Solomon Gold PLC - Annual Report and Accounts
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RNS Number:6606J Solomon Gold PLC 11 December 2007 Solomon Gold plc 11 December 2007 NEWS RELEASE FOR IMMEDIATE RELEASE AIM Code - SOLG ISSUE OF ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2007 Solomon Gold plc has today issued consolidated financial statements for the year ended 30 June 2007. The Chairmans' Statement, Operation Review, Directors' Report, Consolidated Income Statement, Consolidated and Company Balance Sheets, Statement of Changes of Equity and Consolidated and Company Statements of Cash Flows are included below. The full Annual Report is available on the Company's website www.solomongold.com. For further information in respect of the Company's activities, please contact: Nicholas Mather Duncan Cornish CEO Company Secretary and CFO Tel: +61 417 880448 Tel: +61 7 3303 0660 Email:email@example.com Email: firstname.lastname@example.org Nominated adviser for the purposes of AIM: Contact: Mr Stephen Weir RFC Corporate Finance Tel +61 2 9250 0048 Email: Stephen.Weir@rfc.com.au CORPORATE INFORMATION DIRECTORS Nicholas Mather (Chief Executive Officer) Cameron Wenck (Non-Executive Chairman) Brian Moller (Non-Executive Director) Dr Robert Weinberg (Non-Executive Director) COMPANY SECRETARY Duncan Cornish REGISTERED OFFICE 7 Pilgrim Street, London EC4V 6LB United Kingdom Registered Number 5449516 AUSTRALIAN OFFICE Level 5, 60 Edward Street, Brisbane QLD 4000 Phone: + 61 7 3303 0660 Fax: +61 7 3303 0681 Email: email@example.com Web Site: www.solomongold.com AUDITORS PKF (UK) LLP Farringdon Place, 20 Farringdon Road London EC1M 3AP NOMINATED ADVISOR RFC Corporate Finance Ltd Level 14, 19-31 Pitt Street Sydney NSW 2000, Australia BROKER Hanson Westhouse Ltd One Angel Court, London EC2R 7H United Kingdom BANKERS Macquarie Bank Ltd (Brisbane Branch) 300 Queen Street, Brisbane QLD 4000 Australia SOLICITORS Faegre & Benson LLP 7 Pilgrim Street, London EC4V 6LB United Kingdom AUSTRALIAN SOLICITORS Hopgood Ganim Level 8, Waterfront Place 1 Eagle Street, Brisbane QLD 4000 REGISTRARS Computershare Investor Services plc The Pavilions, Bridgwater Road Bristol BS99 7NH CHAIRMAN'S STATEMENT Dear Shareholder, The year to 30th June 2007 saw your company further intensify its mineral exploration activities in Solomon Islands on the Country's main island of Guadalcanal. Our drilling program has experienced a strong turn around from the initially slow start and frustrating delays experienced in the 2006 year. The drilling program has been escalated such that we now have three fully operational drilling rigs on Guadalcanal Island. Despite the inevitable difficulties drilling in such perilous terrain, approximately 7,500 metres were drilled in the 12 months ending November 2007, over the prospects at Sutakiki, Koloula and more recently, Chikora. In 2006, the Company identified a very extensive and intensely mineralised copper gold porphyry system at Sutakiki. Results from extensive, deep drilling of this system throughout the year have ratified our initial optimism around the discovery. We were encouraged by the results of the first hole drilled at Sutakiki, which intersected 309 metres grading 0.54 g/t gold. Although the grade was low, the intersection was very large. Subsequent drilling was encouraging enough to further intensify our drilling program at Sutakiki. The company's exploration strategies will, we believe, be vindicated in the coming year as a result of follow up drilling planned for the very encouraging discovery, recently made at Sutakiki. Solomon Gold recently reported a high-grade intersection of 32 metres grading 9.45 g/t gold from 108m depth, in drill-hole SK11. Drilling around the discovery has commenced and we await the results. This is undoubtedly a very significant find and has created some well deserved attention and interest in the company. Solomon Gold's exploration capabilities have been boosted by the recruitment of additional geologists and the engagement of further drilling rigs over the past year. Our increased scale should result in improved cost efficiencies going forward. Your Board and Management are convinced that Solomon Gold's ambitious programme, foreseen when the Company commenced operations there in September 2005, is likely to lead to a major gold discovery. The Company and its wholly owned operating subsidiary, Australian Resource Management (ARM) P/L, continues to enjoy a harmonious working relationship with the landowners, local people and the Solomon Islands Government. We fully expect this to continue into the future. Throughout this program, your company has managed its activities in an environment of high competition for all services, particularly assay laboratories, drilling rigs and geophysical survey crews. These issues are regularly addressed and we look forward to further improvements in turnaround times for assays. Solomon Gold continually monitors field efficiency given the higher cost of operating in the Guadalcanal environment. Higher operating costs result from the degree of difficulty of access and slow drilling incurred due to constant collaring of drill holes through landslide scree. The company is targeting significant improvements in operating efficiency and is now aiming to deliver around 18,000 metres of drilling over the next 12 months of operations. This will be achieved using three drilling rigs and double shifting as much as possible. In addition the Company has identified additional exploration techniques, which we believe will rapidly uncover high priority targets. This has been achieved with the benefit of reprocessed aeromagnetic information, originally collected by ARM in 1997 and will be further augmented by an airborne electromagnetic survey is planned for February 2008. The mineralogical characteristics of the discovery in SK11 suggest that areas of similar mineralisation will stand out in this survey. The Company has met the expenditure forecasts of the original programs and budgets for the Solomon Gold project on Guadalcanal. In order to meet the future costs of exploration and resource definition around the recent discovery, a capital raising will be undertaken in the near future. In November 2007, Solomon Gold appointed a new Broker and Nominated Advisor in Hanson Westhouse plc and RFC Corporate Finance Limited respectively. The Company looks forward to a successful relationship with both Hanson Westhouse and RFC. On behalf of the Board, I wish to acknowledge the extraordinary commitment of our managers and staff in the field. Their tireless work and never-ending faith in the project has kept us focused and optimistic during otherwise difficult times. Their efforts will surely be rewarded in the future. During the year our inaugural Operations Manager and Executive Director, David Jelley, resigned for personal reasons and we thank him for his efforts on behalf of the Company and wish him the best for his future. Finally, I would like to take this opportunity to thank all shareholders for their support and patience throughout the last two years and to commend to you the Solomon Gold exploration program going forward. Your Board is confident that the next 12 months will see substantial progress towards the definition of a world-class gold mineral system, substantiating our original representations to you. Cameron Wenck Chairman OPERATIONS REVIEW About Solomon Gold plc Solomon Gold holds five granted tenements on the main Island of Guadalcanal, Solomon Islands, for minerals exploration focusing on copper and gold rich porphyry systems and high grade epithermal gold mineralisation. The tenements cover 468km2 and are current, including rights to renewal periods, until 10 November 2011. The company listed on AIM (London Stock Exchange) on 10 February 2006 after a £5m capital raising. The Company has expended those funds in accordance with the proposed work program and budget and has now established the necessary infrastructure and field support facilities and gathered sufficient data from surface mapping, sampling and subsurface drilling programs to enable a further program of exploration drilling to enable, with added efficiency, the exploration for world class gold and copper orebodies. The Company believes the area has the potential for the discovery of a world class copper gold porphyry system similar to other large gold equivalent orebodies in the region such as Ok Tedi (50m oz Au Eq), Grasberg (100m oz Au Eq), Lihir (40m oz Au) and Bougainville (50m oz Au Eq). These orebodies are located on the circum- Pacific zone of volcanoes and associated mineralisation and Solomon Gold management have identified geological features which point to a strong possibility of similar discoveries being made on the Solomon Gold tenements. Solomon Gold has identified approximately 30 km2 of mineralisation indicative of significant porphyry copper gold and epithermal gold mineralisation systems and is currently engaged in a three rig program, drilling key targets. Recently the drilling program returned a spectacular intersection of 32 metres at a grade of 9.45 grams per tonne from 108m depth gold at the Sutakiki Prospect, demonstrating the potential for discovery of a high grade gold resource. The high grade gold mineralisation encountered in the recent drilling is characteristic of high grade gold deposits related to mineralised transform structures in Papua New Guinea such as Porgera and in the Indonesian archipelago such as Halmahera. Solomon Gold is staffed by an active team of expatriate and Solomon Island geologists and field hands, supported by integrated logistics support services including a helicopter contract. Solomon Gold's key prospects are the Sutakiki, Mbina and Chikora gold and copper prospects which all align on a key transform structure through Guadalcanal, and the Mbetilonga Copper gold project, just 15 km south of Honiara, the national capital. The program is augmented by the services of two drilling contractors operating a total of three rigs. The past year has seen Solomon Gold focus its exploration efforts primarily on the Sutakiki prospect in the Sutakiki Valley on the northern side of Guadalcanal and the Mbina and Chikora prospects in the Koloula Valley on the southern side of Guadalcanal. During the year the Company perfected access into the Kuma Valley to the east of the Koloula Valley and conducted stream sediment and mapping and sampling programs over areas of extensive mineralisation. No work was conducted on the Mbetilonga prospect area and the Poleo application to the west of Koloula was relinquished. In addition the Company applied for several new tenement areas. One of these has been granted. The Fauro Island area was applied for over an extinct volcanic caldera which has yielded significant surface and drilling results for gold in the past, in programs conducted by other explorers. Solomon Gold's relationships with local landowners are expected to deliver access to the area in the near future. Fauro is located in the Western Provinces immediately south of the Papua New Guinea border and the giant Bougainville copper gold porphyry. The Fauro project has potential for both epithermal gold and porphyry style copper gold deposits. Three exploration licence areas prospective for Nickel laterites on east Guadalcanal, and Makira and Ngella in the Floridas island group were applied for. It is the current intention of Solomon Gold to define a world class gold or porphyry copper gold deposit and ultimately bring it to production. Solomon Gold has access to the required exploration development and financing skills to achieve this goal. Drilling To date Solomon Gold has completed a total of 8,701 metres of drilling on the Guadalcanal field operations as follows: Mbetilonga 909 metres (5 holes) Koloula (Mbina and Chikora ) 1,754 metres (3 holes) Sutakiki 6,038 metres (11 holes) Total 8,701 metres Of this, 4,480 metres were completed during the year under review and 3,156 metres were completed since the end of the financial year. Solomon Gold expects to increase the drilling rate in the forthcoming year as a result of application of improved drilling practices in unconsolidated surface landslide material, increased frequency of double or extended drilling shifts and enhanced operational standards from the drilling companies. Mapping and sampling 87 stream sediment, 1,174 soil and 1,103 rock chip samples were collected during the year. The bulk of this activity was centred on the Sutakiki Valley where the Company made a significant gold discovery. Logistics The establishment of three field camps at Sutakiki, Mbina and Mbetilonga has enabled the continuance of field operations on a full effort basis. The Company maintains a full communications and accommodation service at the Sutakiki Camp, which is also the geological base for the Sutakiki field program. Personnel During the year Solomon Gold employed a number of local Solomon Islands personnel on the project in positions including field hands, cooks, logistics officers , laboratory technicians, book keepers and clerks receptionists and geologists. The integration of local communities and employees has been a key element of Solomon Gold's uniquely constructive approach to community relations on Guadalcanal. The attention to local management issues by Mr Nicholas Biliki, a Solomon Islander who is the Company's manager of administration and community affairs on the island, has been key in the achievement of Solomon Gold's unprecedented access to field areas on Guadalcanal. Law and Order Law and order has been maintained in Solomon Islands throughout the year. The Regional Assistance Mission to Solomon Islands ("RAMSI") continued to provide support to the Country in accordance with resolutions of the Solomon Islands Government. Australia has indicated that it intends to provide an amount of some AUD 800 million for the period 2004 to 2009 and there is no indication of any reduction in the commitment to RAMSI or Solomon Islands in the near future. Sutakiki During the year under review Solomon Gold focused its efforts on the Sutakiki Valley, 30 km south east of the capital of Solomon Islands, Honiara. The Sutakiki Valley presented as one of the most important targets for Solomon Gold, based on its presence on the Guadalcanal transform structure, and the retrieval by Newmont, during a brief field visit in 1989, of stream sediment samples up to 73 ppb gold and float samples in the river up to 1.8 g/t gold. Final reports by Newmont rated the porphyry prospectivity of the headwaters highly. After a period of establishment of Solomon Gold's credentials with the local peoples of the Sutakiki Valley, Solomon Gold gained access to the area and followed up the Newmont results. The source of the gold anomalism was located up the River in an outcrop which returned 85 m @ 0.8 g/t gold in composite 5 metre channel samples in a mineralised porphyry. Landslides further exposed the mineralised porphyry, and rock chip sampling of a complex vein system exposed returned up to 1000 g/t gold. Excluding this high sample the veins averaged 7 g/ t gold and the first drill hole was located underneath this discovery outcrop. The drillhole SK01 returned 309 metres at a grade of 0.5g/t gold and 0.16% copper. Further drilling in the Sutakiki Valley up to SK010 did not identify any further significant gold mineralised zones. Mapping and sampling in the area identified north westerly trending fault systems, with zones of intense shearing and mineralisation grading up to 3.5 g/t gold in Valehailala Creek, just 500 metres north of the discovery zone in the Sutakiki River. The Company also discovered open space veins with similar grades outcropping beside the fault, with an east west or east south east orientation. Drillhole SK 011 was drilled underneath these occurrences and resulted in the discovery of intense sulphide mineralisation in the Sutakiki fault zone, returning 32 metres @ 9.45 g/t gold from 108m depth including 10 metres @ 21 g/ t, including 1 metre @ 74 g/t gold. Subsequent inspection and reinterpretation of airborne magnetic data collected in 1997 resulted in the identification of structures evident in the magnetic data with the same orientation and position as those observed in the field. Solomon Gold has resolved a structural key for the mineralisation which demonstrates that there are a number of locations nearby with similar potential for high grade gold mineralisation. At the time of this report the company was awaiting the receipt of assay results from sampling programs along the strike extent of the Suta Fault. Rock chip sampling from Vurakindi Creek, 1 km to the west returned 3.5 g/t from breccias exhibiting similar characteristics to the mineralisation in SK11. In the next 8 months Solomon Gold intends to drill nine holes from each of 4 drill pads along an 800 metre extension of the Suta Fault, to a depth of 300 metres in order to test the resource potential of the recent discovery. The Company intends after completion of the current program in the Koloula Valley at the Mbina and Chikora prospects, to place an additional drilling rig on the Sutakiki Prospect. Mbina The Mbina Prospect is located in the Koloula River Valley 4 km to the south west of Sutakiki. At Mbina, complex porphyry intrusions are mineralised with copper and gold over long distances. Channel sampling of exposures in the Koloula River have previously returned up to 125 metres @ 0.23 % copper and 0.5 g/t gold. The mineralisation occurs in a 2km by 300m wide zone on the east side of the Mbina copper porphyry system. During the year drilling at Mbina in KL01 intersected numerous narrow veins trending east south east which returned grades up to 6.7 g /t over 1 metre sections. Drillhole KL02 has been drilled from the same pad as KL01 and assays are awaited. KL03 is at the time of this report being drilled from the same pad to the north west to test western extensions of the vein system encountered in KL01 and a magnetic zone interpreted to be a mineralised porphyry. Additional mapping and sampling has outlined several other drill targets which the Company plans to drill over the next six months. Chikora - Vurakave. The Chikora copper molybdenum porphyry prospect is located 2 km south west of Mbina in the Koloula valley and 6 km south west of Sutakiki. At Chikora, copper and molybdenum mineralisation is evident over a 2.5 x 1.5 km zone in which soil sampling by Utah International in the 1970s and Solomon Gold's subsidiary ARM in the late 1990s and augmented by recent sampling, has returned values over 3000 ppm copper. Molybdenum is also present and has been assayed up to 0.17% in rock chip samples at the Vurakave prospect on the north east of the Chikora grid. Mapping and rock chip sampling at Vurakave has identified intermittent zones of quartz veining containing visible molybdenite over a 600m x 200m zone of interest. Utah drilled 13 short vertical holes into Chikora in the 1970s. The best hole was CH08 returning 115m @ 0.34% Copper and 142 ppm Molybdenum from 152m to 266m and showing mineralisation strengthening with depth, Maximum values of 0.76% Cu and 820ppm Molybdenum (0.082%) were intersected in the zone near the end of the hole. The hole was drilled vertically and is believed to have missed the sub-vertical quartz copper molybdenum sulphide veins outcropping in the Chikora prospect area. The current Solomon Gold hole CK01 is inclined so as to better test the steeply dipping veins in the area. Solomon Gold has reinterpreted all the existing data and designed and commenced a two hole drilling program to test the area of high copper anomalies in soils and a drill intersection by Utah Mining in 1974. The first hole, CK01, penetrated 44 m of loose surface material before entering disseminated 1% bornite (copper sulphide) mineralisation in a porphyry intrusive. CK01 at the time of this report was at a depth of 361 metres and drilling to 600 metres. The hole was in a mineralised biotite porphyry containing frequent copper sulphide veins. The Chikora prospect is situated at a vertical elevation of between 650 and 1,000 metres above sea level, and only 6 km from the south coast of Guadalcanal. The Chikora prospect is believed by Solomon Gold geologists to represent a deeper, copper and molybdenum phase of the gold mineralisation evident at higher elevations at the Mbina (850 to 1,100 m asl ) and Sutakiki gold and copper prospects (950 to 1,300 m asl). Kuma During the year, the Company gained access to the Kuma River Valley to the east of the Koloula Valley where reconnaissance had showed extensive alteration of the regionally dominant Suta Volcanics. The Company conducted a regional sampling and mapping program which did not identify any significant mineralised zones in outcrop. A stream sediment maximum of 0.43 g/t was encountered which is considered to be highly anomalous, however the source of that gold has not yet been identified. The area is still considered to offer considerable prospectivity and will be reassessed in the forthcoming year. Mbetilonga During the year, the Company conducted further mapping sampling and drilling programs at Mbetilonga, 15 kms south of Honiara. Extensive surface mineralisation has not yet led to a significant drilling intersection. The Company has tested several target areas at Mbetilonga, with five drill holes of which two, MB-04 at Hambusimaloso and MB05, at Hahala were drilled in the current year. Neither hole intersected significant mineralisation. The Mbetilonga tenement area covers more than 50 km2 of prospective volcanic, intrusive and altered sedimentary rocks, widely anomalous in copper. At Hambusimaloso, copper anomalism over 0.1% copper in soil samples extends over 2km2 and peaks at over 13.5% copper in rock chip samples. Magnetic anomalies coincident with porphyry intrusions at Hahala, 2 km north of Hambusimaloso, did not yield significant gold mineralisation. Additional important targets at Mbetilonga are at Vuralanggoma on the eastern side of the tenement and at Vatuchichi in the northern section of the mineralised area. Solomon Gold intends to conduct further drilling at Vuralanggoma and Vatuchichi in the forthcoming year. At Vatuchichi drilling is planned to test magnetic anomalies underneath a limestone cover and at the outcropping mineralisation, where epithermal gold mineralisation is recorded up to 51 g/t gold in rock chip samples. At Vuralanggoma a hole drilled by Utah in the 1970s intersected a 38 metre thick zone at a grade of 0.34% copper and Solomon Gold plans to confirm and extend the previous results. Corporate Since the end of the year, Solomon Gold has appointed Hanson Westhouse plc as Broker and RFC Corporate Finance as Nominated Advisor to the Company. Qualified Person Information in this report relating to the exploration results is based on data reviewed by Mr Nicholas Mather (B.Sc. Hons Geol.), the Chief Executive Officer of the Company. Mr Mather is a Fellow of the Australasian Institute of Mining and Metallurgy who has in excess of 25 years experience in mineral exploration and is a Qualified Person under the AIM Rules. Mr Mather consents to the inclusion of the information in the form and context in which it appears. Risks and Uncertainties The Directors consider that the factors and risks described below are the most significant. Use of Funds The Company has prepared detailed budgets setting out the way in which it proposes its funds from time to time. However, the quantum and timing of expenditure will necessarily be dependent upon the continued positive results from the Company's ongoing exploration activities on the Tenements and an ongoing acceptable state of law and order. As the Company conducts its drilling and exploration programs, it is possible that results and circumstances may dictate a departure from the existing budget at the time. Further, the Company may, from time to time as opportunities arise, utilise part of its financial resources (including the funds raised as part of the Placing) to participate in additional opportunities that arise and fit within the Company's broader objectives, as a means of advancing shareholder value. No production history The Group currently has no producing properties and its ultimate success may depend on its operating ability to generate cashflow from producing properties in the future. The Group has not generated any revenue to date and there is no assurance that it will do so in the future. General exploration and extraction risks There is no certainty that the Company will identify commercially mineable reserves in the Tenements. The Company is currently in the early stages of exploration. The exploration for and development of mineral deposits involves significant uncertainties and the Group's operations will be subject to all of the hazards and risks normally encountered in such activities and in addition, several unusual risks. These hazards and risks include unusual and unexpected geological formations, rock falls, landslides, flooding and other climatic conditions, aircraft or boat accidents and injury or death in civil unrest any one of which could result in damage to, or destruction of, the Company's facilities, damage to life or property, environmental damage or pollution and legal liability which could have a material adverse impact on the business, operations and financial performance of the Company. Although precautions to minimise risk will be taken, even a combination of careful evaluation, experience and knowledge may not eliminate all of the hazards and risks. There are no key man insurance policies taken out on any of the Company's personnel. The Company's exploration models and the bases for its search for potential resources are subject to variation or alternate interpretation from time to time as a result of the receipt of new exploration data and interpretation thereon which may not be evident to the Company or the Directors at the date of this document. The targets identified by the Company's personnel and consultants, are based on current experience and modelling and all available data. There is no guarantee that surface sample grades of any metal or mineral taken in the past will persist below the surface of the ground. As is common with all exploration ventures, there is also uncertainty and therefore risk associated with the Company's operating parameters and costs which can be difficult to predict and are often affected by factors outside the Company's control. Few properties which are explored are ultimately developed into producing assets. There can be no guarantee that the estimates of quantities and grades of gold and minerals disclosed will be available for extraction and sale. With all natural resources operations there is uncertainty and, therefore, risk associated with operating parameters and costs resulting from the scaling up of other extraction methods tested in pilot conditions. Natural resources exploration is speculative in nature and there can be no assurance that any potential mineral deposits will be discovered. Project development risks If the Company discovers a potentially economic resource or reserve there is no assurance that the Company will be able to develop a mine thereon, or otherwise commercially exploit such resource or reserve. Further, there can be no assurance that the Company will be able to manage effectively the expansion of its operations or that the Company's current personnel, systems, procedures and controls will be adequate to support the Company's operations as operations expand. Any failure of management to manage effectively the Company's growth and development could have a material adverse effect on the Company's business, financial condition and results of operations. There is no certainty that all or, indeed, any of the elements of the Company's current strategy will develop as anticipated. Operational considerations The Company's operational targets are subject to the completion of planned operational goals on time and according to budget and are dependent on the effective support of the Company's personnel, systems, procedures and controls. Any failure of these may result in delays in the achievement of operational targets with a consequent material adverse impact on the business, operations and financial performance of the Company. The locations of all of the Company's current exploration activities dictate that climatic conditions have an impact on operations and, in particular, severe weather, including cyclones, could prevent access to the Tenements and disrupt the delivery of supplies, equipment and fuel. It is therefore possible that exploration and extraction activity levels might fluctuate. Unscheduled interruptions to the Company's operations due to mechanical or other failures, or industrial relations-related issues, or problems with the supply of goods or services could have a serious impact on the financial performance of those operations. Being located on the Pacific ''Rim of Fire'', Solomon Islands are exposed to the risk of damage from earthquakes and tsunami. Operations in Solomon Islands will expose the Company's staff, contractors and consultants to a variety of tropical diseases and related risks. These include but are not limited to malaria and other numerous skin diseases. The Company may be exposed to liabilities as a result of this. To mitigate potential access and related issues, the Company has entered into a helicopter services agreement. There are also operational risks associated with frequent power outages that occur in Solomon Islands' capital, Honiara. These regular outages make the transacting of business in Solomon Islands difficult, and may have an adverse impact on the ability of the Company to achieve its objectives in a timely manner. Personnel The Company has a small management team and the loss of any key individual could affect the Group's business. Additionally, the Company will be required to secure other personnel to facilitate its exploration programme on each of the Tenements. Any inability to secure appropriate or retain current personnel may have a materially adverse impact on the business and operations of the Company. Economic, political, judicial, administrative, taxation or other regulatory factors The Company may be adversely affected by changes in economic, political, judicial, administrative, taxation or other regulatory factors, in the areas in which the Company (through its subsidiary ARM) operates and holds its major assets. No assurance can be given as to the future policies of any new Government that might be elected. Any policy changes of any new Government may have a material adverse impact on the business, operations and financial performance of the Company. Tenements and regulatory environment There is no guarantee that if ARM applies for a mining lease in respect of minerals it has discovered within the Tenements that it will be granted one. The grant of a mining lease is subject to the exercise of ministerial discretion and no guarantee can be given as to the favourable exercise of any such discretion. There is no guarantee of the terms of any mining lease. The exploration and extraction activities of ARM are subject to various laws governing prospecting, development, production, taxes, labour standards and occupational health, site safety, toxic substances, environmental and other matters. Although the Directors believe that ARM's exploration activities are currently carried out in accordance with all applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing or future rules and regulations will not be applied in a manner which could limit or curtail exploration, production or development. Amendments to current laws and regulations governing operations and activities of exploration and extraction, or more stringent implementation thereof, could have a material adverse impact on the business, operations and financial performance of the Company. Title matters Whilst the Company has the benefit of granted PLs and has diligently investigated its title to, and rights and interests in, the Tenements, there is no absolute guarantee that such title, rights and interests will be held valid in the event of any undetected defects. If a defect does exist it is possible that ARM may lose all or part of its interest in those Tenements to which the defect relates. The grant and future renewals of PLs, as the case may be, are governed by the requirements and restrictions set out in the Mining Act. Whilst the Company believes it is entitled to rely upon all the actions of the Minerals Board and the Minister as being valid, compliance with the requirements and restrictions under the Mining Act may be open to differing interpretations which, in the case of an adverse interpretation, may have a material adverse effect on the Company's title. Volatility of prices of gold and copper The market prices of gold and copper are volatile and are affected by numerous factors which are beyond the Company's control. These include international supply and demand, the level of consumer product demand, international economic trends, currency exchange rate fluctuations, interest rates, inflation, global or regional political events and international events as well as a range of other market forces. Sustained downward movements in gold or copper prices could render less economic, or uneconomic, some or all of the exploration activities to be undertaken by the Group. Currency fluctuations The future value of the Ordinary Shares may fluctuate in accordance with movements in the foreign currency exchange rates. For example, it is common practice in the mining industry for mineral production revenue to be denominated in USD, although some but not all of the costs of exploration production will be incurred in USD and not all of the ore or metal obtained from the Tenements will be sold in USD denominated transactions. Uninsured risks The Company, as a participant in exploration and potential extraction activities, may become subject to liability for hazards that cannot be insured against or against which it may elect not to be so insured because of high premium costs. Furthermore, the Company may incur a liability to third parties (in excess of any insurance cover) arising from negative environmental impact or other damage or injury. Additional requirements for capital Substantial additional financing may be required if the Company is to be successful pursuing its ultimate strategy. No assurances can be given that the Company will be able to raise the additional finance that it may require for its anticipated future operations. Copper and gold prices, environmental rehabilitation or restitution, revenues, taxes, transportation costs, capital expenditures, operating expenses and geological results and the political environment are all factors which will have an impact on the amount of additional capital that may be required. Any additional equity financing may be dilutive to investors and debt financing, if available, may involve restrictions on financing and operating activities. There is no assurance that additional financing will be available on terms acceptable to the Company or at all. If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations or anticipated expansion, forfeit its interest in some or all of the Tenements, incur financial penalties or reduce or terminate its operations. Landowner issues In the case of mining and exploration operations in Solomon Islands, there is a complex land tenure structure and while ARM's PLs and Access Agreements entitle it to explore for the duration of the term of each PL, the existing legislative framework only provides for limited forms of negotiation between the landowners/ community leaders on the one hand and mining companies on the other. It is also incumbent on the Director of Mines and the mining tenement holder to identify which landowners and community leaders they need to negotiate with. The Company does not guarantee that the identifications made to date and upon which the Access Agreements are currently based may not be contested. As a consequence there may be unexpected difficulties experienced in progressing a promising resource into a commercial mining operation. The Company has also procured Access Agreements for areas within the Tenements after the grant of the Tenement. Whilst the Company believes that it is entitled to rely upon the same to conduct exploration within these areas, no assurance can be given that there may not be some future challenge to the Company's ability to do so. Whilst the Company has the Access Agreements with landowners covering the majority of the prospective areas identified by the Company within the Tenements, its ability to carry out exploration in the residual areas will require additional access agreements to be entered into. The ability of the Company to secure the benefits of all of the access agreements is dependent upon, inter alia, the contracting parties' willingness to perform and discharge their obligations thereunder. There may be legal and commercial limitations in respect of enforcement of contractual rights. Additionally, the Company will not be permitted to explore in areas nominated by the landowners as reserved or protected areas under section 4(2) of the Mining Act. Whilst the Company is actively seeking to liaise with landowners to identify relevant reserved or protected areas, some considerable uncertainty exists as to the precise location of these areas, the identification of which requires the input of the indigenous population. The inability of the Company to identify these areas, or a claim by landowners that reserved or protected areas exist over areas identified by the Company as prospective, may have a material adverse effect on the ability of the Company to conduct its exploration programme in the manner identified in this document. Sovereign risk and civil disobedience The Company intends to make significant investment of capital in Solomon Islands. The conduct of exploration and mining-related activities and the investment of capital and placement of personnel in Solomon Islands are potentially subject to a degree of sovereign risk and civil disobedience generally. A decay in law and order in Solomon Islands may expose the Company to un-budgeted costs delays and other potential damage and loss. Environmental risks Inherent with mining operations is an environmental risk. The legal framework governing this area is constantly developing. Thus the Company is unable to fully ascertain any future liability that might arise from new law or regulation although such regulation is typically strict and may impose severe penalties. The proposed activities of the Company, as with any exploration, may have environmental impact which may result in unbudgeted delays, damage, loss and other costs and obligations including, without limitation, rehabilitation and/or compensation. Additionally, there is a risk that the Company's operations and financial position may be adversely affected by the actions of environmental groups or any other group or person opposed in general to the Company's activities and in particular the proposed exploration and mining by the Company within Solomon Islands. Taxation In addition to the normal level of corporation tax imposed on all companies, mining companies are required to pay government royalties, indirect taxes and other imposts which generally relate to revenue or cash flows. Industry profitability can be affected by changes in government taxation policies. ARM carries on business in Solomon Islands and will be subject to income and other taxes in that country. The rates of taxation that may apply to ARM on income and other profits may be higher than the rates that apply in the United Kingdom or Australia. No guarantee can be given that these rates will not vary. FINANCIAL REVIEW Equity During the 2007 accounting year there was no change to the Company's issued share capital. On 12 September 2006 the Company issued 650,000 unlisted share options to directors, employees and consultants of the Company. The options were issued free of charge and are exercisable at prices between 50 pence and 100 pence per ordinary share. The period during which these share options can be exercised is between 1 January 2007 and 1 January 2011. At 30 June 2007 the Company had 26,825,001 ordinary shares, 2,389,997 unlisted options and 326,400 unlisted warrants on issue. A further 500,000 unlisted options (£0.20 expiring 8 November 2010) are being issued to the Company's NOMAD. At the date of this report, the Company had 26,825,001 ordinary shares, 1,689,997 unlisted options and 326,400 unlisted warrants on issue. Financial Controls and Risk Management The Board regularly reviews the risks to which the Group is exposed and ensures through Board Committees and regular reporting that these risks are managed and minimised as far as possible. The Audit Committee is responsible for the implementation and review of the Group's internal financial controls and financial risk management systems. DIRECTORS The Board consists of one Executive Director and three Non-Executive Directors. Cameron Wenck (Non-Executive Chairman) Cameron Wenck (46), appointed 22 November 2005, is a financial adviser and company director with 18 years' experience in the financial services industry. Earlier in his career he worked for the London stockbrokers Scrimgeour Vickers and chartered accountants PricewaterhouseCoopers. He has a Bachelor of Commerce, a Diploma of Financial Planning, is a Fellow of the Australian Society of Accountants and a Certified Financial Planner. Nicholas Mather (Chief Executive Officer) Nicholas Mather (50), appointed 11 May 2005, graduated in 1979 from the University of Queensland with a B.Sc. (Hons, Geology). He has 25 years' experience in exploration and resource company management in a variety of countries. His career has taken him to numerous countries exploring for precious and base metals and fossil fuels. Nicholas Mather has focused his attention on the identification of and investment in large resource exploration projects. He was managing director of BeMaX Resources NL (an ASX-listed company) from 1997 until 2000 and instrumental in the discovery of the world class Ginkgo mineral sand deposit in the Murray Basin in 1998. As an executive director of Arrow Energy NL (also ASX-listed) until his resignation in 2004, Nicholas Mather drove the acquisition and business development of Arrow's large Surat Basin Coal Bed Methane project in south-east Queensland. He was managing director of Auralia Resources NL, a junior gold explorer, before its USD23 million merger with Ross Mining NL in 1995. He was a non-executive director of Ballarat Goldfields NL until 2004, having assisted that company in its recapitalization and requotation on the ASX in 2003. Nicholas Mather is Chief Executive of D'Aguilar Gold Ltd, a non-executive director of ASX-listed Bow Energy Limited and TSX-V listed Waratah Coal Inc. Brian Moller (Non-Executive Director) Brian Moller (49), appointed 11 May 2005, is a corporate partner in the Brisbane-based law firm Hopgood Ganim Lawyers, the Australian solicitors to the Company. He was admitted as a solicitor in 1981 and has been a partner at Hopgood Ganim since 1983. He practices almost exclusively in the corporate area with an emphasis on capital raising, mergers and acquisitions. Brian Moller holds an LLB Hons from the University of Queensland and is a member of the Australian Mining and Petroleum Law Association. Brian Moller acts for many publicly-listed resource and industrial companies and brings a wealth of experience and expertise to the board, particularly in the corporate regulatory and governance areas. He is a non-executive director of ASX listed D'Aguilar Gold Ltd and Platina Resources Ltd and TSX-V listed WCB Capital Ltd. Dr Robert Weinberg (Non-Executive Director) Rob Weinberg (60), appointed 22 November 2005, gained his doctorate in geology from Oxford University in 1973. He has more than 30 years experience of the international mining industry and is an independent mining research analyst and consultant. He is a Fellow of the Geological Society of London. Prior to his current activities he was Managing Director, Institutional Investment at the World Gold Council, and a Director of Gold Bullion Securities. Previously he was a Director of the investment banking division at Deutsche Bank in London after having been head of the global mining research team at SG Warburg Securities. He has also held senior positions within Societe Generale and was head of the mining team at James Capel & Co. He was formerly marketing manager of the gold and uranium division of Anglo American Corporation of South Africa Ltd. Dr Weinberg is a non-executive Director of AIM listed Falkland Gold and Minerals Ltd, ASX listed Kasbah Resources Ltd and Medusa Mining Ltd, a company listed on the ASX, AIM and the Frankfurt Stock Exchange SECRETARY Mr Duncan Cornish was the Secretary of the Company during the period and until the date of this report. Duncan Cornish (Company Secretary and Chief Financial Officer) Duncan Cornish (40) has more than ten years experience in the accountancy profession both in England and Australia, mainly with the accountancy firms Ernst and Young and PricewaterhouseCoopers. He has extensive experience in all aspects of company financial reporting, corporate regulatory and governance areas, business acquisition and disposal due diligence, capital raising and company listings and company secretarial responsibilities. Mr Cornish is a Chartered Accountant. He holds a Bachelor of Business (Accounting) and is a member of the Australian Institute of Chartered Accountants. STATEMENT OF DIRECTORS' RESPONSIBILITIES The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union. The financial statements are required to give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the group for that period. In preparing these financial statements the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgments and estimates that are reasonable and prudent; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements and other information included in annual reports may differ from legislation in other jurisdictions. DIRECTORS' REPORT The directors present their annual report and audited financial statements for the year ended 30 June 2007. PRINCIPAL ACTIVITIES The principal activities of Solomon Gold plc (the "Company") and its subsidiaries (together "Solomon Gold" or the "Group") are gold and mineral exploration in Solomon Islands. Details of the Group's activities, together with a description of the principal risks and uncertainties facing the Group, and the development of the business, are given in the Chairman's Statement and Operations Review. The principal activity of the Company is that of a holding company. BUSINESS REVIEW A review of the Group's business and future developments is set out in the Operations review and Financial review. LAND AND BUILDINGS The directors are of the view that the book value and market value of land and buildings are not materially different. The land and buildings were acquired during 2007 and no independent valuation has been obtained since its acquisition. GOING CONCERN In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in discrete tranches. Further funding is raised as and when required. When any of the Group's projects move to the development state, specific financing will be required. CURRENCY The functional and presentational currency is Australian dollars ("A$") and all amounts presented in the Directors' Report and financial statements are presented in Australian dollars unless otherwise indicated. RESULTS The Group's consolidated loss for the period was A$1,201,646 (2006: A$652,322). CHANGES IN SHARE CAPITAL DURING 2007 A statement of changes in the share capital of the Company is set out in note 15 to the financial statements. DIVIDENDS PAID OR RECOMMENDED The directors do not recommend the payment of a dividend. FINANCIAL INSTRUMENTS The Company does not undertake financial instrument transactions that are speculative or unrelated to the Company's or Group's activities. The Company's financial instruments consist mainly of deposits with banks, accounts payable, and loans to subsidiaries. Further details are provided in note 18 to the financial statements. POLICY AND PRACTICE ON PAYMENT OF CREDITORS The Group policy on the payment of creditors is to settle bills in accordance with the terms agreed with suppliers. At the year end there were 7 days (2006: 32 days) worth of purchases in Group trade creditors and 14 days (2006: 21 days) worth of purchases in Company trade creditors. SUBSEQUENT EVENTS On 23 August 2007, 700,000 unlisted share options in Solomon Gold plc expired as a result of employee resignations. On 8 November 2007, Hanson Westhouse Limited was appointed as Broker to the Company. On 8 November 2007, RFC Corporate Finance Ltd was appointed as Nominated Advisor to the Company. As part of its appointment, RFC will be issued 500,000 unlisted options at an exercise price of £0.20 expiring on 8 November 2010. DIRECTORS AND DIRECTORS' INTERESTS The directors who held office during the period were as follows: Cameron Wenck Non-Executive Chairman Nicholas Mather Chief Executive Officer Brian Moller Non-Executive Director Robert Weinberg Non-Executive Director David Jelley Executive Director - Operations (resigned 23 May 2007) The Company has a Directors' and Officers Liability insurance policy with AFM Insurance Brokers Pty Ltd for all its directors. The policy indemnifies directors up to a level of A$5 million. The directors who held office at the end of the financial year held interests in the ordinary shares and unlisted options of the Company as shown in the tables below. On 12 September 2006, the Company issued share options exercisable at prices between 50 pence and 100 pence per ordinary share to the following directors: Cameron Wenck 75,000, Brian Moller 75,000 and Robert Weinberg 75,000. The period during which these share options can be exercised is between 1 January 2007 and 1 January 2011. Shares held At 30 June 2007 At 30 June 2006 Nicholas Mather 565,159 565,159 Brian Moller 92,535 92,535 Cameron Wenck 212,045 212,045 Robert Weinberg 27,000 - Share options held At 30 June 2007 At 30 June 2006 Option Price Exercise Period Nicholas Mather 233,333 233,333 50p 01/01/07 - 01/01/10 233,333 233,333 75p 01/01/08 - 01/01/11 233,334 233,334 100p 01/01/08 - 01/01/11 Cameron Wenck 25,000 - 50p 01/01/07 - 01/01/10 25,000 - 75p 01/01/08 - 01/01/11 25,000 - 100p 01/01/08 - 01/01/11 Brian Moller 25,000 - 50p 01/01/07 - 01/01/10 25,000 - 75p 01/01/08 - 01/01/11 25,000 - 100p 01/01/08 - 01/01/11 Robert Weinberg 25,000 - 50p 01/01/07 - 01/01/10 25,000 - 75p 01/01/08 - 01/01/11 25,000 - 100p 01/01/08 - 01/01/11 MAJOR SHAREHOLDERS The Company had been notified of the following interests in shares held as at 30 November 2007: Major Shareholders Number of Shares % of Issued Capital Credit Suisse Client Nominees (UK) Ltd 5,761,171 21.48 Tenstar Trading Limited 2,225,766 8.30 Pershing Keen Nominees Limited 1,228,000 4.58 Pershing Keen Nominees Limited 1,110,959 4.14 RAB Special Situations (Master) Fund Limited 852,103 3.18 In addition, the Company had been notified (in accordance with the Disclosure and Transparency Rules, "DTR") of the following interests in Shares held as at 10 December 2007: Major Shareholders Number of Shares % of Issued Capital Universities Superannuation Scheme Limited 1,000,000 3.73 Fidelity International Limited 2,000,000 7.45 CORPORATE GOVERNANCE In formulating the Company's corporate governance procedures the Board of Directors takes due regard of the principles of good governance set out in the Revised Combined Code issued by the Financial Reporting Council in July 2003 (as appended to the Listing Rules of the Financial Services Authority) so far as is practicable for a company of Solomon Gold's size. The board of Solomon Gold plc is made up of one executive director and three non-executive directors. Cameron Wenck chairs the Board and Nicholas Mather is the Company's Chief Executive. It is the Board's policy to maintain independence by having at least half of the Board comprising non-executive directors who are free from any business or other relationship with the Group. The structure of the Board ensures that no one individual or group is able to dominate the decision making process. The Board ordinarily meets on a monthly basis providing effective leadership and overall control and direction of the Group's affairs through the schedule of matters reserved for its decision. This includes the approval of the budget and business plan, major capital expenditure, acquisitions and disposals, risk management policies and the approval of the financial statements. Formal agendas, papers and reports are sent to the directors in a timely manner, prior to Board meetings. The Board also receives summary financial and operational reports before each Board meeting. The Board delegates certain of its responsibilities to management, who have clearly defined terms of reference. All directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that all Board procedures are followed. Any director may take independent professional advice at the Company's expense in the furtherance of his duties. One third of the directors retire from office at every Annual General Meeting of the Company. In general, those directors who have held office the longest time since their election are required to retire. A retiring director may be re-elected and a director appointed by the Board may also be elected, though in the latter case the director's period of prior appointment by the Board will not be taken into account for the purposes of rotation. The Audit Committee, which meets not less than twice a year and is responsible for ensuring that the financial performance, position and prospects of the Group are properly monitored as well as liaising with the Company's auditors to discuss accounts and the Group's internal controls. The Committee is chaired by Brian Moller, the other members being Cameron Wenck and Robert Weinberg. The Audit committee has reviewed the systems in place and considers these to be appropriate. The Remuneration Committee, which meets at least once a year and is responsible for making decisions on directors' remuneration packages, is chaired by Cameron Wenck. Brian Moller and Robert Weinberg are the other committee members. Remuneration of executive directors is established by reference to the remuneration of executives of equivalent status both in terms of the level of responsibility of the position and by reference to their job qualifications and skills. The Remuneration Committee will also have regard to the terms which may be required to attract an executive of equivalent experience to join the Board from another company. Such packages include performance related bonuses and the grant of share options. The Board attaches importance to maintaining good relationships with all its shareholders and ensures that all price sensitive information is released to all shareholders at the same time, in accordance with London Stock Exchange rules. The Company's principal communication with its investors is through the Annual General Meeting and through the annual report and accounts and the interim statement. The 2007 Annual General Meeting will provide an opportunity for the Chairman to present to the shareholders a report on current operations and developments and will enable the shareholders to question and express their views about the Company's business. A separate resolution will be proposed on each substantially separate issue, including the receipt of the financial statements and shareholders will be entitled to vote either in person or by proxy. A Health, Safety, Environment and Community Committee (HSEC Committee) is responsible for the overall health, safety and environmental performance of the Company and its operations and its relationship with the local community and is chaired by Brian Moller, the other members being Nicholas Mather and Robert Weinberg. POLITICAL AND CHARITABLE CONTRIBUTIONS The Group made no political or charitable donations in the year. AUDITORS A resolution for the reappointment of PKF (UK) LLP will be proposed at the forthcoming annual general meeting. Provision of information to auditors In the case of each person who are directors of the Company at the date when this report is approved: • So far as they are individually aware, there is no relevant audit information of which the Company's auditors are unaware; and • Each of the directors has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of the information. This report was approved by the board on 10 December 2007 and signed on its behalf. Duncan Cornish Company Secretary Level 5, 60 Edward Street Brisbane QLD 4000 Australia INDEPENDENT AUDITORS' REPORT INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF SOLOMON GOLD PLC We have audited the group and parent company financial statements ('the financial statements') of Solomon Gold plc for the year ended 30 June 2007 which comprise the consolidated income statement and the consolidated and company balance sheets, cash flow statements and statements of changes in shareholders' equity and the related notes. The financial statements have been prepared under the accounting policies set out therein. This report is made solely to the company's members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' 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 members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The directors' responsibilities for preparing the annual report and the financial statements in accordance with applicable law and International Financial Reporting Standards ('IFRSs') as adopted by the European Union are set out in the statement of directors' responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the information given in the directors' report is consistent with the financial statements. The information in the directors' report includes that specific information presented in the chairman's statement, operations review and financial review that is cross referenced from the principal activities and business review section of the directors' report. In addition we report to if, in our opinion, the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed. We read other information contained in the annual report and consider whether it is consistent with the audited financial statements. The other information comprises only the directors' report, the chairman's statement, the operations review and financial review. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the group's and company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion: • the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the group's affairs as at 30 June 2007 and of its loss for the period then ended; • the parent company financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 1985, of the state of the parent company's affairs as at 30 June 2007; • the financial statements have been properly prepared in accordance with the Companies Act 1985; and • the information given in the directors' report is consistent with the financial statements. Emphasis of matter - going concern In forming our opinion, which is not qualified, we have considered the adequacy of the disclosures made in note 1 to the financial statements concerning the group's and the company's ability to continue as a going concern. As explained in note 1 to the financial statements, the company raises finance for the group's exploration and appraisal activities in discrete tranches, and will need to raise further funds in the near future to continue with its planned exploration programme and to provide working capital. The future of the group depends on the ability of the company to raise such finance. This indicates the existence of a material uncertainty which may cast significant doubt about the company and the group's ability to continue as a going concern. If the company is unable to secure such additional funding, this may have a consequential impact on the carrying value of the related exploration assets and the investment of the parent company. The financial statements do not include the adjustments that would result if the group was unable to continue as a going concern. PKF (UK) LLP Registered Auditors London, UK 10 December 2007 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2007 Group Group Notes 2007 2006 A$ A$ Revenue - - Cost of sales - - Gross profit - - Other income 3,302 72,924 Administrative expenses (1,552,102) (908,064) Exploration costs written off - (10,000) Operating loss (1,548,800) (845,140) Finance income 6 347,154 192,818 Loss before and after tax 3 (1,201,646) (652,322) Loss for the period (1,201,646) (652,322) Basic and diluted loss per ordinary share - Basic and diluted 8 (0.0448) (0.0431) CONSOLIDATED AND COMPANY BALANCE SHEETS AS AT 30 JUNE 2007 Group Group Company Company Notes 2007 2006 2007 2006 A$ A$ A$ A$ Assets Property, plant and equipment 10 273,969 71,189 1,414 2,173 Intangible assets 11 6,799,726 2,201,948 - - Investment in subsidiary 9 - - 10,516,194 2,248,885 Total non-current assets 7,073,695 2,273,137 10,517,608 2,251,058 Other receivables and prepayments 13 381,724 257,677 243,997 220,228 Cash and cash equivalents 14 3,450,530 9,077,456 937 9,055,488 Total current assets 3,832,254 9,335,133 244,934 9,275,716 Total assets 10,905,949 11,608,270 10,762,542 11,526,774 Equity Share capital 15 631,679 631,679 631,679 631,679 Share premium 15 10,752,408 10,752,408 10,752,408 10,752,408 Other reserves 849,251 389,874 849,251 389,874 Retained loss (1,853,968) (652,322) (1,857,699) (553,631) Total equity 10,379,370 11,121,639 10,375,639 11,220,330 Liabilities Trade and other payables 16 526,579 486,631 386,903 306,444 Total current liabilities 526,579 486,631 386,903 306,444 Total liabilities 526,579 486,631 386,903 306,444 Total equity and liabilities 10,905,949 11,608,270 10,762,542 11,526,774 The financial statements were approved and authorised for issue by the Board and were signed in its behalf on 10 December 2007. Nicholas Mather Director STATEMENT OF CHANGES IN EQUITY Group Statement of changes in shareholders' equity Share Share Share option Warrants Retained capital premium reserve reserve loss Total Note A$ A$ A$ A$ A$ A$ Balance at 11 May 2005* - - - - - - Loss for the period - - - - (652,322) (652,322) New share capital 631,679 12,879,279 - - - 13,510,958 subscribed Share issue costs - (2,126,871) - - - (2,126,871) Value of options issued - - 217,071 - - 217,071 to directors, employees and consultants Value of warrants issued - - - 172,803 - 172,803 Balance at 30 June 2006 631,679 10,752,408 217,071 172,803 (652,322) 11,121,639 Loss for the period - - - - (1,201,646) (1,201,646) New share capital - - - - - - subscribed Share issue costs - - - - - - Value of options issued - - 459,377 - - 459,377 to directors, employees and consultants Value of warrants issued - - - - - - Balance 30 June 2007 15 631,679 10,752,408 676,448 172,803 (1,853,968) 10,379,370 Company Statement of changes in shareholders' equity Share Share Share option Warrants Retained capital premium reserve reserve loss Total Note A$ A$ A$ A$ A$ A$ Balance at 11 May 2005* - - - - - - Loss for the period - - - - (553,631) (553,631) New share capital 631,679 12,879,279 - - - 13,510,958 subscribed Share issue costs - (2,126,871) - - - (2,126,871) Value of options issued - - 217,071 - - 217,071 to directors, employees and consultants Value of warrants issued - - - 172,803 - 172,803 Balance at 30 June 2006 631,679 10,752,408 217,071 172,803 (553,631) 11,220,330 Loss for the period - - - - (1,304,068) (1,304,068) New share capital - - - - - - subscribed Share issue costs - - - - - - Value of options issued - - 459,377 - - 459,377 to directors, employees and consultants Value of warrants issued - - - - - - Balance 30 June 2007 15 631,679 10,752,408 676,448 172,803 (1,857,699) 10,375,639 * The Company was incorporated on 11 May 2005 with one subscriber share of £0.0001. CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2007 Group Group Company Company Note 2007 2006 2007 2006 A$ A$ A$ A$ Cash flows from operating activities Operating loss (1,201,646) (652,322) (1,304,068) (553,631) Depreciation 28,955 12,290 759 117 Share based payment expense 459,377 217,071 459,377 217,071 Increase in other receivables and (124,046) (253,587) (23,793) (220,228) prepayments Increase/(decrease) in trade and other 39,947 (23,608) 80,483 145,865 payables Forgiveness of loan liability 3 - (72,924) - - Cash used in operations (797,413) (773,080) (787,242) (410,806) Net cash outflow from operating activities (797,413) (773,080) (787,242) (410,806) Cash flows from investing activities Acquisition of property, plant and (231,735) (72,147) - (2,290) equipment Acquisition of intangible assets (4,597,778) (1,541,712) - - (exploration expenditure) Loans advanced to subsidiary - - (8,267,309) (1,978,314) Payment for subsidiaries net of cash - 17,497 - - acquired Net cash outflow from investing activities (4,829,513) (1,596,362) (8,267,309) (1,980,604) Cash flows from financing activities Proceeds from the issue of ordinary share - 13,240,362 - 13,240,362 capital Payment of issue costs - (1,793,464) - (1,793,464) Net cash inflow from financing activities - 11,446,898 - 11,446,898 Net increase in cash and cash equivalents (5,626,926) 9,077,456 (9,054,551) 9,055,488 Cash and cash equivalents at beginning of 9,077,456 - 9,055,488 - period Cash and cash equivalents at end of period 3,450,530 9,077,456 937 9,055,488 To view the complete 2007 Annual Report, please visit the Company's website: www.solomongold.com Contacts: Mr Duncan Cornish Secretary Tel: +61 7 3303 0680 Email: firstname.lastname@example.org Mr Stephen Weir RFC Corporate Finance Tel: +61 2 9250 0048 Email: Stephen.Weir@rfc.com.au This information is provided by RNS The company news service from the London Stock Exchange END FR OKDKKNBDDOBD
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