Financial Results for Year Ended 31 December 2011

29 June 2012

Touchstone Gold

Financial Results for Year Ended 31 December 2011

Touchstone Gold Limited (AIM: TGL) ("Touchstone Gold" or the "Company"), the Colombian focused gold exploration company, is pleased to announce its financial results for the year ended 31 December 2011 and progress since the year end. The Company's report is also available on the Company's website at www.touchstonegold.com. Unless otherwise noted, all financial information is expressed in U.S. dollars.

The Company made significant progress during the year, underpinned by its Admission to trading on AIM in June 2011 and a highly successful exploration programme that has demonstrated evidence of extensive high-grade gold mineralization.

Operational Highlights Pre and Post Year End

·; Company completed its Stage 3 exploration programme at its Rio Pescado Project located in Antioquia Department in Colombia, comprising over 8,300 metres of drilling across 74 diamond drill holes, doubling the area of known gold mineralization, and discovering a third high-grade gold zone;

·; The systematic exploration programme, including completed Geophysical and LiDAR surveys, has confirmed existing areas of shallow, high-grade gold mineralization, connected previously separated gold zones along strike, and generated new targets in areas of previous artisanal mining activity;

·; Selected drilling results include:

- 8.75 g/t gold over 28.25 metres, including 9.88 g/t gold over 24.25 metres, and 20.90 g/t gold over 5.7 metres from hole LPD-1279;

- 8.70 g/t gold over 16.80 metres, including 17.56 g/t gold over 8.15 metres, and 27.60 g/t gold over 4.50 metres from hole LPD-1286;

- 9.13 g/t gold over 15.00 metres, including 24.92 g/t gold over 4.45 metres from hole LPD-1162;

- 5.84 g/t gold over 21.75 metres, including 20.28 g/t gold over 4.20 metres from hole LPD-1159;

·; A fully-funded dual exploration programme is underway for the remainder of 2012, involving a Stage 4 drilling programme to test the southerly strike extension and westerly down-dip of the vein system at Rio Pescado, alongside a preliminary exploration programme at the prospective high-grade Santa Rosa Project in South Bolivar;

·; Management anticipates metallurgical test results will be received by the end of 2012;

·; The Company expects to be in a position to report a maiden NI 43-101 and JORC compliant resource by the end of 2012.

Corporate Highlights Pre and Post Year End

·; In June 2011, the Company successfully raised gross proceeds of £10,000,000 through a placing of 37,037,038 shares in conjunction with its admission to trading on the AIM market of the London Stock Exchange;

·; At 31 December 2011, the Company had a cash balance of US$9.7 million;

·; In March 2012, the Company diversified its gold exploration assets in Colombia through the acquisition of a 90% interest in four mining concessions, over a total area of 57 square kilometres, that together comprise the important Santa Rosa Project in the well-known gold mining district in South Bolivar;

·; In May 2012, the Company consolidated it South Bolivar assets through the acquisition of a 90% interest in an additional mining concession, over a total area of 11 square kilometres, that complements the Santa Rosa Project.

David Wiley, Chief Executive Officer of Touchstone Gold, commented:

"Touchstone Gold is very pleased to report its first set of financial results that demonstrate the huge progress we have made since the IPO last June in delivering against our strategy to create a significant gold exploration and production group focused on Colombia. The successful implementation of our Stage 3 drilling programme has significantly de-risked and upgraded the Rio Pescado Project and the acquisition of further licenses in South Bolivar, has provided significant strategic expansion and diversification of our gold exploration assets.

Our next phase of exploration is fully funded and now underway. This will include the Stage 4 drilling programme to extend known mineralization at the Rio Pescado Project, alongside a systematic exploration programme at the highly prospective Santa Rosa Project in an area that hosts multiple gold-bearing vein type systems in a gold province that is home to a number of international gold mining and exploration companies. The remaining months of 2012 promise to be both busy and exciting and we expect to be in a position to report a maiden resource by the end of 2012."

For further information please contact:

Operational Review

Between January and June 2011, the Company's focus was on the completion of a competent person report, which formed the basis of the Company's admission document prior to its admission to trading on the AIM market of the London Stock Exchange in June 2011.

In June 2011, shortly after the IPO, the Company began its Stage 3 exploration programme, which has taken a systematic approach from the beginning, utilizing proven exploration techniques to advance the Rio Pescado Project and highlight drill targets.

The exploration team began by initiating a series of geophysical surveys (Induced Polarization, Ground Magnetics, and Very Low Frequency) which were followed by cutting over 100 line kilometres of a large exploration grid, which continues to expand as the Company begins to evaluate the south-western quadrant of the concession package. This grid has enabled the team to collect over 2,400 soil samples, which have provided reliable indications of the locations of zones of gold mineralization.

Since the year end, in April 2012 the company flew a LIDAR survey over the Rio Pescado area which identified new targets and reinforced confidence in the quality and continuity of the Rio Pescado gold mineralized zones.

The Stage 3 drilling programme, consisting of over 8,300 metres across 74 diamond drill holes, was completed in March 2012 (See Figure 1). Drilling assay results from all 74 of the Stage 3 holes have now been reported and the highlights are found below in Table 1. Comprehensive drill results can be found on the Company's website.

Table 1. Selected Stage 3 Drilling Results

* All samples collected were analysed utilizing ACME Analytical Labs of Vancouver BC., Canada and were subject to a 36 element ICP-MS analysis. Over limit samples were subject to gravimetric analysis.

The primary achievements of the Company's Stage 3 drilling programme were connecting the Pepas and Filodehambre Zones along strike through drilling the Gap Area; identifying new high-grade areas at Filodehambre; and defining a new zone of high-grade gold mineralization, the 1141 Zone, to the south of Filodehambre. 

1141 Zone

The 1141 Zone has proven to be a significant discovery for Touchstone Gold. The area is located approximately 200 metres to the south of Filodehambre and contains west dipping, near surface, high-grade gold bearing quartz veins. The area is structurally controlled to the east and down-thrown to the west by a near vertical fault, as well as truncated to the north and offset to the south by north-easterly shears. The 1141 Zone, much like Pepas and Filodehambre, occurs within a fault block, which the Company expects continues south of its drilling to date. The width of the zone is approximately 75 metres. The true thickness of the vein system ranges from 1 to 25 metres, and has been tested to a maximum depth of 75 metres.

For Figure 1: Rio Pescado Project - Drill Hole Location Map, please click on the link below:

http://www.rns-pdf.londonstockexchange.com/rns/4391G_-2012-6-28.pdf 

Corporate Review

In June 2011, the Company successfully raised gross proceeds of approximately £10,000,000 through a placing of 37,037,038 Ordinary Shares, primarily to institutional investors, in conjunction with its admission to trading on the AIM market of the London Stock Exchange.

In February 2012, the Company appointed Northland Capital Partners as Joint Corporate Broker to act alongside Canaccord Genuity as Nominated Adviser and Joint Corporate Broker.

In March 2012, the Company diversified its asset portfolio in Colombia with the announcement that it had entered into an option agreement with a private Colombian company to earn a 90% interest in Santa Rosa Project in South Bolivar, Colombia (See Map 1). The highly prospective area hosts multiple gold bearing vein systems and is located in a gold province that is home to a number of international gold mining and exploration companies. The option consists of 4 concessions covering a total land area of 57 square kilometres.

For Map 1: Santa Rosa Project area in relation to Rio Pescado Project, please click on the link below:

http://www.rns-pdf.londonstockexchange.com/rns/4391G_1-2012-6-28.pdf 

In May 2012, the Company consolidated its South Bolivar assets through the acquisition of a 90% interest in an additional mining concession, over a total area of 11 square kilometres, that complements the Santa Rosa Project (See Map 2). This additional acquisition provided further expansion into an area that is recognised widely as being attractive and highly prospective with extensive artisanal activity.

For Map 2: New concession in relation to existing Santa Rosa Project, please click on the link below:

http://www.rns-pdf.londonstockexchange.com/rns/4391G_2-2012-6-28.pdf 

Outlook

The Company now plans to test the southerly strike extension and the westerly down-dip of the vein system at the Rio Pescado Project through its Stage 4 drilling programme. New permits for these areas have been processed and once approvals have been received, the Company will continue an aggressive programme of definition and reconnaissance drilling in the area. Initial metallurgical work will also be conducted to test gold recoveries. The Stage 4 drilling programme is fully funded and is expected to commence in Q3 2012.

At the Santa Rosa project, the Company intends to begin employing the same methodical approach to exploration that yielded the positive results at Rio Pescado in H2 2012. 

The Company has collected a number of samples for metallurgical evaluation purposes and these samples will be subjected to numerous tests and analysis. Management anticipates these results will be received by the end of 2012.

The Company also expects to be in a position to report a maiden NI 43-101 and JORC compliant resource by the end of 2012.

Financial Review

The following table shows selected comparative financial information for the years ended 31 December 2011 and 2010.

In June 2011, the Company's shareholders approved a share re-organisation, as a result the Company has revised its basic and diluted shares outstanding for year ended 31 December 2011, to reflect the share re-organisation.

Financial Highlights

On 7 June 2011, the Company successfully completed its initial public placing of 37,037,038 Ordinary Shares at a price of 27 pence per Ordinary Share, raising gross proceeds of approximately £10,000,000.

For the year ended 31 December 2011, the Company recorded a net loss of $9,828,937 or $0.11 per share compared with $162,873 or $0.00 per share for the year ended 31 December 2010.

At 31 December 2011, the Company had cash and cash equivalents of $9,704,345.

On 5 March 2012, the Company announced an option agreement with a private company to acquire a 90 percent interest in four mining concessions, over a total area of 57 square kilometres, that together comprise the important Santa Rosa Project located in the well-known gold mining district in the south of the Bolivar Department, Colombia. The material terms of the Agreement are summarised below:

- Initial payment of US$59,000 to the current concession holders, a non-related private company, upon signing the option agreement;

- An additional payment of US$50,000 upon the mining concessions being registered to Touchstone Colombia on the National Mining Registry of Colombia;

- Four annual payments of US$327,750 that will commence one year after the mining concessions have been registered;

- US$1,000,000 in exploration expenditures on the property before earning the 90% interest;

- The Company has secured a right of first refusal to acquire the remaining 10% of the Santa Rosa Project.

On 31 May 2012, the Company announced a further option agreement with an individual land owner, to acquire a 90 percent interest in a mining concession that complements the Santa Rosa Project. The option agreement is conditional on various staged payments and payable over a four-year period from the signing of the agreement.

Operating Activity

For the year ended 31 December 2011, the Company incurred $3,908,350 in exploration expenditures, not including geologist consulting costs. This compares with $1,570,133 in exploration costs for the year ended 31 December 2010. The increase in exploration expenditures was primarily attributed to an increased activity of efforts on the Rio Pescado Project. The Rio Pescado project consists of four concessions, Las Pepas (MCA No. 5969 and MCA No. 6055), El Seis (MCA No. 7013), and El Siete (MCA No. 7014), which cover a total area of 39km2 in the Segovia Gold Belt of Antioquia Department in north, central Colombia.

In addition to the exploration expenditures noted above, the Company also incurred professional geologist and consultant costs of $1,418,468 for the year ended 31 December 2011, which is recorded in professional and consulting costs in the statement of operations.

The increase in expenditures for the year ended 31 December 2011 compared with the year ended 31 December 2010 is a result of increased exploration activity on the Rio Pescado project.

A breakdown of exploration expenditures for the Rio Pescado project for the years ended 31 December 2011 and 2010 is noted in the table below.

During the year ended 31 December 2010, the Company incurred $113,138 in professional geologist and consultant costs, which is recorded in professional and consulting costs in the statement of operations.

Mr. John Nicholson, P.Geo has reviewed and approved the technical information contained within this announcement in his capacity as a qualified person, as required under the AIM rules. Mr. Nicholson is chief geologist of the Company and is a Fellow of the Royal Geographical Society, has a B.Sc. from the University of British Columbia, and has been an accredited member of the Association of Professional Engineers and Geoscientists since 1992. Mr. Nicholson is supervising the work programmes on the Rio Pescado Project.

About Touchstone Gold

Touchstone Gold is a gold exploration company and the 100% owner of the Rio Pescado Project in Colombia, comprising four mining concessions over a total area of 39 square kilometres in the highly prospective Segovia Gold Belt. It owns further options on the Santa Rosa Project, in the South Bolivar area of Colombia, comprising four proposed mining concessions and one mining concession over a total area of 68 square kilometres. With a philosophy of creating value by the systematic exploration and development of the Company's existing assets as well as the acquisition of suitable exploration and development mineral projects, the Company's long-term intention is to build a significant gold exploration and production company.

FORWARD-LOOKING STATEMENTS

Certain information set forth in this Interim Report contains "forward-looking statements" and "forward-looking information" under applicable securities laws. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements which include management's assessment of Touchstone's future plans and operations and are based on Touchstone's current internal expectations, estimates, projections, assumptions and beliefs, which may prove to be incorrect. Some of the forward-looking statements may be identified by words such as "expects" "anticipates", "believes", "projects", "plans", and similar expressions. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause Touchstone's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Touchstone undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.

Touchstone Gold Limited (formerly Touchstone Investment Holdings Limited)

Consolidated Financial Statements

For the years ended 31 December 2011 and 2010

MANAGEMENT'S RESPONSIBILITY

FOR CONSOLIDATED FINANCIAL STATEMENTS

All of the information in the accompanying consolidated financial statements of Touchstone Gold Limited is the responsibility of management. The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards. Where necessary, management has made judgments and estimates in preparing the consolidated financial statements, and such statements have been prepared within acceptable limits of materiality.

Management maintains appropriate systems of internal control given its size to give reasonable assurance that its assets are safeguarded, and the financial records are properly maintained.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control and exercises this responsibility principally through the Audit Committee. The Audit Committee meets with management to review the consolidated financial statements to satisfy itself that management is properly discharging its responsibilities to the Directors, who approve the consolidated financial statements.

(signed)"David Wiley" (signed) "Brian Morales"

David Wiley Brian Morales

Chief Executive Officer Chief Financial Officer

Toronto, Canada

28 June 2012

June 28, 2012

Independent Auditor's Report

To the Shareholders of 

Touchstone Gold Limited

We have audited the accompanying consolidated financial statements of Touchstone Gold Limited and its subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2011 and December 31, 2010 and the consolidated statements of operations, statements of comprehensive loss, statements of shareholders' equity and statements of cash flows for the years ended December 31, 2011 and December 31, 2010, and the related notes, which comprise a summary of significant accounting policies and other explanatory information.

Management's responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

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

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

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Touchstone Gold Limited and its subsidiaries as at December 31, 2011 and December 31, 2010 and its financial performance and cash flows for the years ended December 31, 2011 and December 31, 2010 in accordance with International Financial Reporting Standards.

(Signed) "PricewaterhoouseCoopers LLP"

Chartered Accountants, Licensed Public Accountants

PricewaterhouseCoopers LLP, Chartered Accountants

PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada M5J 0B2

T: +1 416 863 1133, F: +1 416 365 8215, www.pwc.com/ca

"PwC" refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.

TOUCHSTONE GOLD LIMITED

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in U.S. Dollars)

TOUCHSTONE GOLD LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in U.S. Dollars)

TOUCHSTONE GOLD LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Expressed in U.S. Dollars)

TOUCHSTONE GOLD LIMITED

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Expressed in U.S. Dollars)

TOUCHSTONE GOLD LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. Dollars)

NOTE 1 - NATURE OF OPERATIONS

Touchstone Gold Limited ("Touchstone Gold") and its wholly-owned subsidiaries, Touchstone Gold Holdings S.A. and Touchstone Colombia (collectively "the Company") is an exploration stage company engaged in the exploration and development of gold properties in Colombia.

Touchstone Gold was incorporated under the laws of the British Virgin Islands on 29 June 2009 and exists under the provisions of British Virgin Islands Companies Act, 2004, as Company number 1536599. The Company's registered office is Akara Building, 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands.

On 6 June 2011, the Company's directors and shareholders approved a share re-organisation described in further detail in note 5. All per share amounts have been restated to reflect the share re-organisation.

On 7 June 2011, the Company completed a placing of new Ordinary Shares at a price of 27 pence per Ordinary Share, raising a total of approximately £10,000,000 (U.S. $16,442,000). Additionally, 586,106 broker warrants were issued as part of the Placing.

These consolidated financial statements have been prepared using International Financial Reporting Standards ("IFRS") applicable to a going concern, which assumes that assets will be realized and liabilities will be settled in the normal course of business as they become due. Additionally, the consolidated financial statements have been prepared using the historical cost basis except for certain financial instruments, which are measured in accordance with the policies described below. The financial year-end for Touchstone Gold is December 31.

Statement of Compliance: These consolidated financial statements are audited and have been prepared using accounting policies consistent with the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and Interpretations of the International Financial Reporting Interpretations Committee ("IFRIC").

The consolidated financial statements of the Company for the years ended 31 December 2011, and 2010, have been prepared by management, reviewed by the Audit Committee and approved and authorized for issue by the Board of Directors on 28 June 2012.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Functional and presentation currency: All monetary references expressed in the financial statements and the notes thereto are in United States dollars. The functional currency of Touchstone Colombia is the Colombian peso. The remaining entities in the consolidated group have a functional currency of U.S. dollars. All financial information has been presented in U.S. dollars.

Items included in the financial statements of each of the Company's consolidated entities are measured using the currency of the primary environment in which the entity operates.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of operations and comprehensive income.

The results and financial position of Touchstone Colombia are translated as follows:

·; assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that financial period end;

·; income and expenses for each statement of operations and comprehensive income are translated at average exchange rate, unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions;

·; equity transactions are translated using the rate of exchange on the date of the transactions; and

·; all resulting exchange differences are recognized in Other Comprehensive Income.

Use of Estimates: The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The assets and liabilities which require management to make significant estimates and assumptions in determining carrying values include, but are not limited to, mineral interests, provision for income taxes and share-based payments.

The areas where management has made significant judgments include:

Reserves and resources

Proven and probable reserves are the economically mineable parts of the Company's measured and indicated mineral resources, demonstrated by a feasibility study. The Company estimates its proven and probable reserves and measured and indicated and inferred mineral resources based on information compiled by appropriately qualified persons. The information related to the geological data on the size, depth shape of the ore body requires complex geological judgments to interpret the data. The estimation of future cash flows based on proven and probable reserves is based on factors, which include but are not limited to, foreign exchange rates, commodity prices, future capital requirements and production costs and geological assumptions and judgments made in estimating the size and grade of the ore body and engineering assumptions based on the mining and processing methods to be used. Changes in proven and probable reserves, measured and indicated and inferred resources may impact carrying values of property plant and equipment and mineral interests and the recognition of deferred tax amounts.

Deferred taxes

The Company recognizes the deferred tax benefit related to deferred income and resource tax assets to the extent recovery is probable. Assessing the recoverability of deferred income tax assets requires management to make significant estimates of future taxable profit and the income tax rate at which the future tax assets will be realized. To the extent that future cash flows, taxable profit and income tax rates differ significantly from estimates, the ability of the Company to realize deferred tax assets could be impacted. In addition, future changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods from deferred income and resource tax assets.

Share-based payments expense

The recognition of share-based payments expense is based on factors which require management to make estimates on factors such as volatility and forfeiture rates. Changes in the estimates may have a material impact on the amount of share-based payments expense.

Basis of consolidation: The consolidated financial statements comprise the accounts of Touchstone Gold, the parent company and its wholly-owned controlled subsidiaries, after the elimination of all material intercompany balances and transactions.

Subsidiaries are all entities (including special purpose entities) over which the Company, either directly or indirectly, has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Where the group does not directly hold more than one half of the voting rights, significant judgment is used to determine whether control exists. These significant judgments include assessing whether the group can control the operating policies through the group's ability to appoint the majority of directors to the board. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group until the date on which control ceases.

The accounts of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company. A list of subsidiaries are noted below.

Financial Instruments: Financial instruments are classified into one of the following five categories: fair value through profit or loss assets or liabilities, held to maturity investments, loans and receivables, available for sale financial assets or other financial liabilities. Fair value through profit or loss financial instruments are measured at fair value and all gains and losses are included in net income in the period in which they arise. Available for sale financial instruments are measured at fair value with revaluation gains and losses included in accumulated other comprehensive income until the instruments are derecognized or impaired. Loans and receivables, investments held to maturity and other financial liabilities are measured at amortized cost using the effective interest method.

The Company's financial instruments consist of cash and cash equivalents accounts receivable, trade accounts payable and accrued liabilities, and income taxes payable. Cash and cash equivalents are classified as fair value through profit or loss, and are measured at fair value at the balance sheet date. Accounts receivable are designated as loans and receivables and accounted for at amortized cost. Trade accounts payable, accrued liabilities and income taxes payable are classified as other financial liabilities and accounted for at amortized cost.

Cash and Cash Equivalents: Cash and cash equivalents include demand deposits held with banks and highly liquid investments with remaining maturities of three months or less at acquisition date. For purposes of reporting cash flows, the Company considers all cash accounts that are not subject to withdrawal restrictions or penalties to be cash and cash equivalents.

Property, Plant and Equipment: Property, plant and equipment are stated at historic cost. The Company provides for depreciation on a declining balance method ranging from 10 to 20 percent.

The cost of assets sold, retired, or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts. Expenditures for maintenance and repairs are charged to expense as incurred.

Exploration costs: Exploration costs are incurred in gathering the information necessary to determine whether a particular property can become a commercially viable operating mine and include costs to determine whether a property adjacent to a property with Proven and Probable Reserves has Proven and Probable Reserves, whether Inferred Resources can be classified as Measured and Indicated Resources, or whether Measured and Indicated Resources can be converted to Proven and Probable Reserves. These costs are expensed as incurred. When it has been determined than an exploration property can be economically developed as a result of establishing Proven and Probable Reserves, costs incurred prospectively to develop the property and place it into commercial production are classified as development costs and capitalized as they are incurred until the asset is ready for its intended use.

Costs to acquire mineral properties as part of an asset acquisition are capitalized and represent the property's fair value at the time it was acquired.

Interest cost is capitalized for qualifying assets during the period in which the asset is being installed and prepared for its intended use. Capitalized interest cost is amortized on the same basis as the related asset. No interest costs were capitalized for the periods ended 31 December 2011 and 2010.

Impairment of non-financial assets: The carrying amount of the Company's property plant and equipment is reviewed at a minimum each reporting period to determine if there is any indication of impairment. If indicators of impairment exists, the fair value less costs to sell of the asset is estimated and compared to the carrying value to determine the extent of the impairment and is recorded in the statement of operations and comprehensive income.

The recoverable amount of assets is the greater of an asset's fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years.

Income Taxes: Deferred taxation is recognised using the liability method, on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. However, the deferred taxation is not recognised for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred taxation is determined using tax rates (and laws) that have been enacted or substantially enacted by reporting date and are expected to apply when the related deferred taxation asset is realised or the deferred taxation liability is settled.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Loss per Share: The Company calculates the dilutive effect on loss per share based on the use of the proceeds that could be obtained upon exercise of options and warrants. It assumes that the proceeds would be used to purchase common shares at the average market price during the period. For loss per share, the dilutive effect has not been presented, as it would prove to be anti-dilutive. Basic loss per common share is calculated using the weighted-average number of common shares dilutive outstanding during the period. Dilutive loss per share includes the impact of dilutive instruments.

Share-based Payments: The fair value of share options under the employee share incentive schemes and other equity instruments granted to Company's employees is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and expensed over the period during which the employee becomes unconditionally entitled to the equity instruments. The total amount to be expensed is determined by reference to the fair value of the options granted, excluding the impact of any non-market service and performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest.

The fair value of the instruments granted is measured using generally accepted valuation techniques, taking into account the terms and conditions upon which the instruments are granted. At each reporting date, the entity revises its estimates of the number of options that are expected to vest based on the non-marketing vesting conditions. It recognises the impact of the revision to original estimates, if any, in the statement of operations and comprehensive income, with a corresponding adjustment to equity. The proceeds received, net of any directly attributable transaction costs, are credited to share capital when the options are exercised.

Recent accounting pronouncements

Financial instruments

The IASB has issued IFRS 9 ''Financial Instruments'' which proposes to replace IAS 39. The replacement standard has the following significant components: establishes two primary measurement categories for financial assets - amortized cost and fair value; establishes criteria for classification of financial assets within the measurement category based on business model and cash flow characteristics; and eliminates existing held to maturity, available for sale and loans and receivable categories.

This standard is effective for the Company's annual year end beginning 1 January 2013. The Company will evaluate the impact of the change to its consolidated financial statements based on the characteristics of its financial instruments at the time of adoption.

IFRS 7 ''Financial instruments - Disclosures'' (''IFRS 7'') was amended by the IASB in October 2010 and provides guidance on identifying transfers of financial assets and continuing involvement in transferred assets for disclosure purposes. The amendments introduce new disclosure requirements for transfers of financial assets including disclosures for financial assets that are not derecognized in their entirety, and for financial assets that are derecognized in their entirety but for which continuing involvement is retained.

The amendments to IFRS 7 are effective for annual periods beginning on or after 1 July 2011. The Company has not yet determined the impact of the amendments to IFRS 7 on its financial statements.

Consolidation

The IASB issued the following suite of consolidation and related standards, all of which are effective for annual periods beginning on or after 1 January 2013. The Company has not yet determined the impact of these standards on its financial statements.

IFRS 10 ''Consolidated Financial Statements'' (''IFRS 10''), which replaces parts of IAS 27, ''Consolidated and Separate Financial Statements'' (''IAS 27'') and all of SIC-12 ''Consolidation - Special Purpose Entities'', changes the definition of control which is the determining factor in whether an entity should be consolidated. Under IFRS 10, an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

IAS 27 ''Separate Financial Statements (2011)'' (''IAS 27 (2011)'') was reissued and now only contains accounting and disclosure requirements for when an entity prepares separate financial statements, as the consolidation guidance is now included in IFRS 10.

IFRS 11 ''Joint Arrangements'' (''IFRS 11''), which replaces IAS 31 ''Interests in Joint Ventures'' and SIC-13 ''Jointly Controlled Entities - Non-monetary Contributions by Venturers'', requires a venturer to classify its interest in a joint arrangement as either a joint operation or a joint venture. For a joint operation, the joint operator will recognize its assets, liabilities, revenue and expenses, and/or its relative share thereof. For a joint venture, the joint venturer will account for its interest in the venture's net assets using the equity method of accounting. The choice to proportionally consolidate joint ventures is prohibited.

IAS 28 ''Investments in Associates and Joint Ventures (2011)'' (''IAS 28'') was amended as a consequence of the issuance of IFRS 11. In addition to prescribing the accounting for investments in associates, it now includes joint ventures that are to be accounted for by the equity method. The application of the equity method has not changed as a result of this amendment.

IFRS 12 ''Disclosure of Interests in Other Entities'' (''IFRS 12'') is a comprehensive standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates, and structured entities. This standard carries forward the disclosures that existed under IAS 27, IAS 28 and IAS 31, and also introduces additional disclosure requirements that address the nature of, and risks associated with an entity's interests in other entities.

Fair value measurement

The IASB also has issued IFRS 13 "Fair Value Measurement" ("IFRS 13"), which is effective for annual periods beginning on or after 1 January 2013. IFRS 13 provides guidance on how fair value should be applied where its use is already required or permitted by other IFRS standards, and includes a definition of fair value and is a single source of guidance on fair value measurement and disclosure requirements for use across all IFRS standards. The Company has not yet determined the impact on its financial statements.

NOTE 3 - CASH AND CASH EQUIVALENTS

As at 31 December the Company had the following cash and cash equivalents:

NOTE 4 -PROPERTY, PLANT AND EQUIPMENT, NET

NOTE 5 - RELATED PARTY TRANSACTIONS

Compensation of Directors and management

During the year ended 31 December 2011 and 2010 the Company paid $182,159 and $11,875, respectively, in salaries and consulting costs to the Chief Executive Officer and Chief Financial Officer of the Company.

During the year ended December 31, 2011, and 2010, the Company incurred $1,418,468, and $nil, respectively in geologic consulting costs to a Company owned by and controlled by an officer of the Company. These transactions were in the normal course of operations and all transactions are measured at the exchange amount, which is the amount agreed to by the related parties and is recorded in professional and consulting fees.

For the year ended 31 December 2010, the Company paid $139,402 in consulting fees to the former Chief Executive Officer of the Company.

During the year ended 31 December 2011, the Company paid $59,898 in fees to a Director of the Company, $nil was paid for the year ended 31 December 2010.

A total of $588,057 in share-based payment expense was recognized in respect of options granted to Officers and Directors of the Company for the year ended 31 December 2011, $nil was recognized for the year ended 31 December 2010.

Related party loans and advances

During the years ended 31 December 2011 and 2010, the Company was advanced $nil and $1,250,565, respectively, from entities indirectly controlled by Directors of the Company. The purpose of these advances was to fund operating expenditures, which were entered into during the normal course of business. In October 2010, loans in the amount of $2,079,749 were forgiven.

Commitments

In 2009, the Company entered into a contract with an employee of the Company for the purchase of a mining interest payable over a five year period as of the date of the registration of the mining interest on behalf of the Company. The total payable under the contract is $587,500.

Under the contract, the Company reserves the right to continue the agreement based on the results obtained from exploration, economical assessment and construction. At any time while the contract is in force the agreement may be terminated by the Company with no further payments required.

NOTE 6 - SHARE CAPITAL AND CAPITAL MANAGEMENT, STOCK OPTIONS AND SHARE-BASED PAYMENTS

Share capital

The Company is authorized to issue an unlimited number of shares with no par value.

On 7 June 2011, the Company completed a Placing of new Ordinary Shares at a price of 27 pence per Ordinary Share, raising a total of approximately £10,000,000. Additionally, 586,106 broker warrants were issued as part of the Placing, as compensation. The warrants have an exercise price of 27 pence and are exercisable until 7 June 2014.

In June 2011, the shareholders of the Company passed a written resolution to approving the following: 

·; a consolidation of all of the issued and outstanding Ordinary shares of the Company on the basis of one post consolidation share for each 40 pre-consolidation shares. The result of the resolution was that the issued and outstanding shares was reduced from 124,919 to 3,123;

·; immediately following the consolidation, reclassification of the 3,123 ordinary shares into 2,630 A shares and 493 B shares;

·; immediately following the share consolidation and reclassification, the issue of 13,307 bonus A shares for each existing A share held and 64,218 bonus B shares for each existing B share, the result of which was that the aggregate number of shares issued and outstanding was then 66,666,667;

·; immediately following the bonus issue, the reclassification of both the A shares and B shares into 66,666,667 Ordinary Shares; and

·; the cancellation of the warrants issued in October 2010.

As a result of the resolution described above, the share reserve premium made of $2,109,324 on the shares issued in October 2011 and $890,677 allocated to the warrants issued in October 2011 was reclassified to share capital.

In October 2010, the Company issued 19,724 warrants which had a term of one year, exercisable into one common share of the Company at an exercise price of $190.13. In valuing the warrants the Company used an interest rate of 0.21%, a volatility of 95% and a dividend yield of nil. As noted above, these warrants were cancelled in June 2011.

The following tables denote the movement in share capital and warrants to 31 December 2011.

In determining the fair value of the warrants issued in June 2011, the Company used a share price of 27 pence, a risk free interest rate of 0.5%, an expected life of three years and a volatility of 101%.

Stock options

During 2010, the Company issued 12,081 stock options which expire on 31 December 2012. Following the reorganization described above, the stock options were amended so that 6,446,667 options were in issue. The stock options are fully vested and have an exercise price of 27 pence and expire in June 2014.

On 6 June 2011, as a result of the adoption of an Option plan, the Company issued 3,666,666 options, of which 1,666,667 options have an exercise price equal to the Placing Price, and 1,999,999 options have an exercise price equal to the weighted average price of the Ordinary shares in the first five days immediately following Admission. The options expire on 6 June 2021 and vest over a period of 3 years.

In July 2011, the Company issued 3,175,000 options to Officers and employees of the Company. The options have an exercise price of 27 pence and expire on 6 June 2021 and vest over a period of 3 years.

During the year ended 31 December 2011, a total of 525,000 options with an exercise price of £0.27 and expiring in June 2021 were forfeited.

As at 31 December 2011, the following options were outstanding.

Of the options outstanding 6,447,378 are exercisable.

During the years ended 31 December 2011 and 2010, the Company recognized share-based payment expense of $2,493,474 and $nil, respectively based on a weighted average fair value of the options of 20 pence. In determining the fair value of the options the Company used a Black-Scholes valuation with weighted average risk free interest rate of 0.5%, a weighted average expected life of 5.51 years, an average share price of 27 pence and a volatility of 101%. In determining the volatility, the Company used the historic volatility of comparable companies. The options issued have a fair value of £0.20.

Capital management

The Company includes equity, comprised of issued Ordinary Shares, options and warrants and deficit, in the definition of capital. The Company's primary objectives when managing capital are to safeguard the Company's ability to fund the exploration and development of its gold properties in Colombia.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size and stage of the Company is reasonable. The Company is not subject other externally imposed capital requirements.

NOTE 7 - FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS

The Company has exposure to liquidity risk and foreign currency risk. The Company's risk management objective is to protect cash flow and, ultimately, shareholder value. Risk management strategies, as discussed below, are designed and implemented to ensure the Company's risks and the related exposure are consistent with the business objectives and risk tolerance.

Liquidity Risk: Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The Company manages its liquidity by ensuring that there is sufficient capital to meet short and long-term business requirements, after taking into account cash flows from operations and the Company's holdings of cash, cash equivalents, and short-term investments. The Company also strives to maintain sufficient financial liquidity at all times in order to participate in investment opportunities as they arise, as well as to withstand sudden adverse changes in economic circumstances.

Management forecasts cash flows for its current and subsequent fiscal years to predict future financing requirements. Future requirements may be met through a combination of credit and access to capital markets. At 31 December 2011, the Company had $9,704,345 (31 December 2010 - $1,997,085) in cash and cash equivalents

The following are the maturities, excluding interest payments, reflecting undiscounted future cash disbursements of the Company's financial liabilities based on years ending 31 December:

Currency risk: The Company's expenditures are incurred Colombian peso, British pounds, U.S. dollars and Canadian dollars. The results of the Company's operations are subject to currency transaction risk. As the Company's reporting currency is the U.S. dollar, fluctuations in the Colombian peso, British pound and Canadian dollar relative to the U.S. dollar will affect the results of the Company. A 10% change in foreign exchange rates would have an impact of approximately $300,000.

Credit risk: Credit risk is the risk of loss associated with a counterparty's inability to fulfill its payment obligations. As at December 31, 2011, the Company's credit risk is primarily attributable to cash. At 31 December 2011, cash was held with a reputable bank with a Standard and Poor's investment rating of AA-.

Interest rate risk: Interest rate risk is the risk borne by an interest-bearing asset or liability as a result of fluctuations in interest rates. Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company's most significant interest rate risk arises from its investments in cash equivalents. However, the maturity on these investments is less than ninety days, thereby mitigating the exposure to the impact of changing interest rates.

As at 31 December 2011, the Company had $8,166,184 invested in Banker's Acceptances, with a weighted average annual interest rate of approximately 0.30%. The effect of a 1% increase in interest rates would result in an increase forecasted in interest income of $27,008.

Fair Values: The Company's cash and cash equivalents, receivables and payables all had fair values which approximate their carrying values and are considered Level 2 in the fair value hierarchy.

NOTE 8 -Income taxes

During the year ended 31 December 2011, Touchstone Gold Limited became a Canadian resident for tax purposes. For the year ended 31 December 2010, the Company was resident in a non-taxable jurisdiction.

No income tax expense was recognized for the year ended 31 December 2011 and $404 in income tax was recorded for the year ended 31 December 2010.

A reconciliation of the differences between the statutory Canadian income tax rate and the Company's effective tax rate is as follows:

The following table summarizes the components of deferred income tax:

The Company has $1,790,000 in non capital losses available in Canada to apply against future taxable income. The losses expire in 2031.

NOTE 9 -LOSS PER SHARE

The following table details the weighted average number of outstanding common shares for the purposes of computing basic and diluted loss per common share for the three and nine months ended 30 September 2011, and 2010.

As noted previously, as a result of the share re-organisation, the Company has re-stated basic and diluted shares outstanding.

As a result of the losses for the years ended 31 December 2011 and 2010, there is no dilutive effect of options and warrants.

NOTE 10 - SEGMENT INFORMATION

The Company primarily operates in one reportable operating segment, being the development of mineral properties in Colombia. The Company also has an administrative office in Toronto, Canada. In order to determine reportable operating segments, the chief operating decision maker reviews various factors including geographical location, quantitative thresholds and managerial structure. Segmented information on a geographic basis is as follows:

NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES

In 2009, the Company entered into a contract with an employee of the Company for the purchase of a mining interest payable over a five year period as of the date of the registration of the mining interest on behalf of the Company. The total payable under the contract is $587,500.

In 2009, the Company entered into a contract for the purchase of a mining interest payable over a five year period as of the date of the registration of the mining interest on behalf of the Company. The total payable under the contract is $2,000,000.

Under the contract, the Company reserves the right to continue the agreement based on the results obtained from exploration, economical assessment and construction. At any time while the contract is in force the agreement may be terminated by the Company with no further payments required.

NOTE 12 - SUBSEQUENT EVENTS

On 5 March 2012, the Company entered into an option agreement with a private company to acquire a 90% interest in four mining concessions, over a total area of 57 square kilometres, that together comprise the important Santa Rosa Project located in the well-known gold mining district in the south of the Bolivar Department, Colombia.

The material terms of the Agreement are summarised below:

• Initial payment of US$59,000 to the current concession holders, a non-related private company, upon signing the option agreement;

• An additional payment of US$50,000 upon the mining concessions being registered to Touchstone Colombia on the National Mining Registry of Colombia;

• Four annual payments of US$327,750 that will commence one year after the mining concessions have been registered;

• US$1,000,000 in exploration expenditures on the property before earning the 90% interest;

• The Company has secured a right of first refusal to acquire the remaining 10% of the Santa Rosa Project.