Half Yearly Report

Kolar Gold Limited

Nick Spencer / Chris Clowes

+61414874491 / +61417197288

N+1 Singer (Nomad and Joint Broker)

James Maxwell / Jenny Wyllie

+44 20 7496 3000

Ocean Equities Limited (Joint Broker)

Will Slack

+44 20 7786 4370

Tavistock Communications

Ed Portman / Jessica Fontaine

+44 20 7920 3150

During the last six months the Company has been carrying out detailed exploration in the granted South Kolar PL area. This program has entailed detailed structural mapping, trenching, topography and DGPS surveying, multi element bedrock geochemical sampling, IP geophysical survey, ground magnetics and channel sampling.

Evidence of quartz veining, intense hydrothermal alteration, shearing and development of mylonitic fabric indicate that gold mineralisation is persistent over long strike lengths in the South Kolar PL. A number of old workings and Geological Survey of India data also indicate a number of mineralised prospects that require further detailed exploration and potentially follow up shallow drilling

The exploration program in South Kolar PL was predominantly confined to the non-forest areas, whilst approval is still awaited for second phase drilling in forested areas (Mallappakonda and Chigargunta) to the south. As part of the program in the lease area over 1,320m of trenching and 15 km2 of topographic surveys and detailed geological mapping have been completed

Previous IP geophysical surveys comprising over 40 line km indicated well defined, cohesive IP anomalies that warranted further investigation. As a follow up to this finding, a multi-element geochemical survey was undertaken in Chigargunta, Chinnapartikunta and the Sanganapalli-C.Gollapalli Blocks. The objective was to establish possible primary dispersion haloes in the studied area and also to define drill targets in the non forest area.

Samples were collected at an interval of 40m along the previously surveyed IP lines. Soil cover was removed to reach the C-horizon / bedrock and 2.5 to 3.5 kg of weathered rock collected from each location. All the samples were analysed for Au, Ag, As, Cr, Cu, Fe, Mo, Ni, Pb, W, Zn. The total coverage of the survey was 5.5 km and each profile was spaced at 400 m interval. This was followed by infill sampling at 200 m spacing along four lines.

Analytical data was treated statistically to arrive at background, threshold and anomaly levelsBased on this analysis the data was processed to generate contour plots and anomaly patterns. The maps generated highlighted three broad based discontinuous Au anomalies. Similar contour plots were also generated for Cu, Fe, Zn, Pb, Ni, Cr, As. Combined study of all these plots indicated co-incident weak Cu, Cr, Zn anomalies with Au.

There are several promising prospects in the non forest area such as Peddapartikunta, Sanganapalli and Kudithanapalli. As a result of the current exploration program new zones have been identified through an integrated study of IP and geochemistry results. Identified were four discontinuous anomalies worth further exploration. These zones were designated as Zones I to IV.

1. Zone I has been inferred for a length of 5.5 kms of which 1.6 kms towards south falls outside the PL area.

2. Zone II located 250 m west of Zone I has been traced for a length of 2.3 km with a possibility of extending to strike length of 5.1 km.

3. Zone III defined based on IP and Geochemical anomalies is traced for 4.6 km strike length. This is located 500 m west of Zone II.

4. Zone IV is the western most with an inferred length of 4.5 km.

The geochemical sampling, trenching and geological mapping carried out has clearly indicated that Zone II is the most prospective and drill targets have been identified. The remaining three zones are also considered promising, but are still in the process of being tested to the same extent as Zone II. They are currently undergoing detailed mapping, trenching and further geochemical bedrock sampling to confirm.

Within the forestry area the company has applied to the forestry department for a 160 drill hole programme which includes a number of high priority targets including NE Chigargunta, the Eastern Lodes and Mallappakonda. This forestry approval will allow us to drill selected holes as needed and will be utilised to further define extensions and resource definition of existing deposits and mineralised areas for both the Chigargunta and Mallappakonda projects.

The company also has plans to re-open the adits at the Mallappakonda mine to further define the existing JORC compliant gold resource for Mallappakonda, announced last year, of 3.46 million tonnes at an average grade of 1.76 g/t gold containing 195,000 oz of gold. Applications have been submitted with the Director of Mines Safety for the re-opening the adits.

Kolar Gold Projects

The granting of licenses is critical to the Company's success and the Company is working closely with GMSI and its Indian partners in pursuing the key gold licenses identified by the Board. The Company is ready to apply its cash reserves to the implementation of a drilling program, working alongside its Indian partners, as and when these licenses are granted.

BGML acquisition

The Government of India and the BGML ex-employee society have agreed in the Supreme Court to the sale tender route for the revival of the historic BGML mine. The long awaited and very significant milestone towards the revival of the mine namely the court order for the tender process to begin is expected to occur shortly.

Key financials

The Company had £6.5m in cash deposits at period end. The bulk of these funds will be applied the acquisition of mining tenements in India and conducting exploration activities on those tenements.

The loss after tax for the period was £1,223,997, compared to £1,205,337 for the six months to 31 December 2011 and £2,329,598 for the year to June 2012.

Going concern

The Company has implemented a number of strategic changes to reduce its overheads and to maximise the amount of funds available for the acquisition of tenement rights and exploration activities.

The Group has used £1,402,051 (2011: £1,582,057) in operating activities during the six months to December, including the aforementioned due diligence costs. As anticipated at the time of the IPO in June 2011, the Company will need to raise finance if and when all options are exercised over the tenements and exploration is to take place as planned. These matters are described in detail in Note 4 to the financial statements. If such finance is not obtained, the Group will still have sufficient funds to exercise its options over the tenements but will need to slow down or defer its exploration activities in order to have sufficient cash to see it through beyond the next 12 months. However, the Company remains sufficiently well funded for its budgeted 2013 activities at this stage.

_____________________

The Board

Condensed consolidated statement of financial position (unaudited)

as at 31 December 2011

Note

31 December

2012

£

(unaudited)

31 December 2011

£

(unaudited)

30 June

2012

£

(audited)

Non-current assets

Plant and equipment

22,556

26,215

25,238

Exploration and evaluation assets

7

5,807,365

4,961,887

5,496,153

Total non-current assets

5,829,921

4,988,102

5,521,391

Current assets

Prepayments and other current assets

58,628

68,111

54,824

Trade and other receivables

260,422

74,059

50,687

Cash and cash equivalents

6,452,196

9,645,300

8,131,892

Total current assets

6,771,246

9,787,470

8,237,403

Total assets

12,601,167

14,775,572

13,758,794

Current liabilities

Trade and other payables

369,534

495,903

423,513

Employee benefits

175,972

100,856

178,956

Total current liabilities

545,506

596,759

602,469

Non-current liabilities

Employee benefits

3,850

55,656

2,992

Total non-current liabilities

3,850

55,656

2,992

Total liabilities

549,356

652,415

605,461

Net assets

12,051,811

14,123,157

13,153,333

Equity

Share capital

8

7,236,388

7,010,625

7,010,625

Share premium reserve

8

15,803,741

15,700,535

15,700,535

Reserves

3,889,304

3,941,361

4,095,798

Accumulated losses

(14,877,622)

(12,529,364)

(13,653,625)

Total equity

12,051,811

14,123,157

13,153,333

These financial statements were approved by the Board of Directors on 22 March 2013 and were signed on its behalf by:

________________________

Stephen Coe

Director

Condensed consolidated statement of comprehensive income (unaudited)

for the six months ended 31 December

Six months ended

31 December

2012

(unaudited)£

Six months ended

31 December

2011(unaudited)

£

Year ended

30 June 2012

(audited)

£

SUN Mining warrants issued for services

(52,287)

(610,930)

(571,391)

Options issued to directors

(20,421)

-

-

Administrative expenses

(682,695)

(797,718)

(1,905,009)

Due diligence - prospective gold assets

(526,626)

-

-

Unrealised foreign exchange gains

-

133,116

-

Loss from operating activities

(1,282,029)

(1,275,532)

(2,476,400)

Finance income

58,520

75,201

147,889

Finance costs

(488)

(782)

(1,087)

Net finance costs

58,032

74,419

146,802

Loss before tax

(1,223,997)

(1,201,113)

(2,329,598)

Income tax expense

-

(4,224)

-

Loss for the period

(1,223,997)

(1,205,337)

(2,329,598)

Other comprehensive income

Foreign exchange translation losses

(5,775)

(246,764)

(52,788)

Total comprehensive income for the period

(1,229,772)

(1,452,101)

(2,382,386)

Basic and diluted loss per share (p)

1.2

1.2

2.33

Condensed consolidated statement of changes in equity

for the six months ended 31 December

Share capital

Share premium reserve

Options

reserves

Foreign currency translation reserve

Accumulated losses

Total equity

(Unaudited)

£

£

£

£

£

£

Balance at 1 July 2012

7,010,625

15,700,535

4,081,682

14,116

(13,653,625)

13,153,333

Total comprehensive income for the period

Loss for the period

-

-

-

-

(1,223,997)

(1,223,997)

Other comprehensive income - foreign exchange translation variances

-

-

-

(5,775)

-

(5,775)

Total comprehensive income for the period:

-

-

-

(5,775)

(1,223,997)

(1,229,772)

Contributions by and distributions to owners:

Issue of ordinary shares

204,159

69,268

(273,427)

-

-

-

Equity-settled transactions for the period

21,604

33,938

72,708

-

-

128,250

Total contributions by and distributions to owners:

225,763

103,206

(200,719)

-

-

128,250

Balance at 31 December 2012

7,236,388

15,803,741

3,880,963

8,341

(14,877,622)

12,051,811

(Audited)

Balance at 1 July 2011

7,001,696

15,663,226

3,510,291

66,904

(11,324,027)

14,918,090

Total comprehensive income for the period

Loss for the period

-

-

-

-

(2,329,598)

(2,329,598)

Other comprehensive income - foreign exchange translation variances

-

-

-

(52,788)

-

(52,788)

Total comprehensive income for the period:

-

-

-

(52,788)

(2,329,598)

(2,382,386)

Contributions by and distributions to owners:

Issue of ordinary shares

8,929

37,309

-

-

-

46,238

Equity-settled transactions for the period

-

-

571,391

-

-

571,391

Total contributions by and distributions to owners:

8,929

37,309

571,391

-

-

617,629

Balance at 30 June 2012

7,010,625

15,700,535

4,081,682

14,116

(13,653,625)

13,153,333

Condensed consolidated Statement of Cash Flows

for the six months ended 31 December

Six months ended

31 December

2012

(unaudited)

Six months ended

31 December

2011(unaudited)

Year ended

30 June 2012

(audited)

£

£

£

Cash flows from operating activities

Loss for the period

(1,223,997)

(1,205,337)

(2,329,598)

Adjustments for:

Depreciation

3,332

2,898

6,720

Net finance costs/(income)

(58,032)

(74,419)

(144,045)

Unrealised foreign exchange (gains)/losses

(1,483)

(185,303)

(16,930)

Equity-settled share-based payment transactions

80,000

610,930

571,391

Operating loss before changes in working capital and provisions

(1,200,180)

(851,231)

(1,912,462)

Change in trade and other receivables

(206,719)

(14,417)

25,049

Change in other current assets

(7,942)

(30,360)

(12,936)

Change in trade and other payables

14,916

(685,688)

(712,646)

Change in employee benefits

(2,126)

(361)

25,075

Cash used in operating activities

(1,402,051)

(1,582,057)

(2,587,920)

Interest and finance costs paid

(488)

(782)

(1,087)

Net cash used in operating activities

(1,402,539)

(1,582,839)

(2,589,007)

Cash flows from investing activities

Interest received

59,641

75,201

124,900

Payments for exploration and evaluation assets

(331,857)

(420,857)

(948,912)

Payments for plant and equipment

(650)

(7,732)

(11,292)

Net cash used in investing activities

(272,866)

(353,388)

(835,304)

Cash flows from financing activities

Proceeds from issues of equity securities

-

46,238

46,238

Net cash from financing activities

-

46,238

46,238

Net increase/(decrease) in cash and cash equivalents

(1,675,405)

(1,889,989)

(3,378,073)

Foreign exchange gain/(loss) on closing cash balances

(4,291)

(9,341)

(34,665)

Cash and cash equivalents at 1 July

8,131,892

11,544,630

11,544,630

Cash and cash equivalents at 31 December

6,452,196

9,645,300

8,131,892

Kolar Gold Limited

Notes to the condensed consolidated interim financial statements

for the six months ended 31 December 2012

1

Reporting entity

Kolar Gold Limited (the 'Company') is a company incorporated and registered in Guernsey and its shares are traded on AIM in London. The condensed consolidated interim financial statements of the Company as at and for the six months ended 31 December 2012 comprises the Company and its subsidiaries (together referred to as the "Group"). The Group primarily is involved in and also acquiring, exploring and developing the rights to mining assets in the Kolar Belt and the potential acquisition of the mining assets of Bharat Gold Mines Limited ("BGML") from the Government of India.

The consolidated annual financial report of the Group as at and for the year ended 30 June 2012 is available upon request from the Company's registered office at Frances House, Sir William Place, St. Peter Port, Guernsey GY1 4HQ.

2

Statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 30 June 2012.

These condensed interim consolidated financial statements were approved by the Board of Directors on 22 March 2013.

3

Significant accounting policies

The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 30 June 2012.

4

Going concern

These condensed consolidated interim financial statements have been prepared on the basis of accounting principles applicable to Kolar Gold being a "going concern" which assumes the Group will continue in operation for at least 12 months from the date of these interim financial statements and will be able to realise its assets and discharge its liabilities in the normal course of operations.

As an explorer, the Group currently has no source of operating cash inflows, other than interest income, and has incurred net operating cash outflows for the six months ended 31 December 2012 of £1,402,051 (2011: £1,582,057). During this period, the Company received no net financing inflows (2011: £46,238) and applied £331,857 (2011: £420,857) to mineral exploration activities at the South Kolar PL area. At 31 December 2012 the Group had cash balances of £6,452,196 (30 June 2012: £8,131,892) and a surplus in net working capital (current assets less current liabilities) of £6,225,740 (June 2012: £7,634,934 ).

The Directors have prepared forecasts which include cash outflows in respect of the Group's agreement with GMSI to exercise the options on further mineral exploration rights adjacent to BGML and subsequent exploration activities. These outlays will only proceed if and when the mineral exploration rights have been approved by the Government of India. In the event that the Government of India grants the two main licenses that are now in their final stage of approval, the Group is committed, but not obligated, to exercising its options over these key tenements for consideration of approximately £3.8m and has budgeted for additional exploration expenditure of approximately £1.0m to April 2014. The bulk of the Group's current cash reserves will be applied to these purposes.

In the event that the Company is successful in obtaining further licenses or rights then it is likely that it will be necessary to obtain additional finance in order to explore and exploit them.

The directors consider that the Group has adequate resources to continue its operations for at least 12 months from the date of these interim financial statements. Notwithstanding the above, there can be no certainty in this matter and the financial statements do not include any adjustments that would be necessary should the going concern basis not be appropriate.

5

Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 30 June 2012.

6

Capital commitments

In 2010 the Group entered into a contract to acquire the rights to gold assets in the North Kolar, South Kolar and East Kolar permit areas of India. The mining assets comprise mineral exploration rights in these permit areas. The Group is committed, but not obligated, to acquire the rights when, and only when, they have been approved by the Government of India.

As at balance date the total commitments to acquire these rights totalled £4,716,981 (June 2012: £4,716,981).

7

Exploration and evaluation assets

Six months ended

31 December 2012(unaudited)

Year ended

30 June 2012(audited)

£

£

Balance at beginning of period

5,496,153

4,496,933

Exploration expenditure

311,212

999,220

Balance at end of period

5,807,365

5,496,153

Tenement rights will be accounted for in accordance with the Group's accounting policy for exploration and evaluation expenditure and the recoverability of the carrying amounts of exploration and evaluation assets is dependent on the succcessful development and commercial exploitation or sale of the respective area of interest.

8

Share capital and share premium

Issuance of ordinary shares

Ordinary shares (7p each)

Six months ended

31 December 2012

(unaudited)'000

Year ended 30 June 2012

(audited)'000

Opening balance

100,152

100,024

Issued upon the exercise of warrants

2,917

-

Issued as settlement of debt

309

128

Closing balance

103,378

100,152

(i) On 31 December 2012 Kolar Gold Limited issued 75,000 shares with a par value of 7p per share, at 40p per share, to a former director of Kolar Gold Limited, for settlement of debt.

(ii) On 31 December 2012 Kolar Gold Limited issued 192,662 shares with a par value of 7p per share, at 9.84p per share, to a director as part payment of directors' fees. The share issue price is the volume weighted average price for the period covered.

(iii) On 31 December 2012 Kolar Gold Limited issued 40,961 shares with a par value of 7p per share, at 16.071p per share, to a consultant as part payment of consultant's fees. The share issue price is the volume weighted average price for the period covered.

(iv) On 31 December 2012 Kolar Gold Limited issued 2,916,559 shares with a par value of 7p per share, at nil cost, to SUN Mining, upon the exercise of 2,916,559 warrants issued to SUN Mining in February 2011.

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.

Dividends

No dividends were declared nor paid during the six months ended 31 December 2012 (2011: nil).

9

Share-based payments

a) Options

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 31 December 2012, in line with their letters of appointment, 400,000 options were issued to non-executive directors with an exercise price of 8.38p and a term of 5 years.

The following unexpired options existed as at 31 December 2012.

Name

Date of Grant

Ordinary Shares under option

Expiry Date

Exercise Price £

Nicholas Taylor Spencer

01.12.10

500,000

01.12.13

0.30

Richard Johnson

01.12.10

500,000

01.12.13

0.30

Non-Directors

5.5.10

150,000

05.05.13

0.30

Non-Directors

1.12.10

350,000

01.12.13

0.30

Norman Coldham-Fussell

17.6.11

675,000

17.06.14

0.40

Nicholas Taylor Spencer

17.6.11

1,350,000

17.06.14

0.40

Richard Johnson

17.6.11

675,000

17.06.14

0.40

Harvinder Hungin *

10.6.11

450,000

10.06.16

0.40

Stephen Coe

10.6.11

350,000

10.06.16

0.40

Stephen Oke

10.6.11

350,000

10.06.16

0.40

Harvinder Hungin

31.12.12

150,000

31.12.17

0.0838

Stephen Coe

31.12.12

125,000

31.12.17

0.0838

Stephen Oke

31.12.12

125,000

31.12.17

0.0838

5,750,000

Each option entitles the holder to subscribe for one ordinary share in the Company. Options do not confer any voting rights on the holder.

b) Warrants

No warrants were issued during the period.

On 31 December 2012 SUN Mining exercised the initial warrants Series 1 (nil exercise price).

4,664,000 Investor warrants expired during the period.

The following unexercised warrants existed as at 31 December 2012:

Name

Date of Grant

Ordinary Shares under option

Expiry Date

Exercise Price

£

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

SUN Mining initial warrants Series 2

24.2.11

2,916,559

24.2.13

Nil

SUN Mining initial additional warrants

24.2.11

3,499,871

24.2.13

VWAP

9,216,430

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.

10

Operating segments

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

11

Subsequent events

There have been no significant events subsequent to the balance sheet date to report that would alter the financial statements as at 31 December 2012 or require disclosure.