14 September 2017

SolGold plc

("SolGold" or the "Company")

Audited Financial Statements

The Board of SolGold (AIM and TSX code: SOLG) is pleased to advise all shareholders and interested investors of the publication of the Company's audited financial statements for the financial year ended 30 June 2017, which are attached hereto.

A PDF version containing accompanying photos and figures is available on the Company's website www.solgold.com.au under Financial Reports in the Investor Centre, or by clicking the link below:

http://www.rns-pdf.londonstockexchange.com/rns/7272Q_1-2017-9-14.pdf

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of the Regulation (EU) No 596/2014 until the release of this announcement.

By order of the Board

Karl Schlobohm

Company Secretary

CONTACTS:

Mr Nicholas Mather                                                                                                                         Tel: +61 (0) 7 3303 0665

SolGold Plc (Executive Director)                                                                                                         +61 (0) 417 880 448

nmather@SolGold.com.au

Mr Karl Schlobohm                                                                                                                          Tel: +61 (0) 7 3303 0661

SolGold Plc (Company Secretary)

kschlobohm@SolGold.com.au

Mr Ewan Leggat / Mr Richard Morrison                                                                                 Tel: +44 (0) 20 3470 0470

SP Angel Corporate Finance LLP (NOMAD and Broker)

ewan.leggat@spangel.co.uk 

Follow us on twitter @SolGold_plc

Annual Report

For the year ended 30 June 2017

CORPORATE INFORMATION

DIRECTORS

Brian Moller (Non-Executive Chairman)

Nicholas Mather (Executive Director)

Dr Robert Weinberg (Non-Executive Director)

John Bovard (Non-Executive Director)

Craig Jones (Non-Executive Director)

COMPANY SECRETARY

Karl Schlobohm

REGISTERED OFFICE

201 Bishopsgate,

London EC2M 3AB,

United Kingdom

Registered Number 5449516

AUSTRALIAN OFFICE

Level 27, 111 Eagle St

Brisbane   QLD   4000

Phone: + 61 7 3303 0660

Fax: +61 7 3303 0681

Email: info@solgold.com.au

Web Site: www.solgold.com.au

AUDITOR

BDO LLP

55 Baker Street

London W1U 7EU

United Kingdom

NOMINATED ADVISER

SP Angel Corporate Finance LLP

Prince Frederick House

35-39 Maddox Street

London W1S 2PP

United Kingdom

BROKER

SP Angel Corporate Finance LLP

Prince Frederick House

35-39 Maddox Street

London W1S 2PP

United Kingdom

BANKERS

Macquarie Bank Ltd (Brisbane Branch)

345 Queen Street, Brisbane QLD 4000

Australia

UK SOLICITORS

Locke Lord LLP

201 Bishopsgate,

London EC2M 3AB,

United Kingdom

AUSTRALIAN SOLICITORS

HopgoodGanim

Level 8, Waterfront Place

1 Eagle Street,

Brisbane QLD 4000, Australia

REGISTRARS

Computershare Investor Services plc

The Pavilions, Bridgwater Road

Bristol BS99 7NH

United Kingdom

CHAIRMAN'S STATEMENT        

Dear Shareholder,

On behalf of the Board of Directors of SolGold plc ("SolGold" or the "Company") and its subsidiaries (collectively the "Group"), I take pleasure in presenting the Annual Report for 2017 in what has been a transformative last 12 months for the Company.

In the past year Newcrest International Pty Ltd ("Newcrest"), a subsidiary of ASX-listed Newcrest Mining Limited, agreed to invest USD22.8m to become a 10% shareholder of the Company.  This was a pivotal endorsement of SolGold, its management team, and quality and potential of the Cascabel Project. Newcrest, is the largest dedicated gold producer listed on ASX, and has an outstanding record in exploration and in developing high tonnage open cut and underground block cave mines as well as smaller high grade operations.

Further endorsement of the Company and the Cascabel Project came in the form of an investment and farm-in proposal from BHP Billiton, which was ultimately rejected as not being in the best interests of SolGold shareholders.  These technical and corporate endorsements, and the capital raisings undertaken at premiums to the prevailing market price of the Company's shares in the third quarter of 2016, helped propel the Company's share price and provide it with working capital to continue the advanced exploration of the Cascabel Project.  Newcrest invested a further USD40m into the Company in June 2017 to increase its stake in SolGold to 14.5%.  As a result of their equity investments, Newcrest nominated Craig Jones to join the SolGold Board of Directors in March 2017.  Craig has been a very welcome addition to the Board given his pedigree of operational and block cave mining expertise, and will doubtless add significant value to the preliminary economic assessment to be undertaken in 2018.

Twelve months on, and the Company has drilled a total of 44,500 metres of drilling at and around the greater Alpala Prospect within the Cascabel Project concession area.  Many other potential porphyry targets within Cascabel remain to be drill tested, and by January 2018, the Company is aiming to have ten (10) drill rigs working on site.  All drilling efforts are currently focused on the production of data to facilitate an independent assessment of the Company's maiden resource estimate for the Alpala Prospect, which is expected to be completed by the end of 2017.

As part of SolGold's strategy to become a globally important copper company by expanding its copper-gold exploration portfolio in Ecuador, a comprehensive, nation-wide desktop study was undertaken by SolGold's independent experts to analyse the available regional topographic, geological, geochemical and gravity data over the prospective magmatic belts of Ecuador, with the aim of understanding the controls to copper-gold mineralisation on a regional scale.  The Company bid for a range of tenements on the basis of this study and, as a result of these initiatives, SolGold subsidiaries now hold a total of 59 granted tenements, for a combined ground position of 2,496 km², in addition to the Company's world class Cascabel Project. 

From a corporate perspective, the Company was admitted to the Toronto Stock Exchange (TSX) in July of 2017, and continues to work towards listing on the main board of the London Stock Exchange for greater access to institutional investors worldwide.  The LSE main board listing is expected to occur in early October 2017, subject to the receipt of the necessary approvals from the UK Listing Authority and the London Stock Exchange. 

I would also like to mention the efforts over the past 12 months by all our staff, but with special mention to our senior management team in both Australia and Ecuador, who have worked tirelessly to advance the Cascabel project and also our CEO and MD Nick Mather, who has been instrumental in securing funding, in what at times had been a challenging capital market.

On behalf of the Board, I would like to thank you for your support of the Group and I look forward to bringing you further news as our exploration efforts continue.

Yours faithfully

Brian Moller

Chairman

STRATEGIC REPORT

REVIEW OF OPERATIONS

Corporate Structure

SolGold is a public listed company incorporated in England and Wales and is a Brisbane based Exploration Group that carries a diverse portfolio of exploration projects in Ecuador, Solomon Islands and Australia (Figure 1).  SolGold has been focused on exploring the riches of the Andean Copper Belt in Northern Ecuador since 2012. The Cascabel Project is SolGold's flagship project and to date the Group has announced a number of world class intersections of continuous copper and gold mineralisation at the Alpala Deposit.

SolGold's Board includes accomplished professionals with strong track records in the areas of exploration, mine development, investment, finance and law. Board and Management have significant vested interests in the Company. SolGold is based in Brisbane, Queensland, Australia.  The company is listed on London's Alternative Investment Market (AIM) and the Toronto Stock Exchange under the code 'SOLG'.

Corporate Strategy

The Company's corporate strategy is to:

·      Create substantial wealth for its shareholders by exploring, discovering and defining large inventories of, but not limited to, copper and gold metal.

·      Primarily focus on copper and gold, taking up the growth potential and increasing global demands

·      Target regions with world class deposits.

·      Target grass roots level exploration opportunities to enable low cost entry into projects.

·      Focus on disciplined and systematic approach to exploration.

·      Maximise shareholder funds on "in the ground" exploration expenditure as a proportion of the total budget in order to generate high-quality results.

·      Secure additional exploration projects by the application for new tenements and/or farm-in style agreements.

·      Undertake an on-going review of potentially 'value accretive' opportunities that are presented to the company from time to time.

·      Respect the communities and environment in which we operate.

·      Maintain a strong focus on Health and Safety for our employees and contractors.

SolGold is pursuing the growth potential for copper as global urbanisation irrevocably drives copper demand higher, and has enjoyed achieving substantially growing the market capitalisation of the company over the last year.  The Company is focused on two of the world's most important metals, copper and gold.  SolGold has a dedicated commitment to Corporate Social Responsibility and is passionate about the Group's active health, safety, community and environment programs in its areas of exploration.  The Company is proud but not complacent about its outstanding safety record and ensures that its people are properly trained and work in a planned and controlled manner under procedures that ensure safe operations. 

The Cascabel property is situated within the boundaries of three communities. The main community of Santa Cecilia located in the central part of the concession is very supportive of the Group's presence and exploration activities. Local concerns regarding mining and exploration relate primarily to issues of water use and water management, and the Group has state of the art water recycling facilities in place at the Rocafuerte base and Alpala field camp and at each drill site, including the commissioning of innovative Solids Removal Unit (SRU) sediment removal technology, and development of world first man-portable SRU units for the Cascabel project.  The SRU units are highly beneficial towards good environmental stewardship during drilling programs at Cascabel, and substantially lower water usage by reducing the volume of material transported from drilling and reduces the potential of suspended solids running off into natural fresh waters.  The AMC Minerals SRU unit technology won the Association of Mining and Exploration Companies (AMEC) Convention Award in 2014. 

SolGold cares deeply about community relations at Cascabel and throughout Ecuador. Through sponsoring many community enterprises as well as engaging the community in regular environmental monitoring studies and rehabilitation programs the Company continues to strengthen these relations (Figure 2).

The Company's exploration strategy includes the following elements:

·      Capitalisation of the Company's track record of success in the discovery of mineral resources.

·      Detailed due diligence of project opportunities.

·      A disciplined approach to the evaluation of projects to generate exploration datasets that may include all or some of the following exploration activities: geological mapping, stream, soil and rock chip geochemical sampling, and geophysical surveying.

·      Generation of robust drill targets testing ore deposit models based on multiple exploration datasets.

·      Drill testing targets to define potentially economic mineral resources that the group can take to feasibility study stage.

SolGold has a track record of experience at both management and board level to define and develop mineral resources from discovery through to feasibility and development.  The team remains engaged upon project generation globally, targeting tectonically fertile areas and in countries set to blossom in the next mining up turn, as well as streamlining assets in Australia and the Solomon Islands (Table 1, and Figure 3).

Table 1: SolGold exploration projects worldwide.

Ecuador

In Ecuador, the Group is advancing the Cascabel project, whilst continuing to pursue its strategy to become a globally important copper company by expanding the Company's copper-gold exploration portfolio in Ecuador.

Cascabel Project

The Cascabel Project is a porphyry copper- gold deposit located in the Imbabura province of northwest Ecuador (Figure 4). It lies just off the main road, an easy 3-hour drive north of Ecuador's capital city, Quito.  The climate zone is tropical-savannah and vegetation is tropical forest with a well-developed soil horizon.  Topography rises from elevations of 900 metres to 2,200 metres and the moderate to steep landscape is incised by four large drainage complexes.  A first-order paved highway provides year-round access and crosses the north-east corner of the concession.

SolGold has completed over 44,500m of drilling and this has been accomplished with a workforce of up to 176 Ecuadorean workers and geoscientists, and 6 expatriate Australian geoscientists.

At 30 June 2017, SolGold had cash and cash equivalents of approximately A$89.3 million, which will primarily be used to expand the mineralisation being defined along the greater Alpala trend. Over 25,000m of drilling is expected to be completed in the second half of 2017, and over 106,000 metres of drilling is planned in 2018. To date, SolGold has drill tested 4 of the 15 targets, being Alpala Northwest, Alpala Central, Hematite Hill, and Alpala Southeast.  Currently drill testing of Alpala Northwest, Alpala Central and Alpala Southeast targets is underway, with drill testing of the Aguinaga target and other high priority targets to commence in the coming year.

The benefits of corporate deals with Newcrest Mining ltd and Maxit Capital were realised with exploration fully funded for coming years as drilling continued to expand the growing world class deposit at Alpala. A review of drilling results has clarified world class intersections at updated metal prices, and geology Model analysis is constantly improving drill targeting capabilities. Drilling to date has not yet constrained the rich Alpala copper-gold deposit, and the deposit continues to grow with each drill hole. Alpala alone is emerging as a Tier 1 copper project with high average grades in both copper and gold.

The Company is currently directing drilling capability and operations currently to the collection of drill data to be used in the delivery of a Maiden Inferred Resource Estimate by late December 2017. SolGold is also commencing planning for the collection of necessary data to complete a preliminary economic assessment by the end of 2018.

Ecuador is undergoing a transformation with significant improvements to infrastructure, including five key sea ports, over 10,000km of new highways, and 10 new hydroelectric projects. These infrastructure improvements are sure to afford the project enormous capital advantages as it moves toward feasibility over the coming years.  Completion of a new access road to Alpala Camp via the village of Santa Cecilia in co-operation between the provincial government and the local community is providing vital operational advantages to the project.

Northern Ecuador lies within the under-explored northern section of the richly endowed Andean Copper Belt, which extends from Chile in the south to Colombia in the north and then north-west into Panama.  The tenement lies on the margin of the Eocene and Miocene metallogenic belts which are renowned for hosting some of the world's largest porphyry copper and gold deposits, like the giant La Escondida Copper Mine in Chile, which is the world's largest producer of copper and hosted within the same age host rocks as Cascabel (Figure 5). 

A number of globally significant deposits have been discovered in the region, some of which are becoming mines.  These include the Junin copper project (982 million tonnes at 0.89% Cu), located some 60 km to the south-west of Cascabel, the La Colosa porphyry deposit (905 million tonnes at 0.92 g/t Au) located to the north in Colombia and the massive Cobre Panama deposit (3.3 billion tonne at 0.36% Cu) located to the north in Panama which contains over 26 million ounces of gold.  The Fruta del Norte project in southern Ecuador is among the largest and highest grade undeveloped gold projects in the world (23.5 million tonnes at 9.59 g/t Au) and highlights the pedigree of potential within the country.

The project is located within the Cordillera Occidental (or Western Cordillera) of the Ecuadorian Andes. Basement rocks consist of ocean floor basalts and sediments of Cretaceous age. High-level Eocene (and possibly Late-Miocene) batholiths and associated granite, granodiorite and diorite bodies intrude volcanic and sedimentary rocks of Cretaceous to Tertiary age.  The regional controls that localise gold and copper mineralisation at Cascabel are intimately related with the three-dimensional interaction of deep seated NE-trending 1st order (arc-parallel) structures, with NW-trending 2nd order (arc-normal) faults, and NNW-trending 3rd order structures. 

Within the Cascabel concession, volcanic and sedimentary rocks are intruded by a number of Quartz diorite, diorite and hornblende diorite stocks and dykes.  The SolGold field teams completed 1:500 scale, "Anaconda" style geological mapping over the tenement area and all high priority porphyry target centres have been elevated to drill ready status.

Exploration Highlights

Exploration on the Cascabel concession has included: geological mapping, stream silt sampling, soil sampling, rock chip sampling, channel sampling, a heli-magnetic survey (which has been modelled in 3D), a radiometric survey, a 3D Induced Polarisation (IP) and magneto-telluric (MT) survey, diamond drilling, petrography, mineragraphy, metallurgical scoping work, terra-spec spectral mapping, and orientation and environmental base line sampling. 

Exploration activity to date has identified 15 potential porphyry centres at Cascabel, at Alpala Central, Alpala Northwest, Alpala Southeast, Hematite Hill, Alpala East, Alpala West, Alpala South, Moran, Trivinio, Carmen, Cristal, Aguinaga, Tandayama-America, and Parambas (Figure 6):

Exploration activities during the financial year ended 30 June 2017 included:

-      "Anaconda" style geological mapping in key areas, including exploration reconnaissance mapping and sampling.

-      Re-modelling of constrained heli-magnetic, Orion 3DIP and magneto-telluric (MT) surveys at Alpala and Aguinaga using data collected from magnetic susceptibility of drill core and magnetic susceptibility of rock outcrops at satellite prospects

-      Diamond drilling of holes 18 to 27 at Alpala, for a total of 14,884m.

-      Upgrade and expansion of the Alpala field camp and the Rocafuerte field office and core handling and storage facilities.

-      Petrographic work on drill core, confirming intrusive lithologies, mineralisation styles, paragenesis, and alteration types.

-      Mineragraphy and metallurgical scoping work.

-      Spectral alteration mapping, soil gridding, and follow-up deep auger mapping. Further refining targets identified.

-      Ongoing environmental management with strict adherence to guidelines provided by the Ministry of Environment.

-      Submission of annual technical and environmental management reports.

-      A hybrid "Spartan-Orion" 3D MV IP survey is currently underway

-      Lidar topographic control survey is currently final planning stages.

The results of holes completed and assayed to date have produced some of the greatest drill hole intercepts in porphyry copper-gold exploration history - consisting of over 1km of continuous mineralisation grading over 1% copper equivalent.  Drill hole CSD-15-012 for example, returned one of the best results in the history of mineral exploration, with 1044m grading 1.21% copper equivalent (0.74% Cu, 0.74 g/t Au). The average grade of all metres drilled to date on the project currently stands at 0.31% copper and 0.26 g/t gold.

Previous exploration of the project area, extending from 1980 to 2011, focussed on the source of gold, copper, lead and zinc in stream sediments, which led to the location of gold-bearing polymetallic epithermal quartz veins in streams that flank the Alpala deposit. SolGold Plc. took an interest in the tenement, signed a deal with Cornerstone and assumed management of the project in April 2012. In May 2012, SolGold geologists interpreted alteration vectors leading southwest of Moran Creek where previous workers focused exploration. During the first month of reconnaissance mapping along Alpala Creek ~80 m wide zone of copper- and gold-bearing, sheeted, porphyry-style quartz veins was discovered (Figure 7).  Exploration has shown that this small stream outcrop forms the upper portion of a cluster of porphyry targets that extends over 2.2 km northwest by 1.1 km northeast, termed the greater Alpala porphyry cluster.

The Alpala discovery outcrop lies in the approximate centre of a 1.5 km by 2.2 km Mo (>1.4 ppm) anomaly. Alpala, Aguinaga and Tandayama-America are characterized by low Zn and Mn, which when imaged as ratios with Cu and Mo produce robust anomalies (e.g., bullseyes for high Cu/Zn and Mo/Mn) (Figure 8). The Alpala porphyry cluster is characterized by elevated As, Bi, Se and Te in soil. Whereas, Aguinaga and Tandayama-America are low in these elements. Spectral analysis of chips from grid soil samples led to the identification of zoned clay-mica alteration assemblages over 2.5 km by 1.0 km, centred over the discovery outcrop (Figure 9).

This may indicate a higher level of exposure and less erosion for the Alpala cluster than for Aguinaga and Tandayama-America. This interpretation is supported by the occurrence of high-temperature biotite (potassic) alteration in the outcrops at Aguinaga and Tandayama-America and lower-temperature clay-mica (phyllic, intermediate and advanced argillic) alteration at surface in the Alpala cluster.

The completion of 34 diamond core holes over a 2200m by 700m surface area along an 1800m deep vertical column has now defined a northwesterly-trending, steeply northeast-dipping zone of multi-phase porphyry style stock-work veining and associated phases of diorite to quartz diorite stocks and dykes.  This intrusive complex is hosted by a sequence of andesitic volcanoclastic rocks and lavas. The host-rocks are mapped as the Oligocene to Early Miocene San Juan de Lachas Formation, however, age date constraints from studies conducted by SolGold suggest that the lower portion of this sequence was deposited in the Eocene. 

The geometry and nature of the mineralisation at Alpala is now quite well understood.  A total of 17 phases of intrusion are defined on the basis of composition and relative timing-relationships with porphyry-related vein-stages. Pre- mineralisation volcanogenic and "D10" diorite host rocks, are intruded by upward tapering intrusions of early pre-to syn-mineral "QD10" quartz diorite, which are all subsequently intruded by intra-mineral "D15" diorite and "QD15" quartz diorite, cut later by late-mineralisation dikes and breccia bodies.  Each intrusive phase has its own set of quartz veining, and the intimate association between "B"-type quartz vein abundance, with Copper Equivalent grades continues to prove an efficient targeting tool (Figure 10).

Very high grades have been encountered at the cupola of a number of early "QD10" quartz-diorite source intrusions, selected examples of high-grade mineralisation encountered at Alpala to date are shown in Figure 11.

Age dating on zircons in mineralised intrusions returned 38.7 + 0.6 Ma, which lies near the boundary of the Middle-to Late-Eocene. The porphyry-related vein types and paragenesis at Alpala indicate a systematic progression in time and classical porphyry B-type quartz veins contain the majority of the copper and gold in the deposit. Chalcopyrite-rich, C-type sulphide veins containing accessory bornite also contain significant amounts of metal and are associated with elevated gold grades. The B- and C-type veins are spatially associated with intrusions that show variable feldspar-destructive, sericite-chlorite+clay overprinting of biotite-actinolite and chlorite-epidote alteration.

SolGold's Alpala deposit continues to grow with each new drill hole as drilling focusses on high grade porphyry centres at Alpala Northwest, Alpala Central and Alpala Southeast (Figure 12).  Over 44,500m of drilling has been completed to date along the greater Alpala trend.  The use of the Devico drilling technique for deviated path holes from existing parent holes is delivering considerable savings in both drilling meterage and expenditure.

The mineralised porphyry copper gold system at Alpala occurs at surface over 250m in length and 50m width and drilling to date has identified its extents at depth over a zone 700m in length and 550m width over a continuous 1800m vertical column.  The limits of the Alpala deposit are not yet defined and an aggressive forward drilling program is underway.

The best drill intercept to date is 1312 m at 0.67 % Cu and 0.63 g/t Au from 128 m depth in CSD-15-012, which includes 576 m at 1.03 % Cu and 1.19 g/t Au.  Holes 15R2, 16, and 23R also returned spectacular results.  The deposit remains open at depth, along- and across-strike and has similarities to several globally significant copper-gold deposits, many of which have become or are becoming mines.  A summary of drilling results shows the significance of the large high-grade porphyry system being defined at Alpala (Table 2).

From the drilling results at the growing Alpala Porphyry Copper Gold Deposit (only) within the Cascabel Project, the Company considers the deposit to have significant resource potential and the data gathered has provided the basis for the estimation of an exploration target over the area drilled to date. Initial 3D modelling and grade shell interpolants have outlined an approximate exploration target at Alpala that ranges from 729Mt at 1.06% copper equivalent, using a cut-off grade of 0.4% copper equivalent, to 969Mt at 0.92% copper equivalent, using a cut-off grade of 0.3% copper equivalent.  These estimates equate to an endowment of between 7.7-8.9Mt of contained copper equivalent (Figure 13).

Table 2: Drilling results highlights at Alpala to date. Copper equivalent grades used are calculated using a gold conversion factor of 0.63, determined using a copper price of USD 3.00/pound and a gold price of USD 1300/ounce. Drill hole intercepts are calculated using a data aggregation method, defined by copper equivalent cut-off grades and reported with up to 10m internal dilution, excluding bridging to a single sample. True widths of down hole intersections are estimated to be approximately 25-50%.

The reference to the Cascabel Project as "World Class" (or "Tier 1") is considered to be appropriate. Examples of global copper and gold discoveries since 2006 that are generally considered to be "World Class" are summarised in Table 3.

The Cascabel drilling program is expanding to 10 drill rigs by January 2018 as a second drilling contractor mobilises large track mounted drill rigs via sea freight.  Two further man-portable drill rigs (rigs 6 and 7) are currently mobilising to site.

Table 3: Globally significant drilling results for copper and gold deposits. This table has been reviewed by Mr James Gilbertson of SRK Exploration Services Ltd., the Company's independent consultant and "Qualified Person", and does not purport to be exhaustive.

A ground magnetic survey was completed over about 30 km² of the Cascabel tenement in April 2017. In total, 650 km of total-field magnetic data were acquired from east-west oriented lines spaced every 50m. This survey produced an exceptionally high-quality product. The ground magnetics data shows a major zone of magnetite-destruction to occur over much of the Alpala porphyry cluster (Figure 14).  This zone of magnetite-destruction is related to intense hydrothermal (phyllic and advanced argillic) alteration that has converted magnetite to pyrite (+hematite) and chalcopyrite from surface to depths of more than 750 m, as determined from drilling. Below this depth, high-grade copper and gold mineralization occurs with magnetite-rich, hydrothermally altered intrusions. The surface projection of the copper equivalent models for 0.7 % and 1.0 % coincide with the zone of magnetite-destruction, which suggests that similar high-grade mineralization may exist along strike in areas where magnetite-destructive alteration occurs. The significant amounts of copper and gold in Hole 24 at Alpala Southeast indicates that copper mineralization is related to the eastern margin of the zone of magnetite-destruction.

The 3D magnetic inversion (MVI) models based on the ground magnetic data in the Alpala region mostly coincide with subsurface mineralised envelopes and reveal a northwest trending line of significant magnetic bodies at Moran, Trivinio, Alpala Northwest, and Alpala Central. The central body defined by the 3D MVI models coincides with the 1.0% copper equivalent model at Alpala Central and defines the current growing exploration target confirmed by drilling

A Spartan-Orion hybrid, distributed IP/3DMT survey commenced in August with the aim of covering a similar area as the ground magnetic survey. This survey will cover a larger area than the 2014 Orion IP/3DMT survey and provide greater resolution and depth of penetration. The data from both surveys will be merged, where appropriate. The combined electrical survey results will enable detection and modelling of sulphides in 3D. Hydrothermal alteration will also be detected and modelled in 3D by Spartan EM to depths in excess of 3 km.  In combination with the ground magnetic data, this electrical survey will allow the delineation and modelling of secondary (hydrothermal) magnetite associated with altered intrusions in the porphyry systems and assist exploration in the tenement area.

Aguinaga prospect lies along a prominent topographic high (1615m) about 3km south of Rocafuerte site office and 1.3km to the north-west of Alpala.  The interpreted porphyry centre at Aguinaga occurs at the confluence of a deep seated regional north-west trending structure with a major north-east trending lineament. This is the same structural regime within the same host rocks that hold the recently discovered porphyry deposit at Alpala.

It is characterised by a classical 500m x 500m magnetic high surrounded by an annular magnetic-low which has strong similarities with the enormous Alumbrera deposit in Chile, as well as the Grasberg and Batu Hijau magnetic signatures.  This geometry is consistent with a large porphyry system characterized by a central magnetic high related to an intrusive centre and a magnetite-destructive halo caused by pyritic phyllic / argillic alteration.  The presence of a very strong annular chargeability high with a central tapering root at Aguinaga is consistent with sulphide-bearing, disseminated and/or stock work style mineralisation peripheral to and above a porphyry stock. (Figure 15).

The textbook style combination of soil geochemical anomalies over the prospect is tremendously convincing.  The presence of coincident copper, gold, and molybdenum in soil anomalies supports the inferred porphyry centre at Aguinaga.  The low manganese in soil that flanks the central copper zone to the north and south is likely to be related to intense late-stage hydrothermal alteration.  The presence of an elevated zinc aureole surrounding this area of low manganese is a geochemical signature that is typical of the metal zonation around porphyry copper-gold deposits.

Reconnaissance field-work initially located mineralised porphyritic diorite along the northern slope of Aguinaga Hill. Subsequent detailed, 1:500 scale, "Anaconda" style geological and structural mapping has led to the discovery of porphyry stock-work copper-gold mineralization outcropping at surface.  Mineralisation is exposed along the upper section of Aguinaga Creek, where classic porphyry style 'B'-type quartz-magnetite-chalcopyrite-bornite stock-work veining occurs within porphyritic diorite (Figure 16).

The outcropping mineralisation is accompanied by potassic (biotite) alteration and remains open to the north where creek sediments and jungle limit further surface exposure.  Rock-saw channel sampling results over the exposed outcrop returned an open ended intersection of 9.0m @ 1.01 % Cu, and 0.79 g/t Au.  Infill soil-sampling along with spectral analysis of soil rock fragments using deep motorised auger gridding has confirmed the alteration signature at Aguinaga as coincident with geological and geochemical targets and the prospect is planned for drill testing in the coming year.

New Concessions Granted for 100% SolGold Ecuador Subsidiaries

Country wide generative work is being conducted in order to acquire top quality projects in this emerging mining country.  The Group holds 36 project areas, comprising 59 tenements granted to SolGold's four local subsidiary companies of which 38 tenements were granted during the financial year ended 30 June 2016 and the additional 21 tenements granted subsequent to the end of the financial year.  The 59 tenements cover an area of 2,496 km². These tenements cover the targets previously identified in the study of potential prospective porphyry centres throughout the northern Andean copper belt in Ecuador. Teams of company geologists are on the ground throughout Ecuador conducting initial baseline data collection and identifying prospective targets for follow-up exploration. 

The teams are focussed on first pass exploration on the Porvenir, San Antonio, Sharug, Machos, Agustin and Rio Amarillo projects. Initial mapping campaigns have been very encouraging with widespread areas of hydrothermal alteration identified which are considered highly prospective for porphyry and epithermal style mineralisation.  Initial rock chip samples taken of altered outcrops have returned values as high as 12% Cu.  Regional geology teams are commencing systematic stream sediment sampling and panned concentrate programs over the prospective tenements.  From the stream and panned concentrate results, gridded soil programs will be planned to identify targets to be drilled in due course.

Solomon Islands

On 10 February 2017, the Company (through its wholly owned subsidiary, Australian Resources Management (ARM) Pty Ltd applied for the Mbetilonga prospecting licence ("Mbetilonga Application"), which is located in Guadalcanal in the Solomon Islands. The Mbetilonga Application covers an area of approximately 46 km2 and is located approximately 8km south of the capital of the Solomon Islands, Honiara.

On 13 April 2017, the Company (through its wholly subsidiary, Guadalcanel Exploration Pty Ltd) applied for the Kuma prospecting licence ("Kuma Application") which covers an area of approximately 50km2 and is located approximately 37km south-east of the capital of the Solomon Islands, Honiara.

The exciting Kuma project in Guadalcanal has emerged as a significant porphyry copper-gold target upgraded by recent geochemical and spectral work by GEX in 2014-15 (Figure 17). 

Kuma

The Kuma project, which the Group has an application in place with the Solomon Island Government, lies just to the south-west of a series of major NW-SE-trending arc-parallel faults. These faults are associated with numerous Cu and Au anomalies, including the Sutakiki prospect and the Mbetilonga prospect (formerly part of the Guadalcanal Joint Venture).  The project area overlies a 3.5‐kilometre wide, annular, caldera‐like topographic feature.  Annular and nested topographic anomalies in the region suggest the presence of extensive batholiths of the Koloula Diorite beneath the volcanic cover of the Suta Volcanics.  The prospect geology is dominated by a 4km by 1km lithocap. This extensive zone of argillic and advanced argillic alteration is caused by hydrothermal fluids that emanate from the top of porphyry copper-gold mineralising systems, and thus provides a buried porphyry copper gold target (Figure 18).

The geochemically anomalous portion of the Kuma lithocap (northwest end) lies within the annular topographic anomaly.  Kuma has a spectacular oxidized float boulder trail along the Kuma River and was traced to Alemba and Kolovelo creeks which lead to discovery of broad hydrothermal alteration zones and lithocap (Figure 19).

Previous exploration completed at Kuma under the Guadalcanal Joint Venture between SolGold and Newmont included extensive geochemical sampling (BLEG, rock chip and channel samples), geological mapping, a magnetic survey and an electromagnetic survey.  Geochemical results define a central zone of manganese depletion (Mn < 200 ppm) inferred to indicate the destruction of mafic minerals by hydrothermal alteration.   Zinc > 75 ppm forms an annulus to this zone, and Molybdenum > 4 ppm lies along the margins of the manganese low indicating potential for porphyry Cu-Au mineralization at depth. TerraSpec spectral analysis of sieved coarse fraction soil samples covering the Kuma lithocap area was completed at a commercial laboratory in Australia.  The results integrated with known geology in the prospect area has highlighted a primary porphyry target centre in the northern portion of the lithocap (Figure 20).

Access agreements are being negotiated ahead of Anaconda style geological mapping planned for the coming year so as to bring the project to drill ready status in 2018.  Three steeply-inclined diamond core drill-holes, each about 800 m deep, are envisaged for an initial test of the target area.  Drill Sites will be located following Anaconda style geological mapping within and peripheral to the target area.  Silica ledges and dickite anomalies controlled by high level structure can be tested to provide vectors toward the centre of the Kuma porphyry gold-copper system and the identification and orientation of dikes (porphyritic felsic), veins (quartz and epidote) and fractures (containing chalcopyrite or magnetite).

Australia

In Australia, drill testing of porphyry style copper-gold mineralisation at the Normanby Project, in northern Queensland commenced in early July 2017.  A total of 518m of RC drilling from 7 RC drill holes and 89.2m of diamond coring from 1 drill holes was completed at the time of writing.

A reassessment of the range of other projects held in Queensland resulted in definition of detailed work programs that will be put in place as exploration funds become available.  Joint venture opportunities are being sought for these projects and it is pleasing to note that there has been much interest by junior exploration and mining companies. However, despite this interest, the continued challenging equities markets are making it difficult for companies to raise the exploration funds to complete joint venture deals and commence exploration.

The Group holds 6 major project areas in Queensland at Normanby, Rannes, Mt Perry, Cracow West, Westwood and Lonesome (Figure 21).

Normanby

The Normanby Project is located at the southern margin of eastern Australia's densest cluster of million ounce gold deposits, the nearest of which is the Mt. Carlton Au-Ag mine, located 40km to the northwest of Normanby.

SolGold's exploration to date has focussed around the Normanby Goldfield, a collection of 70 historical workings. Work programs have included extensive stream sediment, soil and rock chip sampling, an airborne magnetic survey and 50 drill holes totalling 1523 metres in length. The most significant intersections were at the Mt Flat Top prospect and included an intersection of 42m grading 1.16 g/t gold and 34m grading 1.22 g/t gold. The mineralisation has the geological features of a porphyry copper system with a high gold to copper ratio. Previous drilling across the Normanby tenement and section interpretation at Mt Flat Top are shown in Figures 22 and 23 respectively.

A second phase of drill testing commenced in early July 2017 to test the lateral and vertical extension of this potential porphyry target.  A total of 518m of RC drilling from 7 RC drill holes and 89.2m of diamond coring from 1 drill holes was completed at the time of writing.  A significant vertical mineralised structure was intersected in holes MFT19, and MFT17, and a separate shallow dipping zone of mineralisation was also discovered in holes MFT24 and MFT014.  Assay results remain pending. Regional-scale stream sediment and rock chip sampling has identified numerous anomalous areas, including the Mt Crompton breccia pipe that require follow up work over the coming year.

Mount Perry

The Mt Perry Goldfield is located four hours by road from Brisbane and is host to more than 60 named and numerous other unnamed historical mines and workings (see Figure 16). The area lies adjacent to Evolution Mining Ltd's 100,000 ounce per annum Mt Rawdon Gold Mine which lies at the intersection of two major geological fault structures; the Mt Bania and Darling Lineaments. Current published resources at Mt Rawdon stand at 36.7 million tonnes at 0.87g/t gold for 1 million ounces, and historical production has been approximately 1 million ounces.  Exploration at Mt Perry has focussed along two mineralised structural zones (The Augustine-New Moonta trend and the Chinaman's-Reagans trend (Figure 24). The structural orientations of these are similar to the major structures that host the Mt Rawdon gold mine.

The 'Augustine-New Moonta trend' extends over a 20km long north-east trending corridor from Augustine in the south-west to the New Moonta mines in the north-east.  Sulphide-mineralised breccia bodies with variable gold, silver, base metals and with occurrences of uranium characterise the Augustine-New Moonta trend. The second target zone is the 'Chinaman's-Reagans trend'. This target zone is characterised by copper-molybdenum porphyries with gold and zinc anomalous halos in the south of the project area, and it merges with the 7km long and strongly mineralised Chinaman's Creek - Reid's Creek - Spring Creek - Reagan's target immediately to the north.  Extensive airborne magnetic and electromagnetic surveys have been conducted over the Mt Perry Project area, together with detailed soil sampling, rock chip sampling and geological mapping surveys. This has been followed by drilling programs that conducted first pass reconnaissance drilling on numerous targets.  Exploration at Mt Perry has identified several high -grade vein-style targets and lower grade, high-tonnage porphyry-style gold targets (Figures 25, 26 and 27).  Independent review of the geological resource potential of the area concluded that the prospects have a combined potential to host between 200,000 ounces (base case) and 700,000 ounces (geological potential) of gold.  A significant amount of the tenement remains unexplored, leaving the potential for unrecognised prospects to be discovered within the area.  SolGold encourages interest in a JV partnership to continue exploration at Mt Perry.  

Rannes Project

The Rannes Project area is located 140km west of Gladstone, Queensland, Australia and comprises a number of vein gold and silver deposits (Figure 28).

SolGold's principal targets at the Rannes project are structurally-controlled, low-sulphidation epithermal gold-silver deposits. Thirteen prospects have been identified within the Permian-aged Camboon Volcanics, with the majority lying along north-northwest trending fault zones.  Exploration has included tenement wide stream sediment, soil and rock chip sampling surveys.  A detailed airborne magnetic survey was recently re-interpreted to enhance the development of the structural model of the belt.  Exploration methods have included a 3D IP (Induced Polarisation) survey, geological mapping, and trenching all contributing to definition of additional drill targets at several prospects. 

A total of 473 holes have been drilled at the Rannes project for a total of 58,887m. Most of this drilling has occurred at Kauffmans prospect (151 holes) and the Crunchie prospect (90 holes), while lower meterage drill programs have been conducted at the Shilo, Cracklin Rosie, Porcupine, Brother, Spring Creek and Police Camp Creek prospects.   The geometry and nature of the Kauffmans and Crunchie systems are well understood (Figures 29 and 30).

Mineral resources estimates were completed by Hellman & Schofield Pty Ltd, and by H&S Consulting Pty. Ltd., independent geological consultancies.  The most recent resource estimate includes resources in both Indicated and Inferred categories for reporting under the JORC Code for Reporting of Mineral Resources and Ore Reserves.  The current combined indicated and inferred resource estimate stands at 12.23 million tonnes at 0.6 g/t gold and 23.18 g/t silver; for 237,240 ounces Au and 9,105,072 ounces Ag.  Table 4 lists the current resource estimates at the five main prospects. These estimates are based on gold to silver ratio of 1:50 and a 0.5 g/t Au equivalent cut-off.

Table 4: Resource estimates at Kauffmans, Crunchie, Cracklin, Porcupine and Brother as of 23 May 2012. The gold equivalent values are based on a ratio of 1:50 (Au:Ag). The resource at 0.3 g/t Au cut-off was announced on 23 May 2012.  SolGold welcomes expressions of interest from potential JV partners to continue exploration at Rannes.

Cracow West

Cracow West is located 15km to the north-west of Evolution Mining Ltd's Cracow gold mine (approximately 1.5 million ounces of gold). Gold mineralisation at the mine is associated with Permian-aged, low-sulphidation, epithermal quartz veins which have been emplaced along north-west and north-northwest trending fault zones. SolGold's initial exploration concept was to explore for a similar deposit to Cracow gold mine but a recent review of the regional geology suggests that the anomalism seen at Cracow West may be associated with a later phase of Triassic intrusions, suggesting a later mineralisation event (Figure 31).   

SolGold's exploration at Cracow West has included stream sediment, soil and rock chip sampling. This has identified three significant prospects; Dawson Park, Kambrook and Theodore Bends. A 'SAM' survey (sub-audio magnetotellurics) has also been completed over the Kambrook and Dawson Park prospect. This has identified a potential buried target at Dawson Park, which coincides with a distinct soil tellurium anomaly at surface.

STRATEGIC REPORT (continued)

INTERESTS IN TENEMENTS

^{*Renewal applications have been lodged with the Queensland Department of Natural Resources and Mines and the Group has no reason to believe the renewals will not be granted.}

^{**Represents tenements granted post 30 June 2017.}

RISKS AND UNCERTAINTIES

The Directors consider that the factors and risks described below are the most significant.

Funding Risks

The Group's ability to effectively implement its business strategy over time may depend in part on its ability to raise additional funds and/or its ability to generate revenue from its projects. The need for and amount of any additional funds required is currently unknown and will depend on numerous factors related to the Group's current and future activities. 

If required, the Group would seek additional funds, through equity, debt or joint venture financing. There can be no assurance that any such equity, debt or joint venture financing will be available to the Group in a timely manner, on favourable terms, or at all. Any additional equity financing will dilute current shareholdings, and debt financing, if available, and may involve restrictions on further financing and operating activities.

If adequate funds are not available on acceptable terms, the Group may not be able to take advantage of opportunities or otherwise respond to competitive pressures, as well as possibly resulting in the delay or indefinite postponement of the Group's activities.

General Exploration and Extraction Risks

There is no certainty that the Group will identify commercially mineable reserves in the Tenements.  The exploration for, and development of, mineral deposits involves significant uncertainties and the Group's operations will be subject to all of the hazards and risks normally encountered in such activities, particularly given the terrain and nature of the activities being undertaken.  Although precautions to minimise risks will be taken, even a combination of careful evaluation, experience and knowledge may not eliminate all of the hazards and risks. 

The targets identified by the Group's personnel and consultants, are based on current experience and modelling and all available data.  There is no guarantee that surface sample grades of any metal or mineral taken in the past will persist below the surface of the ground.  Furthermore, there can be no guarantee that the estimates of quantities and grades of gold and minerals disclosed will be available for extraction and sale.

Reserve and resource estimates are expressions of judgement based on knowledge, experience and industry practice.  Estimates which were valid when originally calculated may alter significantly when new information or techniques become available.  In addition, by their very nature, resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate.

Title Risk

SolGold's tenements and interest in tenements are subject to the various conditions, obligations and regulations which apply in the relevant jurisdictions including Ecuador in South America, Queensland, Australia and the Solomon Islands. If applications for title or renewal are required this can be at the discretion of the relevant government minister or officials. If approval is refused, SolGold will suffer a loss of the opportunity to undertake further exploration, or development, of the tenement. SolGold currently knows of no reason to believe that current applications will not be approved, granted or renewed. Some of the properties may be subject to prior unregistered agreements or transfers or native or indigenous peoples' land claims and title may be affected by undetected defects or governmental actions. No assurance can be given that title defects do not exist. If a title defect does exist, it is possible that SolGold may lose all or a portion of the property to which the title defects relates.

Permitting Risk in Ecuador

As with all jurisdictions in which SolGold operates, a particular permitting regime exists in Ecuador with which SolGold must comply.  Before commencing any exploration activity, SolGold may be required to negotiate access and compensation arrangements with any interested land access groups and relevant authorities in Ecuador.  SolGold has engaged experienced advisors and consultants to assist with negotiations, however, there is no guarantee that all necessary access and compensation arrangements will be entered in a timely manner, on favourable terms, without onerous conditions or at all.  Similarly, no guarantees can be made as to timeframes within which negotiations may be finalised or the reasonableness of third parties.  Failure to obtain all necessary permits, licenses and access and compensations arrangements may have a material adverse effect on SolGold.

Australian Native Title Risk

The effect of the Native Title Act 1993 (Cth) ("NTA") is that existing and new tenements held by SolGold in Australia may be affected by native title claims and procedures.  SolGold has not undertaken the historical, legal or anthropological research and investigations at the date of this report that would be required to form an opinion as to whether any existing or future claim for native title could be upheld over a particular parcel of land covered by a tenement. 

There is a potential risk that a determination could be made that native title exists in relation to land the subject of a tenement held or to be held by SolGold which may affect the operation of SolGold's business and development activities.  In the event that it is determined that native title does exist or a native title claim is registered, SolGold may need to comply with procedures under the NTA in order to carry out its operations or to be granted any additional rights such as a Mining Lease.  Such procedures may take considerable time, involve the negotiation of significant agreements, involve a requirement to negotiate for access rights, and require the payment of compensation to those persons holding or claiming native title in the land which is the subject of a tenement.  The administration and determination of native title issues may have a material adverse impact on the position of SolGold in terms of its cash flows, financial performance, business development, ability to pay dividends and share price.

Volatility of Commodity Prices

SolGold's possible future revenues will be derived mainly from Gold and Copper and/or from royalties gained from potential joint ventures or from mineral projects sold. Also, during operations by SolGold, the revenues earned will be dependent on the terms of any agreement for the activities. Consequently, SolGold's potential future earnings, profitability and growth are likely to be closely related to the price of either of these commodities.

Gold and Copper prices fluctuate and are affected by numerous industry factors, many of which are beyond the control of SolGold. Such factors include, but are not limited to, demand for CDIs, technological advancements, forward selling by producers, production cost levels in major producing regions, macroeconomic factors, inflation, interest rates, currency exchange rates and global and regional demand for, and supply of, Gold and Copper. 

Any substantial and extended decline in the market price of Gold and Copper could have an adverse effect on SolGold's future revenues, profitability, cash flows from operations, carrying value of capitalised assets and borrowing capacity among other factors.

Project Development Risks

If the Group discovers a potentially economic resource or reserve, there is no assurance that the Group will be able to develop a mine thereon, or otherwise commercially exploit such resource or reserve. Further, there can be no assurance that the Group will be able to manage effectively the expansion of its operations or that the Group's current personnel, systems, procedures and controls will be adequate to support the Group's operations as operations expand.  Any failure of management to manage effectively the Group's growth and development could have a material adverse effect on the Group's business, financial condition and results of operations.  There is no certainty that all or, indeed, any of the elements of the Group's current strategy will develop as anticipated.

Currency Fluctuations

The Group's asset and liability values may fluctuate in accordance with movements in the foreign currency exchange rates.  If SolGold achieves commercial production the revenue will most likely be denominated in USD, although most but not all of the costs of exploration and production will be incurred in USD. Accordingly, foreign currency fluctuations may adversely affect the Groups financial position and operating results.

Land Access Risk

Land access is critical for exploration and evaluation to succeed.  In all cases the acquisition of prospective tenements is a competitive business, in which proprietary knowledge or information is critical and the ability to negotiate satisfactory commercial arrangements with other parties is often essential.

Access to land for exploration purposes can be affected by land ownership, including private (freehold) land, pastoral lease and native title land or indigenous claims. Immediate access to land in the areas of activities cannot in all cases be guaranteed. SolGold may be required to seek consent of land holders or other persons or groups with an interest in real property encompassed by, or adjacent to, SolGold's tenements. Compensation may be required to be paid by SolGold to land holders so that SolGold may carry out exploration and/or mining activities. Where applicable, agreements with indigenous groups have to be in place before a mineral tenement can be granted.

Rights to mineral tenements carry with them various obligations in regard to minimum expenditure levels and responsibilities in respect of the environment and safety. Failure to observe these requirements could prejudice the right to maintain title to a given area.

Government policy, impassable or difficult access as a result of the terrain, seasonal climatic effects or inclement weather can also adversely impact SolGold's activities.

Environmental Risk

SolGold's operations and projects are expected to have an impact on the environment, particularly if advanced exploration or mine development proceeds. Its activities are or will be subject to in-country national and local laws and regulations regarding environmental hazards. These laws and regulations set various standards regulating certain aspects of health and environmental quality and provide for penalties and other liabilities for the violation of such standards. In certain circumstances they establish obligations to remediate current and former facilities and locations where operations are or were conducted. Significant liability could be imposed on SolGold for damages, clean-up costs, or penalties in the event of certain discharges into the environment, environmental damage caused by previous owners of property acquired by SolGold or its subsidiaries, or non-compliance with environmental laws or regulations. SolGold proposes to minimise these risks by conducting its activities in an environmentally responsible manner, in accordance with applicable laws and regulations, and where possible, by carrying appropriate insurance coverage. Nevertheless, there are certain risks inherent in SolGold's activities which could subject it to extensive liability.

Geopolitical, Regulatory and Sovereign Risk

The availability and rights to explore and mine, as well as industry profitability generally, can be affected by changes in government policy that are beyond the control of SolGold.

SolGold's exploration tenements are located in Ecuador, the Solomon Islands and Australia and are subject to the risks associated with operating both in domestic and foreign jurisdictions. As the Solomon Islands and Ecuador are developing countries, their legal and political systems are emerging when compared to those in operation in Australia and the United Kingdom. Such risks include, but are not limited to:

·      economic, social or political instability or change;

·      hyperinflation, currency non-convertibility or instability;

·      changes of law affecting foreign ownership, government participation, taxation, working conditions, rates of exchange, exchange control, exploration licensing, export duties, resource rent taxes, repatriation of capital, environmental protection, mine safety, labour relations;

·      government control over mineral properties or government regulations that require the employment of local staff or contractors or require other benefits to be provided to local residents;

·      delays and declines in the standard and effective operation of SolGold's activities, unforeseen and un-budgeted costs, and/or threats to occupational health and safety as a consequence of geopolitical, regulatory and sovereign risk.

Ecuador

Ecuador regulations have broad authority to shut down and/or levy fines against facilities that do not comply with regulations or standards. SolGold's projects in Ecuador may be exposed to potentially adverse risks associated with the evolving rules and laws governing mining expansion and development in that jurisdiction. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, environmental legislation and mine safety. Additionally, SolGold's operations may be detrimentally affected in the event that the Ecuadorian government were to default on its foreign debt obligations or become subject to wider global economic and investment uncertainty. SolGold is not aware of any current material changes in legislative, regulatory and public policy initiatives in Ecuador, however any future or proposed changes may adversely affect the Cascabel project or SolGold's ability to operate successfully in Ecuador.

Under the current legislative regime, a mining corporation and the Ecuadorian Government must enter into an exploitation contract prior to exploitation of natural resources. There is no certainty that SolGold will be able to successfully enter into an exploitation contract, or enter into one on commercially favourable terms, and such a scenario may adversely impact on the Cascabel project or render it uneconomical.

Queensland

The Queensland Minister for Natural Resources, Mines and Energy conducts reviews from time to time of policies relating to the granting and administration of mining tenements.  At present, SolGold is not aware of any proposed changes to policy that would affect its tenements.

In Queensland, the Aboriginal Cultural Heritage Act 2003 and the Torres Strait Islander Cultural Heritage Act 2003 (which commenced on 16 April 2004) impose duties of care which require persons, including SolGold, to take all reasonable and practical measures to avoid damaging or destroying Aboriginal cultural heritage.  This obligation applies across the State and requires SolGold to develop suitable internal procedures to discharge its duty of care in order to avoid exposure to substantial financial penalties if its activities damage items of cultural significance. Under this legislation, indigenous people can exercise control over land with respect to cultural heritage without necessarily having established the connection element (as required under native title law).  This creates a potential risk that the tenement holder may have to deal with several indigenous individuals or corporations, where no native title has been established, to identify and manage cultural heritage issues.  This could result in tenement holders requiring lengthy lead times to manage cultural heritage for their projects.

Changing attitudes to environmental, land care, cultural heritage and indigenous land rights' issues, together with the nature of the political process, provide the possibility for future policy changes. There is a risk that such changes may affect SolGold's exploration plans or, indeed, its rights and/or obligations with respect to the tenements.

Solomon Islands

The Solomon Islands Minerals Board may from time to time amend and review its policies on mining and exploration in the Solomon Islands. Any such changes in Government policy may affect the ability of SolGold to conduct and undertake mining and exploration in the Solomon Islands.

The Group achieved several milestones during the financial year ended 30 June 2017.  These included:

·      The completion of successful fund raisings (including exercise of share options) totalling approximately A$127.7 million from institutional and professional investors.  This has resulted in a cash balance of approximately A$89.3 million at 30 June 2017.

·      Exploration and evaluation expenditure of A$18.66 million incurred during the year representing predominantly the diamond drilling of 10 holes at Alpala for a total of 14,884 metres at Cascabel.

·      Operating loss of A$8.32 million representing an increase of A$2.6 million over the prior year.  The increase is largely attributable to a share based payments expense of A$2.24 million recognised on the fair value of share options granted to employee and contractors and an unrealised foreign exchange loss of A$1.03 million recognised on funds held in U.S. dollars.

·      A gain of $12.74 million recognised on the Company's mark to market adjustment on its investment in Cornerstone Capital Resources Inc.

Results

The Group incurred a loss before tax of A$8,323,050 for the year (2016: A$5,723,122), inclusive of the decision to expense A$17,310 (2016: A$1,555,004) for exploration expenditure associated with tenements that were surrendered or which had expired during the year.  A detailed assessment of the carrying values of deferred exploration costs is provided in note 12. The increase in the loss before tax is due to A$2,239,533 (2016: A$nil) recognised as a share based payments expense representing the fair value of share options granted to employees and contractors during the year and an unrealised foreign exchange loss of A$1,032,010 (2016: gain of A$126,619) recognised on funds held in United States dollars.

A gain of A$12,743,593 (2016: A$190,610) was recognised in comprehensive income representing the mark to market adjustment on the Company's investment in Cornerstone Capital Resources Inc.

Statement of Financial Position

As at 30 June 2017, the Group had net assets of approximately A$164.0 million, an increase of approximately A$129.0 million over the previous financial year.  This increase was largely associated with the completion of A$121.2 million in share placements, net of costs, the increase in the value of available for sale financial assets of A$12.7 million, purchase of property, plant and equipment of A$1.6 million, offset by the exploration write off of A$17k recognised in respect of the Groups' exploration assets and annual corporate operating expenses (including finance costs) of approximately A$8.3 million.

Cash Flow

Cash expenditure (before financing activities) for the year ended 30 June 2017 was A$28.3 million (2016: A$9.9 million).  During the financial year ended 30 June 2017, cash of A$117,862,952 (2016: A$908,329) was received from the issue of shares via private placements and the exercise of share options, A$nil (2016: A$2,332,000) received from the issue of convertible notes to DGR Global Ltd and Tenstar Trading Limited and A$852,736 (2016: A$6,535,205) received as unsecured short term borrowings from DGR Global Ltd.  Accordingly, the net cash inflow of the Company for the year ended 30 June 2017 was A$90,249,820 (2016: outflow of A$226,507).

Cash of approximately A$21.7 million (2016: A$6.4 million) was invested by the Group on exploration expenditure during the year.

Closing Cash

As at 30 June 2017, the Group held cash balances of A$89.3 million (2016: A$0.09 million).

Post Reporting Date Events

On 7 July 2017, the Company issued an additional 1,300,000 shares at £0.14 to raise A$0.31 million (£0.18 million) in cash as a result of the exercise of employment options.

On 7 July 2017, the Company issued an additional 1,300,000 shares at £0.28 to raise A$0.62 million (£0.36 million) in cash as a result of the exercise of employment options.

On 9 August 2017, the Company issued a total of 46,762,000 unlisted options to Directors, employees and contractors. The options have a strike price of £0.60 each and are exercisable through to 8 August 2020.

On 11 August 2017, the Company issued an additional 690,000 shares at £0.38 to raise A$0.43 million (£0.26 million) to Newcrest International pursuant to "top-up rights" held by Newcrest International pursuant to the Newcrest Subscription Agreement. The allotment was price was based on a 10 day VWAP, in accordance with the terms of the Newcrest Subscription Agreement.

On 29 August 2017, the Company announced that it had been granted an additional 21 new concessions in Ecuador taking the total number of tenements in Ecuador to 59 tenements in addition to Cascabel.

The Directors are not aware of any other significant changes in the state of affairs of the Group or events after the reporting date that would have a material impact on the consolidated or Company financial statements.

Outlook

The focus of the Company during the financial year ending 30 June 2018 will be to continue exploration on its Cascabel project in Ecuador and continue carrying out reconnaissance filed mapping and rock chip sampling programs as well as evaluating several outcropping mineralised target over the 59 new tenements granted to SolGold's four Ecuadorian subsidiaries.

Key Performance Indicators

Given the stage of the Group's operations, the Board regards the maintenance of tenure and land access arrangements, maintenance of operation capabilities and the continued collection of exploration data in order to advance the prospectivity of the project areas to be the key performance indicators in measuring the Group's success. The review of the business with reference to key performance indicators is set out in the Operations Report and Financial Review on pages 5 to 43.

Financial Controls and Risk Management

The Board regularly reviews the risks to which the Group is exposed and ensures through Board Committees and regular reporting that these risks are managed and minimised as far as possible. The Audit Committee is responsible for the implementation and review of the Group's internal financial controls and financial risk management systems.

Equity

Since the date of the last Annual Report, the Company has issued the following equities:

On 26 August 2016, the Company issued an additional 268,819,004 shares at £0.06 to raise A$27.9 million (£16.1 million) in a combination of cash and debt conversions pursuant to a private placement to progress its exploration and project development efforts across its portfolio of projects in the Solomon Islands, Ecuador and Queensland, Australia.

On 14 October 2016, the Company issued an additional 63,353,339 shares at £0.13 to raise A$13.4 million (£8.2 million) in cash pursuant to a private placement to continue to fund the Group's exploration of its flagship Cascabel Copper Gold Porphyry Project, for general working capital purposes and ongoing corporate costs.

On 17 October 2016, the Company issued an additional 142,896,661 shares at £0.13 to raise A$30 million (£18.6 million) in cash pursuant to a private placement to continue to fund the Group's exploration of its flagship Cascabel Copper Gold Porphyry Project, for general working capital purposes and ongoing corporate costs.

On 17 October 2016, the Company issued an additional 19,591,768 unlisted options to Maxit Capital LP. The options consist of two tranches of 9,795,884 options, one tranche exercisable at £0.14 and one tranche at £0.28.

On 28 October 2016, the Company issued a total of 22,000,000 unlisted options to employees and contractors. The options have a strike price of £0.28 each and are exercisable through to 28 October 2018.

On 17 January 2017, the Company issued an additional 900,000 shares at £0.14 to raise A$0.19 million (£0.13 million) in cash as a result of the exercise of employment options.

On 31 January 2017, the Company issued an additional 100,000 shares at £0.30 to raise A$0.05 million (£0.03 million) in cash to Newcrest International Pty Ltd (Newcrest International), a wholly owned subsidiary of Newcrest Mining Ltd pursuant to "top-up rights" held by Newcrest International pursuant to the Newcrest Subscription Agreement. The allotment price was based on the 10 day VWAP, in accordance with the terms of the Newcrest Subscription Agreement.

On 3 February 2017, the Company issued an additional 1,200,000 shares at £0.14 to raise A$0.28 million (£0.17 million) in cash as a result of the exercise of employment options.

On 21 February 2017, the Company issued an additional 900,000 shares at £0.14 to raise A$0.20 million (£0.13 million) in cash as a result of the exercise of employment options.

On 1 March 2017, the Company issued an additional 240,000 shares at £0.38 to raise A$0.15 million (£0.09 million) in cash to Newcrest International pursuant to "top-up rights" held by Newcrest International pursuant to the Newcrest Subscription Agreement. The allotment price was based on the 10 day VWAP, in accordance with the terms of the Newcrest Subscription Agreement.

On 21 June 2017, the Company issued 78,889,080 ordinary shares at £0.41 to raise A$54.5 million in cash pursuant to a private placement to continue to fund the continued exploration of the Cascabel Project, general working capital and SolGold's pan Ecuadorean exploration strategy.

On 26 June 2017, the Company issued an additional 880,000 shares at £0.14 to raise A$0.20 million (£0.12 million) in cash as a result of the exercise of employment options.

On 26 June 2017, the Company issued an additional 880,000 shares at £0.28 to raise A$0.41 million (£0.25 million) in cash as a result of the exercise of employment options.

At year end the Company had a total of 1,512,955,685 shares and 44,191,768 options on issue.

Post year end equities issued

On 7 July 2017, the Company issued an additional 1,300,000 shares at £0.14 to raise A$0.31 million (£0.18 million) as a result of the exercise of employment options.

On 7 July 2017, the Company issued an additional 1,300,000 shares at £0.28 to raise A$0.62 million (£0.36 million) as a result of the exercise of employment options.

On 9 August 2017, the Company issued a total of 46,762,000 unlisted options to Directors and certain employees and contractors. The options have a strike price of £0.60 each and are exercisable through to 8 August 2020.

On 11 August 2017, the Company issued an additional 690,000 shares at £0.38 to raise A$0.43 million (£0.26 million) to Newcrest International pursuant to "top-up rights" held by Newcrest International pursuant to the Newcrest Subscription Agreement. The allotment was price was based on a 10 day VWAP, in accordance with the terms of the Newcrest Subscription Agreement.

As at the date of this report, the Company had a total of 1,516,245,686 shares and 88,353,768 options on issue.

The strategic report was authorised for issue and signed on behalf of the directors by,

Nicholas Mather

Executive Director

14 September 2017

DIRECTORS' REPORT

DIRECTORS and company secretary

The Board consists of one Executive Director and four Non-Executive Directors.

Nicholas Mather

(Executive Director)

Nicholas Mather (60), appointed 11 May 2005, graduated in 1979 from the University of Queensland with a B.Sc. (Hons, Geology). He has over 25 years' experience in exploration and resource company management in a variety of countries. His career has taken him to numerous countries exploring for precious and base metals and fossil fuels. Nicholas Mather has focused his attention on the identification of and investment in large resource exploration projects.

He was Managing Director of BeMaX Resources NL (an ASX-listed company) from 1997 until 2000 and instrumental in the discovery of the world class Ginkgo mineral sand deposit in the Murray Basin in 1998. As an executive Director of Arrow Energy NL (also ASX-listed) until his resignation in 2004, Nicholas Mather drove the acquisition and business development of Arrow's large Surat Basin Coal Bed Methane project in south-east Queensland. He was managing Director of Auralia Resources NL, a junior gold explorer, before its USD23 million merger with Ross Mining NL in 1995. He was a non-executive Director of Ballarat Goldfields NL until 2004, having assisted that company in its recapitalisation and re-quotation on the ASX in 2003.

Nicholas Mather is Managing Director and Chief Executive of DGR Global Limited and non-executive Director of ASX-listed Companies Armour Energy Limited, Aus Tin Mining Limited, Dark Horse Limited, and Lakes Oil NL and LSE AIM-listed Company IronRidge Resources Limited.

Brian Moller

(Non-Executive Chairman)

Brian Moller (58), appointed 11 May 2005, is a corporate partner in the Brisbane-based law firm Hopgood Ganim Lawyers, the Australian solicitors to the Company. He was admitted as a solicitor in 1981 and has been a partner at Hopgood Ganim since 1983. He practices almost exclusively in the corporate area with an emphasis on capital raising, mergers and acquisitions.

Brian Moller holds an LLB Hons from the University of Queensland and is a member of the Australian Mining and Petroleum Law Association.

Brian Moller acts for many publicly-listed resource and industrial companies and brings a wealth of experience and expertise to the board, particularly in the corporate regulatory and governance areas. He is a non-executive Director of ASX listed DGR Global Limited, Dark Horse Resources Limited, Lithium Consolidate Mineral Exploration Ltd, ASX and TSX-V listed, Aguia Resources Limited and the non-executive Chairman of ASX-listed Aus Tin Mining Limited and Platina Resources Limited.

Dr Robert Weinberg

(Non-Executive Director)

Rob Weinberg (69), appointed 22 November 2005, gained his doctorate in geology from Oxford University in 1973. He has more than 40 years' experience of the international mining industry and is an independent mining research analyst and consultant.  He is a Fellow of the Geological Society of London and also a Fellow of the Institute of Materials, Minerals and Mining.  He has been an independent non-executive director of a number of minerals exploration, development and mining companies. 

Prior to his current activities he was Managing Director, Institutional Investment at the World Gold Council. Previously he was a Director of the investment banking division at Deutsche Bank in London after having been head of the global mining research team at SG Warburg Securities. He has also held senior positions within Société Générale and was head of the mining team at James Capel & Co. He was formerly marketing manager of the gold and uranium division of Anglo American Corporation of South Africa Ltd.

John Bovard

(Non-Executive Director)

John Bovard (71), appointed 2 November 2009, is a civil engineer with over 40 years' experience in mining, heavy construction, project development and corporate management throughout Australia.  His career to date has included roles as CEO of public companies and both Executive and Non-Executive Directorships.  He holds a Bachelor's Degree in Civil Engineering, is a Fellow of the Australasian Institute of Mining and Metallurgy, and a Fellow of the Australian Institute of Company Directors.

Mr Bovard is currently a Non-Executive Director of the ASX-listed Aus Tin Mining Ltd.  Other roles within the past five years have included Non-Executive Chairman of Orbis Gold Limited (resigned 17 February 2015) and Non-Executive Director of Australian Pacific Coal Limited (resigned 29 November 2012).

He was also Project Manager for the A$800 million Phosphate Hill Fertiliser Project for Western Mining Corporation (WMC) situated south of Mount Isa in Queensland, Australia.  Other previous project experience includes managing the construction of the Porgera Mine in Papua New Guinea, the Super Pit expansion at Kalgoorlie, and the development of the Bronzewing Gold Mine in Western Australia.  He was previously the General Manager of the giant OK Tedi porphyry Copper Gold Mine.  John Bovard's corporate profile, together with his extensive experience in south west Pacific mining operations and construction is considered to be of great value to SolGold Plc.

Craig Jones

(Non-Executive Director)

Mr Jones (45), appointed 3 March 2017, joined Newcrest Mining in 2008 and has held various senior management and executive roles within the Newcrest group, including General Manager Projects, General Manager Cadia Valley Operations, Executive General Manager Projects and Asset Management, Executive General Manager Australian and Indonesian Operations, Executive General Manager Australian Operations and Projects, and Executive General Manager Cadia and Morobe Mining Joint Venture. Mr Jones is currently the Executive General Manager Wafi-Golpu (Newcrest / Harmony). Prior to joining Newcrest, Mr Jones worked for Rio Tinto.

Mr Jones holds a Bachelor of Mechanical Engineering from the University of Newcastle, Australia.

COMPANY SECRETARY

Karl Schlobohm

(Company Secretary)

Karl Schlobohm (49) has over twenty years' experience in the accounting profession across a wide range of businesses and industries.  He has previously been contracted into CFO roles with ASX-listed resource companies Discovery Metals Limited and Meridian Minerals Limited, and as Company Secretary of ASX-listed Linc Energy Limited, Agenix Limited, Discovery Metals Limited and Global Seafood Australia Limited.

Mr Schlobohm is a Chartered Accountant and holds Bachelor Degrees in Commerce and in Economics, and a Master's Degree in Taxation.

Mr Schlobohm is also contracted to act as the Company Secretary of the AIM listed IronRidge Resources Limited and ASX-listed DGR Global Limited, Dark Horse Resources Limited, Aus Tin Mining Limited and Armour Energy Limited.

The Directors present their annual report and audited financial statements for the year ended 30 June 2017.

GOING CONCERN

In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in discrete tranches.  The Group and the Company have not generated revenues from operations.  As such, the Group's and Company's ability to continue to adopt the going concern assumption will depend upon a number of matters including future successful capital raisings for necessary funding and the successful exploration and subsequent exploitation of the Group's tenements.

It should be noted that the current working capital levels will not be sufficient to bring the Group's projects into full development and production and, in due course, further funding will be required.  In the event that the Company is unable to secure further finance either through third parties or capital raising, it may not be able to fully develop its projects.

CURRENCY

The functional currency of SolGold Plc and its subsidiaries in Australia is considered to be Australian Dollars (A$). The functional currency of the subsidiaries in Solomon Islands is considered to be Solomon Islands Dollars (SBD$). The functional currency of the subsidiaries in Ecuador is considered to be United States Dollars (US$).  The presentational currency of the Group is Australian dollars ("A$") and all amounts presented in the Directors' Report and financial statements are presented in Australian dollars unless otherwise indicated.

RESULTS

The Group's consolidated loss for the year was A$4,499,972 (2016: A$5,723,122).

CHANGES IN SHARE CAPITAL DURING 2017

A statement of changes in the share capital of the Company is set out in Note 17 to the financial statements.

DIVIDENDS PAID OR RECOMMENDED

The Directors do not recommend the payment of a dividend (2016: nil).

FINANCIAL INSTRUMENTS

The Company does not undertake financial instrument transactions that are speculative or unrelated to the Company's or Group's activities. The Group's financial instruments consist mainly of deposits with banks, accounts payable and loans payable to related parties (including conversion options). In addition to Group's financial instruments, the Company's financial instruments also include its loans to subsidiaries.  Further details of financial risk management objectives and policies, and exposure of the Group and Company to financial risks are provided in note 20 to the financial statements.

DIRECTORS AND DIRECTORS' INTERESTS

The Directors who held office during the year were as follows:

The Company has a Directors' and Officers' Liability insurance policy for all its Directors.

CORPORATE GOVERNANCE

In formulating the Group's corporate governance procedures the Board takes due regard of the principles of good governance set out in the UK Corporate Governance Code (the "Code") to the extent they consider appropriate in light of the Group's size, stage of development and resources. However, given the size of the Company, at present the Board does not consider it necessary to adopt the Code in its entirety and, as a company with an AIM Listing, the Company is not required to comply with the provisions of the Code.

Nevertheless, the Directors are committed to maintaining high standards of corporate governance as detailed in the Company's corporate governance charter and propose, so far as is practicable given the Company's size and nature, to voluntarily adopt and comply with the QCA Code. At present, the Directors acknowledge that adherence to certain other provisions of the QCA Code may be delayed until such time as the Directors are able to fully adopt them. In particular, action will be required in the following areas:

·      In keeping with the QCA Code provisions on board composition, the Company has separated the roles of chairman and chief executive. However, the Company does not currently have a senior independent director. Accordingly, the Company does not comply with the QCA recommendations regarding board composition. Craig Jones, John Bovard and Robert Weinberg are considered by the Board to be independent. As the Company grows, the Board will seek to appoint additional independent directors, one of whom will be appointed as senior independent director.

·      The Directors have established an audit and risk management committee and a remuneration committee with formally delegated duties and responsibilities. The Company has not, however, established a nomination committee, as it is considered not necessary at this stage of the Company's development. The Board as a whole will consider appointments on a case by case basis.

The Board of the Company is made up of one Executive Director and four Non-executive Directors. Nicholas Mather is the Executive Director. It is the Board's policy to maintain independence by having at least half of the Board comprising Non-executive Directors who are free from any material business or other relationship with the Group. The structure of the Board ensures that no one individual or group is able to dominate the decision making process.

The Board ordinarily meets on a monthly basis providing effective leadership and overall control and direction of the Group's affairs through the schedule of matters reserved for its decision. This includes the approval of the budget and business plan, major capital expenditure, acquisitions and disposals, risk management policies and the approval of the financial statements. Formal agendas, papers and reports are sent to the Directors in a timely manner, prior to Board meetings. The Board also receives summary financial and operational reports before each Board meeting. The Board delegates certain of its responsibilities to management, who have clearly defined terms of reference.

All Directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that all Board procedures are followed. Any Director may take independent professional advice at the Group's expense in the furtherance of his duties. One third of the Directors retire from office at every Annual General Meeting of the Company. In general, those Directors who have held office the longest time since their election are required to retire. A retiring Director may be re-elected and a Director appointed by the Board may also be elected, though in the latter case the Director's period of prior appointment by the Board will not be taken into account for the purposes of rotation.

The Board attaches importance to maintaining good relationships with all its Shareholders and ensures that all price sensitive information is released to all Shareholders at the same time. The Group's principal communication with its investors is through the Annual General Meeting, the annual report and accounts, the interim statement and its website.

Audit and Risk Management Committee

The Audit and Risk Management Committee, meets not less than twice a year and is responsible for ensuring that the financial performance, position and prospects of the Group are properly monitored as well as being jointly responsible with the Board for appointing the external auditor of the Company and liaising with the Company's auditors to discuss accounts and the Group's internal controls and reporting procedures.

The members of the Audit and Risk Management Committee consists of a minimum of 3 members who are Brian Moller (as Chair), John Bovard and Robert Weinberg. The Executive Directors attend meetings by invitation, if appropriate.

Remuneration Committee

The Remuneration Committee meets at least once a year and is responsible for making decisions on Directors' and key management's remuneration packages.

Remuneration of any Executive Directors is established by reference to the remuneration of Executives of equivalent status both in terms of the level of responsibility of the position and by reference to their job qualifications and skills. The Remuneration Committee will also have regard to the terms which may be required to attract an executive of equivalent experience to join the Board from another company. Such packages include performance related bonuses and the grant of share options.

The members of the Remuneration Committee are John Bovard (as Chair), Nick Mather, Robert Weinberg and Brian Moller.

Health, Safety, Environment and Community Committee ("HSEC Committee")

The HSEC Committee is responsible for the overall health, safety and environmental performance of the Group and its operations and its relationship with the local community in Ecuador and Queensland. The Committee is comprised of the entire Board of Directors.

Nomination of Directors

The Board does not currently have a formal nominating committee. The Board as a whole is responsible for identifying and recommending candidates for the Board. The Board reviews and makes determinations with respect to:

(i)            the size and composition of the Board;

(ii)           the organization and responsibilities of the appropriate committees of the Board;

(iii)         the evaluation process for the Board and committees of the Board and the chairpersons of the Board and such committees; and

(iv)          creating a desirable balance of expertise and qualifications among members of the Board.

The Board does not take any formal steps to ensure that objectivity in the nomination process. In the nomination process, the Board assesses its current composition and requirements going forward in light of the stage of the Company and the skills required to ensure proper oversight of the Company and its operations.

The Board has recently amended its corporate governance charter to include a nominee director policy setting out the principles to be followed by the Board, in respect of those Directors that are nominated by a Shareholder and the nominating shareholders.

Compensation

The Board with the assistance of the Remuneration Committee, is responsible for approving compensation objectives and the specific compensation programs for policies and practices of the Company.

The 2017 Annual General Meeting will provide an opportunity for the Chairman and/or Chief Executive Officer to present to the shareholders a report on current operations and developments and will enable the shareholders to question and express their views about the Group's business.  A separate resolution will be proposed on each substantially separate issue, including the receipt of the financial statements and shareholders will be entitled to vote either in person or by proxy.

RELATED PARTY TRANSACTIONS

Details of related party transactions for the Group and Company are given in note 22. Key management personnel remuneration disclosures are given in note 5.

DIRECTORS' INDEMNITY

The Company has arranged appropriate directors' and officers' insurance to indemnify the directors against liability in respect of proceedings brought by third parties. Such provisions remain in force at the date of this report.

AUDITOR

A resolution for the re-appointment of the Company's auditor will be proposed at the forthcoming Annual General Meeting.

SUBSEQUENT EVENTS

The Directors are not aware of any other significant changes in the state of affairs of the Group or events after the reporting date that is not covered in this report and would have a material impact on the consolidated or Company financial statements.

DIRECTORS' RESPONSIBILITIES STATEMENT

The directors are responsible for preparing the directors' report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year.  Under that law the directors have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.  Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period.  The directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. 

In preparing these financial statements, the directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and accounting estimates that are reasonable and prudent;

·      state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; and

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006.  They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website publication

The Directors are responsible for ensuring the annual report and the financial statements are made available on a website.  Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions.  The maintenance and integrity of the Company's website is the responsibility of the Directors.  The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

DISCLOSURE OF AUDIT INFORMATION

In the case of each person who are Directors of the Company at the date when this report is approved:

·      So far as they are individually aware, there is no relevant audit information of which the Company's auditor is unaware; and

·      Each of the Directors has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of the information.

This report was approved by the board on 14 September 2017 and signed on its behalf.

Karl Schlobohm

Company Secretary

Lvl 27, 111 Eagle St

Brisbane QLD 4000

Australia

INDEPENDENT AUDITOR'S REPORT

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SOLGOLD PLC

OPINION

We have audited the financial statements of SolGold Plc (the 'Parent Company') and its subsidiaries (the 'Group') for the year ended 30 June 2017 which comprise the consolidated statement comprehensive income, the consolidated and company statements of financial position, the consolidated and company's statements of changes in equity, the consolidated and company's statements of cash flows and notes to the financial statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the group and parent company financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion:

•       the financial statements give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 30 June 2017 and of the Group's loss for the year then ended;

•       the Group and Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

•       the Parent Company financial statements have been properly prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

•       the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

SEPARATE OPINION IN RELATION TO IFRSS AS ISSUED BY THE IASB

As explained in note 1 to the Group financial statements, the Group in addition applying IFRSs as adopted by the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (IASB).  Our opinion is extended to this financial framework.

BASIS FOR OPINION             

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. In addition for the purposes of the Group's regulatory filing requirements as a reporting issuer in Canada we have also conducted our audit in accordance with International Standards on Auditing as issued by the International Auditing and Assurance Standards Board (ISA IAASB). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

CONCLUSIONS RELATING TO GOING CONCERN

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

•       the Directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

•       the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group's or the Parent Company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

OUR APPLICATION OF MATERIALITY

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements.  Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

The basis of our determination of materiality has remained unchanged. However, as there has been a significant movement in the total assets in the year this has impacted the final materiality figure applied. When setting our materiality we have taken this into consideration and reduced the percentage applied to total assets in the determination of materiality. We consider total assets to be the most relevant consideration of the Group's financial performance as the Group continues to focus on and develop its E&E assets.

Whilst materiality for the financial statements as a whole was AU$2.5m, each significant component of the Group was audited to a lower level of materiality ranging from AU$0.0.25m to  AU$0.61m. Such materialities are used to determine the financial statement areas that are included within the scope of our audit and the extent of sample sizes tested during the audit.

There were no misstatements identified during the course of our audit that were individually, or in aggregate, considered to be material in terms of their absolute monetary value or on qualitative grounds. 

AN OVERVIEW OF THE SCOPE OF OUR AUDIT

Our Group audit scope focused on the Group's principal mining entity, Exploraciones Novomining S.A ("ENSA"). ENSA holds the Cascabel exploration project.  ENSA was subject to a full scope audit. The two other significant components were determined to be the Parent Company and the Group consolidation which were also both subject to a full scope audit. 

The remaining components of the Group were considered non-significant and such components were subject to analytical review procedures together with substantive testing on Group audit risk areas applicable to that component ('review work'). We set out below the extent to which the Group's total assets were subject to audit versus analytical review procedures.

The audit of ENSA was performed in Ecuador. All audit work (full scope audit or review work) was conducted by BDO LLP and BDO member firms.

As part of our audit strategy the Group audit team were embedded into the Ecuadorian audit team and were present onsite in Ecuador during the local audit. BDO LLP had full access to all audit working papers of the significant component audit BDO member firm.

OTHER INFORMATION

The Directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006

In our opinion, based on the work undertaken in the course of the audit:

•       the information given in the Strategic Report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

•       the Strategic Report and the Directors' report have been prepared in accordance with applicable legal requirements.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

•       adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

•       the Parent Company financial statements are not in agreement with the accounting records and returns; or

•       certain disclosures of Directors' remuneration specified by law are not made; or

•       we have not received all the information and explanations we require for our audit.

RESPONSIBILITIES OF DIRECTORS

As explained more fully in the Directors' responsibilities statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group's and the Parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.  Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) or ISA IAASB will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Anne Sayers

(Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor

London

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

consolidated statement of comprehensive income

For the year ended 30 June 2017

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

consolidated and company statements of financial position

As at 30 June 2017

Registered Number 5449516

The above consolidated and company statements of financial position should be read in conjunction with the accompanying notes.

A separate statement of comprehensive income for the parent company has not been presented as permitted by section 408 of the Companies Act 2006.  The Company's loss for the year was A$3,912,536 (2016: A$3,639,906).

The financial statements were approved and authorised for issue by the Board and were signed on its behalf on 14 September 2017.

Nicholas Mather

Director