(1,043,817)
Assets and Liabilities
Segment assets				19,462,833			5,631,074	25,093,907
Segment liabilities					(30,085)		(276,811)	(306,896)
Acquisition of plant	and	equipment	and	19,098,346			1,439,495	20,537,841
expenditure on exploration

38

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

20. Segment information (continued)

Other Segment Information

Segments assets and liability amounts provided to the executive directors are measured in the same way that they are measured in the financial statements. Assets and liabilities are allocated based on the operations of the segment and the physical location of the assets.

Segment assets and liabilities reconcile to total assets and liabilities as follows.

egment and the physical location of the assets. egment assets and liabilities reconcile to total assets and liabilities as follows.
Segment Assets Cash Trade and other receivables Property, Plant and equipment Exploration and evaluation assets Total assets per statement of financial position Segment Liabilities Trade and other payables Total liabilities per statement of financial position	2010 2009 $ $ 30 761 307 25,093,906 71,360,800 13,035,661 947,318 133,615 59,697 44,695 - -
	103,129,121 38,307,878
	(1,795,732) (306,896) (188,384) (923,207)
	(1,984,116) (1,230,103)

21. Financial instruments

Management monitors and manages the financial risks relating to the operations of the group through regular reviews of the risks. These risks include market risk (including currency risk and commodity price risk), credit risk, liquidity risk and cash flow interest rate risk.

The primary responsibility for identification and control of financial risks rests with the Board. The Group‟s financial and commodity risk management program supports the achievement of the Company‟s objectives by enabling the identification and evaluation of risks, setting acceptable risk thresholds, identifying and mapping controls against these risks and implementing policies and procedures to manage and monitor the risks.

These written policies establish the financial and commodity risk management framework and define the procedures and controls for the effective management of the Group‟s risks that arise through the Company‟s current gold mining exploration and development activities and those risks which may arise through other mining activities in the future.

The policy ensures all financial and commodity risks are fully recognised and treated in a manner consistent with:

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• The Board‟s management philosophy;

• Commonly accepted industry practice and corporate governance; and

• Shareholders expectations of a gold producer

In December 2009, the Group increased its exposure to exchange rate risk through the acquisition of a controlling stake in the Andash copper- gold project in the Kyrgyz Republic. The risk management policies were revised to incorporate this development.

The policies are reviewed by the Board annually, at a minimum, as the Group‟s financial and commodity risks are likely to change over time.

There have been no other substantive changes in the Group‟s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from the previous period.

The Group‟s principle financial instruments comprise cash at bank, trade and other receivables, and trade and other payables.

39

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

21. Financial instruments (continued)

Exposure limits are reviewed by management on a continuous basis. The group does not enter into or trade financial instruments, for speculative purposes

(a) Capital risk management

The capital structure of the Group consists of equity as disclosed in the statement of financial position. The group manages its capital to ensure that entities in the group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the equity.

There are no externally imposed capital requirements.

(b) Categories of financial instruments

Categories of financial instruments
		Consolidated
	2010	2009
	$	$
Financial assets
Loans and receivables (including cash)	72,343,630	13,232,897
Financial liabilities
Measured at amortised cost	(1,816,744)	(881,252)

(c) Credit risk exposures

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group. Credit risk arises principally from cash on deposit and trade and other receivables. The objective of the entity is to minimize risk of loss from credit risk exposure.

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

There is no concentration of credit risk in trade and receivables as the Group did not have customers during the year.

At balance date the group has a material exposure of $71,363,275 to National Australia Bank Limited relating to funds on deposit and cash at bank (2009: $13,024,646). The group manages its credit risk associated with funds on deposit and cash at bank by only dealing with reputable financial institutions.

(d) Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in commodity prices (commodity price risk); foreign exchange rates (foreign exchange risk) or interest rates (interest rate risk).

The objective of market risk management is to manage and control risk exposure within acceptable parameters whilst optimising returns.

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KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

21. Financial instruments (continued)

(d) Market Risk – (continued)

• i) Foreign currency risk

Foreign currency risks arise from two areas:-

• The Group‟s investment in foreign controlled subsidiaries. The currencies in which these transactions are primarily denominated are Kyrgyz Soms and US Dollars. The Group‟s investments in subsidiaries are not hedged as those currency positions are considered to be long term in nature.

• The Group‟s development of the Andash copper-gold project in the Kyrgyz Republic. As a result of development activities, the parent entity enters into contracts for goods and services denominated in Euro and USD.

It is the policy of the Group to manage the foreign currency risk on highly probable forecast capital expenditure by utilising foreign currency hedging. To hedge its exposure to foreign currency risk on highly probable forecast capital expenditure, the Group purchases Euro and USD to match the currencies in which the Group expects to settle the highly probable forecast capital expenditure.

The cash flows associated with the highly probable forecast capital expenditure are expected to occur at various dates within eighteen months from the end of the reporting period. At the end of the reporting period, the foreign currency that was being held as a hedging instrument was:

	2010	2010	2009
	USD/Euro	$	USD/Euro	$
USD	5,000,000	4,919,807	-	-
Euro	4,000,000	5,215,804	-	-
Total		10,135,611		-

The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and the hedge reserve. When the highly probable forecast capital expenditure occurs, the amount of capital expenditure recognised is adjusted for the related amount deferred in the hedge reserve.

During the year ended 31 December 2010 there was a loss from a decrease in the fair value of the foreign currency held as hedging instruments of $434,483 (2009:Nil).

During the year ended 31 December 2010 no amount was reclassified from the hedge reserve and included in the acquisition cost of capital equipment (2009:Nil). There was no hedge ineffectiveness in the current or prior year.

There were no financial instruments with a material foreign currency exposure at the end of the preceding financial year.

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KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

21. Financial instruments (continued)

(d) Market Risk – (continued)

i) Foreign currency risk (continued)

			2010				2009
	AUD	USD	EUR	Kyrgyz	AUD	USD	EUR	Kyrgyz
				**SOM **				SOM
Consolidated
Cash at Bank	61,066,635	160,653	366	552,736	12,852,809	198,417	-	772,858
Cash set aside
as hedging	-	5,000,000	4,000,000	-	-	-	-	-
instrument
Trade and	947,318	-	-	25,291	133,615	-	-	184,931
other
receivables
Trade and	(1,717,426)	-	-	(283,239)	(923,208)	-	-	(1,600,448)
other payables

The Group‟s exposure to foreign currency risk at reporting date is as follows:

The Following significant exchange rates were applied during the year:-

Currency	Average	Rate	Reporting	Date	Spot
			Rate
	2010	2009	2010		2009
USD	0.928	0.7924	1.0163		0.8931
EUR	n/a	n/a	0.7669		n/a
Kyrgyz SOM	43.132	34.156	47.892		39.402

A +/-10% change in the USD and EURO exchange rate at reporting date would have increased/decreased the loss and other comprehensive income as follows:-

		Increase/(decrease)	Increase/(decrease)	Increase/(decrease)	Increase/(decrease)
		in	net loss	in other	comprehensive income
		2010	2009	2010	2009
USD –	10%	-	(24,685)	564,209	-
USD +	10%	-	24,685	(461,626)	-
EUR –	10%	-	-	579,587	-
EUR +	10%	-	-	(474,207)	-

The effect of a 10% change in the other significant exchange rates were not material in the either the current or prior year.

(e) Interest rate risk

The Group has established a number of policies and processes for managing interest rate risk. These include monitoring risk exposure continuously and utilising fixed rate facilities where required.

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

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KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

21. Financial instruments (continued)

(e) Interest rate risk (continued)

CONSOLIDATED Weighted average interest rate 31 December 2010 Financial assets Cash and deposits 5.99% Trade and other receivables N/A Financial liabilities Trade and other payables N/A	CONSOLIDATED Weighted average interest rate 31 December 2010 Financial assets Cash and deposits 5.99% Trade and other receivables N/A Financial liabilities Trade and other payables N/A	Floating interest rate $ Fixed interest maturing in: Non-interest bearing $ 1 year or less $ over 1 to 5 years $ 5 years or more $ 35,411,403 35,959,618 - - - - - - - 972,609	Total $ 71,371,022 972,609
		35,411,403 35,959,618 972,609	72,343,631
		- - - - (1,984,116)	(1,984,116)
		35,411,403 35,959,618 - - (1,011,507)	70,359,515

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

CONSOLIDATED Weighted average interest rate 31 December 2009 Financial assets Cash and deposits 4.89% Trade and other receivables N/A Financial liabilities Trade and other payables N/A	CONSOLIDATED Weighted average interest rate 31 December 2009 Financial assets Cash and deposits 4.89% Trade and other receivables N/A Financial liabilities Trade and other payables N/A	Floating interest rate $ Fixed interest maturing in: Non-interest bearing $ 1 year or less $ over 1 to 5 years $ 5 years or more $ 587,834 12,506,756 - - - - - - - 138,309	Total $ 13,094,590 138,309
		587,834 12,506,756 138,309	13,232,899
		- - - - (963,826)	(963,826)
		587,834 12,506,756 - - (825,518)	12,269,073

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

The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date.

At 31 December 2010, if interest rates had moved, as illustrated in the table below, with all other variables held constant, net loss and other comprehensive income would have been affected as follows:

					Other
					comprehensive
			Net loss		income
			Higher/(Lower)		Higher/(Lower)
			2010	2009	2010	2009
Consolidated			$	$	$	$
+0.5%	(50	basis	177,057	6,643	-	6,643
points)
-0.5% (50	basis	points)	(177,057)	(6,643)	-	(6,643)

43

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

21. Financial instruments (continued)

(f) Liquidity Risk

Liquidity risk is the risk that the entity will not be able to meet its financial obligations as they fall due. The objective of managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when they fall due.

Working capital primarily comprises of cash. The entity has established a number of policies and processes for managing liquidity risk:

• Monitoring actual against budgeted cashflows Regularly forecasting long term cashflows and stress testing Regularly monitoring the availability of equity capital and current market conditions.

Maturity Analysis

CONSOLIDATED 31 Dec 2010 Financial assets Cash and deposits Trade and other receivables Financial liabilities Trade and other payables Capital commitments Net maturity CONSOLIDATED 31 Dec 2009 Financial assets Cash and deposits Trade and other receivables Financial liabilities Trade and other payables Capital commitments Net maturity	<6 Months $ 6-12 Months $ 1-5 Years $ >5 years $ Total $ 71,371,022 - - - 71,371,022 972,609 - - - 972,609
	72,313,631 - - - 72,313,631
	(1,984,116) - - - (1,984,116) (7,091,666) (5,444,269) - - (12,535,935)
	(9,075,781) (5,444,269) - - (14,520,051)
	63,267,849 (5,444,269) - - 57,823,580
	<6 Months $ 6-12 Months $ 1-5 Years $ >5 years $ Total $ 13,094,590 - - - 13,094,590 138,309 - - - 138,309
	13,232,899 - - - 13,232,899
	(963,826) - - - (963,826) (49,100) - - - (49,100)
	(1,012,926) - - - (1,012,926)
	12,219,973 - - - 12,219,973

• (g) Fair values

The Directors consider that the carrying value of financial assets and liabilities recorded at amortised cost (if amortisation is appropriate) in the financial statements approximate their fair value at balance date.

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KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

22. Commitments for expenditure

22. Commitments for expenditure
		Consolidated
	2010	2009
	$	$
Capital expenditure commitments
Not longer than 1 year (a), (b), (c)	12,535,935	49,100
Operating lease commitments
Not longer than 1 year (d)	24,623	-

Capital Commitments

• (a) In 2010, Kaldora Company committed to purchase two 6MW Ball Mills from Outotec Pty Limited for €4,656,790 and €4,613,210 respectively. Mr John Taylor, a non-executive Director of Kentor was the Managing Director of Outotec (Australasia) Pty Ltd. This transaction occurred based on normal commercial terms.

• (b) During 2010, Kaldora Company Limited signed an option agreement with Turan Metals LLC in regard the Aktash Project. The exclusive option to purchase the Aktash licence will be granted for a period of 18 months following satisfactory completion of due diligence investigations. The option payments are US$200,000 for the first year (paid in full in 2010) and US$200,000 for the remaining period payable October 2011. During the option period, Kentor has an obligation to drill a minimum of 1,500 metres. Payment for exercising the option will be based on a JORC-compliant resource calculation, and has been agreed at:

US$19 per ounce of gold

• US$105 per tonne of copper US$0.30 per ounce of silver

• (c) During 2010, AMEC Minproc was engaged to provide engineering services for the Andash copper-gold project. A total of US$11,162,165 had been budgeted, with the remaining commitment at balance date payable of US$7,029,622. This work will be completed in the next 12 months.

Operating lease commitments

• (d) Operating lease commitments comprise leases over a rail siding storage facility and office space in Australia and the Kyrgyz Republic.

23. Contingent liabilities and assets

(a) In October 2010 the Talas Inter-district court ruled that Aurum Mining Plc and Invest-centre Talas LLC‟s (ICT) ownership in Andash Mining Company LLC (AMC) were invalid due their a failure to comply with the Strategic Objects legislation in the Kyrgyz Republic. On 19 January 2011, a subsequent appeal to the Talas Oblast Court by both parties was dismissed. A further appeal to the Supreme Court of Kyrgyzstan was lodged on the 25 February 2011. A date is yet to be set for the hearing.

Kentor owns the remaining 80% of AMC through its subsidiary Kaldora Company Limited, and remains unaffected by this claim. Kentor complied fully with the requirements of the strategic objects legislation and Kentor is firmly of the belief that the action does not affect Kentor‟s holding in the project.

(b) On the 24 December 2010, the Company was advised that a Statement of Claim (the Claim) has been lodged against Kentor Gold Limited and its subsidiary Kaldora Company Limited. The Claim has been issued by ICT, which recently had its non-controlling interest in Andash Mining Company LLC declared invalid by the Talas Inter-district court. The Claim requests that the Kaldora company, which hold Kentor‟s 80 % interest in the Andash Mining Company LLC (AMC), be excluded from AMC on the basis that Kaldora inflicted a material damage to the other members of AMC. The hearing date has been set for April 2011, however the Company is confident that this case has no merit following the court ruling achieved as set out in part (a) above and will strenuously defending the action.

45

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

23. Contingent liabilities and assets (continued)

(c) On 4 February 2011, Kentor was advised that the Krygyz Government is establishing a Commission of Enquiry for the Andash Project, with a view to expediting the approval process. Kentor agreed to suspend on-site activities whilst this review is undertaken. The Commission was due to deliver its final report on 1 March 2011 and as an interim outcome, the Commission has requested Kentor re-establish communications with the local community. It is Kentor‟s intention to also re-commence its community development programs. It is anticipated that the final determination of the Commission will be issued in the coming weeks.

Kentor is hoping that site access will be obtained in the months following the Commission‟s determinations.

24. Subsequent events

Subsequent to year end, Kentor acquired:

1. US$30,000,000 selling Australian Dollars at an exchange rate of 1.0014.

2. €966,642 selling Australian Dollars at an exchange rate of .7628.

On 21st March 2011, Kentor announced that terms had been agreed with Macquarie Bank Limited on a Committed Letter of Offer for a US$50M debt facility to complete construction of the Andash Gold-Copper project in the Kyrgyz Republic.

No other subsequent events have occurred post balance date.

25. Parent entity information

The Corporations Act requirement to prepare parent entity financial statements where consolidated financial statements are prepared has been removed and replaced by the new regulation 2M.3.01 which requires the following limited disclosure in regards to the parent entity Kentor Gold Limited. The consolidated financial statements incorporate the assets, liabilities and results of the parent entity in accordance with the accounting policy described in Note 1.

Parent entity Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Issued capital Reserves Retained earnings/(accumulated losses) Total shareholders‟ equity		2010 $ 72,308,118 40,449,837 112,757,955 (1,717,426) - (1,717,426) 111,040,529 122,109,423 2,740,118 (13,810,829) 111,040,529		2009 $ 13,169,276 33,497,875 46,667,151 (923,208) - (923,208) 45,743,943 49,041,310 3,019,308 (6,316,675)
				45,743,943

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KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2010

25. Parent entity information (continued)

Parent entity Profit/(loss) for the year Other comprehensive income Total comprehensive income for the year	2010 $ (7,494,154) (434,484) (7,928,638)	2009 $ (5,136,982) - (5,136,982)

Guarantees

No guarantees have been entered into by the parent entity in relation to debts of its subsidiaries.

Contractual commitments

In 2010, the parent entity committed to contractual engineering works with AMEC Minproc for the Andash mining project. The total amount committed at 31 December 2010 was US$7,007,260, which will be fully paid in the 2011 financial year.

There were no other contractual commitments for the acquisition of property, plant and equipment entered into by the parent entity at 31 Dec 2010 (2009 - $nil).

Contingent liabilities

The parent entity has no contingent liabilities.

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Tel: +61 7 3237 5999 Level 18, 300 Queen St Fax: +61 7 3221 9227 Brisbane QLD 4000, www.bdo.com.au GPO Box 457, Brisbane QLD 4001 Australia

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INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF KENTOR GOLD LIMITED

Report on the Financial Report

We have audited the accompanying financial report of Kentor Gold Limited, which comprises the consolidated statement of financial position as at 31 December 2010, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement.

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

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

BDO Audit (QLD) Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (QLD) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

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Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Kentor Gold Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.

Opinion

In our opinion:

• (a) the financial report of Kentor Gold Limited is in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and of its performance for the year ended on that date; and

• (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and

• (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 6 to 11 of the directors’ report for the year ended 31 December 2010. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion, the Remuneration Report of Kentor Gold Limited for the year ended 31 December 2010 complies with section 300A of the Corporations Act 2001.

BDO Audit (QLD) Pty Ltd

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A J Whyte Director

Brisbane: 30 March 2011

BDO Audit (QLD) Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (QLD) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

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