KGL RESOURCES LIMITED — Annual Report 2011

Mar 29, 2012

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

FINANCIAL REPORT

FOR THE YEAR ENDED 31 DECEMBER 2011

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

Contents	Page
Directors’ Report	2
Auditor’s Independence Declaration	15
Directors’ Declaration	16
Statement of Comprehensive Income	17
Statement of Financial Position	18
Statement of Cash Flows	19
Statement of Changes in Equity	20
Notes to the Financial Statements	21
Independent Auditor’s Report	53

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

DIRECTORS’ REPORT

The directors present their report on the consolidated entity (or the Group) consisting of Kentor Gold Limited and the entities it controlled at the end of, or during, the year ended 31 December 2011.

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 has been honoured by each of the Australian and German Governments for his services to international trade and industry.

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 Mr Daley commenced his mining career in 1970 with Anglo American on BSC (HONS)(MINING) the Zambian copper belt and later worked with Rio Tinto and Conoco Grad Dip (GeoSc), C.Eng (UK), Minerals also in Africa. He moved to Australia with the engineering group FAusIMM, MIOM3 Fluor Australia in 1981 working on new project evaluation. In 1983 Mr Non-Executive Director Daley, moved into resource project finance with National Australia Bank, Appointed 10 November 2004 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, 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)

Mr Taylor has held senior positions in business and has had 40 years John Taylor BENG (CHEM) experience in the Australian and international engineering and construction MBA industries; primarily in the resources sector. Previously, the Managing Non-executive Director Director of Outotec (Australasia) Pty Ltd (retired 2010) and has held Appointed 28 July 2009 directorships in several ASX listed companies including Ticor Limited and privately held companies including Lurgi (Australia) Pty Ltd and Metallgesellschaft of Australia Pty Ltd.

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

Other Current Directorships of Listed Companies

Heemskirk Consolidated Ltd appointed 9[th] May 2011.

Former Directorships of Listed Companies in last three years

In the past 3 years he has been a director of Ausmelt Limited (appointed 1 February 2010, resigned 15 December 2010).

Simon Milroy Mr Milroy is a mining engineer who previously spent nearly 4 years as BENG (MINING) General Manager – Project Development and Manager Technical Services Managing Director for Pan Australian Resources Limited in Laos. In those roles he was Appointed 14 May 2007 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.

3

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	207,675	100,000
A Daley	247,302	100,000
H McKinnon	250,110	280,000
SMilroy	124,544	600,000
JTaylor	450,011	-

• These amounts are subsequent to a consolidation of shares that occurred on the 10 February 2012 of 1:10.

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	13	13
A Daley	13	13
J Taylor	12	13
S Milroy	13	13
H McKinnon	13	13

Committee membership and meetings

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

Two meetings of the Audit and Compliance Committee were held during the year. Both meetings were attended by Mr Taylor, Mr Daley and Mr Barr. Two meetings were held by the Nomination and Remuneration Committee during the year, attended by Mr Daley, Mr Taylor and Mr Barr.

CORPORATE INFORMATION

Principal activities

The principal continuing activity of the consolidated entity during the financial year was exploration and development of gold and base metals projects in the Kyrgyz Republic. In July 2011 Kentor Gold commenced exploration and development of gold and other base metals projects in Western Australia and the Northern Territory resulting from the acquisition of Jinka Minerals.

Employees

The consolidated entity employed 81 employees as at 31 December 2011 (2010: 54 employees).

DIVIDENDS

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

4

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

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.

During 2011, Kentor Gold acquired gold, copper and silver projects in Australia, and advanced one of the projects - the Murchison Gold Project – towards scheduled production in mid-2012. At the same time, the Andash Gold-Copper Project in the Kyrgyz Republic progressed towards the final local approval required to commence development.

The Australian projects were acquired through an off-market takeover of Jinka Minerals Limited in May 2011. The acquisition provided Kentor Gold with strong growth prospects in Australia including early gold production, the potential for larger scale projects and geographical diversification from central Asia.

Within two months, Kentor Gold established Inferred Resources of more than 700,000 oz gold at the Murchison Project (comprising Burnakura and nearby Gabanintha) in Western Australia and undertook a feasibility study. Gold production is scheduled to commence in mid 2012 at the initial rate of 24,000 oz a year.

The Jervois Copper-Silver-Gold Project, acquired through the Jinka takeover, is emerging as a potential major multi-commodity mine in the Northern Territory. Jervois currently comprises four deposits along a 12km strike. Initial Resource estimates were increased significantly through exploration during the year, lifting the total Inferred Resource to 11.9 Mt @ 1.3% copper and 25.2 g/t silver containing 150,500 tonnes of copper and 9.66 million ounces of silver. A further 50,000 to 100,000 tonnes of copper and 3 to 5 million ounces of silver are targeted through exploration.* The deposits are open at depth and along strike. Combining to make Jervois a strong project are the high copper grade and silver credits, good metallurgy, the highly encouraging exploration potential and the significant gold assays in recent drilling with gold appearing to increase at depth.

*Exploration potential for the Reward and Bellbird deposits in areas adjoining the current Inferred Resource is 5 – 10 Mt @ 0.75 to 1.25% copper and 10 to 25 g/t silver at a 0.5% copper cut off for 50,000 to 100,000 tonnes copper and 3 to 5 Moz silver. The potential quantity and grade of the Exploration Potential is conceptual in nature and there has been insufficient exploration to define a Mineral Resource. It is uncertain if further exploration will result in the determination of a Mineral Resource.

Pre-construction work for the Andash Gold-Copper Project was completed during the year, other than geotechnical investigations that will be concluded when site access is obtained. At year end the OVOS remained the only outstanding approval required to commence construction. Upon receiving final approval and gaining site access, the Company will commence a 3 month geotechnical drill programme and proceed with the 12 month construction program.

Andash is expected to be one of the world’s lowest cost gold mines, with an estimated total cost of US$29 an ounce, after copper credits and royalty payments, based on a copper price of US$2.75 a pound. The project is planned as a conventional open pit and flotation operation averaging production of a single concentrate containing 70,000 oz gold and 7,400 tonnes copper a year for an initial six-year mine life, with high potential to expand and extend the operation.

High grade gold and copper exploration results were reported at the Bekbulaktor Gold Prospect on the Bashkol Exploration Licence in the Kyrgyz Republic, and widespread gold and copper occurrences were discovered over a 15-kilometre belt in the Licence area. A drilling program at Bekbulaktor and a geological and geophysical program over the belt are planned for 2012.

5

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

OPERATING AND FINANCIAL REVIEW (CONTINUED)

Having discontinued the pursuit of geothermal energy in central Asia due to the region’s low power prices, Kentor Gold applied to the Government of the Solomon Islands for a geothermal prospecting licence to investigate the development of a conventional volcanic geothermal energy project on Savo Island with a view to supplying geothermal power to the nation’s capital, Honiara, at much lower cost than the current diesel generation.

Financial overview

Operating results for the period

The loss for the consolidated entity after income tax was $3,078,567 (2010: loss of $6,487,708). This result was in line with expectations of costs associated with managing exploration and development programmes.

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 and Murchison Gold project, exploration activities on the Jervois Base metal project and tenements held in the Kyrgyz Republic; 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.

CAPITAL RAISINGS / CAPITAL STRUCTURE

There were no capital raisings (other than share options exercised) during the year as a result of the $73,068,113 of equity (net of capital raising costs) raised in the 2010 year 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 Group. On 21 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. These terms lapsed at December 2011.

On 10 February 2012 there was a consolidation of shares in the ratio of 1:10.

Summary of shares and options on issue

As at the date of this report there were 106,209,295 ordinary shares on issue and 2,736,923 unissued ordinary shares in respect of which the options listed below were outstanding. On 10 February 2012 there was a consolidation in the ratio of 1:10. This has been reflected in the table below.

Expiry date/Duration	Number	Exercise price
		$
Unlisted options
31 May 2012	10,000	5.808
31 May 2012	10,000	7.808
31 May 2012	10,000	9.808
16 Dec 2012	1,076,923	1.433
Total unlisted options	1,106,923
Unlisted employee options
30 days after ceasing employment	30,000	6.058
30 days after ceasing employment	30,000	7.308
30 days after ceasing employment	30,000	8.558
30 days after ceasing employment	100,000	1.808
30 days after ceasing employment	95,000	2.308
30 days after ceasing employment	95,000	2.808
Earlier of 14 Sept 2014 or 30 days after ceasing employment	150,000	1.176
Earlier of 14 Sept 2014 or 30 days after ceasing employment	350,000	1.449
Earlier of 04 June 2015 or 30 days after ceasing employment	50,000	1.688
Earlier of 04 June 2015 or 30 days after ceasing employment	50,000	1.378
Earlier of 04 June 2015 or 30 days after ceasing employment	50,000	1.408
Earlier of 04 June 2015 or 30 days after ceasing employment	50,000	1.728
Earlier of 30 May 2016 or 30 days after ceasing employment	50,000	1.455

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

Summary of shares and options on issue (continued)

Expiry date/Duration Earlier of 30 May 2016 or 30 days after ceasing employment Earlier of 31 May 2016 or 30 days after ceasing employment Earlier of 31 May 2016 or 30 days after ceasing employment Earlier of 31 May 2016 or 30 days after ceasing employment Earlier of 31 May 2016 or 30 days after ceasing employment Earlier of 01 July 2016 or 30 days after ceasing employment Earlier of 01 July 2016 or 30 days after ceasing employment Earlier of 25 July 2016 or 30 days after ceasing employment Earlier of 25 July 2016 or 30 days after ceasing employment Total unlisted employee options TOTAL OPTIONS GRANTED

Number Exercise price 50,000 1.746 50,000 2.078 50,000 2.493 100,000 1.218 100,000 1.462 50,000 1.256 50,000 1.507 25,000 1.137 25,000 1.365 1,630,000 2,736,923

The option holders have no rights to participate in any share or interest issue of the Company or any other entity under the options. 550,000 options over unissued shares of the Company were granted during the year, 3,724,213 options were forfeited and 50,000 options were exercised.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

During the year Kentor Gold acquired three advanced gold and base metals projects in Australia with the expectation of Murchison Gold Project commencing gold production in mid-2012, while the Andash GoldCopper Project in the Kyrgyz Republic awaited local approval for site access.

The off-market takeover of Jinka Minerals Limited provided Kentor Gold with a significant diversification and expansion into Australia. The Jinka assets comprise the Murchison Gold Project at Burnakura and Gabanintha, both former gold mines in Western Australia, and the Jervois Multi-Commodity Project in the Northern Territory.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

On 7 February 2012 the Board of Kentor Gold approved the development of Phase 1 of the Murchison Gold Project. The capital cost of phase 1 is $14.8m, initially producing 24,000 ounces of gold a year from a combination of open pit and underground mining over an initial three years with a forecast cash operating cost of $1,223 per ounce.

The Company is evaluating a second phase to commence during 2013 with the addition of a parallel heap leaching operation. Third and fourth phases were being evaluated to expand the CIP plant from 260,000 to 500,000 tonnes a year and the addition of a flotation circuit to produce a copper concentrate.

An open pit mining contract has been awarded to Minepower.. Mobilisation of mining equipment to the Burnakura site commenced in March 2012 with mining to commence in early April 2012 subject to final approval from the WA Department of Mines. Early termination requires three months notice on equipment and one month for Labour.

Network Aviation, has been awarded a 24 month contract to provide a charter services twice a week a Perth – Meekatharra – Perth. Early termination requires three months notice.

Action Catering, has been awarded a 24 month contract to provided catering and camp management services at the Burnakura site. Early termination 30 days notice is required.

The Company has been award a three year prospecting licence for geothermal energy granted by the Solomon Islands government.

On 10 February 2012 there was a consolidation of shares in the ratio of 1:10.

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

In the Kyrgyz Republic, the Board of Directors primary focus in FY2012 is to commence construction of a 1.5Mtpa Gold Copper concentrator plant “Andash” and continue exploration and development programmes on existing tenements including Andash and Bashkol.

On 24 June 2011, Kentor Gold advised that a resolution was adopted in the Kyrgyz Parliament calling for the suspension of all activities related to the development of the Andash gold-copper project, revocation of all permits and cancellation of land use permits. On 28 June 2011 the Department of Natural Resources wrote to Kentor stating that it “... has no information on and sees no causes for early cancellation of the Andash Licences”. Mining licences and land use permits are the responsibility of the Executive Government through the Department of Natural Resources.

In March 2012, following a request made to a meeting of the Kyrgyz Parliamentary Committee on the Development of Economic Sectors including Andash, the Kyrgyz Parliamentary Committee has sought clarification of the Kyrgyz Government position by 10 April 2012.

Within Australia, the Kentor Board has been focusing on the successful assimilation of Jinka Minerals’ assets into the Group and committing to significant exploration and capital development programmes on its tenements in Western Australia and the Northern Territory. The Board anticipates that the Murchison Gold Project will commence production of first gold in mid 2012. Exploration was commenced at both locations to increase Resources including copper at Gabanintha where the initial Resource included 450,000 tonnes at 0.5% copper..

At the Jervois copper-silver-gold mine, a scoping study being undertaken into the development of an open pit multi-metal mine is expected to be released in April of 2012. It is anticipated that this will lead to a full feasibility study later in 2012. Lycopodium are responsible for the definition of the engineering design to support the capital and operating cost estimates to an accuracy of ± 35%. On the completion of a successful feasibility the Group will look to commence a full Definitive Feasibility Study on the Jervois asset.

ENVIRONMENTAL REGULATION

The Group’s operations in Western Australia and the Northern Territory are now subject to significant environmental regulations under both Commonwealth and State legislation. In all instances there have been no breaches by Kentor Gold and its subsidiaries.

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 no breaches have been reported.

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 has introduced a short term incentive programme which links executive officers’ remuneration to the Group’s financial and operational performance through a series of measurable key performance indicators.

The Board is also looking to introduce a formal long term incentive programme for senior executives which aligns executives’ long term remuneration with overall group strategy.

Employment agreements are entered into with executive directors and other key management personnel. The current employment contract with the Managing Director has lapsed. The employment contract with the Executive Director, Hugh McKinnon, is automatically renewed for a 6 month period 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.

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

REMUNERATION REPORT (AUDITED) (CONTINUED)

Remuneration committee

The Nomination and 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.

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 $500,000. An amount not exceeding $500,000 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. Kentor considers it 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 – short and long term incentives

Objective

The primary objectives of short term incentives are to:

• provide cash or options incentives to key individuals to meet their stretched targets.

• provide an incentive to the employees to achieve the short term objectives of the Company and improve the performance of the Company; and

• attract persons of experience and ability to employment with the Company.

The primary objectives of long term incentives will be 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.

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

REMUNERATION REPORT (AUDITED) (CONTINUED)

Structure

Short term incentives are measured through the achievement of stretched key performance indicators (KPI’s) which are agreed with each senior executive. These KPI’s are based on safety, sustainability, financial management, business development governance and leadership.

All short term incentive payments for senior executives are approved at the discretion of the board based on the recommendation of the Nomination and Remuneration Committee.

An Employee Share Option Plan was approved by shareholders on 22 May 2008 which will be updated in 2012. Under this plan options have been issued to senior executives. 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 plans to introduce a revised long term incentive programme in 2012.

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

Employment contracts - Executive Directors

Simon Milroy – Managing Director

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

• Mr Milroy is engaged to provide services in the capacity of Managing Director at an annual salary of $392,700, inclusive of superannuation effective 1 January 2012 (increased from $374,000 per annum effect 1 January 2011). 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.

• 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 with no additional contractual obligations.

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$278,250 effective 1 January 2012 (increase from USD$265,000 per annum effective 1 July 2011 and increased from USD$230,000 per annum effective 1 January 2011).

• 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.

• Notice period of 3 months with no additional contractual obligations.

Employment contracts - 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, including superannuation, is $250,425 effective 1[st] January 2012 (increased from $238,500, per annum effect 1 January 2011).

• Notice period of 3 months with no additional contractual obligations.

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KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

REMUNERATION REPORT (AUDITED) (CONTINUED)

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 with no additional contractual obligations.

Mr Cordingley resigned on 18 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. The terms of the engagement consist of:

• Mr Russell is engaged as the General Manager Corporate Finance of the Company.

• Mr Russell total remuneration package, including superannuation, is $244,860 effective 1 January 2012 (increased from $233,200 per annum effect 1 January 2011).

• Notice period of 3 months with no additional contractual obligations.

Keith Mayes – Chief Operating Officer, Australia

Mr Mayes’s employment agreement with the Company commenced as of 1 July 2011. The agreed terms of his employment includes inter alia :

• Mr Mayes is engaged as the Chief Operating Officer of Jinka Minerals Limited.

• Mr Mayes’s total remuneration package, including superannuation, is $250,800 effective 1 January 2012 (increased from $220,000 per annum effect 1 July 2011).

• The term is for 3 years from the commencement date with the option to extend by mutual agreement on a year by year basis.

• Notice period of 3 months with no additional contractual obligations.

Remuneration of non-executive directors

John Barr

By mutual agreement approved by the Board, Mr John Barr is engaged to provide services as a Nonexecutive Director, with an annual fee of $120,000 plus $10,800 superannuation (increased from $80,000 plus $7,200 super) subject to annual review. The increase was approved and effective at the AGM on 26 May 2011.

Andrew Daley

By mutual agreement approved by the Board, Mr Andrew Daley is engaged to provide services as a Non-executive Director through his Company Dalenier Enterprises Pty Ltd, with an annual director’s fee of $65,000, $10,000 for Chairmanship of a sub-committee, $5,000 for participation on a sub-committee plus $7,200 superannuation (increased from $54,500) subject to annual review. The increase was approved and effective at the AGM on 26 May 2011.

John Taylor

By mutual agreement approved by the Board, Mr John Taylor is engaged to provide services as a Nonexecutive Director with an annual directors fee of $65,000, $10,000 for Chairmanship of a subcommittee, $5,000 for participation on a sub-committee plus $7,200 superannuation (increased from $54,500) subject to annual review. The increase was approved and effective at the AGM on 26 May 2011.

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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 executives received the following compensation for their services during the year.

				Post-
				employment
	Short-term	benefits		benefits		Share-		% total
			Termin-			based		perform-		%total
	Salary &		ation	Super-		Payment		ance		issued as
	fees	Bonus	Payments	annuation		Options	Total	related		options
Year ended	$	$	$	$		$	$	%		%
31 Dec 2011
Directors
W.H.J. Barr	64,625	-	-	44,375		-	109,000		-	-
S. J. Milroy	350,000	61,084	-	25,250		154,029	590,363		10.3	26.1
A.E. Daley*	80,369	-	-		-	-	80,369		-	-
H. McKinnon	254,249	17,533	-		-	-	271,782		6.5	-
J C Taylor	67,250	-	-	3,600		-	70,850		-	-
Other executives
G Cordingley ***	19,812	-	70,225		-	-	90,037		-	-
G Kelly	223,367	24,928	-	17,400		-	265,695		9.4	-
K Russell **	233,200	30,468	-		-	-	263,668		11.6	-
K Mayes ****	113,939	14,187	-	10,255		51,682	190,063		7.5	27.2
	1,406,811	148,200	70,225	100,880		205,711	1,931,827
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

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

** Fees were paid to Dartmouth Capital Pty Ltd, a Company which is controlled by Mr Russell. *** Mr Cordingley resigned on 18 March 2011.

**** Mr Mayes commenced on 1 July 2011.

Cash bonuses

Cash bonuses were granted to H McKinnon, K Russell, G Kelly, K Mayes, SJ Milroy on 10 February 2012 in relation to the 31 December 2011 financial year and have been included in the bonus column above. The quantum of the bonus reflected the individuals performance against key indicators, as well as the Company’s performance overall. The Board provided employees with a choice as to how the bonus can be taken, namely 100% Cash; 50% Cash, 50% Options; or 100% Options. The amount reflected above is the amount should the employee elect to take the bonus in cash. These amounts will be paid in the 2012 financial year or the options will be issued in relation to them should the employee elect this option. Cash bonuses were determined based on an agreed percentage of annual salary package based on achieved of short term incentives incorporating the overall Company business factor.

12

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

REMUNERATION REPORT (AUDITED) (CONTINUED)

Options granted as part of remuneration

Details of the terms and conditions of options granted to directors and other executives as compensation during the reporting period are as follows:

	No. options	No. options	Fair value	Exercise	Amount	Expiry date	Date
	granted	vested	per option	price	paid or		exercisable
Year ended			at grant	$	payable
31 Dec 2011			date
			$
Directors
S.J. Milroy	1,000,000	1,000,000	0.0791	0.1218	-	31 May 2016	31 May 2011
S.J. Milroy	1,000,000	1,000,000	0.0750	0.1462	-	31 May 2016	31 May 2011
Other executives
K Mayes	500,000	500,000	0.0533	0.1256	-	01 Jul 2016	08 Aug 2011
K Mayes	500,000	500,000	0.0500	0.1507	-	01 Jul 2016	08 Aug 2011
Total	3,000,000	3,000,000

Options vest on the grant date. In the event of the cessation of employment, 30 days after the date of cessation of employment they will forfeit them.

The fair value of the options was determined using a binomial model.

Equity instruments issued on exercise of remuneration options

There were no equity instruments issued during the period to directors and other executives as a result of options exercised that had previously been granted as compensation.

Value of options to directors and other executives

Details of the value of options granted, exercised and lapsed during the year to directors and other executives as part of their remuneration are summarised below:

Year ended 31 Dec 2011 Directors S.J. Milroy Other executives K Mayes Total	Value of options at grant date $ Value of options exercised at exercise date *$ Value of options lapsed at date of lapse *$ 154,029 - - - 51,682 - -
	205,711 - -

• The value of options granted during the period may differ to the expense recognised as part of each directors' or other executives' remuneration in the remuneration section above because this value is the grant date fair value calculated in accordance with AASB 2 Share-based Payment.

** The value of options exercised at exercise date has been determined as the intrinsic value of the options at exercise date, i.e. the excess of the market value at exercise date over the strike price of the option.

*** Options lapsed due to vesting conditions not being satisfied. The value of options at date of lapse is determined assuming that the vesting condition has been satisfied.

This is the end of the audited remuneration report.

13

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 part of those proceedings.

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

AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES

The auditor’s independence declaration is attached to this 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,

==> picture [116 x 75] intentionally omitted <==

WJ Barr AM Chairman Melbourne Dated 30[th] March 2012

14

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

==> picture [78 x 31] intentionally omitted <==

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 2011, 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.

A J Whyte

Director

==> picture [81 x 64] intentionally omitted <==

BDO Audit (QLD) Pty Ltd

Brisbane: 30 March 2012

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 limite 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.

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 2011 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 the directors’ report (as part of the audited Remuneration Report), for the year ended 31 December 2011, 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 the directors.

On behalf of the Board

==> picture [116 x 75] intentionally omitted <==

W J Barr AM

Chairman

Melbourne 30[th] March 2012

16

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2011

KENTOR GOLD LIMITEDAND CONTROLLED ENTITIES ABN 52 082 658 080 STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2011
Note Revenue and other income 2 Foreign exchange losses Employee benefits expense Depreciation and amortisation expense Consultancy expense Overseas administrative expense Head office facility overheads expenses Other expenses Impairment of VAT receivable Impairment of exploration and evaluation assets 2 Loss before income tax expense Income tax expense 3 Net loss Other comprehensive income Change in fair value of cash flow hedges Reclassification cash flow hedge transferred to plant and equipment Foreign currency translation differences Other comprehensive income for the year Total comprehensive income for the year Net loss attributable to: Non-controlling interests Owners of Kentor Gold Limited Total comprehensive income for the year attributable to: Non-controlling interests Owners of Kentor Gold Limited Basic and diluted earnings per share (cents per share) 4	Consolidated 2011 2010 $ $ 1,340,547 662,204 (3,073) (12,882) (2,044,064) (1,277,139) (91,948) (53,626) (1,240,430) (1,012,673) (543,386) (337,371) (328,189) (121,740) (644,013) (264,978) (400,100) - (37,204) (4,069,503)
	(3,991,860) (6,487,708) - -
	(3,991,860) (6,487,708)
	(303,012) (434,483) 117,670 - 531,668 (2,233,986)
	346,326 (2,668,469)
	(3,645,534) (9,156,177)
	(139,399) (91,267) (3,852,461) (6,396,441)
	(3,991,860) (6,487,708)
	(33,694) (538,065) (3,611,840) (8,618,112)
	(3,645,534) (9,156,177)
	(2.94) (12.06)

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

17

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2011

KENTOR GOLD LIMITEDAND CONTROLLED ENTITIES ABN 52 082 658 080 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2011
Current assets Note Cash and cash equivalents 15(b) Trade and other receivables 5 Prepayments Inventory Total current assets Non-current assets Deposits 6 Property, plant and equipment 7 Exploration and evaluation assets 8 Other non-current assets 10 Total non-current assets Total assets Current liabilities Trade and other payables 11 Total 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 2011 2010 $ $ 34,134,415 71,371,022 605,814 972,609 422,787 216,650 386,189 380,484
	35,549,205 72,940,765
	747,000 - 40,763,227 16,890,407 24,367,065 12,773,258 164,306 524,691
	66,041,598 30,188,356 101,590,803 103,129,121
	3,469,712 1,984,116
	3,469,712 1,984,116 3,469,712 1,984,116
	98,121,091 101,145,005
	122,404,505 122,109,423 1,135 (566,025) (26,166,592) (22,314,130)
	96,239,048 99,229,268 1,882,043 1,915,737
	98,121,091 101,145,005

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

18

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 082 658 080

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2011

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 Payment for exploration and evaluation assets Payment for property, plant and equipment Proceeds from sale of exploration and evaluation assets Payment for deposits Net cash used in investing activities Cash flows from financing activities Proceeds from issue of ordinary shares Payment/(refund) 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 2011 2010 $ $ 673,163 171,019 (3,876,069) (3,217,971) 1,004,724 497,959
	(2,198,182) (2,548,993)
	(16,703,875) (1,207,412) (17,676,732) (10,589,727) 465,869 - (747,000) -
	(34,661,738) (11,797,139)
	- 77,843,611 (73,675) (4,773,681)
	(73,675) 73,069,930
	(36,933,595) 58,723,798 71,371,022 13,094,590 (303,012) (447,366)
	34,134,415 71,371,022

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

19

KENTOR GOLD LIMITED AND CONTROLLED ENTITIES ABN 52 052 658 080

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011

BN 52 052 658 080	STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011
Consolidated Balance at 1 January 2010 Loss for the year Foreign currency translation Cash flow hedge Total comprehensive income for the year Issue of share capital Cost of share capital issue Share-based payments Balance at 31 December 2010 Loss for the year Foreign currency translation Reclassification – net gain/loss on cash flow hedge transferred to plant and equipment Cash flow hedge Total comprehensive income for the year Issue of share capital Cost of prior year share capital issue Refund of GST on prior year share issue costs Share-based payments Balance at 31 December 2011	Contributed equity Accumulated losses Foreign currency translation reserves Share-based payments reserve Hedge reserve Total parent equity Non- controlling interests Total equity $ $ $ $ $ $ $ $
	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 (22,314,130) (3,306,144) 3,174,602 (434,483) 99,229,268 1,915,737 101,145,005
	- (3,852,461) - - - (3,852,461) (139,399) (3,991,860) - - 424,353 - - 424,353 105,705 530,058 - - - - 117,670 117,670 - 117,670 - - - - (303,012) (303,012) - (303,012)
	- (3,852,461) 424,353 - (185,342) (3,613,450) (33,695) (3,647,144)
	18,000 - - (18,000) - - - - (72,265) - - - - (72,265) - (72,265) 349,348 - - - - 349,348 - 349,348 - - - 346,147 - 346,147 - 346,147
	122,404,505 (26,166,591) (2,881,789) 3,502,749 (619,825) 96,239,048 1,882,043 98,121,091

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

20

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011

Note Contents

Note	Contents
1.	Summary of significant accounting policies
2.	Revenue and expenses
3.	Income tax
4.	Earnings per share
5.	Trade and other receivables –current
6.	Deposits
7.	Property, plant and equipment
8.	Exploration and evaluation assets
9.	Subsidiaries
10.	Other non-current assets
11.	Trade and other payables – current
12.	Contributed equity
13.	Reserves
14.	Non-controlling interests
15.	Notes to the statement of cash flows
16.	Share based payments
17.	Key management personnel
18.	Auditor’s remuneration
19.	Related party disclosures
20.	Segment information
21.	Financial instruments
22.	Commitment for expenditure
23.	Contingent liabilities and contingent assets
24.	Subsequent events
25.	Parent entity information

21

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011

Kentor Gold Limited is a listed public company, limited by shares, incorporated and domiciled in Australia. The financial statements cover the consolidated entity, Kentor Gold Limited, and its subsidiaries. Separate financial statements for Kentor Gold Limited as an individual entity have not been presented. The registered office and principal place of business is Level 9, 40 Creek Street, Brisbane, Queensland, 4000, Australia. However, limited financial information for Kentor Gold Limited as an individual entity is included in Note 25. The financial statements were authorised for issue by the directors on 30 March 2012.

1. Summary of significant accounting policies

Statement of compliance

The financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards as issued by the IASB. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless otherwise stated.

Basis of preparation

The financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. The financial statements are presented in Australian dollars. The following significant accounting policies have been adopted in the preparation and presentation of the financial statements:

(a) Adoption of new and revised Accounting Standards

New and amended standards and interpretations that are mandatory for the first time for the financial year beginning 1 January 2011 have been adopted. The adoption of these standards and interpretations did not have any material impact on the current or any prior period and is not likely to materially affect future periods.

(b) New and amended Accounting Standards and Interpretations not yet adopted

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group.

Management anticipates that all of the relevant pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group’s financial statements is provided below.

Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group's financial statements.

22

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 1. Summary of significant accounting policies (continued)

• (b) New and amended Accounting Standards and Interpretations not yet adopted (continued)

AASB 9 Financial Instruments (effective from 1 January 2015)

The AASB aims to replace AASB 139 Financial Instruments: Recognition and Measurement in its entirety. The replacement standard (AASB 9) is being issued in phases. To date, the chapters dealing with recognition, classification, measurement and derecognition of financial assets and liabilities have been issued. These chapters are effective for annual periods beginning 1 January 2015. Further chapters dealing with impairment methodology and hedge accounting are still being developed.

Management have yet to assess the impact that this amendment is likely to have on the financial statements of the Group. However, they do not expect to implement the amendments until all chapters of AASB 9 have been published and they can comprehensively assess the impact of all changes.

Consolidation Standards

A package of consolidation standards that are effective for annual periods beginning or after 1 January 2013. Information on these new standards is presented below. The Group’s management have yet to assess the impact of these new and revised standards on the Group’s consolidated financial statements.

AASB 10 Consolidated Financial Statements (AASB 10)

AASB 10 supersedes AASB 127 Consolidated and Separate Financial Statements (AASB 127) and Interpretation 112 Consolidation – Special Purpose Entities. It revised the definition of control together with accompanying guidance to identify an interest in a subsidiary. However, the requirements and mechanics of consolidation and the accounting for any non-controlling interests and changes in control remain the same.

AASB 11 Joint Arrangements (AASB 11)

AASB 11 supersedes AASB 131 Interests in Joint Ventures (AASB 131). It aligns more closely the accounting by the investors with their rights and obligations relating to the joint arrangement. In addition, AASB 131’s option of using proportionate consolidation for joint ventures has been eliminated. AASB 11 now requires the use of the equity accounting method, which is currently used for investments in associates.

AASB 12 Disclosure of Interests in Other Entities (AASB 12)

AASB 12 integrates and makes consistent the disclosure requirements for various types of investments, including unconsolidated structured entities. It introduces new disclosure requirements about the risks to which an entity is exposed from its involvement with structured entities.

Consequential amendments to AASB 127 and AASB 128 Investments in Associates and Joint Ventures (AASB 128)

AASB 127 now only deals with separate financial statements. AASB 128 brings investments in joint ventures into its scope. However, AASB 128’s equity accounting methodology remains unchanged.

AASB 13 Fair Value Measurement (AASB 13)

AASB 13 does not affect which items are required to be fair-valued, but clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements. It is applicable for annual periods beginning on or after 1 January 2013. The Group’s management have yet to assess the impact of this new standard.

23

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 1. Summary of significant accounting policies (continued)

(b) New and amended Accounting Standards and Interpretations not yet adopted (continued)

Amendments to AASB 101 Presentation of Financial Statements (AASB 101 Amendments)

The AASB 101 Amendments require an entity to group items presented in other comprehensive income into those that, in accordance with other IFRSs: (a) will not be reclassified subsequently to profit or loss and (b) will be reclassified subsequently to profit or loss when specific conditions are met. It is applicable for annual periods beginning on or after 1 July 2012. The Group’s management expects this will change the current presentation of items in other comprehensive income; however, it will not affect the measurement or recognition of such items.

(c)

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 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. 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.

Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to the parent, are reported separately within the equity section of the consolidated statement of financial position and statement of comprehensive income. The non-controlling interests in the net assets comprise their interests at the date of the original business combination and their share of changes in equity since that date.

(d)

Business combinations

Business combinations occur where an acquirer obtains control over one or more businesses.

A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. These business combinations will be accounted for from the date that control is attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed are recognised (subject to certain limited exemptions).

When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability is remeasured each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date.

All transaction costs incurred in relation to the business combination are expensed to the profit or loss. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase price.

(e) Revenue and other income

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:

24

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 1. Summary of significant accounting policies (continued)

(e) Revenue and other income

Interest

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.

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

(f)

Income tax

The income tax expense (income) for the year comprises current income tax expense (income) and deferred tax expense (income).

Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses.

Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss.

Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right to set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

The Group has not adopted the tax consolidation legislation.

(g) 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.

25

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 1. Summary of significant accounting policies (continued)

(g) Share-based payments (continued)

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 profit or loss. 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.

(h) 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.

(i) Foreign currency

Functional and presentation currency

The functional currency of each of the Group’s entities is the currency of the primary economic environment in which that entity operates. 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. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation 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.

Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the exchange difference is recognised in profit or loss.

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.

26

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011

1. Summary of significant accounting policies (continued)

(j) 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 in cash flows of hedged items.

The gains or losses in respect of hedge transactions which relate to future purchases are recognised in other 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 as noted above 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 reclassified to the profit and loss.

(k) Financial assets and liabilities

Initial recognition and measurement

Financial assets and liabilities are recognised when the entity becomes party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the Group commits itself to either the purchase or sale of the asset (ie trade date accounting is adopted).

Financial assets and liabilities are measured at fair value plus transaction costs, except where the instrument is classified ‘at fair value through profit or loss’, in which case transaction costs are expensed to profit or loss immediately.

Classification and subsequent measurement

Financial assets and liabilities are subsequently measured at fair value, amortised cost using the effective interest method, or cost.

Amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment and adjusted for any cumulative amortisation of the difference between the initial amount and the maturity amount calculated using the effective interest method.

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense item in profit or loss.

The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of Accounting Standards specifically applicable to financial instruments.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets, where they are expected to mature within 12 months.

Financial liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost.

27

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 1. Summary of significant accounting policies (continued)

(k) Financial assets and liabilities (continued)

Impairment

At the end of each reporting period, the Group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale equity instruments, a significant or prolonged decline in the value of the instrument below its cost is considered to determine whether an impairment has arisen. Impairment losses are recognised in profit or loss. Also, any cumulative decline in fair value previously recognised in other comprehensive income is reclassified to profit or loss at this point.

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where there related obligations are discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

(l) 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.

(m) Impairment of assets

At the end of each reporting period, 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 cashgenerating 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.

28

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 1. Summary of significant accounting policies (continued)

(n) Property, plant and equipment

Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated depreciation and accumulated impairment losses. The carrying amount of property, plant and equipment is reviewed to ensure it is not in excess of the recoverable amount from these assets.

declining balance basis to allocate their cost, net of their residual values, over their estimated useful lives to the consolidated entity commencing from the time the asset is held ready for use, as follows:

Plant and equipment 3-6 years Mine development Life of mine

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

(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.

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the lease term.

(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 Group. 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.

29

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 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.

(u) Significant accounting judgements, 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 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 directors’ decisions are made after considering the likelihood of finding commercially viable outcomes balanced with acceptable political and environmental assessments.

Accounting for the acquisition of Jinka Minerals

AASB 3 Business Combinations identifies a ‘business’ as consisting of both inputs and processes, capable of creating outputs.

Through the Jinka Minerals acquisition (effective 6 May 2011), the Group acquired the rights to intangible assets (reserves and resources) as well as the physical assets of a former operating mine which meet the definition of ‘inputs’.

However, there were no existing ‘processes’ which were purchased with the assets (e.g. operating systems, employees, OH&S systems, etc), as the former operating assets were on care and maintenance (Burnakura project) or were undeveloped exploration projects (Jervois and Gabanintha projects).

Therefore the directors have assessed that the acquisition of Jinka Minerals is not a business combination as defined, and is in fact an asset purchase. The consideration paid and the associated acquisition costs have been capitalised and allocated to the class of assets acquired, which are included in the financial statements in their respective categories at cost.

- Continued recognition of non controlling interest in relation to Andash Mining Corporation

In October 2010 the Talas Inter-district court ruled that Aurum Mining Plc and Invest-centre Talas LLC’s (ICT) ownership interests in Andash Mining Company LLC (AMC) were invalid due to their 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. In compliance with the court decision AMC was re-registered with Kaldora Company Limited, a subsidiary of the Group, as the sole participant, and an offer made by the Company to the Kyrgyz Government for their purchase of 20% of AMC for nil consideration. Before the transfer to the Kyrgyz Government could be effected, a further appeal to the Supreme Court of the Kyrgyz Republic was lodged on the 25 February 2011.

30

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 1. Summary of significant accounting policies (continued)

(u) Significant accounting judgements, estimates and assumptions (continued)

On the 22 April 2011, the Supreme Court of the Kyrgyz Republic sent the case to the Chu Inter-District Court, a court of first instance, for re-hearing. The Chu Inter-District Court upheld the original ruling of the Talas Inter-District Court. Subsequent to the ruling, Tryden International Limited, a wholly owned subsidiary of Aurum Mining plc, lodged another appeal.

The Talas court case was heard by Chu Oblast Court. The court found in favour of the General Prosecutor. This resulted in Kentor, through its holding Company Kaldora Company Limited, having its ownership of AMC increased from 80% to 100%. The former minority holders in AMC (Invest-center Talas and Aurum Mining plc) had 30 days to appeal the decision.

Kentor has offered 20% of the Andash project to the Kyrgyz Government. A parliamentary committee has recommended that the Kyrgyz Government take up this offer.

As a result of these on-going proceedings and in line with Kentor’s intention to have the Kyrgyz Government as its strategic partner in Andash, the Group has continued to recognise a non-controlling interest of 20% of AMC’s comprehensive income for the year and net assets, as the Group does not have the right to exercise control over the 20% which has been re-registered with Kaldora Company Limited and subsequently offered to the Kyrgyz Government.

Consideration of asset impairment for Andash mining project

On 4 February 2011, Kentor was advised that the Kyrgyz Government was to establish a Commission of Enquiry for the Andash mining 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 to the Standing Committee on Energy and Minerals on 21 June 2011. The Standing Committee adopted a resolution to be put to the plenary session of parliament which recommended that the Andash deposit not be developed until an understanding was reached between the local population and Andash Mining Company LLC.

On 24 June 2011, the last day of parliament before the break for the northern summer, a private member put a motion to the house recommending to Government that the licences and rights of Andash Mining Company LLC be cancelled. The motion was adopted in controversial circumstances..

On 28 June 2011, the Minister for Natural Resources issued a letter that Andash Mining Company LLC’s licences are, and remain, in good standing.

In March 2012, a Parliamentary Committee directed the government to complete a review of the environmental aspect of the Andash project by the 10[th] April 2012.

The Andash Exploration licence has expired as at 31[st] December 2011. All documents for the renewal of the licence have been filed.

A current obligation under the Andash Mining licence is that production commences by June 2012. In October 2011 Andash Mining Company applied for a two year extension of the production commencement date to June 2014.

The government department handing the exploration licence renewal and the application for the extension of the production commencement date under the current mining licence, was disbanded during the year. The Kyrgyz government has re-established the appropriate department in March 2012.

The directors have considered a detailed risk assessment of the project’s likely development at the year end, considering the developments in the last twelve months, and are confident that the project is still very likely to proceed. Therefore, no impairment losses have been recognised at 31 December 2011.

In light of this the Group has continued to apply hedge accounting to effective cash flow hedges at the year end, recognising the unrealised net gain/loss on the hedges outstanding at reporting date through the hedge reserve in equity.

31

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011

2. Revenue and expenses (a) Revenue and other income Interest Other operating revenue Total revenue Other income Profit on disposal of non-current asset Total revenue and other income (b) 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 Impairment of exploration and evaluation assets	Consolidated 2011 2010 $ $ 895,279 653,961 231,351 8,243
	1,126,630 662,204 213,917 -
	1,340,547 662,204
	(91,948) (53,626) (143,157) (66,171) (87,869) (37,365) (37,204) (4,069,503)

In the 2010 year, the Group recognised an impairment loss of $3,764,347 in relation to the Savoyardy Project (refer Note 8). The other impairment expenses related to other exploration expenditure previously capitalised on other interests in the Kyrgyz Republic

.

3. Income tax

3. Income tax (a) The components of tax expense comprise Current tax expense Deferred tax arising from origination and reversal of temporary differences Total income tax expense in profit and loss (b) Reconciliation Loss before income tax Income tax expense/(benefit) calculated at 30% (2010: 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 Total income tax expense in profit and loss (c) Unrecognised deferred tax assets Prior year tax losses brought forward Current year tax losses Unrecognised tax losses Deferred tax assets not taken up	Consolidated 2011 2010 $ $ - - - -
	- -
	(3,991,860) (6,487,708)
	(1,197,558) (1,946,312) 106,996 125,807 1,090,562 1,820,505
	- -
	22,779,493 16,711,143 3,635,207 6,068,350
	26,414,700 22,779,493
	5,124,410 4,033,848

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.

(d) There are no franking credits available.

32

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011

Notes to the financial statements for the year ended 31 December 2011
		Consolidated
	2011	2010
4. Earnings per share	$	$
Loss attributable to the owners of Kentor Gold Limited	3,991,860	6,396,441
Basic and diluted loss per share (cents per share)	(2.94)	(12.06)
Weighted average number of ordinary shares used in the calculation of basic
and diluted loss per share	106,193,268	53,016,968

At 31 December 2011, the Company had on issue 2,736,723 options (2010: 5,961,136 options) over unissued shares and has incurred a net loss. These options are anti-dilutive and 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 2011 2010 $ $ 364,530 735,557 241,284 237,052
	605,814 972,609

(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.

			Consolidated
		2011	2010
		$	$
6. Deposits – non-current
Term Deposits		747,000	-
		747,000	-
Rolling one year interest bearing term deposits to	support environmental bank	guarantees with the	department
of mines in Western Australia.
7. Property, plant and equipment	Plant & equipment 2011 $	Mine development 2011	Consolidated Total property plant and equipment 2011
		$	$
Cost	10,157,025	30,998,093	41,155,118
Accumulated depreciation	(391,891)	-	(391,891)
Net carrying amount	9,765,134	30,998,093	40,763,227
At 1 January, net of accumulated depreciation	5,601,713	11,288,694	16,890,407
Additions	1,734,237	13,859,335	15,593,572
Transfers from exploration (*)	-	4,616,429	4,616,429
Transfers between classes of assets	(1,101,475)	1,101,475	-
Acquisitions through asset purchase (**)	3,570,711	-	3,570,711
Disposals	(1,215)	-	(1,215)
Reclassification from hedge reserve	-	117,670	117,670
Effect of movement in exchange rate	53,111	14,490	67,601
Depreciation	(91,948)	-	(91,948)
At 31 December, net of accumulated depreciation	**9,765,134 **	30,998,093	40,763,227

(*) In the current period, exploration and evaluation assets of $4,616,429 relating to the Andash Mining project were transferred from exploration and evaluation assets to mine development (2010: $779,031).

(**) In the current period, Kentor Gold Limited acquired property, plant and equipment though the acquisition of Jinka Minerals Limited on the 27 April 2011, totalling $3,570,711 (2010: nil).

33

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011

7. Property, plant and equipment (continued)		Mine	Consolidated Total property
	Plant & equipment 2010	development 2010	plant and equipment 2010
	$	$	$
	$	$	$
Cost	5,894,871	11,288,694	17,183,565
Accumulated depreciation	(293,158)	-	(293,158)
Net carrying amount	5,601,713	11,288,694	16,890,407
At 1 January, net of accumulated depreciation	6,462,791	-	6,462,791
Additions	343,861	10,509,663	10,853,524
Transfers from exploration	-	779,031	779,031
Effect of movement in exchange rate	(1,151,313)	-	(1,151,313)
Depreciation	(53,626)	-	(53,626)
At 31 December, net of accumulated depreciation	5,601,713	11,288,694	16,890,407
The transfer from exploration during the year ended 31 December 2010 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 2010 year this balance was transferred to mine development.

		Consolidated
	2011	2010
	$	$
8. Exploration and evaluation assets
Deferred exploration and evaluation assets	24,367,065	12,773,258
Deferred exploration and evaluation assets
Balance at beginning of the year	5,515,999	10,483,242
Effect of movement in exchange rate	68,741	(871,826)
Current year expenditure	6,915,792	753,117
Transfers to mine development (*)	(4,616,429)	(779,031)
Disposals	(213,297)	-
Acquisition through asset purchases (**)	9,476,204	-
Impairment of area of interest	(37,204)	(4,069,503)
Balance at end of the year	17,109,806	5,515,999
Exploration tenements
Balance at beginning of the year	7,257,259	7,257,259
Movements	-	-
Balance at end of the year	7,257,259	7,257,259

(*) In the current period, exploration and evaluation assets of $4,616,429 relating to the Andash Mining project were transferred from exploration and evaluation assets to mine development (2010: $779,031).

(**) In the current period, Kentor Gold Limited acquired mining tenements and mining information through the acquisition of Jinka Minerals Limited on the 27 April 2011, totalling $9,476,204 (2010: nil)

Ultimate recovery of the exploration and evaluation assets is dependent upon successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

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 2010 year.

34

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 9. 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(c).

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

	Country of	2011	2010
Name	Incorporation	% Held	%Held
CJSC Kentor	Kyrgyz Republic	80	80
CJSC Kyldoo	Kyrgyz Republic	-	80
CJSC Epic	Kyrgyz Republic	-	80
Kaldora Limited BVI Company	British Virgin Islands	100	100
Tatianna Limited BVI Company	British Virgin Islands	100	100
Andash Mining Company LLC	Kyrgyz Republic	80	80
Kentor Gold Kazakhstan LLP	Kazakhstan	100	-

During the year Kentor Gold Limited incorporated Kentor Kazakhstan in Kazakhstan, in order to pursue potential business opportunities in country. This Company had minimal activities during the year. During the year Kentor Gold Limited closed CJSC Kyldoo and CJSC Epic as they no longer aligned with the strategic objectives of the group.

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

	Country of	2011	2010
Name	Incorporation	% Held	%Held
Dunmarra Uranium Ltd	Australia	100	100
Jinka Minerals Ltd	Australia	100	-
Kentor Energy Pty Ltd	Australia	100	-

Kentor Gold Limited acquired control of Jinka Minerals Limited on 27 April 2011 (effective 6 May 2011) through an agreed off market takeover.. Refer to Note 15 for details of the assets and liabilities purchased.

During the year Kentor Gold Limited incorporated Kentor Energy Pty Ltd to support the three year prospecting licence for geothermal energy granted by the Solomon Islands government.

10. Other non-current assets VAT paid	Consolidated 2011 2010 $ $ 164,306 524,691
	164,306 524,691

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. During the year $400,100 VAT paid was written off (2010: NIL).

11. Trade and other payables - current Unsecured trade payables Employee benefits	Consolidated 2011 2010 $ $ 3,252,929 1,816,744 216,783 167,372
	3,469,712 1,984,116

(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.

35

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011

12. Contributed equity (a) Issued and paid up capital Ordinary shares fully paid (b) Movements in shares on issue Details Beginning of the financial year Movements during the year:- 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 Share options exercised 27 April 2011 (Costs)/refunds of costs of share issues Closing balance	Consolidated 2011 2010 122,404,505 122,109,423 2011 2010 Number of shares issued Issued capital $ Number of shares issued Issued capital $ 1,061,592,950 122,109,423 393,011,481 49,041,310 - - 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 13,414,150 500,000 18,000 - - - 277,082 - (4,775,498)	Consolidated 2011 2010 122,404,505 122,109,423
	1,062,092,950 122,404,505 1,061,592,950 122,109,423

(c) Terms and conditions 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.

36

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011

12. Contributed equity (continued)

(d) Share options

Options over ordinary shares

At the end of the financial year, there were 27,369,232 (31 December 2010: 59,611,358) 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 2012 16 Dec 2012 Total unlisted options Unlisted employee 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 Earlier of 11 Sept 2014 or 30 days after ceasing employment Earlier of 11 Sept 2014 or 30 days after ceasing employment Earlier of 04 June 2015 or 30 days after ceasing employment Earlier of 04 June 2015 or 30 days after ceasing employment Earlier of 04 June 2015 or 30 days after ceasing employment Earlier of 04 June 2015 or 30 days after ceasing employment Earlier of 30 May 2016 or 30 days after ceasing employment Earlier of 30 May 2016 or 30 days after ceasing employment Earlier of 31 May 2016 or 30 days after ceasing employment Earlier of 31 May 2016 or 30 days after ceasing employment Earlier of 31 May 2016 or 30 days after ceasing employment Earlier of 31 May 2016 or 30 days after ceasing employment Earlier of 01 July 2016 or 30 days after ceasing employment Earlier of 01 July 2016 or 30 days after ceasing employment Earlier of 25 July 2016 or 30 days after ceasing employment Earlier of 25 July 2016 or 30 days after ceasing employment Total unlisted employee options Total options granted

Number Exercise price $ 100,000 0.5808 100,000 0.7808 100,000 0.9808 10,769,232 0.1433 11,069,232 300,000 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 500,000 0.1688 500,000 0.1378 500,000 0.1408 500,000 0.1728 500,000 0.1455 500,000 0.1746 500,000 0.2078 500,000 0.2493 1,000,000 0.1218 1,000,000 0.1462 500,000 0.1256 500,000 0.1507 250,000 0.1137 250,000 0.1365 16,300,000 27,369,232

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.

37

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 14. Non-controlling interests

14.	Non-controlling interests		Consolidated
		2011	2010
		$	$
Non-controlling interest in:
Share capital		5	5
Foreign currency translation reserve		(341,093)	(446,797)
Retained earnings		**2,223,131 **	2,362,529
		1,882,043	1,915,737
15. Notes to the statement of cash flows
(a)	Reconciliation of loss after tax to net cash flows from operations
	Net profit/(loss) for the year	(3,991,860)	(6,487,708)
	Non cash flows in operating result
	Depreciation expense	91,948	53,626
	Impairment of exploration and evaluation assets	37,204	4,069,503
	Share based payments	346,147	155,294
	GST capital raising cost subsequently recovered	349,348	-
	Gain on sale of property, plant and equipment	(213,917)	-
	Other	-	12,882
	Change in operating assets and liabilities
	(Increase)/Decrease in receivables	162,069	(724,022)
	Increase/(Decrease) in payables	666,199	793,886
	(Increase)/Decrease in VAT paid	360,385	(197,929)
	(Increase)/Decrease in inventory	(5,705)	(224,525)
		(2,198,182)	(2,548,993)
(b)	Cash on hand and at call	34,124,142	35,411,403
	Term deposits	10,273	35,959,619
		34,134,415	71,371,022
(c)	Financing facility
	The group has no available finance facilities at balance date (2010: NIL).
(d)	Acquisition of assets and liabilities of Jinka Minerals Ltd
	Kentor Gold Limited acquired control of Jinka Minerals Limited on 27 April
	2011 (effective 6 May 2011) through an agreed off market takeover.
	Cash consideration	12,851,564	-
	Acquisition costs	816,298	-
	Total acquisition costs	13,667,862	-
	Represented by:
	Cash and cash equivalents	7,323	-
	Trade and other receivables	14,542	-
	Deposits	747,000	-
	Plant and equipment	3,570,711	-
	Exploration assets	9,476,204	-
	Trade and other payables	(147,918)	-
	Net assets	13,667,862	-

38

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011

16. Share based payments

16. Share based payments Share based payment expense recognised during the financial year Value of shares on the date options exercised Options exercised 6 October 2010 Options exercised 27 April 2011	Consolidated 2011 2010 $ $ 346,147 155,294
	Number of options 1,000,000 500,000 Share price $ 0.15 0.14

Employee options

Employee options are either granted at date of commencement or at the discretion of the Board based on a formal employee review process. 5,500,000 options over unissued shares of the Company were granted to employees during the year and 1,000,000 were forfeited. Information with respect to the number of options granted is as follows:

Balance at beginning of year - granted - forfeited - exercised Balance at end of year	2011 2010 Number of options Weighted average exercise price Number of options Weighted average exercise price 11,800,000 $0.15 8,800,000 $0.25 5,500,000 $0.16 4,000,000 $0.17 (1,000,000) $0.20 - - - - (1,000,000) $0.13
	16,300,000 $0.23 11,800,000 $0.15

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

	Grant date	Vesting date	Expiry date	Weighted average	Fair value at
No. of options				exercise price	grant date
At 31 December 2011				$	$
300,000	01 Dec 2004	01 Dec 2004	n/a*	0.6058	0.0294
300,000	01 Dec 2004	01 Dec 2004	n/a*	0.7308	0.0216
300,000	01 Dec 2004	01 Dec 2004	n/a*	0.8558	0.0162
1,000,000	30 May 2009	30 May 2009	n/a*	0.1808	0.0280
950,000	30 May 2009	30 May 2009	n/a*	0.2308	0.0200
950,000	30 May 2009	30 May 2009	n/a*	0.2808	0.0110
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
500,000	04 Jun 2010	04 Jun 2010	04 Jun 2015	0.1688	0.0415
500,000	04 Jun 2010	04 Jun 2010	04 Jun 2015	0.1378	0.0309
500,000	04 Jun 2010	04 Jun 2010	04 Jun 2015	0.1408	0.0412
500,000	04 Jun 2010	04 Jun 2010	04 Jun 2015	0.1728	0.0377
1,000,000	31 May 2011	31 May 2011	31 May 2016	0.1218	0.0791
1,000,000	31 May 2011	31 May 2011	31 May 2016	0.1462	0.0750
500,000	31 May 2011	31 May 2011	31 May 2016	0.2078	0.0667
500,000	31 May 2011	31 May 2011	31 May 2016	0.2493	0.0623
500,000	08 Aug 2011	08 Aug 2011	01 Jul 2016	0.1256	0.0533
500,000	08 Aug 2011	08 Aug 2011	01 Jul 2016	0.1507	0.0500
500,000	08 Aug 2011	08 Aug 2011	30 May 2016	0.1455	0.0507
500,000	08 Aug 2011	08 Aug 2011	30 May 2016	0.1746	0.0474
250,000	08 Aug 2011	08 Aug 2011	25 July 2016	0.1137	0.0554
250,000	08 Aug 2011	08 Aug 2011	25 July 2016	0.1365	0.0522

39

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011

16. Share based payments

(continued)

At	31	December	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	0.0280
		950,000		30 May 2009	30 May 2009	n/a*	0.2308	0.0200
		950,000		30 May 2009	30 May 2009	n/a*	0.2808	0.0110
		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
		500,000		04 Jun 2010	04 Jun 2010	04 Jun 2015	0.1688	0.0415
		500,000		04 Jun 2010	04 Jun 2010	04 Jun 2015	0.1378	0.0309
		500,000		04 Jun 2010	04 Jun 2010	04 Jun 2015	0.1408	0.0412
		500,000		04 Jun 2010	04 Jun 2010	04 Jun 2015	0.1728	0.0377

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

At year end all options were exercisable with the exception of those noted in Note 17(b).

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 December 2011 are:

Spot price	$0.12 and $0.09
Grant date	31 May 2011 and 08 August 2011
Expiry date	31 May 2016, 1 July 2016 and 25 July 2016
Volatility	78%
Risk free rate	4.75%

Expected volatility was determined based on historic volatility adjusted for any expected changes to future volatility based on publicly available information. All options vested at grant date.

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.

personnel.	personnel.	personnel.	personnel.	personnel.
(a) Key management personnel compensation									2011	2010
									$	$
Short-term employee benefits									895,110	721,405
Post employment	benefits								73,225	111,200
Share-based payments									154,029	39,144
									1,122,364	871,749
(b) Option holdings of directors
	Opening	Granted as		Options		Net		Closing	Vested and	Vested and
	balance	remuneration		exercised		change-		balance	exercisable	un-
31 December	1 January					other		31 December	at 31 December	exercisable at 31
2011										December
Directors
A.E. Daley	1,000,000		-		-		-	1,000,000	1,000,000	-
W.H. J Barr	1,000,000		-		-		-	1,000,000	1,000,000	-
H. McKinnon	2,800,000		-		-		-	2,800,000	1,900,000	900,000
S.J. Milroy	4,000,000	2,000,000			-		-	6,000,000	4,000,000	2,000,000
J Taylor	-		-		-		-	-	-	-
Total	8,800,000	2,000,000			-		-	10,800,000	7,900,000	2,900,000

40

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011

17. Key management personnel (continued)

	Opening	Granted as	Granted as	Granted as	Options	Net change-	Closing	Vested and	Vested and
	balance	remuneration			exercised	other	balance	exercisable at	un-
31 December	1 January						31 December	31 December	exercisable at
2010									31 December
Directors
A.E. Daley	1,000,000			-	-	-	1,000,000	1,000,000	-
W.H. J Barr	1,000,000			-	-	-	1,000,000	1,000,000	-
H. McKinnon	2,800,000			-	-	-	2,800,000	1,900,000	900,000
S.J. Milroy	4,000,000			-	-	-	4,000,000	2,000,000	2,000,000
J Taylor		-	1,000,000		(1,000,000)	-	-	-	-
Total	8,800,000		1,000,000		(1,000,000)	-	8,800,000	5,900,000	2,900,000
(c) Shareholdings of directors
			Balance		Granted as	On	Net change-	Balance	Held
		1	January	remuneration		exercise of	other	31 December	nominally at
31 December 2011			2011			options		2011	31 December
Ordinary Shares									2011
Directors
W H J Barr		2,076,837			-	-	-	2,076,837	-
A E Daley		2,473,018			-	-	-	2,473,018	-
H McKinnon		2,501,094			-	-	-	2,501,094	-
S J Milroy		1,245,428			-	-	-	1,245,428	-
J C Taylor		4,000,006			-	-	500,000	4,500,006	-
Total		12,296,383			-	-	500,000	12,796,383	-
			Balance		Granted as	On exercise	Net change-	Balance	Held
		1 January			remuneration	of options	other	31 December	nominally at
31 December 2010			2010					2010	31 December
Ordinary Shares									2010
Directors
W H J Barr			954,666		-	-	1,122,171	2,076,837	-
A E Daley			733,586		-	-	1,739,432	2,473,018	-
H McKinnon		2,064,627			-	-	436,467	2,501,094	-
S J Milroy			775,555		-	-	469,873	1,245,428	-
J C Taylor		1,076,666			-	1,000,000	1,923,340	4,000,006	-
Total		5,605,100			-	1,000,000	5,691,283	12,296,383	-

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. Mr Taylor has now retired from this position. This transaction occurred based on normal commercial terms. The first ball mill was fully paid for during the year. At 31 December 2011, the commitment remains for the secondary mill of $4,695,977 (€3,690,568) to be paid in full by October 2012.

A loan of US$25,000 was granted to Mr Hugh McKinnon during the year. There are no outstanding amounts relating to this loan as at 31 December 2011. No interest was accrued for the period.

There were no other transactions with key management personnel (2010: nil)

At year end, there was no outstanding amounts payable to key management personnel (2010: nil)

41

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011

Notes to the financial statements for the year ended 31 December 2011
	Consolidated
	2011	2010
	$	$
18. Auditors’ remuneration
Amounts paid or payable to
BDO Audit (QLD) Pty Ltd for:
• audit or review of the financial statements of the entity and any other entity in the Group	41,000	56,853
Remuneration of other auditors of subsidiaries
• audit or review of the financial statements of subsidiaries	14,740	6,682
No non-audit services were provided by the auditors.

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 Kyrgyz Republic

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 end 31 December 2011.

Development Projects – Australia

This segment consists of projects that are in the process of being developed. The Murchison project was the only project in this reportable segment for the year ended 31 December 2011.

- Exploration Projects Kyrgyz Republic

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

Exploration Projects - Australia

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

Information Provided to the Executive Directors

42

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 Segment information provided to the executive directors is as follows:

	Development	Exploration	Development	Exploration	Total
	Projects -	Projects -	Projects -	Projects -
	Kyrgyz	Kyrgyz	Australia	Australia
	Republic	Republic
Year ended 31 December 2011	$	$	$	$	$
Segment Revenue
Total segment revenue	201,850	-	-	87,638	289,488
Result
Segment result	(482,705)	83,758	-	(389,689)	(788,636)
Segment result contains:
Interest revenue	-	-	-	69,718	69,718
Impairment expense	-	(10,507)	-	-	(10,507)
Depreciation and amortisation	-	(16,341)	-	(49,351)	(65,692)
Assets and Liabilities
Segment assets	44,805,853	957,983	7,417,142	13,865,960	67,046,938
Segment liabilities	(63,398)	(9,597)	-	(1,889,427)	(1,962,422)
Acquisition of non-current assets	13,859,335	179,417	-	16,203,693	30,242,445

43

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 20. Segment Information (continued)

	Development	Exploration	Development	Exploration	Total
	Projects -	Projects -	Projects -	Projects -
	Kyrgyz	Kyrgyz Republic	Australia	Australia
	Republic
Year ended 31 December 2010	$	$	$	$	$
Segment Revenue
Total segment revenue	-	7,907	-	-	7,907
Result
Segment result	-	(4,262,110)	-	-	(4,262,110)
Segment result contains:
Interest revenue	-	7,907	-	-	7,907
Impairment expense	-	-	-	-	-
Depreciation and amortisation	-	(16,952)	-	-	(16,952)
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 non-current assets	11,134,984	253,968	-	-	11,388,952

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 revenue and result reconciles to total revenue and loss for the year as follows.

Segment Revenue Interest revenue Other income Total revenue per statement of comprehensive income Segment result Interest revenue Other income Impairment Corporate expenses Total loss for the year per statement of comprehensive income Segment assets and liabilities reconcile to total assets and liabilities as follows. Segment assets Cash Trade and other receivables Property, plant and equipment Total assets per statement of financial position Segment liabilities Trade and other payables Total liabilities per statement of financial position	2011 2010 $ $ 289,488 7,907 825,561 654,297 225,498 -
	1,340,547 662,204
	(788,636) (4,262,110) 825,561 654,297 225,498 - (26,697) - (4,227,586) (2,879,895)
	(3,991,860) (6,487,708)
	2011 2010 $ $ 67,046,938 30,761,307 34,022,583 71,360,800 217,152 947,318 186,460 59,696
	101,473,133 103,129,121
	(1,962,421) (1,795,732) (1,507,291) (188,384)
	(3,469,712) (1,984,116)

44

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 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 interest rate risk, currency risk and commodity price risk), credit risk, and liquidity 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:

• The Board’s management philosophy;

• Commonly accepted industry practice and corporate governance; and

• Shareholders expectations of becoming a gold and copper producer.

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 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.

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
	2011	2010
	$	$
Financial assets
Loans and receivables (including cash)	35,487,229	72,343,631
Financial liabilities
Measured at amortised cost	(3,252,929)	(1,816,744)

45

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 21. Financial instruments (continued)

(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 other receivables as the Group did not have customers during the year.

At balance date the Group has a material exposure of $34,023,819 to National Australia Bank Limited relating to funds on deposit and cash at bank (2010: $71,363,275). 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.

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:

	2011		2010
	USD/Euro	$	USD/Euro	$
USD	31,687,927	31,145,987	5,000,000	4,919,807
Euro	-	-	4,000,000	5,215,804
Total		31,145,987		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.

46

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 21. Financial instruments (continued)

(d) Market risk (continued)

During the year ended 31 December 2011 there was a loss from a decrease in the fair value of the foreign currency held as hedging instruments of $303,012 (2010: $434,483).

During the year ended 31 December 2011 no amount was reclassified from the hedge reserve and included in the acquisition cost of capital equipment (2010:Nil). There was no hedge ineffectiveness in the current or prior year.

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

			2011
	AUD	USD	EUR	Kyrgyz SOM	KZT
Consolidated
Cash at bank	2,958,788	-	2,621	1,204,369	128,002
Cash set aside as hedging
instrument	-	31,687,927	-	-	-
Trade and other receivables	584,441	-	-	1,000,548	1,381
Trade and other payables	(3,202,690)	-	-	(2,374,818)	(132,000)
			2010
	AUD	USD	EUR	Kyrgyz SOM	KZT
Consolidated
Cash at bank	61,066,635	160,653	366	552,736	-
Cash set aside as hedging
instrument	-	5,000,000	4,000,000	-	-
Trade and other receivables	947,318	-	-	25,291	-
Trade and other payables	(1,717,426)	-	-	(283,239)	-

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

Currency	Average Rate		Reporting Date	Spot Rate
	2011	2010	2011	2010
USD	1.033	0.928	1.0174	1.0163
EUR	n/a	n/a	0.7856	0.7669
Kyrgyz SOM	47.611	43.132	47.2703	47.892

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) in net loss	Increase / (decrease) in net loss	Increase / (decrease) in other	Increase / (decrease) in other
				comprehensive income
		2011	2010	2011	2010
USD –	10%	-	-	3,460,665	564,209
USD +	10%	-	-	(2,831,453)	(461,626)
EUR –	10%	-	-	371	579,587
EUR +	10%	-	-	(303)	(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.

47

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 21. Financial instruments (continued)

(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 Group’s 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:

CONSOLIDATED Weighted average interest rate 31 December 2011 Financial assets Cash and deposits 0.39% Deposits 5.75% 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 $ 1 year or less $ 461,532 33,672,883 - 747,000 - -	Floating interest rate $ 1 year or less $ 461,532 33,672,883 - 747,000 - -	Fixed interest maturing in: Non- interest bearing $ Total $ over 1 to 5 years $ 5 years or more $ - - - 34,134,415 - - - 747,000 - - 605,814 605,814
	461,532 34,419,883		- - 605,814 35,487,229
	- -		- - (3,259,929) (3,259,929)
	461,532 34,419,883		- - (2,654,115) 32,227,300
	Floating interest rate $ Fixed 1 year or less $ 35,411,403 35,959,618 - -	Fixed	interest maturing in: Non- interest bearing $ Total $ over 1 to 5 years $ 5 years or more $ - - - 71,371,022 - - 972,609 972,609
	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.

The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date. At 31 December 2011, 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:

	Net loss		Other comprehensive income	Other comprehensive income
	Higher/(Lower)		Higher/(Lower)
	2011	2010	2011	2010
Consolidated	$	$	$	$
+0.5% (50 basis points)	68,859	177,057		-	-
-0.5% (50 basis points)	(68,859)	(177,057)		-	-

48

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 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 Group 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; and

• Regularly monitoring the availability of equity capital and current market conditions.

Maturity Analysis

Maturity Analysis
CONSOLIDATED 31 December 2011 Financial assets Cash and deposits Trade and other receivables Financial liabilities Trade and other payables Net maturity 31 December 2010 Financial assets Cash and deposits Trade and other receivables Financial liabilities Trade and other payables Net maturity	<6 Months $ 6-12 Months $ 1-5 Years $ >5 years $ Total $ 34,134,415 - - - 34,134,415 605,814 - - - 605,814 34,740,229 - - - 34,740,229 (3,259,929) - - - (3,259,929) (3,259,929) - - - (3,259,929) 31,480,300 - - - 31,480,300
	<6 Months $ 6-12 Months $ 1-5 Years $ >5 years $ Total $ 71,371,022 - - - 71,371,022 972,609 - - - 972,609
	72,343,631 - - - 72,343,631
	(1,984,116) - - - (1,984,116)
	(1,984,116) - - - (1,984,116)
	70,359,515 - - - 70,359,515

(g) Fair values

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

22. Commitments

Capital expenditure commitments No longer than 1 year Between 1 and 5 years Greater than 5 years Operating lease commitments No longer than 1 year Between 1 and 5 years Greater than 5 years	Consolidated 2011 2010 $ $ 5,640,906 12,535,935 2,544,868 - 6,961,068 - 15,146,842 12,535,935 264,990 24,623 817,850 - - - 1,082,840 24,623

49

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011

22. Commitments (continued)

Capital Commitments

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.

The first ball mill was fully paid for during the year. At 31 December 2011, the commitment remains for the secondary mill of $4,695,977 (€3,690,568) to be paid in full by October 2012.

During the period, the Group acquired interests in various mining and exploration tenements in WA and NT as part of the Jinka Minerals Limited acquisition. There are capital and rental commitments on these tenements ranging from $4,360 to $100,000 per annum with expiry terms of between 1 to 19 years.

Operating lease commitments

Operating lease commitments comprise leases over a rail siding storage facility and office space in the Kyrgyz Republic, the corporate office operating lease rental in Brisbane Australia, and the office space in Perth Australia. The annual rental commitments on these leases range from $13,686 to $154,560 per annum with expiry terms of between 1 month to 5 years.

23. Contingent liabilities and contingent assets

• (a) On 24 June 2011, a private member put a motion to the house recommending to Government that the licences and rights of Andash Mining Company LLC be cancelled. The motion was adopted in controversial circumstances.

On 28 June 2011, the Minister for Natural Resources issued a letter that Andash Mining Company LLC’s licences are, and remain, in good standing.

In March 2012 a Kyrgyz Parliamentary committee has recommended that the Government take up the 20% interest offered by Kentor Gold and cancel the parliamentary resolution passed on 24 June 2011.

Kentor has offered 20% of AMC to the government on the basis of a free carry. They are yet to take up the offer.

The directors have considered a detailed risk assessment of the project’s likely development at the year end, considering the developments in the last twelve months, and are confident that the project is still highly likely to proceed. Therefore, no impairment losses have been recognised at 31 December 2011.

• (b) On the 27 April 2011, the Company obtained control of Jinka Minerals Limited through an agreed off-market takeover offer. Attached to the sale of the Burnakura mining tenements owned by Jinka Minerals Limited, is a royalty agreement with Royal Gold, Inc. The Group is contractually obliged to pay Royal Gold, Inc a royalty based on potential future extractions at a rate of 1.5% of gold sales once 300,000 oz’s has been recorded in the region.

50

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 24. Subsequent events

On 7 February 2012 the Board of Kentor Gold approved the development of Phase 1 of the Murchison Gold Project. As part of this, the following contracts have been entered into subsequent to year end,

• An open pit mining contract has been awarded to Minepower. Mobilisation of mining equipment to the Burunakura site commenced in March 2012 with mining to commence in early April 2012 subject to final approval from the WA Department of Mines. Early termination requires three months notice on equipment and one month for Labour.

• Network Aviation, has been awarded a 24 month contract to provide a charter services twice a week a Perth – Meekatharra – Perth. Early termination requires three months notice.

• Action Catering, has been awarded a 24 month contract to provided catering and camp management services at the Burnakura site .Early termination 30 days notice is required

The Company has been awarded a three year prospecting licence for geothermal energy granted by the Solomon Islands government.

On 10 February 2012 there was a consolidation of shares in the ratio of 1:10.

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 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 Total liabilities Net assets Contributed equity Share-based payments reserve Hedge reserve Retained earnings/(accumulated losses) Total shareholders’ equity Profit/(loss) for the year Other comprehensive income Total comprehensive income for the year	2011 $ 2010 $ 34,239,414 72,308,118 75,654,457 40,449,837
	109,893,871 112,757,955
	(1,507,291) (1,717,426)
	(1,507,291) (1,717,426)
	108,386,580 111,040,529
	122,404,505 122,109,423 3,502,749 3,174,602 (619,825) (432,667) (16,900,849) (13,810,829)
	108,386,580 111,040,529
	(3,090,020) (7,494,154) (185,342) (434,484)
	(3,275,362) (7,928,638)

51

KENTOR GOLD LIMITED ABN 52 082 658 080

Notes to the financial statements for the year ended 31 December 2011 25. Parent entity information (continued)

Guarantees

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

Contractual commitments

There were no contractual commitments for the acquisition of property, plant and equipment entered into by the parent entity at 31 December 2011 (2010 - $nil).

Contingent liabilities

The parent entity has no known contingent liabilities.

52

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 2011, 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 gives a true and fair view and 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 company’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 company’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 77 110 275, 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 2011 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.

Emphasis of Matter

We draw attention to the disclosure in Note 1 to the financial statements regarding “Consideration of asset impairment for Andash mining project”. The matters raised in this note are of such importance that they are fundamental to the users’ understanding of the financial report. Our conclusion is not qualified in respect of these matters.

Report on the Remuneration Report

We have audited the Remuneration Report included in the directors’ report for the year ended 31 December 2011. 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 2011 complies with section 300A of the Corporations Act 2001 .

BDO Audit (QLD) Pty Ltd

A J Whyte

Director

Brisbane: 30 March 2012

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 77 110 275, 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.

The information in this report that relates to mineral resource estimation for Gabanintha and Burnakura is based on work completed by Mr Jonathon Abbott who is a full-time employee of Hellman & Schofield Pty Ltd and a member of the Australasian Institute of Mining and Metallurgy. Mr Abbott has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Abbott consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

The data in this report that relates to Mineral Resource Estimates and Exploration Potential for Jervois is based on information evaluated by Mr Simon Tear who is a Member of The Australasian Institute of Mining and Metallurgy (MAusIMM) and who has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the “JORC Code”). Mr Tear is a full-time employee of Hellman & Schofield Pty Ltd and he consents to the inclusion in the report of the Mineral Resource in the form and context in which they appear.