XREF LIMITED — Interim / Quarterly Report 2014

Dec 10, 2013

KING SOLOMON MINES LIMITED

FINANCIAL REPORT

FOR HALF YEAR ENDED 30 SEPTEMBER 2013

	Page
Directors’ Report	2
Condensed Consolidated Statement of Comprehensive Income	3
Condensed Consolidated Statement of Changes in Equity	4
Condensed Consolidated Statement of Financial Position	5
Condensed Consolidated Statement of Cash Flows	6
Notes to the Condensed Financial Statements	7-15
Auditor’s Review	16

KING SOLOMON MINES LIMITED

DIRECTORS’ REPORT

FOR HALF YEAR ENDED 30 SEPTEMBER 2013

Your directors have pleasure in presenting the interim financial report for the half year ended 30 September 2013.

DIRECTORS

The names of directors who held office during or since the end of the half year and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated.

Christopher D. Castle (Non-Executive Chairman)

Stephen J. McPhail (Managing Director) Fu La (Executive Director)

REVIEW OF OPERATIONS

The net loss of the Group for the half year ended 30 September 2013 amounted $206,658 (half year ended 30 September 2012: $6,020,164)

EXPLORATION ACTIVITIES

Over the 6 months the Company has focused on the sale of Sonid North, its principal project in Inner Mongolia. The continuing difficult state of the commodities market has made it difficult to achieve an early sale.

The Company continues to review a number of minerals opportunities as potential acquisitions.

The Board believes the Company will be successful in moving its focus to a new minerals opportunity.

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KING SOLOMON MINES LIMITED

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

1. GENERAL INFORMATION

These financial statements are presented in Australian Dollars being the Group’s presentation currency unless otherwise noted.

King Solomon Mines Limited (‘the Company’) and its subsidiary (together ‘the Group’) were incorporated for the purpose of exploring and developing gold, copper and other metallic deposits in China and are profit oriented entities.

The Company is a limited liability company incorporated on 28 January 2003 and domiciled in New Zealand. The address of its registered office is 242 Marine Parade, Otaki Beach, Otaki, 5512.

These condensed consolidated financial statements were approved by the Board of Directors on 6 December 2013.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The half yearly financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing activities of the Group as the full financial report. Accordingly, this report should be read in conjunction with the Annual Financial Report of King Solomon Mines Limited for the year ended 31 March 2013.

The principal accounting policies applied in the preparation of these condensed consolidated financial statements of the Group are consistent with those of the previous financial year except as described below.

• NZ IAS 1 Amendment – Presentation of Items in Other Comprehensive Income. An amendment to NZ IAS 1 required that items of other comprehensive income that would be reclassified to profit and loss in future if certain conditions were met be presented separately from those that would never be reclassified to profit and loss. This resulted in a change in the presentation of the Group’s statement of other comprehensive income.

Basis of preparation

The Directors had assessed the Group’s business and estimated that it would be difficult to obtain additional capital to fund further exploration and /or development expenditure last year. Accordingly, the Group had no realistic alternative but to sell core assets. The situation has not changed in the current six month period. Management continues to seek the sale of the Sonid North gold project and other assets. The Group plans to use the current funds and the funds from the sale of assets to secure new exploration projects and consider other options. Consequently, the Group is not deemed to be a going concern and the financial statements continue to be prepared on a realisation basis.

The condensed consolidated financial statements of the Group have been prepared in accordance with IAS 34 and NZ IAS 34 which deal with Interim Financial Reporting, and follow Generally Accepted Accounting Practice in New Zealand.

The condensed consolidated financial statements have been prepared in accordance with the requirements of the Companies Act 1993 and the Financial Reporting Act 1993, and should be read in conjunction with the annual financial statements for the year ended 31 March 2013, which have been prepared in accordance with NZ IFRS and IFRS.

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KING SOLOMON MINES LIMITED

NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

In preparing the financial statements on a realisation basis, the Group and Company have made estimates of the net realisable value of their assets.

In particular, the net realisable value of property, plant and equipment was determined by reference to relevant market prices less estimated selling costs (if any). Exploration and evaluation assets and property held for resale were determined based on the Directors’ best estimates of realisable value (see note 6).

4 . SEGMENT INFORMATION

Management has determined the operating segments based on the reports reviewed by The King Solomon Mines Limited Board which is responsible for making strategic decisions.

As at 30 September 2013, the Group is organised into one main business segment; the activity of exploring and developing gold, copper and other metallic deposits. As there is only one main segment as at 30 September 2013 the disclosures on the face of the Condensed Consolidated Statement of Comprehensive Income and the Statement of Financial Position represent the Group’s one business segment.

Geographical Information:

The Group operates its business of exploration in China with the bulk of the administrative functions being performed in New Zealand and Australia.

This is demonstrated by the geographical breakdown of material assets shown in total on the Statement of Financial Position:

30 September 2012 Property Plant and Equipment Exploration and Evaluation Assets Total Non Current Assets 31 March 2013 Property for Resale Motor Vehicles for Sale Other Plant and Equipment for Sale Exploration and Evaluation Assets	New Zealand Unaudited $ 6,296 - 6,296 New Zealand Audited $ - - 3,351 - 3,351	China Consolidated Unaudited Unaudited $ $ 286,856 293,152 950,000 950,000 1,236,856 1,243,152 China Consolidated Audited Audited $ $ 275,339 275,339 107,075 107,075 14,877 18,228 995,332 995,332 1,392,623 1,395,974

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KING SOLOMON MINES LIMITED

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

30 September 2013 Property for Resale Motor Vehicles for Sale Other Plant and Equipment for Sale Exploration and Evaluation Assets Total Non Current Assets	New Zealand Unaudited $ - - 1,726 - 1,726	China Consolidated Unaudited Unaudited $ $ 262,045 262,045 101,524 101,524 12,756 14,482 1,056,898 1,056,898 1,433,223 1,434,949

5. CASH AND CASH EQUIVALENTS

Cash Cash at Bank Short Term Bank Deposits	30 September 2013 Unaudited $ 182 114,399 - 114,581	31 March 30 September 2013 2012 Audited Unaudited $ $ 266 460 164,067 350,462 150,000 500,000 314,333 850,922

6. EXPLORATION AND EVALUATION INCOME AND EXPENDITURE

The results of drilling at all tenements have not been as encouraging as hoped. All current drilling programmes have ceased since 31 March 2013 and the Group intends to sell the Sonid North gold project in its current state and consider options for the other tenements. The Directors have impaired the carrying value of the tenements based on the Directors’ best estimate of the likely sales price of each tenement. There is no active market in China for these tenements.

The capitalised exploration and evaluation expenditure carried forward has been determined as follows:

Exploration phase: Opening Balance Foreign Exchange on Opening Balance Expenditure incurred during the Period Expenditure written off during the Period (Refer note 3) Closing Balance	30 September 2013 Unaudited 6 Months $ 995,332 141,399 - (79,833) 1,056,898	31 March 30 September 2013 2012 Audited Unaudited 12 Months 6 Months $ $ 5,611,354 5,611,354 12,282 (1,757) 1,469,023 968,547 (6,097,327) (5,628,144) 995,332 950,000

The exploration and evaluation expenditure has been allocated across the following prospects:

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KING SOLOMON MINES LIMITED

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

Prospect Sonid North Naogaoshandu Marmot Bu Dun Hua Total Exploration and Evaluation Expenditure	30 September 2013 Unaudited 6 Months $ 839,795 80,000 57,103 80,000 1,056,898	31 March 30 September 2013 2012 Audited Unaudited 12 Months 6 Months $ $ 735,332 650,000 130,000 100,000 50,000 100,000 80,000 100,000 995,332 950,000

Operating Leases:

Inner Mongolia Plate Mining Limited in its capacity as lessor has granted leases for the mining of Iron Ore over its exploration licences and received the following income:

Prospect Marmot Total Lease Income	30 September 2013 Unaudited $ - -	31 March 30 September 2013 2012 Audited Unaudited $ $ 21,437 21,390 21,437 21,390

7. SHARE CAPITAL

ssued Share Capital ssued share capital is represented by: Number of Shares Issue Price $ Average Issue Price $/Share Opening Balance 223,139,260 17,506,982 0.08 Shares Issued - - Capital Raising Costs - - Options Expired Reclassification - - Closing Balance 223,139,260 17,506,982 0.08 30 September 2013 Unaudited	Number of Shares Issue Price $ Average Issue Price $/Share 166,287,552 16,992,950 0.10 56,851,708 941,436 - (37,522) - (389,882) 223,139,260 17,506,982 0.08 31 March 2012 Audited	Number of Shares Issue Price $ Average Issue Price $/Share 166,287,552 16,603,068 0.10 30,913,452 510,072 - -34,175 - 389,882 166,287,552 17,468,847 0.10 30 September 2012 Unaudited

All shares are fully paid and rank equally with regard to voting rights and distribution of profit.

All shares have no par value, are fully paid and rank equally with regard to voting rights and distribution of profit.

Share Options

Options are currently issued to directors, one employee and Dayton Way Financial Pty Ltd. Options exercisable as at balance date are as follows:

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KING SOLOMON MINES LIMITED

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

Expiry date At 1 April 29 July 2014 At 1 April 25 March 2016 At 1 April 29 July 2016 At 1 April 3 March 2014 Granted 3 March 2014 Granted 4 October 2014 Lapsed 4 October 2014 Lapsed 29 July 2014 Lapsed 25 March 2016 Lapsed 29 July 2016 Exercised Forfeited	Average exercise price in $A per share Options 0.10 3,100,000 0.12 165,000 0.12 1,963,000 0.05 1,000,000 - - - 0.12 (1,100,000) 0.12 (165,000) 0.12 (363,000) - - 0.09 4,600,000 30 September 2013 Unaudited	Average exercise price in $A per share Options Average exercise price in $A per share Options 0.10 3,100,000 0.10 3,100,000 0.12 500,000 0.12 500,000 0.12 2,900,000 0.12 2,900,000 - - 0.05 1,000,000 - 0.03 1,800,000 - 0.03 (1,800,000) - - - 0.12 (335,000) - 0.12 (937,000) - - - - 0.12 6,228,000 0.11 6,500,000 31 March 2013 30 September 2012 Audited Unaudited

• No participation in future dividends until exercised

8. INVESTMENT IN SUBSIDIARIES

Name of Subsidiary	Principal Activity	Equity Holding	Equity Holding	Equity Holding
		30 September	31 March	30 September
		2013	2013	2012
		Unaudited	Audited	Unaudited
Inner Mongolia Plate Mining Co Limited	Exploration	90%	90%	90%

On 8 March 2006, King Solomon Mines Limited and Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited signed an agreement to form Inner Mongolia Plate Mining Co Limited, a sino foreign equity joint venture of which King Solomon Mines Limited owns 90% and Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited holds 10% in trust for King Solomon Mines Limited due to Chinese regulatory requirements.

As King Solomon Mines Limited effectively owns 100% of this subsidiary and retains all the risks and rewards of ownership, the Group has not accounted for any minority interest. Inner Mongolia Plate Mining Co Limited has a balance date of 31 December in line with Chinese regulatory requirements.

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KING SOLOMON MINES LIMITED

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

9. EARNINGS PER SHARE

9. EARNINGS PER SHARE
	30 September	30 September
	2013	2012
	Unaudited	Unaudited
	$	$
Loss from continuing operations attributable to equity holders of
the Company	(317,930)	(6,008,953)
Weighted average number of ordinary shares on issue	223,139,260	170,848,553
Basic earnings per share from continuing operations($ per share)	(0.00)	(0.04)
Diluted eranings per share	(0.00)	(0.04)

Diluted losses per share have not been calculated as the effect of including the share options would be anti-dilutive. Hence the diluted earnings per share for prior periods is the same as the basic earnings per share.

10. RECONCILIATION OF FINANCIAL PERFORMANCE AND OPERATING CASH FLOW

Loss for Period Non Cash Items Amortisation Depreciation (Gain) / Loss on Sale Write down of Property for resale Write Off of Exploration Expenditure Share Options Foreign Exchange Movement in Working Capital Other Receivables - Related Parties Other Receivables - Tax on Interest Other Receivables - Other Prepayments Accounts Payable - Related Parties Accounts Payable - Other Items classified as Investing Activities Increase in Accounts Payable for Exploration Items classified as Financing Activities Increase in Accounts Payable for Financing Net Cash used in Operating Activities

30 September 30 September 2013 2012 Unaudited Unaudited $ $ (317,930) (6,008,953) - 30 26,053 10,050 (993) 1,693 48,933 - 79,833 5,628,144 10,224 54,220 (62,195) (6,596) (293) 260 (971) 24,904 20,488 (18,399) (5,250) 9,543 (6,479) (42,404) 28,162 251,515 2,633 (334,574) - (7,671) (177,785) (438,238)

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KING SOLOMON MINES LIMITED

NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

11. COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES

The Company and Group lease property in New Zealand and China. They have no non cancellable operating leases.

As recorded in note 7, the Company currently has 4,600,000 options issued to executive directors and an employee. Options are being expensed in the periods in which the options vest. There is a further $18,859 to be expensed in future periods at 30 September 2013 (30 September 2012: $133,808).

The Group had no other commitments at 30 September 2013 (30 September 2012: $8,041). The Group had no contingent liabilities at 30 September 2013 (30 September 2012: $397,243).

12. TRANSACTIONS WITH RELATED PARTIES

King Solomon Mines Limited provided funds to Inner Mongolia Plate Mining Limited, a subsidiary of King Solomon Mines Limited, as share capital and advances.

Payment for consulting fees and reimbursement of expenses was made to Stephen McPhail (Director and Shareholder) and Bodhi Svaha Holdings Limited being a company in which Stephen McPhail has an interest.

Payment of consulting fees, reimbursement of expenses and funding for Inner Mongolia Plate Mining Limited was made to Fu La (Director and Shareholder) and to Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited being a company in which Fu La has an interest.

Payment of director fees and expenses were made to John Quinn (Director and Shareholder) and to Widespread Limited (Shareholder) for Chris Castle (Director).

Payment for wages and reimbursement of expenses was made to Anna Di (Shareholder).

Payment for accounting fees was made to Michael Wilcox (Shareholder).

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KING SOLOMON MINES LIMITED

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

RELATED PARTY EXPENDITURE 30 September 2013 Unaudited $ Directors Bruce Bell - Bodhi Svaha Holdings Ltd 44,108 Chris Castle - Fu La 17,942 47,040 John Quinn - Selwyn Geosurveys Ltd - Stephen McPhail 796 Widespread Limited 17,590 Shareholders Di Anna 2,567 Michael Wilcox 14,244 144,287 Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited OWING TO RELATED PARTIES 30 September 2013 Unaudited $ Directors Bodhi Svaha Holdings Ltd 6,323 Fu La 6,000 - Selwyn Geosurveys Ltd - Stephen McPhail - Shareholder Di Anna 54 Michael Wilcox 8,299 20,676 # Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited

31 March 30 September 2013 2012 Audited Unaudited $ $ 4,331 2,341 239,493 85,248 489 - 80,867 50,272 174,000 60,000 59,588 35,497 104,657 92,600 9,751 8,138 40,348 20,126 13,033 10,610 26,031 17,536 752,588 382,368 31 March 30 September 2013 2012 Audited Unaudited $ $ 9,542 14,199 8,000 726 - 840,525 - 13,179 - 6,907 49 803 9,564 8,113 27,155 884,452

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KING SOLOMON MINES LIMITED

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

OWING BY RELATED PARTIES 30 September 2013 Unaudited $ Directors Fu La 7,324 Selwyn Geosurveys Ltd - Stephen McPhail 38 - 7,362 # Inner Mongolia Ao Meng Xin	31 March 30 September 2013 2012 Audited Unaudited $ $ 5,462 - 1,607 1,600 - 74 - 840,525 7,069 842,199

• These represent advances for exploration expenditure.

These represent funding advances to Inner Mongolia Plate Mining Co Limited through Inner Mongolia Ao Meng Xin Economic and Trade Co. Limited.

13. FEES TO AUDITORS

Fees payable to the auditors for the review of the financial statements for the six months to 30 September 2013 amounted to $7,930 (30 September 2012: $10,268).

14. SUBSEQUENT EVENTS

There are no subsequent events for this period.

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Independent Review Report to the shareholders of King Solomon Mines Limited

Report on the Interim Financial Statements

We have reviewed the interim condensed financial statements (“financial statements”) of King Solomon Mines Limited (the “Company”) and the entity it controlled at 30 September 2013 (the “Group”) on pages 3 to 15, which comprise the statement of financial position as at 30 September 2013, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the six months period then ended, and the notes to the financial statements that include a summary of significant accounting policies and other explanatory information.

Directors’ Responsibility for the Interim Financial Statements

The Company’s Directors are responsible for the preparation and presentation of the financial statements that present fairly the financial position of the Group as at 30 September 2013, and its financial performance and cash flows for the period ended on that date.

Our Responsibility

We are responsible for reviewing the financial statements presented by the Directors in order to report to you whether, in our opinion and on the basis of the procedures performed by us, anything has come to our attention that would indicate that the financial statements do not present fairly the matters to which they relate.

A review is limited primarily to enquiries of company personnel and analytical review procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit on the financial statements and, accordingly, we do not express an audit opinion.

We have reviewed the financial statements of the Group for the period ended 30 September 2013 in accordance with the Review Engagement Standards issued in New Zealand.

Other than in our capacity as assurance practitioners conducting this review, and auditors of the annual financial statements, we have no relationship with, or interests in, King Solomon Mines Limited.

Basis for Disclaimer of Opinion

As disclosed in the statement of accounting policies in note 2 and critical accounting estimates and judgements in note 3 to the financial statements, the financial statements for the period ended 30 September 2013 have been prepared on a realisation basis and include a number of material amounts based on Directors estimates of net realisable value. We were unable to undertake sufficient review procedures on these estimates of the carrying values of exploration and evaluation assets and property for resale held at 30 September 2013 which are stated in the balance sheet at $1,056,898 and $262,045 respectively. As a result of these matters, we were unable to determine whether any adjustments might have been found necessary in respect of exploration and evaluation assets, property for resale and the elements making up the statements of comprehensive income and statements of changes in equity.

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PricewaterhouseCoopers , 113 – 119 The Terrace, PO Box 243, Wellington 6140, New Zealand T: +64 (4) 462 7000, F: +64 (4) 462 7001, www.pwc.com/nz

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Independent Review Report King Solomon Mines Limited

Disclaimer of opinion

Because of the significance of the matter described in the Basis for Disclaimer of Opinion paragraph, we have not been able to express a conclusion on the accompanying consolidated interim financial information. Accordingly, we do not express an opinion on the financial statements on pages 3 to 15.

Restriction on Distribution or Use

This report is made solely to the Company’s shareholders, as a body. Our review work has been undertaken so that we might state to the Company’s shareholders those matters which we are required to state to them in an accountants’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our review procedures, for this report or for the opinions we have formed.

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Chartered Accountants 6 December 2013

Wellington