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1 Toro Gold Ltd Annual Report 2012

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3 Contents Overview Chairman s Statement Operations Review Board and Management Biographies Report of the Directors Independent Auditor s Report Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes forming part of the Financial Statements

4 Overview Toro Gold Ltd ( Toro Gold or The Company ) is a private gold exploration and development company focused on Africa. The Company is establishing a multi-million ounce portfolio of gold projects across multiple jurisdictions to offer investors exposure both to proven and emerging gold provinces while providing technical and political risk diversification. The Mako project in Eastern Senegal is Toro Gold s flagship asset and is the subject of a positive Scoping Study. The balance of the Company s portfolio comprises a further 6 early to mid stage exploration projects across 4 countries. Based on track record of discovery, development, operation and corporate transactions across the African continent, the management of Toro Gold has the experience to identify and advance gold projects at all stages of their development and operational cycle. 1.6 million oz CIM compliant Mineral Resource at the Mako project in Senegal Positive Scoping Study completed for Mako demonstrating a robust project Pre-feasibility and ESIA baseline studies commenced at Mako Continued exploration success across the portfolio Portfolio Summary 1 Mako Project 2 Kenieba Project 3 Madina Foulbe & Velingara Guilengbe Project Baramako - Siguiri Project Block 12 Project 7 Zomoko Project 7 Project Name Project Ownership Equity Holding Geological Terrane Permit Size Senegal Mako Project Direct Application 100% Lower Proterozoic / Birimian 160km 2 Kenieba Project JV - 3SI Earn in to 77.5% Lower Proterozoic / Birimian 400km 2 Madina Foulbe & Velingara JV- SN Mineral Mining Ltd Earn in to 74.9% Lower Proterozoic / Birimian 1,009km 2 Guinea Guilengbe Project JV - JMC Earn in to 100% Lower Proterozoic / Birimian 251km 2 Baramako Siguiri Direct Application 100% Lower Proterozoic / Birimian 94km 2 Gabon Zomoko Project JV- Mineroil 70% Holding US$3m Free Carry Archaean Greenstone (BIF) 2,618km 2 Sudan Block 12 Project Direct Application 100% Upper Proterozoic / Nubian Shield 3,500km 2 1

5 Chairman s Statement I am happy to report another year of excellent progress for the Company. November 2012 saw the Company announce a resource update for the Mako Project which included a 60% upgrade in its total resource estimate to 1.6Moz including 1.25Moz at 3g/t in a High Grade Core. Based on this resource growth and the results of a metallurgical test work programme announced in May 2012 confirming the ore type s amenability to industry standard gold extraction techniques, the Company launched a Scoping Study (the Study ) in late 2012 to assess the development potential of Mako. The Study, completed in April 2013, demonstrates a robust project which comprises a high grade open pit operation feeding a Carbon In Pulp metallurgical processing facility to produce in excess of 1Moz of gold. Further encouragement was provided by the fact that total construction costs for the Mako Project appear to be financeable for a company of Toro s size an important factor in these challenging equity markets. The management team believe that the results of the Study can be further optimised through more detailed engineering at the Pre- Feasibility Study stage in addition to the potential to increase the scale of the Mako Project through continued exploration success. Accordingly a permit scale exploration programme comprising soil sampling over the totality of the permit and an airborne VTEM survey on the Southern and Eastern parts of the licence has been undertaken to further assess the geological potential of the Project area in addition to the existing resources at Petowal. The Mako project in which the Company acquired the remaining 35% of the project it did not own in January 2012, has the potential to transform Toro Gold from an exploration company into a developer with a demonstrable route to cashflow generation. The Mako Project will be the focus of 2013 as the Company seeks to maximise shareholder value by the prioritisation of its development. We look forward to updating you through 2013 as we continue to fast track the Mako project towards a development decision. Exploration work across the rest of the portfolio has continued with encouraging results. In Gabon two soil anomalies on the Zomoko licences were identified in 2012: both are associated with Banded Ironstone Formations and work will continue in 2013 to follow up on this encouraging start. Work at the Guilengbe licence in Guinea has focused on the evaluation of sampling and drilling results generated throughout the year albeit against a background of heightened political uncertainty within the country. This uncertainty gave rise to investor concerns and the Company has decided to write down the value of the Guinea assets to zero in the financial statements. We will continue to review the projects technical viability over the coming months before deciding on the next course of action. The Company ceased operating the Samaya Nord project in Mali during the year as results in the field had been disappointing. In Sudan, a majority of the Block 12 permit area has now been subject to the initial surface exploration programme. A strategic review will be completed during the summer of 2013 to assess results across all the permits outside of Mako to ensure we remain focussed on the creation of shareholder value. At a corporate level, Toro Gold maintains a strong treasury position that is sufficient to fund exploration activities until the final quarter of 2013 and deliver a number of key technical milestones which will support value creation for our shareholders. The Company has progressed the implementation of its stated Environmental and Social Performance Framework ( ESPF ) with the establishment of a Social Investment Programme ( SIP ), a Biodiversity Fund, and the commencement of ESIA baseline studies and data collection at Mako. The Board and Management team believe the early incorporation of Social and Environmental performance to be a key aspect of any successful project development, and we will continue to work with our key stakeholders at Mako to ensure an integrated approach to Environmental and Social aspects of the project s development. The Company places a strong emphasis on its commitment to meeting international standards of good practice and operating in accordance with the highest ethical standards. Initiatives this year include a review of our Health and Safety and medical emergency planning and by introducing an Anti Bribery Policy which applies to all Toro Gold personnel across the Company. We will continue to review our operations to ensure we meet the expectations of the international community. I would like to take this opportunity to thank the team at Toro Gold, our commercial partners and those partners and stakeholders in the host Governments with which we work. The year saw excellent progress across the Company and I look forward to updating you all in due course. A Pouroulis Non-Executive Chairman 2

6 Operations Review Corporate activities In March 2012 the Company completed a private placement of 3,613,077 new Ordinary Shares at 4.50/share for gross proceeds of 16,258,847. Given the strength of investor demand for the Placement, the Agents were able to complete a series of secondary trades to provide liquidity to a number of shareholders. A total of 1,862,083 existing shares were placed at 4.50/share with a value of 8,379,374 (the Secondary Sales ). The result of both the Placement and the Secondary Sales is a shareholder structure populated in the majority with well regarded international institutional investors. This left the Company in a strong position to accelerate the development of the portfolio against a backdrop of continued weakness in the equity markets which has seen many junior companies struggle to raise funding. With a strong treasury and a supportive shareholder register of recognised investors, the Company is well placed to continue its development activities. In relation to our Guinean projects, the Company has noted the broader market concerns around the investment climate for the country. During the period the Guilengbe Project has continued to be developed in line with its regional peers of the AngloGoldAshanti Siguiri Mine and Nordgold s Lefa Mine as a lower grade, bulk tonnage operation. However given reduced investor confidence in the country, the Company has decided to take an impairment charge on Guilengbe to reflect investor concerns around the short to medium term prospects for Guinea s mining sector. Technical work is on-going to assess the Guilengbe Project s viability and a review of all available data will be completed in the forth coming wet season. The Company implemented it s formal Anti Bribery Policy during the period which applies to all staff, consultants and contractors that work with Toro Gold across our group operations. Based on the 2010 UK Anti-Bribery Act, the policy seeks to ensure that Toro Gold operates in an ethical and transparent manner in all our business dealings and that the Company has a mechanism for staff to alert management should any issues or incidents occur. The period saw the Company commence implementation of a Social Investment Program ( SIP ) at the Mako Project that aims to share the benefit of our operation with our host communities. Priority programs under the SIP include healthcare, water supply, education and income generation. Projects that are consistent with the principles of sustainability are identified in partnership with local development authorities and community representatives before being approved for implementation by the Mako team. In 2013 the Mako project is supplying educational materials to 14 schools within the Mako permit area; equipment to two community health clinics including training to each respective health committee and has commenced the development of groundwater wells with hand pumps that will provide secure access to potable water for two hamlets that were previously without a source of potable water. VTEM helicopter survey, Mako Drilling, Mako Core shed, Mako Local water well built by Toro Gold 3

7 Mako Project, Senegal The Mako Project was the focus of the Company s development during 2012 and the key driver of an excellent period of success. Based on the maiden Inferred Resource estimation of 1.05Moz at 2.2g/t reported in March 2012, the balance of the 2011/12 field season until July 2012 saw a further 13,000m of core drilling completed over 70 drill holes for a total of ~16,000m from 90 drill holes. SRK (UK) Ltd completed an updated Mineral Resource estimate in late 2012 that resulted in a CIM compliant Mineral Resource of 1.60 Moz at 2.0g/t and highlights of the Mineral Resource Statement included: Indicated Mineral Resources of 1.00 Moz at an average grade of 3.0 g/t Inferred Mineral Resources of 0.60 Moz an average grade of 1.2g/t; The estimate includes a High Grade Core containing: - Indicated Mineral Resources: 1.00 Moz at 3.0 g/t gold - Inferred Mineral Resources: 0.25 Moz at 2.8 g/t gold; The Mineral Resource estimation is constrained by a Whittle Pit shell using a US$1,350/oz gold price and is given above a cut off grade of 0.55 g/t; Excellent geological continuity along strike and down dip implying that infill drilling will lead to conversion of resources into higher confidence resource categories; The current Petowal resource is confined to a 1km long northeast trending zone; Three targets for near term resource expansion exist: down-dip (particularly should a larger pit be used) as well as along strike to the northeast and to the southwest where there are coincident gold-in-soil and IP geophysical anomalies; and, SRK applied a cut-off grade of 0.55g/t Au for the Mineral Resource Statement and classified the Mineral Resource into Indicated and Inferred categories as follows: Category Tonnage Mt Grade g/t Contained Gold 000 oz Indicated - Open Pit High Grade Core ,000 Indicated Total ,000 Inferred Open Pit High Grade Core Resource Envelope Inferred Total These resources are based on a pit shell which was generated using a gold price of US$1,350. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate and any resultant apparent errors are not considered to be material. Vertical projection displaying metal accumulation at Petowal 4

8 Based on the increase in Mineral Resources at Mako, the Company commenced a Scoping Study in late 2012 to assess the potential to develop a mining operation at the project site. Using a team of experienced professionals managing a group of internationally recognised consultants, the Study was completed by the first quarter of The Study demonstrates the potential to develop a high grade, open pit mining operation that can produce in excess of one million ounces of gold over an 11 year operating life. The Scoping Study envisions: Production in excess of 1.0 Moz of gold over 11 years of operations based on an initial 8 year mine life plus 3 years of processing lower grade stockpiles; An average Run of Mine ( RoM ) head grade in excess of 2.6 g/t for the first 8 years of production at an average strip ratio of 6.5:1 (waste : ore); A metallurgical processing facility treating ore at a rate of 1.5 mtpa utilising a CIP circuit for an overall recovery of 93%; Based on an owner-operated model for the mining fleet and an HFO fuelled power plant plus the costs associated with an EPCM contract, contingencies and capitalised financing costs, a total construction cost of US$255 million; and, Based on the combination of refinement of the technical and economic inputs plus the potential for resource expansion, the Company anticipates that opportunities can be realised following the completion of a Pre-feasibility Study. Given the positive findings of the Scoping Study, the Company has commenced a Pre-feasibility Study that is anticipated to be finalised in early In parallel with the Pre-feasibility Study, resource exploration work continues at Mako. Drilling recommenced in October 2012 after the wet season, and work focussed on the potential depth and strike extensions of the known mineralisation at the Petowal deposit. The Company has also completed a permit scale soil sampling campaign and a VTEM survey covering the Southern half of the permit. It is hoped that the analysis of the VTEM data and soil sampling results will guide upcoming exploration activities towards the discovery of resource extensions of Petowal and/or satellite deposits within the broader Mako permit area. A total 15,000m of core drilling is planned to be completed by Q Given the proximity of Mako to the Niokolo Koba National Park, the Company has maintained its focus on the early collection of baseline data relating to the environmental and social values in the project area. In 2012 the Company appointed Earth Systems SARL to carry out a number of baseline studies, namely: Socio-economic including land and water use; Ecology & Biodiversity; and Archaeology & Cultural Heritage. These studies will support the evaluation of project design options and alternatives during the Prefeasibility Study, culminating in a selection of the preferred Project arrangement and the subject of a detailed Environmental and Social Impact Assessment. Cross section, Mako Mako Drill Targets Core logging, Mako 5

9 Kenieba Permit, Senegal The 400km² permit is held through a joint venture with Senegalese group, 3SI. Previous work identified a 25km long narrow sedimentary sequence, of which quartzitic units are visually predominant and appear to be hosts to gold mineralisation. Within this overall sequence a central 8km long zone was identified via systematic soil geochemistry, rock chip sampling and selective trenching that has the potential for zones with economic levels of mineralisation. Work over 2012 focussed on the completion of an in-fill soil sampling campaign supported by detailed mapping that has enabled a programme to be designed to undertake first pass reconnaissance RAB drilling over this central area. It is anticipated that the RAB drilling will be completed during Q with results available later this year. Madina Foulbe and Velingara, Senegal The Company operates the Madina Foulbe (405km²) and Velingara (604km²) permits under a Joint Venture with SN Mineral Mining Limited. Madina Foulbe is contiguous with the southern boundary of the Kenieba Permit while Velingara is situated to the southern extent of the Kenieba Inlier on the Guinean border. The Company completed an initial soil sampling programme at Madina Foulbe which identified three areas that have the potential to host drill targets: to the North East of the permit area, a central zone and a southern target zone. In total some 12km of strike extent of targets have been identified from this reconnaissance scale soil sampling for a total of 2,405 samples. Based on the results from the initial work programme in early 2013, an in-fill soil sampling and detailed surface mapping campaign resulted in the identification of the Tambor NW targets over a total strike length of 4 km which will be subject to a RAB drilling programme in Q2 2013, as detailed in the map below. Velingara will be subject to an in-fill soils campaign during Q with the potential for a RAB drilling campaign to be completed in Q depending on the results received from the soil sampling. Kenieba and Madina Foulbe exploration targets Exploration in Senegal 6

10 Zomoko Permits, Gabon Operating via its 70% owned subsidiary, Toro Gold Gabon Ltd, the Company operates the Zomoko-Ngama North (1,495 km²), Zomoko- Ngama South (1,123 km²), and Zomoko-Extension 104km² licences in north-central Gabon. Initial soil sampling and mapping work focussed on identified Banded Ironstone Formations ( BIF ) targets within the permit areas: work comprising over 60km of soil grids and for the collection of 4,800 soil samples was completed during the 2011 / 2012 field season. In the second half of 2012 further soil grids were completed over a number of identified structural targets and areas of artisanal mining for a total of 4,722 samples. From this extensive reconnaissance scale work a number of anomalous zones of potential mineralisation were identified for follow up work. Accordingly in early 2013 an in-fill soils campaign with associated trenching was completed on the 5km long Ntou North soil target to help prepare a drill test programme that will be completed during 2013/2014. Additional in-fill soil sampling will also be completed on the remaining soil anomalies to potentially identify additional drilling targets. Zomoko permits soil sampling Zomoko permits location Guilengbe Project, Guinea Work at Guilengbe has focussed on evaluating the potential of a bulk tonnage resource similar to that of the nearby Siguiri and Lefa mines. With over 80,000m of drilling completed at the Guilengbe Project and a total of 6 zones of mineralisation identified over a total strike extent of 8km the potential scale of the Guilengbe project is now beginning to be fully appreciated. During the middle of 2012 a close spaced drilling programme was completed to understand the gold grade variability within the larger zones of potential mineralisation, the results of which were analysed during late 2012 and early Based on the analysis of the close spaced drilling, the Company is completing trenching and mapping during 2013 to evaluate the next stage of work for the Guilengbe project. However, based on concerns around the political risk associated with Guinea and the viability of lower grade deposits in lower gold price environments, the Company decided to write down the value of this asset to zero. Guilengbe, mineralised zones h a s 7

11 Block 12, Sudan Work at the Block 12 permit has focussed on the completion of reconnaissance scale exploration activities over the remaining 30% of the licence area not previously covered. This has included soil sampling, mapping and the identification of artisanal mining sites. In addition to this higher level work, in-fill soil campaigns have been completed over areas of previously identified potential which include sites of artisanal activity. To date some 8,686 soil and rock samples have been taken from Block 12. While Sudan has benefitted from a well publicised upsurge in artisanal gold mining with significant workings within Block 12 itself, to date the majority of sites visited do not appear to host commercial scale deposits. Work will continue over Q to complete our initial review of the Block 12 permit with an emphasis on the identification of larger scale targets that have the potential to host mining operations. Block 12 project location Block 12 soil sampling grids Other Permits During 2012 the Company completed a review of all its exploration properties to ensure an efficient and effective use of funds in creating shareholder value. Accordingly the Company has relinquished the Samaya Nord joint venture in Mali and has suspended the proposed joint venture with ORGEM in the Central African Republic. Further, the Company will continue to monitor the results achieved across the portfolio in addition to monitoring the investment climate in each jurisdiction to ensure that Toro seeks to provide the best risk adjusted return for our shareholders. 8

12 Board & Management Biographies The Board and Management team of Toro Gold has an established track record of successful discovery and development of projects across Africa this encompasses technical capability from the exploration phase through to operations and corporately in fund raising and M&A transactions. The management group has discovered over 10 million ounces of gold across four African countries during the last 15 years which includes two operating mines and one project currently under development. In addition the team has participated in corporate transactions totalling in excess of US$1bn over the last 15 years. The mix of complimentary technical and corporate skills allied to excellent political and business relations across the continent means that Toro Gold can identify and develop projects across our operational footprint in Africa to create returns for our shareholders. Board of Directors Adonis Pouroulis Non Executive Chairman Adonis is an entrepreneur whose expertise lies in the discovery, exploration and development of mineral resources including diamonds, precious / base metals, coal and oil and gas, and bringing these assets into production. Having worked in the natural resources sector for over 20 years he has extensive experience in the exploration and mining sector, and a wide network of industry relationships across the African continent. Adonis qualified as a mining engineer from the University of Witwatersand in Johannesburg in 1991 and subsequently spent some time working in the South African gold mines before heading to the Former Soviet Union where he established the Koronia metal trading company in Moscow. In 1994, having returned to South Africa, Adonis founded Blue Diamond Mines that developed a diamond mining operation in Port Nolloth and brought it into full production. Seeing an opportunity to create a larger, international diamond company focused in Africa, he founded Petra Diamonds and in 1997 it became the first diamond company to be listed on London s AIM market with a market capitalisation at the time of just 10 million. He has since overseen Petra s development from an exploration base into one of the largest independent diamond producers in Africa today with a market capitalisation of over US$1billion. He was influential in the founding, development and listing of a number of other natural resources companies including Chariot Oil & Gas that floated on AIM in May 2008 (having raised US$90 million and subsequently raised a further US$140m to further the exploration programme), Chromex Mining and Mukuba Resources. He continues to work with a pipeline of other early stage private companies such as Benzu Resources, Alufer Mining, Centrale Oil and Gas, Helios Oil and Gas and Rainbow Resources. Martin Horgan Chief Executive Officer & Executive Director A mining engineer by training, Martin has worked across numerous areas of the mining sector including as an engineer for Gold Fields in South Africa, for Steffen Robertson & Kirsten ( SRK ) in the UK and RSA offices, at Barclays Capital and as Executive Director of BDI Mining Corp. Martin started his career working as a mining engineer at Gold Fields East Driefontein Mine on the West Witswatersrand Basin some 70km from Johannesburg in South Africa. He joined SRK working in the Cardiff office in Dr Mike Armitage s Resource evaluation team where he worked on a diverse range of projects covering different commodities globally. At Barclays Capital his role covered mining project finance and advisory business across the African and the Middle East regions, global responsibility for the technical appraisal and review of all investments, environmental and social compliance of the investments in line with international standards and the financial modelling of all transactions. Martin subsequently joined AIM listed BDI Mining as an Executive Director, and he was part of the team which negotiated the sale of the company to Gem Diamonds in 2007 realising a record share price for the Group. Martin co-founded Toro Gold with Howard Bills in early

13 Howard Bills Group Exploration Manager and Director An exploration geologist by training, Howard has spent 30 years working predominately on gold and diamond exploration projects across the African continent undertaking work for BP Minerals, SAMAX, SRK Consulting and AXMIN. Over the years, Howard has developed an in-depth knowledge of a broad range of exploration techniques and the application of these to both gold and diamond exploration in the tropics. As well as being responsible for a variety of discoveries across Africa, Howard was also involved in numerous other early to advanced exploration projects in South East Asia, South America, Central Asia and Russia and preparing documents and independent reports for stock exchange listings and private placements. Prior to co-founding Toro Gold with Martin Horgan, Howard was Exploration Manager for AXMIN including being the General Manager of AXMIN s CAR subsidiary where he managed the discovery, drill out and pre-feasibility study on the 3m ounce Passandro gold project in the CAR building up a team of over 240 staff. Boubacar Thera International Business Development Manager and Director Boubacar Thera is a mining administrator and lawyer, has been involved with francophone African countries since Prior to joining the Company in 2009 Mr. Thera was appointed Manager and Chief Government Liaison Officer of AXMIN and African Selection Mining, and has previously acted as a consultant for other mining companies across Francophone Africa. Phillip Jeffrey (Jeff) Gard Executive Director After graduating with degrees in Chemical, Mining and Minerals engineering, Jeff started his career in mining in 1966 with the National Coal Board in the U.K. He then joined Cominco in Canada with the position of Process Superintendent in lead/zinc, gold and coal. In 1974 he joined the Fluor Corporation as Senior Process Engineer in their mining and metals group. Over the following 30 years he held various positions around the globe including Process Manager, Project Manager and Project Director, becoming the Managing Director for Southern Africa and later became President of their mining and metals group. In this position he was responsible for the safe and timely execution of projects worth approximately US$2 billion in value annually. This included the US$1.9 billion Batu Hijau project (copper/gold) in Indonesia and the US$1.8 billion Muskeg River project (oil sands) in northern Canada. Jeff has held a number of directorships in the resource sector following his retirement from Fluor, helping to establish mining operations across multiple commodities and jurisdictions. William Lovering Non Executive Director William is currently a Managing Partner at The Private Office in Geneva, Switzerland where he also resides. Prior to this role he served as Head of International Portfolio Management for the Al Rajhi Holdings Group of Companies. He has significant experience in the resource sector and over twenty years investing experience in London, the Middle East and Geneva. Robert Sinclair Non executive Director Robert is managing director of the Guernsey-based Artemis Fiduciaries and a director of a number of investment fund management companies and investment funds associated with Artemis Fiduciaries. Robert is chairman of Schroder Oriental Income Fund Limited, and a director of Picton Property Income Limited and also chairman of its audit committee. He is a Fellow of the Institute of Chartered Accountants in England and Wales and is resident in Guernsey. 10

14 Management Team Martin Horgan Chief Executive Officer See page 9 Gary Townsend Chief Financial Officer Gary is a Fellow of the Institute of Chartered Accountants and a Chartered Taxation Adviser. For the majority of the last 16 years has worked for major gold mining companies in Africa in senior financial roles. From 1996 to 2004, he was Group Financial Controller of Ashanti Goldfields where he was in charge of structuring the finance department in order to accommodate several acquisitions including that of SAMAX Gold. Within this role Gary was also integral in setting up and running the internal budgetary and reporting systems dealing with the Group s seven mining operations across Africa, mitigating tax liabilities and helping to refinance the Group prior to the Company being sold to Anglo Gold in Gary has also held positions as Chief Financial Officer and Company Secretary at Guinor Gold (which was subsequently sold to Crew Gold for US$350m following a raising of US$130m in equity and project finance to fund mine expansion) and more recently Horizonte Minerals Plc where he dealt with all financial aspects required for the operations in London, Peru and Brazil. Howard Bills Group Exploration Manager See page 10 Boubacar Thera International Business Development Management See page 10 Glen Armstrong Senior Environmental and Social Performance Advisor An environmental scientist and public health specialist by training, Glen has nearly 30 years experience in environmental management and social development, much of it International, having worked extensively across Africa, Latin America and South East Asia as well as Europe. As Managing Director of Aspinwall and Company he led one of the UK s leading and most respected consultancies before joining IFC as head of its Environmental and Social Development team in Washington DC, responsible for environmental and social analysis of all its investments worldwide. After moving back to the UK he continued as an advisor to IFC and the World Bank during which he played a key role in facilitating the Equator Principles. In 2003 he co-founded Sustainable Finance Ltd providing E&S risk management services to over 40 major Banks globally before the Company was acquired by PWC in Since 2008 he has acted as an advisor to a range of international organisations. 11

15 Report of the Directors Report of the Directors for the year ended 31 December 2012 The Directors present their report together with the Group financial statements for the year ended 31 December 2012.There is no ultimate controlling party as the Company has a large number of shareholders; the most significant shareholding as at the date of signing is Macquarie Bank Limited who hold 19%. Principal Activity Toro Gold Limited is a gold exploration and development company focused on sub-saharan Africa. Results & Dividends The results for the year are set out on page 16. The Directors do not recommend the payment of a dividend (2011: Nil). Directors Adonis Pouroulis Martin Horgan Phillip Jeffrey Gard William Lovering Robert Sinclair Howard Bills (appointed 3 February 2012) Boubacar Thera (appointed 3 February 2012) Artemis Corporate Services Limited Review of the Business A detailed review of the Group s activities together with future developments of the Group is provided in the Chairman s Statement and the Operations Review. Key Performance Indicators The key performance indicators of the Group are as follows: Cash at bank 16,404 3,673 Exploration expenditure for the year 12,117 7,390 Impairment of intangible assests 9,124 - Financial Instruments Details of the use of financial instruments by the Group and financial risk management are set out in note 16 to the financial statements. Events after the Reporting Date There were no significant events after the reporting date. 12

16 Directors Responsibilities The Directors are responsible for preparing the Directors Report and the financial statements for the Group in accordance with applicable Guernsey law and regulations. Guernsey legislation requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that year. The Directors have elected to prepare the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. International Accounting Standard 1 requires that the financial statements present fairly for each financial year the Groups financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board s Framework for the preparation and presentation of financial statements. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRS. A fair presentation also requires the directors to: consistently select and apply appropriate accounting policies; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity s financial position and financial performance; and prepare the financial statements on a going concern basis unless, having assessed the ability of the Group to continue as a going concern, management either intends to liquidate the entity or to cease trading, or have no realistic alternative to do so. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure the financial statements comply with The Companies (Guernsey) Law 2008.They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group s website. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Directors statement as to disclosure of information to auditors Each of the Directors, who were all members of the Board at the time of approving the financial statements, confirms that having made enquiries of fellow Directors: So far as the Directors are aware, there is no relevant information of which the Company s Auditors are unaware; and They have taken all the steps that ought to have been taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company s Auditors are aware of that information. BDO LLP have expressed their willingness to continue in office and a resolution to re-appoint them will be proposed at the next annual general meeting. By order of the Board Artemis Secretaries Limited Secretary Date: 29th July

17 Independent Auditor s Report TO THE MEMBERS OF TORO GOLD LIMITED We have audited the financial statements of Toro Gold Limited for the year ended 31 December 2012 which comprise the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of cash flows, the statement of changes in equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the company s members, as a body, in accordance with Section 262 of The Companies (Guernsey) Law 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. Respective Responsibilities of the Directors and Auditor As explained more fully in the Directors Responsibilities Statement within the Directors Report, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the Audit of the Financial Statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non financial information in the Directors Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report. Opinion on the Financial Statements In our opinion the financial statements: give a true and fair view of the state of the company s affairs as at 31 December 2012 and of its loss for the year then ended; have been properly prepared in accordance with IFRSs as adopted by the European Union; and have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law Emphasis on matter going concern In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 2 to the financial statements concerning the Group s ability to continue as a going concern which is dependent on the Group s ability to raise further funds through debt or new equity placing. The Directors believe that the Group will secure the necessary funds. While the Directors are continuing funding negotiations with certain third parties there are currently no binding agreements in place. These conditions together with the other matters referred to in note 2 indicate the existence of a material uncertainty which may cast significant doubt over the Group s ability to continue as a going concern. The financial statements do not include any adjustments that would result if the Group was unable to continue as a going concern. 14

18 Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies (Guernsey) Law 2008 requires us to report to you if, in our opinion: proper accounting records have not been kept by the company; or the financial statements are not in agreement with the accounting records; or we have failed to obtain all the information and explanations, which, to the best of our knowledge and belief, are necessary for the purposes of our audit. BDO LLP 55 Baker Street London W1U 7EU Date: 29th July 2013 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 15

19 Consolidated statement of comprehensive income for the year ended 31 December 2012 Year ended 31 December 2012 Year ended 31 December 2011 Note Share based payments (1,258) (2,059) Impairment of intangible assets 10 (9,124) - Administrative expenses 6 (2,905) (2,997) Total operating expenses (13,287) (5,056) Loss from operations 4 (13,287) (5,056) Finance costs 7 (1,328) (884) Loss for the year before taxation (14,615) (5,940) Taxation expense 8 (29) - Loss and total comprehensive loss for the year (14,644) (5,940) Loss and total comprehensive loss for the year attributable to: Owners of the parent (14,644) (5,829) Non - controlling interest - (111) (14,644) (5,940) The notes on pages 20 to 37 form part of these financial statements. 16

20 Consolidated statement of financial position as at 31 December 2012 Note Assets Non-current assets Property, plant and equipment 9 1, Intangible assets 10 19,880 10,379 Total non-current assets 20,917 10,805 Current assets Trade and other receivables Cash and cash equivalents 13 16,404 3,673 Total current assets 16,631 3,959 Total assets 37,548 14,764 Equity and liabilities Current liabilities Trade and other payables 14 1, Tax liabilities Other financial liabilities 15-1,619 Total current liabilities 1,057 2,285 Equity and reserves Share capital Share premium 17 62,000 25,003 Other reserves 18 2,676 1,114 Retained losses (28,382) (13,738) Equity attributable to the owners of the parent 36,508 12,496 Non-controlling interest (17) (17) Total equity and reserves 36,491 12,479 Total equity and liabilities 37,548 14,764 The financial statements were approved and authorised for issue by the Board of Directors on 29th July 2013 and were signed on its behalf by: Martin Horgan Director Adonis Pouroulis Director The notes on pages 20 to 37 form part of these financial statements. 17

21 Consolidated statement of cash flows for the year ended 31 December 2012 Year ended 31 December 2012 Year ended 31 December 2011 Operating activities Loss before tax (14,615) (5,940) Adjusted for: Depreciation Impairment of intangible assets 9,124 - Share based payments 1,258 2,059 Movement in fair value of warrants 1, Operating loss before changes in working capital (2,882) (2,980) Movement in receivables (93) 126 Movement in payables (37) 316 Net cash outflow from operating activities (3,012) (2,538) Investing activities Payments in respect of intangible assets (12,117) (7,390) Payments in respect of property, plant and equipment (607) (357) Cash outflow used in investing activities (12,724) (7,747) Financing activities Issue of ordinary shares 28,467 11,942 Net cash inflow from financing activities 28,467 11,942 Net change in cash and cash equivalents 12,731 1,657 Cash and cash equivalents at the start of the year 3,673 2,016 Cash and cash equivalents at the end of the year 16,404 3,673 The notes on pages 20 to 37 form part of these financial statements. 18

22 Consolidated statement of changes in equity for the year ended 31 December 2012 Share Capital Share premium Other reserves Retained losses Equity attributable to owners of parent Noncontrolling interest Total Balance at 1 January , (4,253) 3, ,413 Total comprehensive loss for the year (5,829) (5,829) (111) (5,940) Issue of shares 42 12, ,546-12,546 Share issue costs - (604) - - (604) - (604) Fair value of warrants exercised Share based payments - - 2,059-2,059-2,059 Reallocation of share based payments to non-controlling interest - - (1,170) - (1,170) 1,170 - Acquisition of non-controlling interest 18 5,364 - (3,656) 1,726 (1,726) - Balance at 31 December ,003 1,114 (13,738) 12,496 (17) 12,479 Total comprehensive loss for the year (14,644) (14,644) - (14,644) Issue of shares 61 25, ,774-25,774 Share issue costs - (1,165) - - (1,165) - (1,165) Share based payments - services - - 1,257-1,257-1,257 Share based payments - asset acquisition (note 10) 19 5, ,985-5,985 Warrants exercised (note 15) 17 6, ,805-6,805 Balance at 31 December ,000 2,676 (28,382) 36,508 (17) 36,491 The following describes the nature and purpose of each reserve within shareholders equity: Share capital Share premium Other reserves Retained losses Non-controlling interest Amount subscribed for share capital at nominal value Amount subscribed for share capital in excess of nominal value Reserve in respect of share based payments Cumulative net gains and losses recognised in the statement of comprehensive income Represents a 30% shareholding in Toro Gold Gabon Limited The notes on pages 20 to 37 form part of these financial statements. 19

23 Notes forming part of the financial statements for the year ended 31 December General information Toro Gold Limited is a company incorporated and domiciled in Guernsey with registration number The address of the registered office is Trafalgar Court, Admiral Park, Guernsey GY1 3EL. The Group s administrative and head office is in Guernsey. The nature of the Company s operations and its principal activities are set out in the Directors Report and in the Operations review. 2 Accounting policies Basis of preparation The principal accounting policies adopted in the preparation of the financial statements are set out below. These financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations issued by the International Accounting Standards Board (IASB) as adopted by the European Union (IFRS). The adoption of all of the new and revised Standards and Interpretations issued by the IASB and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to the operations and effective for annual reporting periods beginning on 1 January 2012 are reflected in these financial statements. The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 3. The following new standards and amendments to standards are mandatory for the first time for the Group for financial year beginning 1 January Except as noted, the implementation of these standards did not have a material effect on the Group. Standard Effective date Impact on initial application IFRS 7 Amendment Transfer of Financial Assets 1 Jul 2011 No impact IFRS 1 Amendment Severe hyperinflation and removal of fixed dates 1 July 2011 No impact No other IFRS issued and adopted but not yet effective are expected to have an impact on the Group s financial statements. 20

24 Notes forming part of the financial statements for the year ended 31 December 2012 (continued) Accounting policies (continued) Standards, amendments and interpretations, which are effective for reporting periods beginning after the date of these financial statements which have not been adopted early: Standard Description Effective date IAS 1 Presentation of Items of Other Comprehensive Income 1 Jul 2012 IFRS 10 Consolidated Financial Statements 1 Jan 2013 IFRS 11 Joint Arrangements 1 Jan 2013 IFRS 12 Disclosure of Interests in Other Entities 1 Jan 2013 IFRS 13 Fair Value Measurement 1 Jan 2013 IAS 27 Separate Financial Statements 1 Jan 2013 IAS 28 Investments in Associates and Joint Ventures 1 Jan 2013 IAS19 Employee Benefits 1 Jan 2013 IFRS 7 Offsetting Financial Assets and Financial Liabilities 1 Jan 2013 IFRS improvements ( Cycle) 1 Jan 2013 IAS 32 Offsetting Financial Assets and Financial Liabilities 1 Jan 2014 IFRS 9* Financial Instruments 1 Jan 2015 * not yet been endorsed by the European Union at the date that these financial statements were approved and authorised for issue by the Board. The Group is evaluating the impact of the above pronouncements but they are not expected to have a material impact on the Group s income or equity. Going Concern The Group at 31 December 2012 had a cash balance of US$16,404,000. The Directors have prepared cash flow forecasts for the twelve months from the date of signing of these financial statements which indicate that the Group has sufficient funding to finance its operations through to March 2014 and therefore further funding will be required after this date. The Directors are in negotiations with a number of parties in respect of raising further funds through debt or new equity placing to continue with its operations. Whilst progress is being made on a number of potential transactions which would provide additional financing at present there are no binding agreements in place. Based on the current progress of the negotiations with potential providers of finance and discussions with potential investors the Directors believe that the necessary funds to provide adequate financing for continued exploration work will be raised as required and accordingly they are confident that the Group will continue as a going concern and have prepared the financial statements on that basis. Should the Group be unable to raise the necessary finance, it may be unable to realise its assets and discharge its liabilities in the normal course of business. These conditions indicate the existence of a material uncertainty which may cast significant doubt over the Group s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was not able to continue as a going concern. 21