Kolar Gold : Interim Half Yearly Accounts December 2013

31 March 2014

Kolar Gold Limited ("Kolar Gold" or the "Company"), the Indian focussed gold exploration and mine development
company, announces its unaudited results for the six months ended 31 December 2013.
The Company recorded a loss after tax for the period of £1,578,434, (2012: £1,223,997) including a loss on the dilution of investment in an associate of £909,622 (2012: nil). The Company had £4.0m in cash and term deposits as at 31 December
2013 (2012: £6.5m).
The Company at the balance sheet date had the following interests:

 an effective interest of 26% in Geomysore Services India Private Limited ('GMSI') GMSI;

 a right of first refusal, in association with the Cooperative Societies of Bharat Gold Mines Limited ("BGML") ex- employees, to acquire the "BGML" mining assets through a tender process to be held by the owner, the Government of India; and

 held cash balances of around £4.0m.

In addition, Kolar Gold has a management team with long standing experience and knowledge of GMSI's activities and
BGML.

GMSI

On 16 August 2013 the Company announced that it had entered into a binding Heads of Agreement ("HoA") with GMSI to:
1. Dissolve the 2011 agreements between the Company and GMSI through which Kolar Gold had certain rights over 14
Kolar Gold projects;
2. Transfer the Kolar Gold exploration assets to GMSI;
3. Cancel £300,000 of advances previously made by Kolar Gold to GMSI during the previous reporting period; and
4. Invest £700,000 into that company to fund its working capital and to develop a number of advanced stage gold projects in India. This includes the recently granted Jonnagiri Gold Mining Lease, which already has a total JORC compliant Resource of 710k oz.
In exchange for the above consideration Kolar Gold acquired a 30% interest in GMSI, and Kolar Gold's chief executive, Nick
Spencer, has joined the Board of GMSI.
In November 2013 GMSI awarded shares to Thriveni Earthmovers Private Limited ('Thriveni') in consideration for the provision of exploration and mining services to develop the Jonnagiri mining lease project. As a result Kolar Gold now has an effective interest in GMSI of 26%.
Subsequent to the Company's investment in GMSI, Deccan Gold Mines (DGM), an Indian focussed gold exploration company listed on the Bombay Stock Exchange (BSE), announced its in principle agreement for an amalgamation with GMSI with a view to creating a unique BSE listed large portfolio of India gold exploration and development interests. The amalgamation is subject to valuations and share swap ratios being agreed between the parties and the shareholders of GMSI receiving a detailed and binding proposal from DGM.

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The Board of Kolar Gold has not received any definitive proposal in connection with its interests in GMSI to consider at this point. Should it do so it will consider the merits of the proposal and whether its implementation would be in the best interest of Kolar Gold's shareholders. The Board will report to shareholders if and when it is appropriate to do so.
In the meantime, GMSI is proceeding with exploration and drilling activities. Two core drill rigs have commenced operating at Jonnagiri in recent weeks to upgrade and expand the defined gold resource.
As at 31st December 2013 the Company valued its investment in GMSI at £5.851million.

BGML Tender

Kolar Gold is jointly pursuing, with the Cooperative Societies of BGML ex-employees, the acquisition and revival of the historic Kolar Gold Fields which has produced 25 million ounces of gold at 15.9 grams per tonne over 120 years until closure in 2001.
In July 2013, the Supreme Court of India instructed the Government of India to proceed with the tender sale and mine revival of the historic BGML gold mines at Kolar Gold Fields.
In December 2013, Mecon Limited was appointed by the Government to manage the tender process on its behalf. A final tender document is expected to be issued to interested and qualifying parties in 2014.
The BGML ex-employees Society and Kolar Gold, as their Technical and Financial collaborator has a right of first refusal to acquire the BGML mine assets and fully revive the historic gold mine and community.

Cash Balances and Working Capital

The strategic changes initiated by the Company in 2013 have resulted in a reduction in ongoing overheads incurred during the half-year (£605,000) and the investment in GMSI has removed any further obligations (in respect of tenement rights) to the company. Kolar Gold is no longer required to directly carry out exploration activities on tenements as the Company now has exposure to GMSI's increased and considerable gold licence area portfolio.
As at 31 December 2013 the Company's cash balances were £4m and at the date of this report are around £3.7m.

"Kolar Gold is pursuing two strategies to develop a substantial gold exploration and development business in India. First, through its investment in GMSI, which may amalgamate with DGM to create India's largest gold company listed on the Bombay Stock Exchange. Secondly, after many years of work we are approaching the launch of the tender process for the privatisation of BGML, the acquisition of which, on acceptable terms, has been a long standing goal of Kolar Gold. We have also minimised the cash burn to preserve resources to enable Kolar Gold to participate at the level afforded by our current resources or further, through Kolar Gold potentially raising further capital . Major progress on both fronts is anticipated this year, although India remains a challenging and unpredictable environment in which to be certain as to timing"

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"Through our investment in GMSI and the forthcoming BGML tender we are positioning ourselves to have access to later stage gold projects to pursue and develop. In GMSI, the two core rigs are now operational full-time in order to potentially upgrade and expand this gold resource at the Jonnagiri Mining License to over 1Moz of gold. The necessary preparatory work to prepare for GMSI's possible amalgamation with DGM is proceeding well, which will enable an assessment to be made of the merits of the amalgamation and its benefits to Kolar Gold shareholders. In anticipation of the BGML tender, we are preparing our resources with the Employee Societies to put ourselves in the position of being able to secure this important gold asset."

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Kolar Gold is an Indian gold exploration and development company, listed on the AIM market (Ticker: KGLD) and an experienced international board and strong local partners.

Kolar Gold is an investor in GMSI, an Indian exploration and development company with a large portfolio of gold assets in the Kolar Gold Belt and the rest of India. The Kolar Gold Belt is one of the most prospective underdeveloped Archaean Greenstone Belts in the world and is regarded by Mr Andrew J Vigar of Mining Associates Limited, the Competent Person, as comparable to the Archaean Greenstone Belts of South Africa, Canada and Western Australia which have similar geology, structure and style of mineralisation. This project area includes 32 known mineralised prospects and covers 568 square kilometres in the southern states of Andhra Pradesh, Karnataka and Tamil Nadu. GMSI has also recently been awarded the Jonnagiri Gold Mining License for development.

Kolar Gold is also jointly pursuing, with the BGML mine employee unions, the acquisition and revival of the neighbouring historic Kolar Gold Fields which has produced 25 million ounces of gold at 15.9 grams per tonne over 120 years until closure in 2001.

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(77,542) (21,649) (1,438,250)
(741,671)
-
Foreign exchange gains 8,752 - -

The condensed notes on pages 9 to 12 are an integral part of the condensed consolidated interim financial statements.

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Plant and equipment 18,807 22,556 19,674
Investment in associate 6 5,851,077 - - Exploration and evaluation assets 6 - 5,807,365 6,122,168

Cash and cash equivalents 1,633,685 6,452,196 698,817

Trade and other payables 256,744 369,534 321,450
Employee benefits 116,416 175,972 134,760

Employee benefits 2,923 3,850 4,606

Accumulated losses (17,425,987) (14,877,622) (15,847,553)

on its behalf by:

Director
The condensed notes on pages 9 to 12 are an integral part of the condensed consolidated interim financial statements.

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Total comprehensive income for the period

Loss for the period - - - - (1,578,434) (1,578,434) Other comprehensive income -
foreign exchange translation

variances - - - (35,417) - (35,417)

Total comprehensive income

for the period: - - - (35,417) (1,578,434) (1,613,851)

Contributions by and distributions to owners:

Issue of ordinary shares - - - - - - Equity-settled transactions for

the period - - 21,723 - - 21,723

Total contributions by and

distributions to owners: - - 21,723 - - 21,723

Total comprehensive loss for the year

Loss for the year - - - - (2,193,928) (2,193,928) Other comprehensive income -
foreign exchange translation

variances - - - (5,510) - (5,510)

Total comprehensive loss for

the period: - - - (5,510) (2,193,928) (2,199,438)

Contributions by and distributions to owners:

Exercise of SUN warrants 408,318 (43,749) (364,569) - - - Other issues of ordinary shares 21,603 33,938 - - - 55,541
Equity-settled transactions for

the period - - 99,191 - - 99,191

Total contributions by and

distributions to owners: 429,921 (9,811) (265,378) - - 154,732

The condensed notes on pages 9 to 12 are an integral part of the condensed consolidated interim financial statements.

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Loss for the period (1,578,434) (1,223,997) (2,193,928)

Adjustments for:

Depreciation 2,181 3,332 6,410
Share of loss of associate 61,469 - - Dilution of investment in associate 909,622 - - Net finance costs/(income) (30,301) (58,032) (84,917) Unrealised foreign exchange (gains)/losses (49,584) (1,483) 14,716

Equity-settled share-based payment transactions 21,723 80,000 99,191

Operating loss before changes in working capital and

Change in other current assets (5,703) (7,942) 23,181

Change in trade and other payables (64,706) 14,916 (51,755) Change in employee benefits (20,027) (2,126) (42,582) Cash used in operating activities (745,540) (1,402,051) (2,208,663) Interest and finance costs paid (497) (488) (14,271) Net cash used in operating activities (746,037) (1,402,539) (2,222,934)

Interest received 46,525 59,641 103,447

Funds (placed on)/taken off term deposit 2,321,527 - (4,671,734) Payments for investment in associate (700,000) - - Payments for exploration and evaluation assets - (331,857) (676,323) Payments for plant and equipment (1,314) (650) (846) Net cash used in investing activities 1,666,738 (272,866) (5,245,456)

Proceeds from issues of equity securities - - 55,541

The condensed notes on pages 9 to 12 are an integral part of the condensed consolidated interim financial statements.

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In November 2013 GMSI granted shares to a third party amounting to 20% of GMSI's issued capital, in exchange for the provision of services. As a result of this transaction and the purchase arrangements, the Group's equity holding of GMSI fell to an effective interest of 26%. Based on the above, between the date of acquisition and 31
December 2013, the Group suffered a loss on dilution in its investment totalling £909,622.
The carrying value of the investment in an associate is determined as follows: Investment in an associate £ Acquisition cost 6,822,168

Dilution of investment (909,622) Share of loss of associate (61,469)
Total 5,851,077

Opening balance 106,294 100,152
Issued upon the exercise of warrants - 5,833
Issued as settlement of debt - 309

No shares were issued during the period.
All shares issued by the Company are 'ordinary' shares and rank equally in all respects, including for dividends, shareholder attendance and voter rights at meetings, on a return of capital and in a winding- up.

No dividends were declared nor paid during the six months ended 31 December 2013 (2012: nil).

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The Company has issued options to directors, employees and long-term consultants to compensate them
for services rendered and incentivise them to add value to the Group's longer term share value. They comprise Reward Options in exchange for the provision of services and Bonus Options, which are only receivable upon the Company's shares being admitted to trading on a stock exchange.
On 27 November 2013, in line with their letters of appointment, 400,000 options were issued to non- executive directors with an exercise price of 6.38p and a term of 5 years.
The following unexpired options existed as at 31 December 2013.

No warrants were issued during the period.
The following unexercised warrants existed as at 31 December 2013:

Broker warrants Series 1 5.5.11 1,300,000 17.6.14 0.40
Broker warrants Series 2 17.6.11 1,500,000 17.6.14 0.60

2,800,000

Each warrant entitles the holder to subscribe for one ordinary share in the Company. The holder must exercise the warrants no later than 30 days after the expiry date. Warrants do not confer any voting rights on the holder.

The Group currently has one operating segment, being the exploration for gold in India.

There have been no significant events subsequent to the balance sheet date to report that would alter the financial statements as at 31 December 2013 or require disclosure.

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