XTSE:OYM Annual Report 20-F/A Filing - 6/30/2012

Effective Date 6/30/2012

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 20-F/A
 
Amendment No. 1
 
 
[  ]
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[  ]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
OR
 
[X ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the six-month transitional year ended June 30, 2012

OR

[   ]
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from ____________ to __________

Commission file number 0-52324

Olympus Pacific Minerals Inc.
(Exact name of Registrant as specified in its charter)

n/a.
(Translation of Registrant’s name into English)

Canada
(Jurisdiction of incorporation or organization)

Suite 500 –10 King Street East, Toronto, Ontario, Canada, M5C 1C3
(Address of principal executive offices)

 
Securities to be registered pursuant to Section 12(b) of the Act:
 
Title of each class                                                                           Name of each exchange on which registered
 
None                                                                                 N/A
 

 
 

 
 
 
Securities to be registered pursuant to Section 12(g) of the Act:                common shares
(Title of Class)
 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:None 

Number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 378, 781, 186

 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Yes []      No [X]

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934.
Yes [X]      No [ ]

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants was required to file such reports). And (2) has been subject to such filing requirements for the past 90 days.
Yes [X]      No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [  ]      No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated file [ ]     Accelerated file [ ]     Non-accelerated file [X]

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filling:

U.S. GAAP [   ]      International Financial Reporting Standards as issued Other []
                                By the International Accounting Standards Board [ X]

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
 [] Item 17   [   ] Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes []      No [X ]

 
 

 
 

Table of Contents
 
    GLOSSARY iii
    Cautionary Note Regarding Forward-Looking Information  vii
ITEM 1:               Identity of Directors, Senior Management and Advisers 1
ITEM 2:               Offer Statistics and Expected Timetable 1
ITEM 3:               Key Information 1
    3A.           Selected Financial Data 1
    3B.            Capitalization and Indebtedness 3
    3C.            Reasons for the Offer and Use of Proceeds 3
    3D.            Risk Factors 3
ITEM 4:               Information on the Company 14
    4A.           History and Development of the Company 14
    4B.            Business Overview 21
    4C.            Organizational Structure 25
    4D.            Property, Plant and Equipment 26
ITEM 4A:            Unresolved Staff Comments 73
ITEM 5:               Operating and Financial Review and Prospects 74
    5A.           Operating Results 74
    5B.            Liquidity and Capital Resources 80
    5C.            Research and development, patents and licenses, etc. 81
    5D.           Trend Information 81
    5E.            Off-Balance Sheet Arrangements 82
    5F.            Tabular Disclosure of Contractual Obligations as at December 31, 2011 82
ITEM 6:               Directors, Senior Management, and Employees 82
    6A.           Directors and Senior Management 82
    6B.            Compensation 86
    6C.            Board Practices 92
    6D.            Employees 94
    6E.            Share Ownership 94
ITEM 7:               Major Shareholders and Related Party Transactions 96
    7A.           Major Shareholders 96
    7B.            Related Party Transactions 97
    7C.             Interests of Experts and Counsel 98
ITEM 8:                Financial Information 98
    8A.            Consolidated Statements and Other Financial Information 98
    8B.             Significant Changes 98
ITEM 9:                The Offer and Listing 98
    9A.            Offer and Listing Details 98
    9B.             Plan of Distribution 101
    9C.             Markets 101 
    9D.             Selling Shareholders 101
    9E.              Dilution 101
    9F.              Expenses of the Issue 101
ITEM 10:               Additional Information 101
    10A.           Share Capital 101
    10B.            Memorandum and Articles of Association 101
    10C.            Material Contracts 101
    10D.            Exchange Controls 103
 
 
 
- i -

 
 
 
 
    10E.            Taxation 104
       10E.1.           Certain Canadian Federal Income Tax Consequences – General 104
       10E.2.           Dividends 104
       10E.3.           Disposition of Common Shares 104
       10E.4.           United States Taxation 105
    10F.            Dividends and Paying Agents 110
    10G.            Statements by Experts 110
    10H.            Documents on Display 110
    10I.            Subsidiary Information 110
ITEM 11:                 Quantitative and Qualitative Disclosures about Market Risk 110
ITEM 12:                 Description of Securities other than Equity Securities 110
ITEM 13:                 Defaults, Dividend Arrearages and Delinquencies 111
ITEM 14:                 Material Modifications to the Rights of Security Holders and Use of Proceeds 111
ITEM 15:                 Controls and Procedures 111
ITEM 16:                 [RESERVED] 113
    ITEM 16A.              Audit Committee Financial Expert 113
    ITEM 16B.               Code of Ethics 113
    ITEM 16C.               Principal Accountant Fees and Services 113
    ITEM 16D.               Exemptions From the Listing Standards for Audit Committees 114
    ITEM 16E.                Purchases of Equity Securities by the Issuer and Affiliated Purchasers 114
    ITEM 16F.                Change in Registrant’s Certifying Accountant 115
ITEM 17:                 Financial Statements 116
ITEM 18:                 Financial Statements 116
ITEM 19:                 Exhibits 116
    19A.            Financial Statements 116
    19B.            Exhibits 116
SIGNATURES 1
 
 
 
- ii -

 
 
 
GLOSSARY
 
Following is a glossary of terms used throughout this Annual Report.
 
artisanal mining
mining at small-scale mines (and to a lesser extent quarries) that are labor intensive, with mechanization being at a low level and basic.  Artisanal mining can encompass all small, medium, large, informal, legal and illegal miners who use rudimentary processes to extract valuable rocks and minerals from ore bodies.
 
bitumen
known as asphalt or tar, bitumen is the brown or black viscous residue from the vacuum distillation of crude petroleum.
 
breccia
a rock in which angular fragments are surrounded by a mass of finer-grained material.
 
C-horizon soil
the soil parent material, either created in situ or transported into its present location.  Beneath the C horizon lies bedrock.
 
concentrate
a concentrate of minerals produced by crushing, grinding and processing methods such as gravity, flotation or leaching.
 
exploration stage
the search for mineral deposits which are not in either the development or production stage.
 
Form 43-101F1
technical report issued pursuant to Canadian securities rules, the objective of which is to provide a summary of scientific and technical information concerning mineral exploration, development and production activities on a mineral property that is material to an issuer. Form 43-101F1is prepared in accordance with NI 43-101.  Form 43-101F1 sets out specific requirements for the preparation and contents of a technical report.
 
feasibility study
a comprehensive study of a mineral deposit in which all geological, engineering, legal, operating, economic, social, environmental and other relevant factors are considered in sufficient detail that it could reasonably serve as the basis for a final decision by a financial institution to finance the development of the deposit for mineral production.
 
gneiss
a coarse-grained, foliated rock produced by regional metamorphism. The mineral grains within gneiss are elongated due to pressure and the rock has a compositional banding due to chemical activity.
 
grade
the metal content of rock with precious metals.  Grade can be expressed as troy ounces or grams per tonne of rock.
 
granodiorite
a medium to coarse-grained intrusive igneous rock, intermediate in composition between quartz diorite and quartz monzonite.
 
gold deposit
a mineral deposit mineralized with gold.
 
 
 
 
 
- iii -

 
 
 
 
hydrothermal
the products or the actions of heated waters in a rock mass such as a mineral deposit precipitating from a hot solution.
 
igneous
a primary type of rock formed by the cooling of molten material.
 
inferred mineral resource
that part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings, and drill holes.
 
intrusion
intrusive-molten rock which is intruded (injected) into spaces that are created by a combination of melting and displacement.
 
mafic
igneous rocks composed mostly of dark, iron- and magnesium-rich minerals.
 
metallurgical tests
scientific examinations of rock/material to determine the optimum extraction of metal contained. Core samples from diamond drill holes are used as representative samples of the mineralization for this test work.
 
mineral resource
a concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and industrial minerals in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge.  Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.
 
NI 43-101
National Instrument 43-101 Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators
 
ore
a naturally occurring rock or material from which minerals, such as gold, can be extracted at a profit; a determination of whether a mineral deposit contains ore is often made by a feasibility study.
 
open pit
a mining method whereby the mineral reserves are accessed from surface by the successive removal of layers of material usually creating a large pit at the surface of the earth.
 
ounce or oz.
a troy ounce or 20 pennyweights or 480 grains or 31.103 grams.
 
petrology
a field of geology which focuses on the study of rocks and the conditions by which they form. There are three branches of petrology, corresponding to the three types of rocks: igneous, metamorphic, and sedimentary.
 
pre-feasibility study
a comprehensive study of the viability of a mineral project that has advanced to a stage where the mining methods, in the case of underground mining, or the pit configurations, in the case of an open pit, has been established, where  effective methods of mineral processing has been determined, and includes a financial analysis based on reasonable assumptions of technical, engineering, legal, operating, and economic factors and evaluation of other relevant factors which are sufficient for a Qualified Person, acting reasonably, to determine if all or part of the Mineral Resource may be classified as a Mineral Reserve.
 
 
 
 
- iv -

 
 
 
probable reserve (Canadian definition)
the economically mineable part of an indicated and, in some circumstances, a measured mineral resource demonstrated by at least a preliminary feasibility study. This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.
 
probable reserve
(U.S. definition)
reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced.  The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.
 
prospect
an area prospective for economic minerals based on geological, geophysical, geochemical and other criteria.
 
production stage
all companies engaged in the exploitation of a mineral deposit (reserve).
 
proven reserve
(Canadian definition)
 
the economically mineable part of a measured mineral resource demonstrated by at least a preliminary feasibility study.  This study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.
 
proven reserve
(U.S. definition)
 
reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quantity are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral contents of reserves are well established.
 
qualified person
Has the meaning ascribed thereto in NI 43-101.
 
reserve
that part of a mineral deposit, which could be economically and legally extracted or produced at the time of the reserve determination. Reserves are customarily stated in terms of “ore” when dealing with metalliferous minerals such as gold or silver.
 
schists
a metamorphic rock containing abundant particles of mica, characterized by strong foliation, and originating from a metamorphism in which directed pressure plays a significant role.
 
 
 
 
- v -

 
 
 
shaft
a vertical or inclined tunnel in an underground mine driven downward from surface.
 
shear
a tabular zone of faulting within which the rocks are crushed and flattened.
 
skarn
a lime-bearing silicate derived from nearly pure limestone and dolomite with the introduction of large amounts of silicon, aluminum, iron, and magnesium.
 
stoping
the act of mining in a confined space.
 
stratigraphic units
sequences of bedded rocks in specific areas.
 
strike
the direction of line formed by intersection of a rock surface with a horizontal plane. Strike is always perpendicular to direction of dip.
 
thrust fault
 
a particular type of fault, or break in the fabric of the Earth’s crust with resulting movement of each side against the other, in which a lower stratigraphic position is pushed up and over another. This is the result of compressional forces.
 
toll treatment
processing or treatment of ore at an offsite processing facility.
 
trenching
the surface excavation of a linear trench to expose mineralization for sampling.
 
vein
a tabular body of rock typically of narrow thickness and mineralized occupying a fault, shear, fissure or fracture crosscutting another pre-existing rock.
 
For ease of reference, the following conversion factors are provided:
 
1 mile (mi)
= 1.609 kilometres (km)
2,204 pounds (lbs)
= 1 tonne
1 yard (yd)
= 0.9144 meter (m)
2,000 pounds/1 short ton
= 0.907 tonne
1 acre
= 0.405 hectare (ha)
1 troy ounce
= 31.103 grams
1 kilometre (km)
= 1,000 meters
   
 
 
 
- vi -

 

 
 
Cautionary Note Regarding Forward-Looking Information
 
This report contains certain forward-looking statements relating to, but not limited to, management’s expectations, estimates, intentions, plans and beliefs. Forward-looking information can often be identified by forward-looking words such as “anticipate”, “believe”, “expect”, “anticipate”, “project”, “goal”, “plan”, “intend”, “budget”, “estimate”, “may” and “will” or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Forward-looking information may include, but is not limited to, statements regarding:
 
•           reserve and resource estimates;
 
•           estimates of future production;
 
•           unit costs, costs of capital projects and timing of commencement of operations;
 
•           production and recovery rates;
 
•           financing needs, the availability of financing on acceptable terms or other sources of funding, if needed; and
 
•           the timing of additional tests, feasibility studies and environmental or other permitting
 
Forward-looking statements should not be construed as guarantees of future performance. The forward-looking statements contained herein are based on our management’s current expectations, estimates, assumptions, opinion and analysis in light of its experience that, while considered reasonable at the time, may turn out to be incorrect or involve known and unknown risks, uncertainties and other factors that are inherently subject to a number of business and economic risks and uncertainties and contingencies that could cause actual results to differ materially from any forward-looking statement.  Forward-looking statements involve significant known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any forward-looking statement.  These risks, uncertainties and other factors include, but are not limited to, the following:
 
•           failure to establish estimated resources and reserves;
 
•           the grade and recovery of ore which is mined varying from estimates;
 
•           capital and operating costs varying significantly from estimates;
 
•           delays in obtaining or failures to obtain required governmental, environmental or other project approvals;
 
•           changes in national and local government legislation, taxation or regulations, political or economic developments;
 
•           the ability to obtain financing on favourable terms or at all;
 
•           inflation;
 
•           changes in currency exchange rates;
 
•           fluctuations in commodity prices;
 
 
 
- vii -

 
 
 
•           delays in the development of projects; and
 
•           other risks that we set forth in our filings with the SEC and other applicable securities regulatory authorities from time to time and available at www.sedar.com or www.sec.gov/edgar.
 
Due to the inherent risks associated with our business, readers are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur.  We disclaim any intention or obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by applicable laws.
 
 
 
- viii -

 
 
 
PART I
 
ITEM 1:  
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
 
Not applicable
 
ITEM 2:  
OFFER STATISTICS AND EXPECTED TIMETABLE
 
Not Applicable.
 
ITEM 3:  
KEY INFORMATION
 
3A.  
Selected Financial Data
 
The following is selected financial data of Olympus Pacific Minerals Inc. (together with its consolidated subsidiaries, the “Company”, “Olympus” or “we”, “us”, “our” or similar identifying terminology), expressed in United States dollars, for the six-month transitional fiscal year ended June 30, 2012 and the fiscal years ended December 31, 2011 and 2010, prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) for fiscal years ended December 31, 2009 and 2008, which differ substantially from United States generally accepted accounting principles (“US GAAP”).   The Consolidated Financial Statements for the six-month transitional fiscal year ended June 30, 2012 and the fiscal years ended December 31, 2011 and 2010 comply with IFRS as published by the IASB. Prior to the adoption by the Company of IFRS, for a description of the differences between Canadian GAAP and US GAAP, and how these differences could affect the Company’s financial statements, please see Note 19 to the audited financial statements for the years ended December 31, 2010, 2009 and 2008 which are included in Item 19 of the Company’s 2010 20-F Annual Report dated June 7, 2011. Note 19 to the audited financial statements for the years ended December 31, 2010, 2009 and 2008 is incorporated by reference herein. This reconciliation is not required for financial statements prepared under IFRS, and accordingly has not been prepared for the six-month transitional fiscal year ended June 30, 2012 and fiscal years ended December 31, 2011 and 2010.
 
The selected financial data should be read in conjunction with the financial statements and other financial information included elsewhere in this Annual Report on Form 20-F.
 
Table No. 1:  
Selected Financial Data
 
   
Six-month
Transitional Fiscal Year Ended June 30, 2012 Audited
   
Year Ended
December
31, 2011
Audited
   
Year Ended
December
31, 2010
Audited
 
AMOUNTS IN ACCORDANCE WITH IFRS
                 
Revenue
    34,552,265       47,976,630       35,986,013  
Income (Loss) for the Period
    -18,326,891       1,644,898       -12,773,072  
Basic Earnings (Loss) Per Share
    -0.040       0.003       -0.042  
Diluted (Loss) Per Share
    -0.040       0.003       -0.042  
Dividends Per Share
 
Nil
   
Nil
   
Nil
 
Period-End Shares
    378,781,186       380,593,907       365,510,797  
Cash
    3,397,728       8,730,248       4,105,325  
Working Capital
    -12,878,781       3,210,632       3,618,445  
Mine Properties
    37,165,314       37,896,565       39,197,779  
Deferred Exploration Expenditure
    21,428,562       19,516,555       13,621,774  
Deferred Development Expenditure
    10,636,534       20,276,490       18,103,858  
Long-Term Liabilities
    38,763,749       47,257,310       41,325,266  
Capital Stock
    135,134,697       135,846,955       129,903,856  
Non-Controlling Interest
    2,169,412       5,920,409       5,682,771  
Shareholders’ Equity
    50,562,061       71,524,794       65,227,594  
Total Assets
    121,117,149       145,252,174       123,192,405  
 
 
 
1

 
 
 
(US$)
 
Year Ended
December
31, 2009
   
Year Ended
December
31, 2008
 
   
Audited
   
Audited
 
AMOUNTS IN ACCORDANCE WITH CANADIAN GAAP
           
Revenue
    16,400,740       7,275,324  
Income (Loss) for the Period
    -9,346,892       -20,200,995  
Basic & Diluted Earnings (Loss) Per Share
    -0.038       -0.087  
Dividends Per Share
 
Nil
   
Nil
 
Period-End Shares
    268,458,779       232,423,101  
Cash
    5,718,725       4,161,735  
Working Capital
    7,400,950       5,424,272  
Mineral Properties
    7,203,352       7,810,307  
Deferred Development and Exploration
    25,049,053       26,067,847  
Long-Term Liabilities
    770,010       1,046,883  
Capital Stock
    97,318,003       88,904,501  
Non-Controlling Interest
    -444,043    
Nil
 
Shareholders’ Equity
    48,314,083       48,940,283  
Total Assets
    54,024,268       54,282,352  
                 
AMOUNTS IN ACCORDANCE WITH US GAAP
 
Year Ended
December
31, 2009
Audited
   
Year Ended
December
31, 2008
Audited
 
Net Comprehensive (Loss)
    -8,056,464       -20,957,186  
Income (Loss) Per Share – Basic & Diluted
    -0.03       -0.05  
Mineral Properties
    7,172,729       7,779,684  
Deferred Development and Exploration
    4,797,776       3,545,531  
Non-controlling Interest
    -339,358    
Nil
 
Shareholders’ Equity
    27,967,401       26,313,898  
Total Assets
    33,677,586       32,655,967  
 
 
 
2

 
 
 
In this Transition Report on Form 20-F, unless otherwise specified, all dollar amounts are expressed in United States dollars.
 
3B.  
Capitalization and Indebtedness
 
Not applicable
 
3C.  
Reasons for the Offer and Use of Proceeds
 
Not Applicable.
 
3D.  
Risk Factors
 
The Company faces significant risk factors and uncertainties associated with its business and its industry, similar to those faced by other exploration and development companies in Southeast Asia, including the following general description of material risk factors:
 
There is a significant doubt regarding the ability of the Company to continue as a going concern. The Company’s audited annual consolidated financial statements as at and for the period ended June 30, 2012 were prepared on a going concern basis, under the historical cost basis, which assumes the Company will continue its operations for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the ordinary course of business.
 
During the six-month period ended June 30, 2012, the Company had a significant disruption to its operations at the Phuoc Son Mine which negatively impacted the cash-flows and the Company incurred a net loss of $18.3 million for the period. As at June 30, 2012, the Company’s current liabilities exceeded its current assets by $12.9 million and the Company has high debt levels. Further the Corporation currently has limited cash on hand and, since it is experiencing negative cash flow, its cash reserves are being depleted.
 
 
 
3

 
 
 
The Phuoc Son Mine has now resumed normal operations and management expects that net cash flows from operations will be positive in fiscal 2013. If the Company is able to increase production to targeted levels and the market price for gold remains robust through fiscal 2013, the Company’s liquidity position may improve.
 
The ability of the Company to continue as a going concern depends upon its ability to resume profitable operations or to continue to access debt or equity capital in the ordinary course.  No assurance can be given that such capital will be available at all or on terms acceptable to the Company.  Management is considering various alternatives, including a number of initiatives to raise additional capital or to restructure its existing debt.  However, as at the date of this report the Company has not secured such further financing.  Although the Company has been successful in securing the funds necessary to execute its business plan in the past, it is not possible to determine with certainty the success or adequacy of its financing initiatives.
 
Not all of the Company’s mineral properties contain a known commercially mineable mineral deposit. The business of mineral exploration and extraction involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. Major expenses may be required to locate, establish or expand mineral reserves, to develop metallurgical processes and to construct mining and processing facilities at a particular site. The long-term profitability of the Company’s operations will be in part directly related to the cost and success of its ability to develop the extraction and processing facilities and infrastructure at any site chosen for extraction. It is impossible to ensure that the exploration or development programs planned by the Company will result in a profitable commercial mining operation nor enable a continuation of those operations when established. Whether a mineral deposit is commercially viable depends on a number of factors, including, but not limited to the following: particular attributes of the deposit, such as ground conditions, depth, grade, size and proximity to infrastructure; the ability of the Company to maximize the recovery rate of ore extracted; cost of supplies; metal prices, which are volatile; and government regulations, including regulations relating to investment, mining, prices, taxes, royalties, land use and tenure, importing and exporting of minerals and environmental protection.
 
The Company’s resources and reserves estimates are subject to uncertainty. The Company’s mineral resources and mineral reserves are estimates based on a number of assumptions, any adverse changes in which could require the Company to lower its mineral resource and mineral reserve estimates. There is no certainty that any of the mineral resources or mineral reserves disclosed by the Company will be realized or that the anticipated tonnages and grades will be achieved, that the indicated level of recovery will be realized or that reserves can be mined or processed profitably. Until a deposit is actually mined and processed, the quantity and grades of mineral resources and mineral reserves must be considered as estimates only. Valid estimates made at a given time may significantly change when new information becomes available. Any material change in the quantity of mineral resources or mineral reserves, grade or stripping ratio may affect the economic viability of the Company’s properties. There can also be no assurance that any discoveries of new or additional reserves will be made. Any material reductions in estimates of mineral resources or mineral reserves could have a material adverse effect on the Company’s results of operations and financial condition. This risk may be particularly acute with respect to the Bong Mieu Central Gold Mine where the Company conducted a limited amount of drilling before making its decision to commence production.
 
The Company may not meet key production or other cost estimates. A decrease in the amount of or a change in the timing of the mineral production outlook for the Company may impact the amount and timing of cash flow from operations. The actual impact of such a decrease of cash flow from operations would depend on the timing of any changes in production and on actual prices. Any change in the timing of these projected cash flows resulting from production shortfalls or labor disruptions would, in turn, result in delays in receipt of such cash flows and in using such cash to, as applicable, reduce debt levels and fund operating and exploration activities. Should such production shortfalls or labor disruptions occur, the Company may require additional financing to fund capital expenditures in the future. The level of capital and operating cost estimates which are used for determining and obtaining financing and other purposes are based on certain assumptions and are inherently subject to significant uncertainties. It is very likely that actual results for the Company’s projects will differ from its current estimates and assumptions, and these differences may be material. In addition, experience from actual mining or processing operations may identify new or unexpected conditions that could reduce production below, and/or increase capital and/or operating costs above, the current estimates. In particular, the Bong Mieu Central Gold Mine was put into production without a full feasibility study. Instead, the Company prepared a pre-feasibility study, which can underestimate a project’s capital and operating costs, while at the same time overestimating the amount of reserves, grade recovery from processing and mineralization. Accordingly, production estimates in respect of the Bong Mieu Central Gold Mine may be even less reliable. If actual results are less favorable than the Company currently estimates, the Company’s business, results of operations, financial condition and liquidity could be materially adversely impacted.
 
 
 
4

 
 
 
The Company is subject to various risk associated with its mining operations. By its nature, the business of mineral exploration, project development, mining and processing, contains elements of significant risks and hazards. The continuous success of the Company’s business is dependent on many factors including, but not limited to:
 
·  
discovery and/or acquisition of new ore reserves;
 
·  
securing and maintaining title to tenements and obtaining necessary consents, permits or authorizations for exploration and mining;
 
·  
successful design and construction of mining and processing facilities;
 
·  
successful commissioning and operating of mining and processing facilities;
 
·  
ongoing supplies of essentials goods and services; and
 
·  
the performance of the technology incorporated into the processing facility.
 
Specifically, the Company placed the Bong Mieu Central Gold Mine into production based on a pilot plant and bench scale testing. There can be no assurance that mineral or other metal recoveries in small scale laboratory tests will be duplicated in a larger scale test under on-site conditions or during production and the volume and grade of reserves mined and processed and recovery rates may not be the same as currently anticipated.
 
The Company is largely dependent upon its mining and milling operations at its Phuoc Son mine and any adverse condition affecting that operation may have a material adverse impact on the Company. The Company’s operations at the Phuoc Son property accounted for approximately 70% of the Company’s gold production for the six month transition year ended June 30, 2012 and is expected to account for approximately 82% of the Company’s gold production in 2012 (based on the Company’s production guidance of 60,000 ounces). During the six month transition year ended June 30, 2012, gold production at the Phuoc Son mine was below the Company’s expectation as a result of diminished tonnage output during engineering remediation of the Southern Deposit, compounded by higher than expected grade dilution during initial development of the Northern Deposit. Any adverse condition affecting mining or milling conditions at the Phuoc Son property could be expected to have a material adverse effect on the Company’s financial performance and results of operations. The Company also anticipates using revenue generated by its operations at Phuoc Son to finance a substantial portion of its capital expenditures during the Company’s 2013 fiscal year, including at the Company’s Bau Gold Property in East Malaysia. The Company likely will continue to be dependent on operations at the Phuoc Son property for a substantial portion of its gold production until the Bau Gold Property achieves commercial production or production is increased at the Bong Mieu Gold Property.
 
 
 
5

 
 
 
The Company is dependent upon its ability to raise funds in order to carry out its business. Mining operations, exploration and development involve significant financial risk and capital investment. The operations and expansion plans for the Company may also result in increases in capital expenditures and commitments. The Company may require additional funding to expand its business and may require additional capital in the future for, among other things, the development of the Bau Gold Project which is currently the subject of a feasibility study targeting production commencing in 2015, or the development of other deposits or additional processing capacity at the Company’s Phuoc Son or Bong Mieu projects. No assurance can be given that such capital will be available at all or available on terms acceptable to the Company. The Company may be required to seek funding from third parties if internally generated cash resources and available credit facilities are insufficient to finance these activities. In the event that the Company was unable to obtain adequate financing on acceptable terms, or at all, to satisfy its operating, development and expansion plans, its business and results of operations may be materially and adversely affected. The success and the pricing of any such capital raising and/or debt financing will be dependent upon the prevailing market conditions at that time, the availability of funds from lenders and other factors relating to the Company’s properties and operations.
 
The Company has debt and may be unable to service or refinance its debt, which could have negative consequences on the Company’s business, could adversely affect its ability to fulfill its obligations under its debt and may place the Company at a competitive disadvantage in its industry. In the first half of 2010 and 2011, the Company incurred indebtedness by way of convertible unsecured notes (“Convertible Notes”) and by way of secured redeemable gold delivery promissory notes (“Gold Loan Notes”). The existence of this debt could have negative consequences for the Company. For example, it could:
 
·  
increase the Company’s vulnerability to adverse industry and general economic conditions;
 
·  
require the Company to dedicate a material portion of cash flow from operations to make scheduled principal or interest payments on the debt, thereby reducing the availability of its cash flow for working capital, capital investments and other business activities;
 
·  
limit the Company’s ability to obtain additional financing to fund future working capital, capital investments and other business activities;
 
·  
limit the Company’s flexibility to plan for, and react to, changes in its business and industry; and
 
·  
place the Company at a competitive disadvantage relative to less leveraged competitors.
 
Servicing the Company’s debt requires an allocation of cash and the Company’s ability to generate cash flow may be adversely affected by factors beyond its control. The Company’s business may not generate cash flow in an amount sufficient to enable it to pay the principal of, or interest on, its indebtedness or to fund other liquidity needs, including working capital, capital expenditures, project development efforts, strategic acquisitions, investments and alliances and other general corporate requirements. The Company’s ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. As such, the Company is faced with the risk that (i) the Company’s business will generate insufficient cash flow from operations or (ii) future sources of funding will not be available to the Company in amounts sufficient to enable it to fund its capital needs.
 
 
 
6

 
 
 
If the Company cannot fund its capital needs, it will have to take actions such as reducing or delaying capital expenditures, project development efforts, strategic acquisitions, investments and alliances; selling assets; restructuring or refinancing its debt; or seeking additional equity capital. The Company cannot provide assurance that any of these measures could, if necessary, be effected on commercially reasonable terms, or at all, or that they would permit the Company to meet its scheduled debt service obligations.
 
Restrictive covenants in the agreements governing the Company’s indebtedness restrict its ability to operate its business. The documentation governing the Convertible Notes and the Gold Loan Notes contain covenants that restrict the Company’s ability to, among other things, incur additional debt, pay dividends, make investments, enter into transactions with affiliates, merge or consolidate with other entities or sell all or substantially all of the Company’s assets. A breach of any of these covenants could result in a default thereunder, which could allow the noteholders or their representative to increase the interest rate payable and/or declare all amounts outstanding thereunder immediately due and payable. If the Company is unable to repay outstanding borrowings when due, the lenders and the collateral agent under the Gold Loan Notes and related agreements have the right to proceed against the collateral granted thereunder, including the shares in the Company’s subsidiary holding companies which control the Bong Mieu and Phuoc Son projects and the loans owed to the Company by BMGMC and PSGC. The Company may also be prevented from taking advantage of business opportunities that arise because of the limitations imposed on it by the restrictive covenants under its indebtedness.
 
The Company has entered into certain derivative arrangements which may not obtain their intended result. The Company’s Convertible Notes and Gold Loan Notes contain embedded derivative instruments. The use of such instruments involves certain inherent risks including credit risk, market liquidity risk and unrealized mark-to-market risk. Initially, the Company does not have any other hedging agreements in place but may enter into additional contracts from time to time. While hedging activities may protect the Company in certain circumstances, they may also cause it to be unable to take advantage of fluctuating market prices, and no assurances are given as to the effectiveness of the Company’s current or future hedging policies.
 
The Company will not be able to insure against all possible risks. Exploration for natural resources involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. The Company’s business is subject to a number of risks and hazards generally, including adverse environmental conditions, industrial accidents, labor disputes, unusual or unexpected geological conditions, ground or slope failures, cave-ins, changes in the regulatory environment and natural phenomena such as inclement weather conditions, floods and earthquakes. Such occurrences could result in damage to mineral properties or production facilities, personal injury or death, environmental damage to the Company’s properties or the properties of others, delays, monetary losses and possible legal liability. If any such catastrophic event occurs, investors could lose their entire investment. Obtained insurance will not cover all the potential risks associated with the activities of the Company. Moreover, the Company may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution, political risk or other hazards as a result of exploration and production is not generally available to the Company or to other companies in the mining industry on acceptable terms. The Company might also become subject to liability for pollution or other hazards which may not be insured against or which the Company may elect not to insure against because of premium costs or other reasons. Losses from these events may cause the Company to incur significant costs that could have a material adverse effect upon its financial performance and results of operations. Should a catastrophic event arise, investors could lose their entire investment.
 
 
 
7

 
 
 
The Company is subject to commodity price fluctuations. If the price of gold declines, the Company’s properties may not be economically viable. The Company’s revenues are, and are expected to be for the foreseeable future in large part derived from the extraction and sale of precious metals, particularly gold. The price of those commodities has fluctuated widely, particularly in recent years, and is affected by numerous factors beyond the Company’s control including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumptive patterns, speculative activities and increased production due to new or improved mining and production methods. The effect of these factors on the price of base and precious metals cannot be predicted and the combination of these factors may result in the Company not receiving adequate returns on invested capital or the investments retaining their respective values. If the price of gold (including other base and precious metals) is below the cost to produce gold, the properties will not be mined at a profit. Fluctuations in the gold price affect the Company’s reserve estimates, its ability to obtain financing and its financial condition as well as requiring reassessments of feasibility and operational requirements of a project. Reassessments may cause substantial delays or interrupt operations until the reassessment is finished.
 
The Company may not be able to compete with other mining companies for mineral properties, financing, personnel and technical expertise. The resource industry is intensely competitive in all of its phases, and the Company competes for mineral properties, financing, personnel and technical expertise with many companies possessing greater financial resources and technical facilities than it does. Competition could prevent the Company from conducting its business activities or prevent profitability of existing or future properties or operations if the Company were unable to obtain suitable properties for exploration in the future, secure financing for its operations or attract and retain mining experts. The Company’s inability to effectively compete could substantially impair its results of operations.
 
If the Company does not comply with all applicable regulations, it may be forced to halt its business activities. The activities the Company engages in are subject to various laws in the different jurisdictions in which the Company operates governing, among other matters, land use, the protection of the environment, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances and mine safety. The Company may not be able to obtain all necessary licenses and permits required to carry out the exploration, development or mining of the projects. Unfavorable amendments and/or back-dating of changes to current laws, regulations and permits governing operations and activities of resource exploration companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures which could result in a cessation of operations by the Company. Failure to comply with applicable laws and regulations may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. The Company may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violation of applicable laws or regulations. Large increases in capital expenditures resulting from any of the above factors could force the Company to cease business activities which could cause investors to lose their investment.
 
Non-compliance with environmental regulation may hurt the Company’s ability to perform its business activities. The Company’s operations are subject to environmental regulation in the jurisdiction in which it operates. Environmental legislation is still evolving in these jurisdictions and it is expected to evolve in a manner which may require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. If there are future changes in environmental regulation, or changes in its interpretations, possibly backdated, they could impede the Company’s current and future business activities and negatively impact the profitability of operations.
 
 
 
8

 
 
 
Land reclamation requirements for exploration properties may be burdensome and may divert funds from the Company’s exploration programs. Although variable, depending on location and the governing authority, land reclamation requirements are generally imposed on mineral exploration companies, as well as companies with mining operations, in order to minimize long term effects of land disturbance. Reclamation may include requirements to control dispersion of potentially deleterious effluents and to reasonably re-establish pre-disturbance land forms and vegetation. In order to carry out reclamation obligations imposed on the Company in connection with its mineral exploration, the Company must allocate financial resources that might otherwise be spent on further exploration programs.
 
Mining operations and projects are vulnerable to supply chain disruption and the Company’s operations and development projects could be adversely affected by shortages of, as well as lead times to deliver, strategic spares, critical consumables, mining equipment or metallurgical plant. The Company’s operations and development projects could be adversely affected by shortages of, as well as lead times to deliver, strategic spares, critical consumables, mining equipment and metallurgical plant. In the past, the Company and other gold mining companies have experienced shortages in critical consumables, particularly as production capacity in the global mining industry has expanded in response to increased demand for commodities, and it has experienced increased delivery times for these items. These shortages have also resulted in unanticipated increases in the price of certain of these items. Shortages of strategic spares, critical consumables, mining equipment or metallurgical plant, which could occur in the future, could result in production delays and production shortfalls, and increases in prices result in an increase in both operating costs and the capital expenditure to maintain and develop mining operations.
 
The Company and other gold mining companies, individually, have limited influence over manufacturers and suppliers of these items. In certain cases there are only limited suppliers for certain strategic spares, critical consumables, mining equipment or metallurgical plant who command superior bargaining power relative to the Company, or it could at times face limited supply or increased lead time in the delivery of such items.
 
If the Company experiences shortages, or increased lead times in delivery of strategic spares, critical consumables, mining equipment or processing plant, its results of operations and financial condition could be adversely affected.
 
If the Company is unable to obtain and keep in good standing certain licenses and permits, it will be unable to explore, develop or mine any of its property interests. The current and future operations of the Company require licenses and permits from various governmental authorities and such operations are and will be subject to laws and regulations governing prospecting, development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, use of explosives, land use, surface rights, environmental protection, safety and other matters, and are dependent upon the grant, or as the case may be, the maintenance of appropriate licenses, concessions, leases, permits and regulatory consents which may be withdrawn or made subject to limitations. The maintaining of tenements, obtaining renewals, or getting tenements granted, often depends on the Company being successful in obtaining required statutory approvals for its proposed activities and that the licenses, concessions, leases, permits or consents it holds will be renewed as and when required. There is no assurance that such renewals will be given as a matter of course and there is no assurance that new conditions will not be imposed in connection therewith. There can be no assurance that the Company will be able to obtain or maintain all necessary licenses or permits that may be required to commence construction, development or operation of mining facilities at these properties on terms which enable operations to be conducted at economically justifiable costs.
 
 
 
9

 
 
 
If the Company does not make certain payments or fulfill other contractual obligations, it may lose its option rights and interests in its joint ventures. There is a risk that the Company may be unable to meet its share of costs incurred under any option or joint venture agreements to which it is presently or becomes a party in the future and the Company may have its interest in the properties subject to such agreements reduced as a result. Furthermore, if other parties to such agreements do not meet their share of such costs, the Company may be unable to finance the cost required to complete recommended programs. The loss of any option rights or interest in joint ventures on properties material to the Company could have a material adverse effect on the Company.
 
Title to the Company’s assets can be challenged or impugned, which could prevent the Company from exploring, developing or operating at any of its properties. There is no guarantee that title to concessions will not be challenged or impugned to the detriment of the Company. In Malaysia, Vietnam and the Philippines, the system for recording title to the rights to explore, develop and mine natural resources is such that a title opinion provides only minimal comfort that the holder has title. For example, in Vietnam, mining laws are in a state of flux, continuously being reviewed and updated, and the system is new and as yet untested. If title to assets is challenged or impugned, the Company may not be able to explore, develop or operate its properties as permitted or enforce its rights with respect to the properties.
 
Political and economic instability in the jurisdictions in which the Company operates could make it more difficult or impossible for the Company to conduct its business activities. The Company’s exploration, development and operation activities occur in Malaysia, Vietnam, the Philippines and Australia. As such, the Company may be affected by possible political or economic instability in those countries. The risks include, but are not limited to, terrorism, military repression, fluctuations in currency exchange rates and high rates of inflation. Changes in resource development or investment policies or shifts in political attitude in those countries may prevent or hinder the Company’s business activities and render its properties unprofitable by preventing or impeding future property exploration, development or mining. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, restrictions on repatriation of earnings, royalties and duties, income taxes, nationalization of properties or businesses, expropriation of property, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. The laws on foreign investment and mining are still evolving in Vietnam and it is not known how they will evolve. The effect of these factors cannot be accurately predicted. There may be risks in Malaysia and the Philippines including nationality restriction in the ownership of mining properties regarding the payment of permitting fees and obtaining the free, prior and informed consent of affected indigenous peoples.
 
Vietnamese tax laws are open to interpretation and, with respect to mining and refining, there are no clear precedents to properly guide the Company’s tax policies. Management considers that the Company has made adequate provision for tax liabilities to the Vietnamese national, provincial and local authorities based on correspondence with such authorities, and on external advice received. However, because Vietnam’s tax laws, especially with respect to mining and refining, are evolving and open to interpretation, there is a risk that material additional and/or back-dated taxes and penalties may be levied on the Company, which could adversely impact its results of operations.
 
Exchange rate and interest rate fluctuations may increase the Company’s costs. The profitability of the Company may decrease when affected by fluctuations in the foreign currency exchange rates between the United States Dollar and the Canadian Dollar, Malaysian Ringgit, Vietnamese Dong, Philippines Peso and Australian Dollar. Exchange rate fluctuations affect the costs of exploration and development activities that the Company incurs in United States dollar terms. The Company does not currently take any steps to hedge against currency fluctuations. In the event of interest rates rising, the liabilities of the Company that are tied to market interest rates would increase the Company’s borrowing costs.
 
 
 
10

 
 
 
The Company’s stock price could be volatile. The market price of the Company’s common shares, like that of the common shares of many other natural resource companies, has been and is likely to remain volatile. Results of exploration and mining activities, the price of gold and silver, future operating results, changes in estimates of the Company’s performance by securities analysts, market conditions for natural resource shares in general, and other factors beyond the control of the Company, could cause a significant decline in the market price of the Company’s common shares and results in the need to revalue derivative liabilities.
 
In the US, the Company’s common shares are “Penny Stock” which imposes significant restrictions on broker-dealers recommending the stock for purchase. Securities and Exchange Commission (“SEC”) regulations define "penny stock" to include common stock that has a market price of less than $5.00 per share, subject to certain exceptions. These regulations include the following requirements: broker-dealers must deliver, prior to the transaction, a disclosure schedule prepared by the SEC relating to the penny stock market; broker-dealers must disclose the commissions payable to the broker-dealer and its registered representative; broker-dealers must disclose current quotations for the securities; if a broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealers presumed control over the market; and a broker-dealer must furnish its customers with monthly statements disclosing recent price information for all penny stocks held in the customer’s account and information on the limited market in penny stocks. Additional sales practice requirements are imposed on broker-dealers who sell penny stocks to persons other than established customers and accredited investors. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and must have received the purchaser’s written consent to the transaction prior to sale. For so long as the Company’s common shares are subject to these penny stock rules, these disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the shares. Accordingly, this may result in a lack of liquidity in the common shares and investors may be unable to sell their shares at prices considered reasonable by them.
 
The Company may not be able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act of 2002 (‘‘SOX’’) requires an annual assessment by management of the effectiveness of the Company’s internal control over financial reporting. Section 404 of SOX also requires an annual attestation report by the Company’s independent auditors addressing the effectiveness of the Company’s internal control over financial reporting. The Company has completed its Section 404 assessment and received the auditors’ attestation as of June 30, 2012.
 
If the Company fails to maintain the adequacy of its internal control over financial reporting, as such standards are modified, supplemented or amended from time to time, the Company may not be able to conclude that it has effective internal control over financial reporting in accordance with Section 404 of SOX. The Company’s failure to satisfy the requirements of Section 404 of SOX on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its financial statements, which in turn could harm the Company’s business and negatively impact the trading price of its common shares and securities convertible or exchangeable for common shares. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company’s operating results or cause it to fail to meet its reporting obligations. Future acquisitions of companies may provide the Company with challenges in implementing the required processes, procedures and controls in its acquired operations. Acquired companies may not have disclosure controls and procedures or internal control over financial reporting that are as thorough or effective as those required by securities laws currently applicable to the Company. No evaluation can provide complete assurance that the Company’s internal control over financial reporting will prevent misstatement due to error or fraud or will detect or uncover all control issues or instances of fraud, if any. The effectiveness of the Company’s controls and procedures could also be limited by simple errors or faulty judgments. In addition, as the Company continues to expand, the challenges involved in maintaining adequate internal control over financial reporting will increase and will require that the Company continue to improve its internal control over financial reporting. Although the Company intends to devote substantial time and incur substantial costs, as necessary, to ensure ongoing compliance, the Company cannot be certain that it will be successful in continuing to comply with Section 404 of SOX.
 
 
 
11

 
 
 
The Company does not plan to pay any dividends in the foreseeable future. The Company has not paid a dividend in the past and it is unlikely that the Company will declare or pay a dividend for the foreseeable future. The declaration, amount and date of distribution of any dividends in the future will be decided by the Board of Directors from time-to-time, based upon, and subject to, the Company’s earnings, financial requirements, loan covenants and other conditions prevailing at the time.
 
Shareholders could suffer dilution of the value of their investment if the Company issues additional shares. There are a number of outstanding securities and agreements pursuant to which common shares may be issued in the future, including pursuant to the Convertible Notes, stock options and warrants. If these shares are issued, this may result in further dilution to the Company’s shareholders.
 
In the event that key employees leave the Company or its subsidiaries, the Company would be harmed since it is heavily dependent upon them for all aspects of the Company’s activities. The Company is dependent on key employees and contractors, and on a relatively small number of key directors and officers, the loss of any of whom could have, in the short-term, a negative impact on the Company’s business and results of operations. The Company has a consulting agreement or employment agreement, as applicable, with each of the Company’s officers.
 
Management may be subject to conflicts of interest due to their affiliations with other resource companies. Because some of the Company directors and officers have private mining interests and also serve as officers and/or directors of other public mining companies, their personal interests may be in conflict with the interests of the Company. Because of their activities, situations may arise where these persons are presented with mining opportunities, which may be desirable for the Company, as well as other companies in which they have an interest, to pursue. If the Company is unable to pursue such opportunities because of its officers’ and/or directors’ conflicts, this would reduce the Company’s opportunities to increase its future profitability and revenues. In addition to competition for suitable mining opportunities, the Company competes with these other companies for investment capital, and technical resources, including geologists, metallurgists, mining engineers and others. Similarly, if the Company is unable to obtain necessary investment capital and technical resources because of its officers’ and directors’ conflicts, the Company would not be able to obtain potential profitable properties or interests which would reduce the Company’s opportunities to increase its future revenues and income. Any material potential conflicts of interest is directed to the Company’s board of directors and is resolved on a case by case basis in accordance with applicable Canadian law. In addition, each of the directors is required to declare and refrain from voting on any matter in which such directors may have a conflict of interest in accordance with the procedures set forth in applicable laws. Nevertheless, potential conflicts of interests could deny the Company access to important corporate opportunities.
 
Future sales of common shares by existing shareholders could decrease the trading price of the common shares. Sales of large quantities of the common shares in the public markets or the potential of such sales could decrease the trading price of the common shares and could impair the Company’s ability to raise capital through future sales of common shares.
 
 
 
12

 
 
 
The profitability of the Company’s operations and the cash flow generated by these operations are significantly affected by fluctuations in input production prices, many of which are linked to the prices of oil and steel. Fuel, energy and consumables, including diesel, heavy fuel oil, chemical reagents, explosives, tires, steel and mining equipment consumed in mining operations form a relatively large part of the operating costs and/or capital expenditures of any mining company. The Company has no influence over the cost of these consumables, many of which are linked to some degree to the price of oil and steel.
 
The price of oil has recently been volatile. The Company’s mines at Bong Mieu and Phuoc Son are most vulnerable to changes in the price of oil. Furthermore, the price of steel which is used in the manufacture of most forms of fixed and mobile mining equipment is also a relatively large contributor to the operating costs and capital expenditure of a mining company and has also been volatile recently.
 
Fluctuations in the price of oil and steel have a significant impact upon operating cost and capital expenditure estimates and, in the absence of other economic fluctuations, could result in significant changes in the total expenditure estimates for new mining projects or render certain projects not viable.
 
Inflation may have a material adverse effect on the Company’s operational results. Most of the Company’s operations are located in countries that have experienced high rates of inflation during certain periods. Since the Company is unable to influence the market price at which it sells gold, it is possible that significantly higher future inflation in the countries in which the Company operates may result in an increase in future operational costs in local currencies without a concurrent devaluation of the local currency of operations against the dollar or an increase in the dollar price of gold. This could have a material adverse effect upon the Company’s results of operations and its financial condition. Significantly higher and sustained inflation in the future, with a consequent increase in operational costs, could result in operations being reduced or rationalized at higher cost mines.
 
Mining companies such as the Company are increasingly required to consider and ensure the sustainable development of, and provide benefits to, the communities and countries in which they operate. As a result of public concern about the perceived ill effects of economic globalization, businesses generally and multinational corporations such as the Company face increasing public scrutiny of their activities. These businesses are under pressure to demonstrate that, as they seek to generate satisfactory returns on investment to shareholders, other stakeholders, including employees, communities surrounding operations and the countries in which they operate, benefit and will continue to benefit from their commercial activities. Such pressure tends to be particularly focused on companies whose activities are perceived to have a high impact on their social and physical environment. The Company’s failure to adequately perceive and address these pressures could lead to reputational damage, legal suits and social spending obligations.
 
In addition, the location of mining operations often coincides with the location of existing towns and villages, natural water courses and other infrastructure. Mining operations must therefore be designed to minimize their impact on such communities and the environment, either by changing mining plans to avoid any such impact, modifying mining plans and operations, or relocating the relevant people to an agreed location. These measures may include agreed levels of compensation for any adverse impact the mining operation may continue to have upon the community. The Company is subject to the above factors at its mining and exploration sites. The cost of these measures could increase capital and operating costs and therefore could have an adverse impact upon the Company’s results of operations.
 
 
 
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ITEM 4: INFORMATION ON THE COMPANY
 
4A. History and Development of the Company
 
Olympus Pacific Minerals Inc. was formed under the laws of the Province of Ontario, Canada on July 4, 1951 under the name “Meta Uranium Mines Limited”.  Effective August 24, 1978, the Company changed its name from “Meta Uranium Mines Limited” to “Metina Developments Inc.”  The Company reincorporated under the Company Act (British Columbia) under the name “Olympus Holdings Ltd.” on November 5, 1992 and simultaneously consolidated its share capital on a 4.5:1 basis.  The Company further consolidated its share capital on a 3:1 basis and changed its name from “Olympus Holdings Ltd.” to “Olympus Pacific Minerals Inc.” on November 29, 1996.  The Company was continued under the Business Corporations Act (Yukon) on November 17, 1997 and the Canada Business Corporations Act on July 13, 2006.
 
Operations in Vietnam
 
On February 26, 1997, as subsequently amended on August 18, 1997, the Company entered into an agreement with Ivanhoe Mines Limited (formerly Indochina Goldfields Ltd., “Ivanhoe”) and Zedex Ltd. (formerly Iddison Group Vietnam Limited, Iddison Holdings Limited, Iddison Limited and IT Capital Limited, with the agreement being referred to herein as the “Ivanhoe Agreement”). Pursuant to the Ivanhoe Agreement, which closed on September 11, 1997, the Company acquired from Ivanhoe all of the shares of Formwell Holdings Limited (“Formwell”), which holds 100% of  the shares of Bong Mieu Holdings Limited, which in turn holds 80% of the shares of Bong Mieu Gold Mining Company Limited (“Bogomin”).  Bogomin, together with then local and national branches of the government of the Socialist Republic of Vietnam, holds various mining and exploration licenses comprising the Bong Mieu gold property in Quang Nam-Da Nang Province in the Socialist Republic of Vietnam. Refer to Item 4D for further details on the Bong Mieu Gold Property.
 
Also in September 1997, the Company acquired an interest in the Phuoc Son Gold Property by entering into a joint venture agreement with Ivanhoe and Zedex Ltd., regarding a joint venture company, New Vietnam Mining Corporation (“NVMC”), which holds an 85% interest in the Phuoc Son Gold Property.  Initially, NVMC was comprised of the Company (57.18%), Ivanhoe (32.64%) and Zedex Ltd. (10.18%) with the Company as the operator of the project.
 
In 2003, NVMC, entered into a joint venture agreement with Mien Trung Industrial Company (“MINCO”), a mining company then controlled by the local provincial government, resulting in the formation of the Phuoc Son Gold Company Limited (“PSGC”) for the purposes of exploration and extraction activities and any other related activities.
 
On March 1, 2004, the Company entered into a Vend-in Agreement and, on June 21, 2004, an Extension of Vend-in Agreement, with Ivanhoe and Zedex Ltd. (the “Vendors”) to acquire the remaining 42.82% interest held by the Vendors in NVMC.  The sale was concluded in June 2004, resulting in the Company owning 100% of NVMC, which owns 85% of PSGC. MINCO currently owns 15% of PSGC. Refer to Item 4D for further details on the Phuoc Son Gold Property.
 
The Company commenced production at the Bong Mieu Gold Property with the construction of the Bong Mieu Central Gold Mine (Ho Gan) which was completed in 2006.   The Bong Mieu Underground project was subsequently placed into commercial production on April 1, 2009.
 
Following the receipt by the Company on March 26, 2008 of a positive independent feasibility study, the Company determined to construct a plant at the Phuoc Son Gold Property. The Company partially funded the plant construction by the treatment of high-grade ore from Phuoc Son’s Dak Sa deposit at the Bong Mieu gold processing plant on a toll treatment basis.
 
 
 
14

 
 
 
In March 2010, the Company obtained private placement funding of CAD$12,750,000.  The net funds were used towards the establishment of the Phuoc Son processing plant.  The financing was in the form of nine percent unsecured convertible promissory notes which mature on March 26, 2014. The holders are entitled to convert the notes and any accrued interest owing at a conversion rate of CAD$0.42 per common share.
 
In June 2010, the Company obtained further private placement funding of US$21,960,000. The net proceeds also were used towards the construction of the Phuoc Son processing plant and for general exploration and corporate purposes. The financing was in the form of gold delivery notes which mature on May 31, 2013, bear interest at a rate of eight percent and obligate the Company to physically deliver gold in six semi-annual increments of which two deliveries remain.
 
The Phuoc Son gold plant was commissioned in June 2011, has been in commercial production since July 1, 2011 and achieved full scale processing in the fourth quarter, 2011 processing order from the South Deposit (Bai Dat) at the Dak Sa area. Commercial production from the North Deposit (Bai Go) at the Dak Sa area commenced in July 2012. The principal capital expenditures relating to the new Phuoc Son plant include infrastructure, machinery and equipment and buildings, which total $27M.
 
Effective January 1, 2011, the Vietnamese government imposed a 10% gold export tax.  As a result, the Company refines all gold from the Company’s Vietnam mines in Vietnam to 99.99 gold, pursuant to an agreement with a local Vietnamese refinery, which enables the Company to export gold from Vietnam without incurring the export tax.
 
Operations in Malaysia
 
The Company’s initial interest in North Borneo Gold Sdn Bhd (a Malaysian company, hereinafter referred to as “NBG”) came about as a result of the Company’s amalgamation with Zedex Minerals Limited (“Zedex”) on January 12, 2010. NBG is governed by a joint venture agreement between the Company and a local Malaysian company and is the operator of the Bau Gold Project.
 
The Bau Gold Project comprises consolidated mining and exploration tenements that collectively cover more than 1,340 km2 of the most highly-prospective ground within the historic Bau Goldfield, in Sarawak, East Malaysia. This goldfield has been operating since 1864, with estimated historic gold production of approximately 3-4 million oz. gold of which approximately two million oz. of gold production has been recorded.
 
On September 30, 2010 (as amended on May 20, 2011 and further amended on January 20, 2012), the Company entered into an agreement to acquire a further 43.50% interest in NBG. The settlement is to be paid in several tranches as set out below and will bring the Company’s effective interest to 93.55% by January 2014.
 
 
15

 
 
 
   
Purchase
Price
 
Purchase
Date
 
North
Borneo Gold
Sdn Bhd
Class A
Shares
   
Company's
Effective
Holding
 
Tranche 1
  $ 7,500,000  
9/30/2010
    31,250       62.55 %
Tranche 2
  $ 7,500,000  
10/30/2010
    31,250       75.05 %
Tranche 3a
  $ 6,000,000  
5/20/2011
    13,700       80.53 %
Tranche 3b
  $ 3,000,000  
1/20/2012
    6,800       83.25 %
Tranche 3c
  $ 2,000,000  
1/28/2013
    4,500       85.05 %
Tranche 4a
  $ 3,000,000  
9/13/2013
    7,000       87.85 %
Tranche 4b
  $ 6,000,000  
1/21/2014
    14,250       93.55 %
                           
                108,750       93.55 %

In September 2011, the Company moved the Bau project into feasibility phase with the objective of a favourable development decision targeting stage one production commencing in 2015. The feasibility study is focussed on initial development of the Jugan deposit, a near surface gold deposit that outcrops as a low hill towards the northeast end of the Bau Central gold trend. Exploration, mining feasibility and environmental studies are now in progress to further expand the resource base, determine the best development route and examine the issues involved in developing multiple deposits in a sequential manner.
 
In addition, in 2011, upgraded sample processing facilities and an independent on-site assay laboratory were established.
 
During 2012, work on the feasibility study progressed, particularly with respect to metallurgical testing. The feasibility study is expected to be completed during 2013.
 
Operations in the Philippines
 
The Company operates in the Philippines through KMC, a Philippine corporation registered with the Republic of the Philippines Securities and Exchange Commission on May 31, 2007. KMC is 100% beneficially owned by the Company.  Kadabra will hold the Company’s interest in its Philippines operations.
 
On September 30, 2011, the Company entered into formal joint venture agreement (the “Capcapo Joint Venture Agreement”) with Abra Mining & Industrial Corporation(“AMIC”), Jabel Corporation (“Jabel”), Kadabra Mining Corporation (a wholly-owned subsidiary of the Company) (“KMC”), and PhilEarth Mining Corporation (a Company in the process of incorporation and in which the Company will hold a 40% interest, hereinafter referred to as “PhilEarth”) in respect of the Capcapo Gold Property, Northern Philippines.
 
 
Pursuant to the terms of the Capcapo Joint Venture Agreement, the Company, in consortium with PhilEarth, has an option to acquire up to a 60% interest in the Capcapo Gold Project, Northern Philippines, subject to compliance with Philippine foreign ownership laws. Olympus paid to AMIC $300,000 upon the signing of the joint venture agreement, is required to pay a further $400,000 upon gaining unencumbered access to the property and may fully exercise its option over three stages of expenditure as follows:
 
 
 
16

 
 
 
STAGE
 
EXPECTED EXPENDITURES
USD
   
PAYMENT DUE UPON
COMPLETION OF THE STAGE
USD
 
Stage 1     1,000,000       400,000  
Stage 2     2,000,000       400,000  
Stage 3     4,000,000       N/A  
 
 
In addition, Jabel will be paid a royalty based on the calculation that yields the highest payment; either 3% of the gross value of production from the Capcapo Gold Property or 6% of the annual profit of the joint venture corporation.
 
Finally, Olympus is also obligated to make milestone payments each time a specified milestone is achieved in respect of the property. A specified milestone occurs at the earlier of defining a cumulative mineral reserve of 2,000,000 ounces of gold and gold equivalents for the property, or upon achievement of a consistent production rate of 2,000 tonnes per day. Accordingly, achieving one milestone does not trigger the obligation to make a subsequent milestone payment if the alternative milestone has already been achieved. The milestone payment to AMIC consists of a payment of $2,000,000 and the issuance of 2,000,000 common shares of the Company or common shares having a market value of $5,000,000, whichever is of lesser value.
 
The Capcapo Gold Property consists of a Mineral Production Sharing Agreement No. 144-99-CAR (“MPSA 144”), which covers 756 hectares in Capcapo, Licuan-Baay, Abra Province, Philippines, and a two-kilometre radius buffer zone around MPSA 144, with an area of about 3,500 hectares, which formed the subject of a renewal Exploration Permit Application (“EXPA”) filed by Jabel.
 
The Capcapo Joint Venture Agreement replaced a Memorandum of Agreement and Supplement to Memorandum of Agreement dated November 23, 2006 among the Company, AMIC and Jabel.
 
The Company is in the process of co-ordinating a community consultation program in accordance with Philippine laws as part of a formal program of obtaining the Free, Prior and Informed Consent of affected indigenous peoples in the area, undertaken in conjunction with the National Commission on Indigenous Peoples. All efforts in the Capcapo area have concentrated on obtaining community approval which is required before any further exploration can continue.  No further work will be undertaken at the project until this issue is resolved.
 
Total cumulative spending on this project as at December 31, 2008 was $865,779 which was capitalized to deferred exploration.  As at December 31, 2008 the full $865,779 of capitalized deferred exploration expenditure was written off.  Management considered this to be a prudent measure given the delays in recommencing exploration activity and the economic uncertainty of world markets at the time. Refer to Item 3D for a list of risk factors. Spending on this project was minimal in 2009 and 2010 and has been expensed. In 2011, exploration expenditure of $561,839 was expensed due to the fact that the Company does not yet have unencumbered access to the property. A further $252,965 was expensed during the six-month transition year ended June 30, 2012, primarily towards a community consultation program for which KMC retained a consultant.
 
Future spending on the property will be expensed until such time as the Company gains unencumbered access to the Capcapo Gold Property at which point it will be capitalized.
 
 
 
17

 
 
 
Operations in Laos and Cambodia
 
The Company continues to investigate prospective areas in Laos and Cambodia, but to date no formal agreements have eventuated.
 
Other Historical Matters
 
On April 3, 2006, the Company’s common shares commenced trading on the Toronto Stock Exchange (the “TSX”) in Canada under the symbol “OYM”. On March 6, 2008, the Company’s common shares commenced trading on the OTC Bulletin Board in the United States under the symbol “OLYMF”. Effective February 5, 2010, the Company’s shares commenced trading on the Australian Securities Exchange under the symbol “OYM”. The Company’s common shares were delisted from the OTC Bulletin Board and began trading on the OTCQX effective October 31, 2011 under the symbol “OLYMF”.
 
On November 10, 2009, the Company announced its intention to merge with Zedex.  On January 12, 2010, the Company and Zedex amalgamated. Under the terms of the merger, Zedex’s shareholders received one share of the Company for every 2.4 Zedex shares owned, resulting in an issuance on January 25, 2010 of 54,226,405 new common shares in Olympus and the distribution to holders of Zedex shares, on a prorata basis, of the 65,551,043 common shares of Olympus owned by Zedex.  Mr. Leslie Robinson, director of Zedex, was appointed to the Board of Olympus.  Mr. Rodney Murfitt, formerly Chief Geologist for Zedex, became Group Exploration Manager for Olympus. Mr. Paul Seton, formerly CEO of Zedex, became Senior Vice President, Commercial for Olympus. Ms. Jane Bell (previously Baxter), formerly CFO and Company Secretary for Zedex, became Vice President, Finance for Olympus.  All costs associated with the amalgamation were expensed during the 2009 fiscal year, these being recorded in professional and consulting fees in the consolidated statement of operations and comprehensive loss.
 
In March of 2010 and June of 2010, the Company issued convertible notes and gold loan notes, respectively, as discussed above.
 
In October 2010, the Company issued 37,000,000 common shares at AUD$0.45 per share, for gross proceeds of $16,291,697 and net proceeds of $15,548,141.  Agents for the private placement were paid a cash commission of 5% of the gross proceeds of the placement.
 
On March 29, 2011, the Company completed an AUD$5.6 million private placement. The private placement was for 14,000,000 common shares to be held in the form of CHESS Depository Interests (“CDI”) at a price of AUD$0.40 per CDI. Olympus paid a capital-raising fee of 5% to Patersons Securities Limited, the lead manager for the placement.
 
On May 6, 2011, the Company closed a private placement financing of US$14.6 million of four-year 8% unsecured and redeemable notes convertible into common shares at US$0.51 per common share (the “2011 Notes”) and including warrants exercisable to acquire common shares at CAD$0.55 based on a one share and one-half warrant equivalent structure.
 
A similar private placement of CAD$15 million of 8% unsecured and redeemable notes convertible at CAD$0.50 per common share and including warrants exercisable to acquire common shares at CAD$0.55 closed May 5, 2011.  Euro Pacific Capital Inc. acted as the exclusive sole placement agent on both private placements.  Proceeds of both private placements provided Olympus with the necessary funds to advance its development, exploration, and acquisition plans in Vietnam, Malaysia, and the Philippines.
 
 
 
18

 
 
 
The Company’s registered and records office is located at Suite 500, 10 King Street East, Toronto, Ontario, M5C 1C3, Canada.  Its telephone number is (416) 572-2525.
 
Capital Expenditures
 
The table below shows the historical capital balances, in United States dollars:
 
   
Capital Assets, Advances on Capital Assets, Mine Properties and Deferred Exploration and Development Costs
 
As at December 31, 2010
    102,934,415  
As at December 31, 2011
    115,571,472  
As at June 30, 2012
    102,204,591  

 
Amalgamation with Zedex
 
On January 12, 2010, the Company and Zedex amalgamated. Total consideration for the amalgamation amounted to US$15,206,478. The purchase consideration was settled by way of share issue effective January 25, 2010.
 
The properties acquired as a result of the Zedex amalgamation were the Bau Property in East Malaysia, the Tien Thuan Property in Central Vietnam and the GR Enmore Property in New South Wales, Australia.
 
The purchase consideration was allocated as follows:
 
 
    USD  
Current assets      
Cash     45,643  
Accounts receivable and prepaid expenses     158,997  
Non-current assets        
Property, plant and equipment     86,759  
Mineral properties     33,159,770  
Current liabilities        
Accounts payable and accrued liabilities     (1,626,168 )
Non-current liabilities        
Future income tax liability     (6,707,733 )
      25,117,268  
Other elements of consideration        
Amounts attributable to non-controlling interests     (9,910,790 )
Total consideration     15,206,478  
 

The table below shows the mine properties and deferred exploration and development costs by the Company in United States dollars:
 
 
 
19

 
 
 
         
Mine Properties
         
Deferred Exploration and Development Costs
 
June 30, 2012/December 31, 2011 and December 31, 2010
 
2012
   
2011
   
2010
   
2012
   
2011
   
2010
 
Bong Mieu Gold Mining Co
  $ 3,220,670     $ 3,220,670     $ 3,220,670     $ 21,669,031     $ 20,300,410     $ 15,846,392  
Phuoc Son Gold Co
    4,995,064       4,995,064       4,995,064       30,417,319       25,409,263       19,582,685  
North Borneo Gold
    31,276,437       31,276,437       31,276,437       10,663,853       7,526,402       2,267,175  
Binh Dinh NZ Gold Co
    1,333,333       1,333,333       1,333,333       796,583       756,674       535,827  
GR Enmore
    550,000       550,000       550,000       -       -       -  
Kadabra Mining Corp
    -       -       -       -       -       -  
      41,375,504       41,375,504       41,375,504       63,546,786       53,992,749       38,232,079  
Accumulated amortization
    - 4,210,190       -3,478,939       -2,177,725       -21,137,528       -14,199,704       -6,506,447  
Impairment charge
    -       -       -       -10,344,162       -       -  
Total
  $ 37,165,314     $ 37,896,565     $ 39,197,779     $ 32,065,096     $ 39,793,045     $ 31,725,632  
                                                 
 

The table below shows the property, plant and equipment of the Company in United States dollars for the periods shown.
 
   
June 30, 2012
   
December 31, 2011
   
December 31, 2010
 
   
Cost
   
Accumulated
Depreciation
   
Impairment Charge
   
Net Book
Value
   
Cost
   
Accumulated
Depreciation
   
Net Book
Value
   
Cost
   
Accumulated
Depreciation
   
Net Book
Value
 
Building
  $ 3,080,057     $ 1,306,560     $ 88,000     $ 1,685,497     $ 2,961,812     $ 1,074,037     $ 1,887,775     $ 976,993     $ 803,136     $ 173,857  
Leasehold   improvements
    141,405       134,055       -       7,350       141,405       129,201       12,204       125,821       114,923       10,898  
Machinery & equipment
    30,317,738       12,317,293       1,673,000       16,327,445       28,349,882       9,928,627       18,421,255       12,292,843       6,047,774       6,245,069  
Office equipment, furniture & fixtures
    1,770,843       1,033,880       32,000       704,963       1,614,970       1,029,664       585,306       1,504,391       942,896       561,495  
Vehicles
    438,651       392,134       13,000       33,517       438,651       381,120       57,531       439,589       349,365       90,224  
Infrastructure
    20,925,447       7,028,358       547,000       13,350,089       20,337,058       5,138,091       15,198,967       4,732,912       2,902,757       1,830,155  
Capital assets in progress(1)
    833,073       -       115,000       718,073       775,077       -       775,077       21,737,979       -       21,737,979  
Total
  $ 57,507,214     $ 22,212,280     $ 2,468,000     $ 32,826,934     $ 54,618,855     $ 17,680,740     $ 36,938,115     $ 41,810,528     $ 11,160,851     $ 30,649,677  
                                                                                 
 
(1) Included in the net carrying value of buildings, plant & equipment and infrastructure at December 31, 2011 were capitalized interest and borrowing costs of $4,417,315 in relation to the Phuoc Son plant which was under construction and placed into commercial production on July 1, 2011.
 
 
On September 30, 2010, as amended on May 20, 2011 and further amended on January 20, 2012, the Company entered into an agreement to acquire a further 43.50% interest in NBG, which is the owner of the Bau property. The settlement is to be paid in several tranches as set out below and will bring the Company’s effective interest to 93.55% by January 2014.
 
 
 
20

 
 
 
   
Purchase
Price
 
Purchase
Date
 
North Borneo
Gold Sdn Bhd
Class A Shares
   
Company’s
Effective
Holding
 
Tranche 1
  $ 7,500,000  
9/30/2010
    31,250       62.55 %
Tranche 2
  $ 7,500,000  
10/30/2010
    31,250       75.05 %
Tranche 3a
  $ 6,000,000  
5/20/2011
    13,700       80.53 %
Tranche 3b
  $ 3,000,000  
1/20/2012
    6,800       83.25 %
Tranche 3c
  $ 2,000,000  
1/28/2013
    4,500       85.05 %
Tranche 4a
  $ 3,000,000  
9/13/2013
    7,000       87.85 %
Tranche 4b
  $ 6,000,000  
1/21/2014
    14,250       93.55 %
Total
              108,750       93.55 %
 
 
4B. Business Overview
 
General
 
Olympus Pacific Minerals Inc. is an international mining exploration, development and production company focused on the mineral potential of Southeast Asia. Olympus is focussed on its two producing gold mines in Central Vietnam, property in East Malaysia that is currently the subject of a feasibility study and an early stage exploration property in the Northern Philippines.
 
Olympus has been active in Vietnam since the mid-1990s on its own account and through associated companies, PSGC and Bogomin, and maintains an office in Danang in central Vietnam. In January 2010 the Company acquired by merger with Zedex, its interests in NBG which operates the Bau Gold Project near Kuching in East Malaysia, Binh Dinh New Zealand Gold Company Limited which operates the Tien Thuan Gold Project near Qui Nhon in Central Vietnam and GR Enmore Pty Ltd, which operates a gold project in New South Wales Australia.
 
In September 2011, the Company signed the Capcapo Joint Venture Agreement in respect of the Capcapo Gold Property, Northern Philippines, superseding a memorandum of agreement entered into in November 2006.
 
The Company’s two most advanced properties, covered by investment certificates, are the Phuoc Son Gold Property and the Bong Mieu Gold Property, both including producing mines. Both properties are located in central Vietnam along the Phuoc Son-Sepon Suture.   The Bong Mieu and Phuoc Son Gold properties are approximately 74 kilometres apart. Proven and probable reserves exist for the Bong Mieu Central Gold Mine and for the Phuoc Son Dak Sa area.
 
The Bong Mieu Central plant was commissioned in April 2006 and commercial production started in the fourth quarter of 2006.  The Company poured its first 3.6 kg doré bar on February 15, 2006.  To June 30, 2012, the plant had produced 102,061 ounces of gold.
 
Exploration work to date has resulted in one new significant discovery in the Bong Mieu East area (Thac Trang) as well as a number of new, surface showings.   In addition, further exploration will be required to define the extent of the deposits in several directions. Based on results of the exploration work completed to date, management believes the potential for additional discoveries and resource expansion at the Bong Mieu Gold Property is positive.  Underground evaluation studies are continuing at the Bong Mieu Underground mine, located within one kilometre of the Bong Mieu Central plant.
 
 
 
21

 
 
 
The Phuoc Son Gold Property is located in central Vietnam, 74 kilometres from the Bong Mieu Gold Property. The property hosts over 30 known gold prospects and two known high-grade gold deposits in the Dak Sa area of the property. PSGC has been granted a mining licence by the Government of Vietnam to mine and develop its Dak Sa deposits (north and south deposits).Exploration work to date has defined the Dak Sa zone, which contains two deposits, North and South Deposits, over a minimum length of approximately five kilometres.  Evaluation of the large Phuoc Son land package continues to reinforce the potential of the overall property to host new deposits which could be mined in conjunction with the Dak Sa operation or have potential to be stand-alone deposits.  The Phuoc Son mine was put into commercial production effective October 1, 2009 with ore from the Southern Deposit (Bai Dat) of Dak Sa being processed at the Bong Mieu Central plant on a toll treatment basis. The new plant at the Phuoc Son Gold Property was commissioned in June 2011, has been in commercial production since July 1, 2011 and achieved full scale processing in the fourth quarter, 2011.Commercial production from the Northern Deposit (Bai Go) commenced in July 2012.
 
The Bau Gold Project comprises consolidated mining and exploration tenements that collectively cover more than 1,340 km2 of the most highly prospective ground within the historic Bau Goldfield in Sarawak, East Malaysia.  The property is attributed with significant gold resources and has been independently assessed as having substantially greater resource potential.
 
The Capcapo Gold-Copper Project comprises MPSA 144which covers 756 Ha. Due diligence studies conducted in 2006 confirmed the presence of potential ore-grade, epithermal, gold-copper mineralization at surface and extending beyond 100m depth. The mineralization is inferred to be related to a classic copper-gold porphyry system at depth. The resumption of exploration currently awaits completion of a community relations programme.
 
The Tien Thuan Gold Project in Central Vietnam covers about 100 km2 of hilly terrain, encompassing numerous hard rock and alluvial gold occurrences within and peripheral to a large, multiphase intrusive complex of predominantly granitic composition.  Quartz veins extend over 15 km of strike.  Two discrete intrusive featuring veins and disseminated molybdenum mineralization have been discovered.  Geological mapping has revealed outcropping features that are broadly consistent with economically productive circum-pacific porphyry (copper-molybdenum-gold-silver) deposits.
 
The Enmore Gold Project covers approximately 325km2 within the Enmore-Melrose Goldfield of northeastern New South Wales, Australia. The Company holds a 100 percent interest in an exploration licence covering 290km2 and is earning an 80 percent interest in two exploration licences covering 35 km2. The geological setting is broadly analogous to that at the nearby Hillgrove copper gold mine. Exploration results to date have confirmed the potential for lode and/or quartz stock-work style gold deposits at a number of individual prospects, including Bora, Sunnyside, Lone Hand, Stony Hill, Sheba and Tabben. Potentially minable grades and widths have to date been drill-intersected at Sunnyside and Bora prospects.
 
Description of Mining Industry
 
Our business is highly speculative.  We are exploring for base and precious metals and other mineral resources.  Ore is rock containing particles of a particular mineral (and possibly other minerals which can be recovered and sold). Mining involves the legal extraction and processing of ore to recover minerals which can be sold at a profit.  Although mineral exploration is a time consuming and expensive process with no assurance of success, the process is straight forward.  First, we acquire the rights to enable us to explore for, and if warranted, extract and remove ore so that it can be refined and sold on the open market to dealers.  Second, we explore for precious and base metals by examining the soil, rocks on the surface, and by drilling into the ground to retrieve underground rock samples, which can then be analyzed.  This work is undertaken in staged programs, with each successive stage built upon the information gained in prior stages.  If exploration programs discover what appears to be an area which may be able to be profitably mined, we will focus our activities on determining whether that is feasible, while at the same time continuing the exploratory activities to further delineate the location and size of the potential ore body. Things that will be analyzed by us in making a determination of whether we have a deposit which can be feasibly mined at a profit include:
 
 
 
22

 
 
 
1.           The amount of mineralization which has been established, and the likelihood of increasing the size of the mineralized deposit through additional drilling;
 
2.           The expected mining dilution;
 
3.           The expected recovery rates in processing;
 
4.           The cost of mining the deposit;
 
5.           The cost of processing the ore to separate the gold from the host rocks, including refining the precious or base metals;
 
6.           The costs to construct, maintain, and operate mining and processing activities;
 
7.           Other costs associated with operations including permitting, community co-operation programs and reclamation costs upon cessation of operations;
 
8.           The costs of capital;
 
9.           The costs involved in acquiring and maintaining the property; and
 
10. The price of the precious or base minerals. For example, the price of one ounce of gold for the years 2001 to June 30, 2012 ranged from a low of $271 in 2001, to a high of $1,895 in 2011.  At September 17, 2012, the price of gold was $1,770 per ounce1.
 
Our analysis will rely upon the estimates and plans of geologists, mining engineers, metallurgists and others.

If we determine that we have a feasible mining project, we will consider pursuing alternative courses of action, including:
 
·  
seeking to sell the project to third parties;
 
·  
entering into a joint venture with another mining company to mine the deposit; or
 
·  
placing the property into production ourselves.
 
 

1Based upon the Average Spot Price of Gold, London PM fix.
 
 
 
23

 
 
 
There can be no assurance that we will discover any precious or base metals, establish the feasibility of mining a deposit, or, other than the Bong Mieu Central, Underground and East areas and the Phuoc Son Dak Sa area which are currently in production, develop a property to production and maintain production activities, either alone or as a joint venture participant.  Furthermore, there can be no assurance that we would be able to sell the property on acceptable terms or at all, enter into such a joint venture on acceptable terms, or be able to place a property into production ourselves. Our mining operations are subject to various factors and risks generally affecting the mining industry, many of which are beyond our control. These include the price of precious or base metals declining, the possibility that a change in laws respecting the environment could make operations unfeasible, or our ability to conduct mining operations could be adversely affected by government regulation.  For a more complete description of risk factors facing our Company, please see “Item 3D. Risk Factors” of this report.
 
Regulation of Mining Industry and Foreign Investment in Vietnam
 
The current Vietnamese mining law was enacted in November 2010 replacing the 1996 mining law as subsequently modified. The new Vietnamese mining law came into effect on July 1, 2011 and a formal decree of implementation came into effect on April 25, 2012. Pursuant to the new legislation, a company exploring and mining precious metals may apply to the licensing authority, the Ministry of Natural Resources & Environment, for exploration and mining licenses. An exploration license provides an exclusive right to conduct advanced exploration over areas defined in the exploration license for an initial 4 year term, after which the exploration license may be renewed for subsequent terms not exceeding four years subject to the requirement to relinquish 30% of the area upon each renewal. Exploration license holders have the right to apply for a mining license at any time up to 6 months after expiry of an exploration license. An approved level of mineral reserves, an environmental impact assessment report, an investment certificate and specified minimum levels of equity are required to support a mining license application. Investment certificates are issued by the Ministry of Planning and Investment. A mining license provides the right to mine specified minerals for the term of the license which can be no more than 30 years. A mining license can be extended subject to a maximum aggregate duration of the extensions of 20 years.
 
On January 11, 2007, Vietnam became a full member of the World Trade Organization (“WTO”). After becoming a full member of the WTO, various commitments Vietnam made for joining the WTO became effective.  These commitments impact a number of areas such as tariffs and duties on goods, foreign service providers’ access to Vietnam, foreign ownership, reforms on Vietnam’s legal and institutional set up for trade, foreign exchange, commercial business, trading rights, policy making, duties, restrictions, pricing and export restrictions.  The overall changes were expected to further expand Vietnam’s access to the global economy and facilitate doing business in Vietnam.
 
Since Vietnam is now a member of the World Trade Organization (“WTO”), foreign companies under the terms of WTO membership, are expected to be treated on an equal basis as Vietnamese companies.
 
Profits earned in Vietnam transferred abroad annually shall be the amount of profits of a fiscal year distributed to the foreign investor after payment of corporate income tax, plus (+) other profits earned in the year, such as profits from assignment of capital, from assignment of assets, items of corporate income tax which were paid and then refunded to the foreign investor in accordance with the provisions of the Law on Corporate Income Tax; less (-) items which the foreign investor has used or undertaken to use to re-invest in Vietnam, profit items which the foreign investor has used to pay out the expenses of such foreign investor for production and business operations or for private needs of the investor in Vietnam, and profit items provisionally transferred during the year.   The amount of income that an investor is permitted to transfer abroad in a fiscal year shall be determined after the Company submits an audited financial report and a tax finalization report for the fiscal year with the local tax office which manages the enterprise.   Foreign investors shall be permitted to transfer profits abroad in the following circumstances: (i)  Annual transfer and one-off transfer of the whole of the amount of profits distributed or earned after the end of the fiscal year and after filing a tax finalization report with the tax office, (ii) Provisional transfer during a fiscal year once every quarter or once every six months after payment of corporate income tax in accordance with the Law on Corporate Income Tax (except for foreign investors exempt from corporate income tax in accordance with the provisions of the Law on Corporate Income Tax and the Law on Foreign Investment in Vietnam), (iii)  Transfer of profits upon termination of business operation in Vietnam in accordance with the Law on Foreign Investment in Vietnam.
 
 
 
 
24

 
 
 
 
Regulation of Mining Industry and Foreign Investment in Malaysia
 
The two main legal instruments that govern activities relating to minerals are the Mineral Development Act, 1994 and the State Mineral Enactment.  The Mineral Development Act came into force in August 1998. The State Mineral Enactment for Sarawak, where the Bau Gold Project is located, is entitled the “Minerals Ordinance, 2004” and was proclaimed into effect on July 1, 2010.
 
The Mineral Development Act 525 of 1994 defines the powers of the Federal Government for inspection and regulation of mineral exploration and mining and other related issues.  The State Mineral Enactment provides the States with the powers and rights to issue mineral prospecting and exploration licenses and mining leases and other related matters.  The Governor of the state of Sarawak, in which the Bau Project is located, has statutory rights to forfeit or cancel the mining tenements if there is a breach of, or default in the observance of any of the covenants or conditions attached to the relevant Mining Tenement.
 
Parties may apply for a General Prospecting License or an Exclusive Prospecting License for an initial term of two years (with one renewal period for a further two years). Mining operations require a Mining Lease, or in the case of a Mining Lease where the boundary survey of the area has not been completed, a Mining Certificate. In either case, the maximum term is 21 years.
 
Malaysia has been a member of the World Trade Organisation (“WTO”) since 1 January 1995 and has made various commitments pursuant to the General Agreement on Trade in Services (“GATS”) including setting out the transactions relating to investment in Malaysia which would require approval. Since Malaysia is a member of the WTO, foreign companies under the terms of the WTO membership are expected to be treated on an equal basis as Malaysian Companies.
 
No restrictions are imposed on foreign companies investing in Malaysia with regard to repatriation of capital, interest, profits and dividends. No royalties are payable to the Federal Government.
 
4C. Organizational Structure
 
The following is a chart showing the corporate organizational structure of the Company and its subsidiaries as of the date of this report.
 
 
 
25

 
 
Graphic
 
 
4D.  
Property, Plant and Equipment
 
General
 
The Company is currently prioritizing its resources towards the production of gold from, and the continued exploration and development of, the Phuoc Son Gold Property and the Bong Mieu Gold Property in Vietnam and towards the feasibility study underway at the Company’s Bau Gold Project in East Malaysia. The Company also intends to dedicate the resources necessary to earn its interest in the Capcapo joint venture, Philippines, as set out in the Capcapo Joint Venture Agreement. The company maintains small exploration bases at the Tien Thuan Gold Project in Vietnam and at the Enmore Gold Project in NSW, Australia but is not actively engaged in operations at those sites. The Company has thus diversified its property portfolio over four key projects in three jurisdictions, thus reducing sovereign risk.
 
In order to acquire, explore and develop its property interests in Vietnam, the Company was required to acquire licenses from the Vietnamese government.  Please refer to Item 4.A of this report for a discussion of the regulation of mining activities in Vietnam.  Following is a schedule of the investment, mining and exploration licenses/certificates the Company, through its subsidiaries or affiliated companies, holds in respect of the Phuoc Son Gold Property and the Bong Mieu Gold Property:
 
 
 
 
26

 
 
Schedule of Investment Licenses
 
PROJECT
OWNER
LICENSE
AREA
STATUS
GRANT DATE
TERM
EXPIRY
DATE
1. Bong Mieu
BOGOMIN
Certificate No 331022000008
30 Sq Km
Granted
6/27/08
7.75 years
5/3/2016
2. Phuoc Son
PSGC
Certificate No 331022000010
70 Sq Km
Granted
7/8/2008
25 years
10/20/2033
 
Schedule of Mining Licenses
 
PROJECT
MINE
OWNER
LICENSE
AREA
STATUS
GRANT DATE
TERM
EXPIRY
DATE
1. Bong Mieu
Ho Gan
BOGOMIN
ML592/CNNg
358 Ha
Granted
7/22/92
25 years
7/22/2017
Bong Mieu
Nui Kem
BOGOMIN
ML592/CNNg
358 Ha
Granted
7/22/92
25 years
7/22/2017
Bong Mieu
 Ho Ray
BOGOMIN
Proposed new MLA
Not yet defined
Proposed
-
-
-
2. Phuoc Son
Dak Sa
Bai Dat
PSGC
ML565/GP-BTNMT
3.67 Ha
Granted
4/25/2012
5 years
4/25/2017
Phuoc Son
Dak Sa
Bai Go
PSGC
ML565/GP-BTNMT
4,28 Ha
Granted
4/25/2012
5 years
4/25/2017

 
 
27

 
 
 
Schedule of Certificates

COMPANY
TYPE OF
CERTIFICATE
DATE
GRANTED
TERM
EXPIRY
DATE
Bong Mieu Gold Mining Company
Gold export certificate
Jan9, 2012
1 year
Dec 31, 2012
Phuoc Son Gold Mining Company
Gold export certificate
Jan9, 2012
1 year
Dec 31, 2012
Bong Mieu Gold Mining Company
Land Use Certificate
Oct 9, 1993
25 years
Sep 2017

 
Schedule of Exploration Tenements (Applications)
 
PROJECT
E.L. REG. #
REG. HOLDER
1. Phuoc Son
67/GP-BTNMT
PSGMC
2. Bong Mieu
2125/GP BTNMT
BOGOMIN

 
In order to acquire, explore and develop its property interests in Malaysia, the Company is required to acquire licenses from the Malaysian government.  Reference is made to Item 4.A for a discussion of the regulation of mining activities in Malaysia.  Following is a schedule of the mining licenses and certificates the Company, through its subsidiaries or affiliated companies, holds in respect of the Bau Gold Property:
 
 
 
28

 
 
 
Schedule of Mining Licenses/Certificates
 
         
GRANT
 
EXPIRY
PROJECT
OWNER
LICENSE
AREA
STATUS
DATE
TERM
DATE
               
Bau
NBG
ML1D/134/ML/2008
40.5 Ha
Granted
6/12/2005
20 years
6/11/2025
 
NBG
ML 136
139.6 Ha
Granted
1/19/2003
20 years
1/18/2023
 
NBG
ML/01/2012/1D
12.7 Ha
Granted
1/19/2003
20 years
1/18/2023
 
NBG
ML/03/2012/1D
49.4 Ha
Granted
3/5/2004
20 years
3/4/2024
 
NBG
ML 138
409.5 Ha
Granted
11/20/2005
20 years
11/19/2025
 
NBG
ML/04/2012/1D
52.1 Ha
Granted
1/10/2005
20 years
1/9/2025
 
NBG
ML/05/2012/1D
5.3 Ha
Granted
1/10/2005
20 years
1/9/2025
 
NBG
ML 142
38.4 Ha
Granted
6/12/2005
20 years
6/11/2025
 
NBG
ML/02/2012/1D
49.8 Ha
Granted
6/23/2004
20 years
6/22/2024
 
NBG
ML 1D/137/ML/2008
2.6 Ha
Granted
6/23/2004
20 years
6/22/2024
 
NBG
MC KD/01/1994
1,694.9 Ha
Granted
10/27/1994
20 years
6/22/2014
 
NBG
ML 101
48.2 Ha
New Application
     
 
NBG
MLA (ex ML93)
17.1 Ha
New Application
     
 
NBG
MLA (ex ML129)
263.0 Ha
New Application
     
 
NBG
MC (ex ML132)
126.0 Ha
New Application
     
 
NBG
MC (ex ML 99)
12.7 Ha
New Application
     
 
NBG
MC (ex ML 106)
25.1 Ha
New Application
     
 
NBG
MC (ex ML 114)
42.9 Ha
New Application
     
 
NBG
MC (ex ML 116)
43.3 Ha
New Application
     
 
NBG
MC (ex ML 120)
43.7 Ha
New Application
     
 
NBG
MC (ex ML 130)
13.7 Ha
New Application
     
 
NBG
MC (ex ML 132)
126.0 Ha
New Application
     
 
NBG
MLA (ex ML110)
64.2 Ha
Renewal Application
     
 
NBG
MC 1D/3/1987(A)
7,240.0 Ha
Renewal Application
     
 
NBG
MC 1D/1/1987
194.0 Ha
Renewal Application
     
 
NBG
MC 1D/2/1987(A)
82.0 Ha
Renewal Application
     
 
NBG
MC 1D/2/1987(B)
3,237.0 Ha
Renewal Application
     
 
NBG
MC SD/1/1987
1397.0 Ha
Renewal Application
     

The Capcapo Joint Venture Agreement provides the Olympus Consortium with the right to earn a 60% interest in Mineral Production and Sharing Agreement #144-99-CAR covering756 Ha expiring November 29, 2024 and registered in the name of Jabel.
 
 
 
 
29

 
 
 
Global Resource Estimates
 
CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF MEASURED AND INDICATED MINERAL RESOURCES
 
This section and section 4D.1 describing the Phuoc Son Gold Property and section 4D.2 describing the Bong Mieu Gold Property use the term “ measured and indicated resources.”  We advise U.S. investors that while those terms are recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission (“SEC”) does not recognize them.  U.S. investors are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves.
 
CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF INFERRED MINERAL RESOURCES
 
This section uses the term “inferred resources.”  We advise U.S. investors that while this term is recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission does not recognize it. “Inferred resources” have a great uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility.  It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or prefeasibility studies, except in rare cases.  U.S. investors are cautioned not to assume that part or all of an inferred resource exists, or is economically and legally mineable.

The mineral reserve and mineral resource estimates contained in the following tables have been prepared in accordance with NI 43-101. Although generally the NI 43-101 standards are similar to those used by the SEC Industry Guide No. 7, the definitions in NI 43-101 differ in certain significant respects from those under Industry Guide No. 7.Accordingly, mineral reserve and mineral resource information contained herein may not be comparable to similar information disclosed by U.S. companies.

The Company’s Global Reserves and Resources are summarized in the table below as at June 30, 2012 and December 31, 2011.
 
 
 
30

 
 
 
RESERVES
       
As at June 30, 2012
         
As at December 31, 2011
 
Property
 
Reserve Catagory
   
Tonnes
   
Gold Grade (g/t)
   
Contained Gold (oz)
   
Tonnes
   
Gold Grade (g/t)
   
Contained Gold (oz)
 
Bong Mieu Gold Property (1)
                                     
NI43-101
 
Proven
      0       -       0       0       -       0  
   
Probable
      109,312       2.04       7,169       133,547       2.17       9,333  
   
Total P&P
      109,312       2.04       7,169       133,547       2.17       9,333  
Phuoc Son Gold Property (2)
                                                 
NI43-101
 
Proven
      170,481       6.97       38,182       180,313       4.88       28,303  
   
Probable
      557,068       5.78       103,512       567,635       5.83       106,377  
   
Total P&P
      727,549       6.06       141,694       747,948       5.60       134,680  
                                                       
RESOURCES
       
As at June 30, 2012
           
As at December 31, 2011
         
(Measured & Indicated Resources Include Proven and Probable Reserves)
         
Property
 
Reserve Catagory
   
Tonnes
   
Gold Grade (g/t)
   
Contained Gold (oz)
   
Tonnes
   
Gold Grade (g/t)
   
Contained Gold (oz)
 
Bong Mieu Gold Property (3)
                                                 
NI43-101
 
Measured
      1,037,660       1.95       65,038       1,037,660       1.95       65,038  
   
Indicated
      2,494,970       1.47       117,585       2,519,205       1.48       119,750  
   
Total M&I
      3,532,630       1.61       182,839       3,556,865       1.62       184,788  
   
Inferred
      4,951,920       1.39       221,306       4,951,920       1.39       221,306  
Ancillary Metal Credits (7)
 
Measured
                      37,908                       37,908  
   
Indicated
      69,793                                       69,793  
   
Total M&I credits
              107,701                       107,701  
   
Inferred
                      97,779                       97,779  
Historic Estimate
 
Measured
      24,200       5.00       3,890       24,200       5.00       3,890  
   
Indicated
      192,700       6.60       40,890       192,700       6.60       40,890  
   
Total M&I
      216,900       6.42       44,780       216,900       6.42       44,780  
   
Inferred
      1,220,000       8.00       313,792       1,220,000       8.00       313,792  
Phuoc Son Gold Property (4)
                                                 
NI43-101
 
Measured
      118,731       9.26       35,354       111,273       8.17       29,214  
   
Indicated
      418,463       9.12       122,654       429,030       9.15       126,276  
   
Total M&I
      537,194       9.15       158,008       540,303       8.95       155,490  
   
Inferred
      2,448,797       5.96       469,384       2,466,256       6.01       476,206  
Tien Thuan Gold Property (5)
                                                 
NI43-101
    n/a    
Not disclosed - See Note (5) below.
   
Not disclosed - See Note (5) below.
 
                                                         
Bau Gold Property (6)  
                                                       
NI43-101
 
Measured
      3,425,000       1       158,500       0       -       0  
   
Indicated
      13,633,000       1.72       755,000       10,963,000       1.60       563,900  
   
Total M&I
      17,058,000       1.67       913,500       10,963,000       1.60       563,900  
   
Inferred
      50,062,000       1.31       2,108,100       35,808,000       1.64       1,888,500  
                                                         
Global Totals:
         
As at June 30, 2012
           
As at December 31, 2011
         
   
Reserve Catagory
   
Tonnes
   
Gold Grade (g/t)
   
Contained Gold (oz)
   
Tonnes
   
Gold Grade (g/t)
   
Contained Gold (oz)
 
RESERVES
                                                       
NI43-101
 
Proven
      170,481       6.97       38,182       180,313       4.88       28,303  
   
Probable
      666,380       5.17       110,680       701,182       5.13       115,711  
   
Total P&P
      836,861       5.53       148,863       881,495       5.08       144,014  
RESOURCES
                                                       
NI43-101
 
Measured
      4,581,391       2.01       296,800       1,148,933       3.58       132,160  
   
Indicated
      16,546,433       2.00       1,065,033       13,911,235       1.97       879,719  
   
Total M&I
      21,127,824       2.00       1,361,832       15,060,168       2.09       1,011,879  
   
Inferred
      57,462,717       1.57       2,896,570       43,226,176       1.93       2,683,792  
Historic Estimate
 
Measured
      24,200       5.00       3,890       24,200       5.00       3,890  
   
Indicated
      192,700       6.60       40,890       192,700       6.60       40,890  
   
Total M&I
      216,900       6.42       44,780       216,900       6.42       44,780  
   
Inferred
      1,220,000       8.00       313,792       1,220,000       8.00       313,792  
 
 
 
31

 
Notes to reserves and resources table
 
1 - Bong Mieu Reserve Estimate
 
Bong Mieu reserves were estimated by Olympus in accordance with NI 43-101 and the Council of the Canadian Institute of Mining, Metallurgy and Petroleum (“CIMM”) definitions & standards and were independently reviewed by Terra Mining Consultants and Stevens & Associates (“TMC/SA”) in March 2009. A copy of the TMC/SA technical report entitled “Updated Technical Review of Bong Mieu Gold Project in Quang Nam Province, Vietnam”, dated April, 2009 can be found in the Company’s filings at www.sedar.com. Deposit notes and reserve impairments as at June 30, 2012 are as noted below:
 
1.1 - Ho Gan Deposit
 
Lower and upper grade-cutoffs are 0.80 g/t Au and 10.00 g/t Au respectively. The mining dilution factor is 10% @ 0.30 g/t Au.
 
No new reserves were developed during the quarter ended June 30, 2012. Accordingly, the remaining reserve was estimated by deducting the tonnage mined during the quarter ended June 30, 2012 from the reserve remaining at the quarter ended March 31, 2012. The tonnage mined during the quarter ended June 30, 2012 was estimated by reconciling the tonnage (by truck count) with mill tonnage (by weightometer).
 
1.2 - Ho Ray-Thac Trang Deposit
 
No reserves have yet been estimated.
 
1.3 - Nui Kem Deposit
 
No reserves have yet been estimated.
 
2 - Phuoc Son (Dak Sa) Reserve Estimate
 
Dak Sa (Bai Dat and Bai Go Sector) reserves were estimated by Olympus (based on a 3.00 g/t Au stope cut-off, practical stope layouts and the application of appropriate mining dilution rules and minimum width criteria) in accordance with NI 43-101 and CIMM definitions & standards. This estimate was independently audited by TMC/SA in March 2008. This TMC/SA report entitled “Technical Report on the Phuoc Son Project in Quang Nam Province, Vietnam” (March 2008), is within the Company’s filings at www.sedar.com. Deposit notes and reserve impairments as at June 30, 2012 are as noted below:
 
2.1 - Bai Dat Sector
 
During the quarter ended June 30, 2012, mining of Bai Dat deposit continued down to sub-level 6. No new reserves were developed during the quarter ended June 30, 2012. Accordingly, the remaining reserves were determined by deducting the ore mined during the quarter ended June 30, 2012 from the quarter ended March 31, 2012 reserve. The ore mined was determined by underground survey, reconciled with the official milled tonnage (by weightometer). The Bai Dat reserve estimate employed a lower grade-cutoff of 3.00 g/t Au and an upper grade-cutoff of 100.00 g/t Au.
 
2.2 - Bai Go Sector
 
During the quarter ended June 30, 2012, development ore was mined from the Bai Go ore body. No new (NI 43-101 status) reserves were developed. Accordingly, the Bai Go quarter ended June 30, 2012 reserve was determined by deducting the ore mined during the quarter ended June 30, 2012 from the quarter ended March 31, 2012 reserve. The ore mined was determined by underground survey, reconciled with milled tonnage (by weightometer). The March 2008 reserve estimate employed a lower grade-cutoff of 3.00 g/t Au and an upper cutoff of 80.00 g/t Au.
 
3 - Bong Mieu Resource Estimate
 
Bong Mieu resources were initially estimated by Olympus (in accordance with NI 43-101 and CIMM definitions & standards) and independently audited/updated by Watts Griffis and McOuat (“WGM”) (“A Technical Review of the Bong Mieu Gold Project in Quang Nam Province, Vietnam”) in September 2004, by TMC/SA (“Technical Review of the Bong Mieu Gold Project in Quang Nam Province, Vietnam”) in August 2007 and by TMC/SA (“Updated Technical Review of Bong Mieu Gold Project in Quang Nam Province, Vietnam”) in April 2009. Copies of these reports can be found within the Company’s filings at www.sedar.com.  Deposit notes and resource impairments as at June 30, 2012 are as noted below:
 
3.1 - Bong Mieu Central (Ho Gan) Deposit
 
During the quarter ended June 30, 2012, mining was conducted, but no new (NI 43-101 status) resources were estimated. The quarter ended June 30, 2012 resource was therefore estimated by deducting the tonnage mined from the resource model during the quarter ended June 30, 2012 from the resource remaining at end of the quarter ended March 31, 2012. Mining conducted outside of the resource model is excluded from this calculation.
 
3.2 - Bong Mieu East (Ho Ray-Thac Trang) Deposit
 
During the quarter ended June 30, 2012, no mining was conducted. An internal (NI 43-101/CIMM status) block model resource estimate (Bong Mieu-East Mineral Resource Update, March, 2011) is the basis for the quarter ended June 30, 2012 resource statement. This estimate incorporated upper and lower grade cutoffs of 0.5g/t Au and 10 g/t Au respectively. The previous estimate was from an April 2009 independent review by TMC/SA (refer above), which incorporated drilling completed by Olympus during 2008 (using upper and lower grade cutoffs of 0.5g/t Au and 10 g/t Au respectively) to update prior NI 43-101 and CIMM standard estimates/audits.
 
 
 
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3.3 - Bong Mieu South (Nui Kem) Deposit
 
The Nui Kem underground resource is an Historic estimate; being an independent estimate by Continental Resource Management Pty Ltd (“CRM”) in 1993. This estimate used lower and upper grade-cutoffs of 3.00 g/t Au and 30.00 g/t Au respectively. Although this CRM estimate pre-dates NI 43-101, it was independently reviewed by WGM in 1997 and again in 2007 by TMC/SA (refer above).
 
Neither WGM nor TMC/SA audited the CRM estimate, nor did they attempt to reclassify the Nui Kem resource to meet NI 43-101 standards. Nonetheless, both independent consultant groups consider it to have been carried out in a manner consistent with standard industry practice of the time and deem it to be relevant and of historic significance. It is accordingly herein reported as a historical resource.
 
During the quarter ended June 30, 2012, Olympus continued mining production from trial stoping and underground exploration developments. The historic resource has not been impaired by this production because the production to date is small and predominantly external to the CRM resource boundaries. Depth considerations effectively preclude resource drilling from surface, but it is anticipated sufficient data will become available from underground drilling and exploratory headings to enable a new NI 43-101 compliant estimate to be prepared, which will allow an application for an extended mining license.
 
4 - Phuoc Son (Dak Sa) Resource Estimate
 
Dak Sa (Bai Dat and Bai Go Sector) resources were estimated by Olympus in January 2008, in accordance with NI 43-101 and CIMM definitions & standards. This estimate was independently reviewed by TMC/SA in a technical report entitled “Technical Report on the Phuoc Son Project in Quang Nam Province, Vietnam”, dated March 2008, copy of which can be found in the Company’s filings at www.sedar.com. A prior independent review (by WGM) entitled “A Technical Review of the Phuoc Son Gold Project in Quang Nam Province, Vietnam”, dated January 30, 2004 can also be found in the Company’s filings at www.sedar.com. Current resources include an in-house estimate of additional resources conducted in May 2010. Deposit notes and resource impairments as at June 30, 2012 are as noted below:
 
4.1 - Dak Sa South (Bai Dat) Deposit
 
During the quarter ended June 30, 2012, mining of the Bai Dat deposit continued, but no additional (NI 43-101 status) resources were defined. Accordingly, the quarter ended June 30, 2012 resource (which includes reserves) was determined by deducting the quarter ended June 30, 2012 mining depletion from the resource remaining at end of the quarter ended March 31, 2012. The Dak Sa South estimate (refer above) employed an upper grade cutoff of 100.00 g/t Au, with no lowercut.
 
4.2 - Dak Sa North (Bai Go) Deposit
 
During the quarter ended June 30, 2012, underground access to the Bai Go ore body was developed and mining commenced. No new (NI 43-101 status) resources were developed. Accordingly, the Bai Go quarter ended June 30, 2012 resource was determined by deducting the ore mined during the quarter ended June 30, 2012 from the quarter ended March 31, 2012 resource. The ore mined was determined by underground survey, reconciled with milled tonnage (by weightometer). The Dak Sa North resource estimate employed an upper grade cutoff of 80.00 g/t Au, with no lower grade cutoff.
 
5 - Tien Thuan Resource Estimate
 
No Tien Thuan resource is disclosed as of the quarter ended June 30, 2012 because no NI 43-101 status resource estimate has yet been made. An historic (1993) gold resource estimate by the Geological Survey of Vietnam cannot presently be disclosed because it is neither JORC nor NI 43-101 compliant.
 
6 - Bau Resource Estimate
 
No mining was conducted at the Bau Gold Project during the quarter ended June 30, 2012. Current Bau resources are pursuant to an estimate conducted by TMC/SA, dated February 28, 2012. This estimate employed lower grade-cutoffs of 0.50 g/t Au and 2.00 g/t Au respectively for near surface (open-pit) and deeper (u/g) deposits. Upper cutoffs ranged from 3.3 g/t Au in respect of tailings and from 6.47 g/t Au to 33.13 g/t Au in respect of other deposits, depending upon grade statistics for each deposit. This estimate supersedes an earlier estimate by the same consultants dated June 15, 2010.
 
A prior estimate (of partial Bau resources) was completed in November 2008 by Ashby Consultants Ltd (“ACL”) of New Zealand. The ACL estimate (conducted in accordance with JORC standards) is superseded by the TMC/SA estimate, which was conducted in accordance with NI 43-101 and CIMM definitions & standards. A copy of the 2010 TMC/SA technical report in respect of the Bau resource estimate may be viewed within the Company’s filings at www.sedar.com.
 
 
 
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Ongoing Bau project resource drilling is expected to enable a further resource update later in 2012.
 
7 - Ancillary Metals
 
The gold-equivalent value of the Tungsten in the Bong Mieu East Resource was calculated using Tungsten value of US$430/MTU and gold value of US$1,650/ounce. Other metals, such as silver, copper, lead, zinc and fluorine, have not been included in the quarter ended June 30, 2012 estimate because they are of insignificant value or uneconomic to recover.
 
(8) Commodity Prices
 
Commodity prices used over the last three years (in USD) were as follows:
 
Commodity
2009 Price
2010 Price
2011 Price
2012 Price
Gold
US$1,120/oz
US$1,340/oz
US$1,650/oz
US$1,650/oz
Tungsten
US$200/MTU
US$320/MTU
US$430/MTU
US$430/MTU

The 2008 – 2015 gold metal price forecasts used were those of Macquarie Bank (consistent with near term trailing gold price averages and the January 2008 Reuters poll), as follows:
 
YEAR
 
GOLD PRICE (US$)
 
2008
    960  
2009
    1050  
2010
    1000  
2011
    900  
2012
    800  
2013
    750  
2014
    750  
2015
    750  

(10)
The Company currently operates three mines (Bong Mieu Central, Bong Mieu Underground and Phuoc Son), company ownership of which is 80% at Bong Mieu and 85% at Phuoc Son. The quantities disclosed relate to the whole mines.
 
Minor differences between estimated reserves and actual production have been accounted for in the respective reserve tables. There are no material variations to be disclosed.
 
The new Phuoc Son processing plant was out into commercial production on July 1, 2011. Metallurgical recoveries are consistently within the 90-95% range.
 
An independent financial analysis of the Phuoc Son Deposit was conducted in 2008 by Mr John Glenn of Meridian Capital Group Pty Ltd.
 
The metallurgical recovery factor used was 90%, with sensitivity analyses at: +5%, -5% and -10%.
 
Phuoc Son Gold Property, Vietnam
 
Olympus Pacific currently holds an 85% interest in the Phuoc Son Gold Property with a focus on exploration, development and production of gold and other potential minerals in the specified project area, located in Phuoc Son and Nam Giang districts in the Quang Nam Province. In 2003, NVMC, a subsidiary of the Company, entered into a joint venture agreement with MINCO, a mining company then controlled by the local provincial government, to form PSGC. PSGC has an investment certificate on the Phuoc Son property. NVMC’s initial interest in PSGC is 85% and MINCO has a 15% interest.
 
After five years, from the end of the period in which PSGC makes a profit for 12 consecutive months, MINCO can increase its interest by 15% to 30% if MINCO chooses to acquire such interest from NVMC by paying fair market value. After 20 years, MINCO can increase its interest to a total of 50% if MINCO chooses to acquire such additional 20% interest from NVMC by paying fair market value. Fair market value shall be determined by using an independent accounting firm to perform the fair market value assessment and that assessment will be considered final and binding for both parties. If MINCO does not exercise its right of acquisition within three months from the dates of entitled acquisition, MINCO will be considered as having waived its right to acquire the interest.
 
 
 
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If either party fails to contribute, by way of debt or equity, in proportion to its participating interest or defaults on any other substantial obligation under the agreement and such default is not rectified within 60 days of notice of default, the non-defaulting party can terminate the agreement or serve notice on the defaulting party which would result in the participating interest of each party being recalculated and adjusted based on the percentage of debt and equity contributed by each party when compared to the total debt and equity contributed by both parties.
 
Phuoc Son License Tenure
 
Investment Certificate
 
On October 20, 2003, a 30-year investment license No. 2355/GP was granted for the Phuoc Son property covering 70 km2. This license permitted MINCO and NVMC to establish the PSGC joint venture for a term of 30 years. PSGC has investment capital of $65,000,000 and legal capital of $5,000,000, of which NVMC contributed $4,250,000 (85%) and MINCO contributed $750,000 (15%).  PSGC must pay the Vietnamese government a royalty equal to fifteen percent of the sales value of gold production, annual land rent and annual corporate tax of 40% of net profit but will be exempt from import duties and is subject to 7% tax upon remittance of profits abroad. Following issuance of new Investment Law, the original investment license was reissued on July 8, 2010 as an investment certificate (no. 331022000010) which will expire on October 20, 2033.
 
Exploration Licenses
 
Initial Exploration Licences (1953 & 1955/QD-DCKS) were granted over 100 km2 on 18/9/1998, with and extended term that expired on 31/12/2002. Since then, a series of exploration licenses have been held over progressively diminishing areas. The penultimate exploration license (EL67/GP-BTNMT) was granted over 70 km2 on 10/1/2008. Application for renewal of this EL over a reduced area of 28km2 has recently been held up pending issuance of a governmental mining law decree and implementation circular and confirmation that Phuoc Son IC area is exempt from government competitive mineral rights bidding. PSGC may also apply for two additional Exploration Licences over peripheral areas of interest in 2012.
 
Mining Licenses
 
A Mining License (ML116/GP-BTNMT) was originally granted over the Dak Sa (North and South deposits) on January 23, 2006 for a 3 year term. The term was later extended to 5.5 years, after which a replacement mining license was applied for and the current Mining License (ML 565/GP/BTNMT) was issued on April 25, 2012 for a five year term expiring on April 25, 2017. An additional mining license application over an area to the north of the current mining license is currently in preparation.
 
Gold Export License
 
PSGC exports and sells gold offshore pursuant to a gold export certificate that is renewed annually. The current certificate was issued on January 9, 2012 and will expire on December 31, 2012.
 
 
 
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Production History and Processing Plant
 
The Phuoc Son processing plant was designed to a capacity of 1,000 tpd.  The mill was commissioned on June 2011 at a nominal throughput of 500 tpd.  The processing plant consists of a conventional grinding, gravity, flotation, CIL and detox circuits.   Gold is recovered by a combination of gravity, cyanidation and carbon-in-pulp methods.

Ore from the underground workings is delivered to the mill. The run of mine ore is then processed through a primary jaw crusher and two cone crushers, standard and short head.  The crushed product is subsequently fed to the grinding circuit, consisting of two ball mills operating in a closed circuit with hydrocyclones.  The ground particles from the ball mill reports to two gravity concentrators where gold particles are extracted and treated in a high efficiency leaching system with an intensive cyanidation process. Between 70 percent and 80 percent of the gold in the ore fed to the mill is extracted in the Acacia system. The high-grade, gold-bearing solution from the Acacia system goes to electrowinning.

After the gravity circuit, product grind is conditioned with chemical reagents to activate flotation of sulphide minerals bearing gold particles.  The unwanted flotation tails report to the tailings area, Dam 1 containment.  The floated sulphide concentrate is thickened to approximately 50% solids (2w/w) and fed to the CIL (carbon in leach) circuit containing activated carbon.   This is a cyanidation circuit to adsorb dissolved gold onto activated carbon in agitated tanks.

Gold is removed from the loaded carbon using the pressurized Zadra technique. The resulting solution goes to a pregnant solution tank and subsequently to electrowinning where gold is deposited onto stainless steel cathodes by electrolysis. The gold is washed from the cathodes, filtered, dried and smelted in a furnace to produce yellow-gold metal.

Prior to the disposal of CIL tailings they are subject to cyanide detoxification. This results in a reduction of cyanide levels (measured in terms of weak-acid-dissociable cyanide) from about 100 parts per million to 5 parts per million.  After treatment, the tailings are pumped to a tailings impoundment (Dam 2B and 2A) located approximately 1 kilometre from the mill site. In the tailings impoundment, solids settle out and the clear supernatant is recycled back to the mill for reuse. Surplus effluent from the tailings is disposed to the natural environment, under the permission from the dignitaries in the local communities.

For further information on the operating results from Bong Mieu, refer to Operating Results at 5A.
 
Phuoc Son Exploration & Development Expenditure
 
The carrying value of the mine property and rights and deferred exploration and development costs related to the Phuoc Son Gold Property, is $2,286,349 and $14,459,318 respectively, as at June 30, 2012, and the carrying value of the property, plant, equipment and infrastructure for the Phuoc Son property is $27,098,950.
 
Phuoc Son Property Description and Location
 
The Phuoc Son Gold property, is located in the western highlands of Quang Nam Province, in central Vietnam, some 8kilometres (14.5 kilometres by road) northwest of the small town of Kham Duc and approximately 90 kilometres (140kilometres by road) southwest of the coastal city of Da Nang, the fourth largest city in Vietnam (see Figure 1).
 
 
 
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Figure 1 (below) shows the location of the property, whilst Figure 2 shows the location of the South and North Dak Sa deposits and the location of principal facilities on the property.
 
Graphic
 
Figure 1.   Phuoc Son Gold Property
 
 
 
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Graphic
 
Figure 2.  Project Site Plan for Bai Dat (South) and Bai Go (North) deposits
 
Accessibility, Climate, Local Resources, and Infrastructure for Phuoc Son Property
 
Access to the Dak Sa Project area within the Phuoc Son Gold Property is by 140 kilometres of bitumen road from Da Nang to Kham Duc.  From Kham Duc to the mine area is approximately 14.5 kilometres on a newly upgraded access road.  The South and North gold deposits lie about one kilometre apart and are linked together via a dirt road.
 
The climate is sub-tropical with average monthly temperatures ranging from about 27°C in June to 20.5°C in December, although it is reported that temperatures may fall below 15º C in the cold season. Average annual rainfall is 2,762.5 mm with the maximum average monthly value of 763.8 mm, which occurs in October.
 
The minimum average monthly precipitation value is for February and measures 30.9 mm.  Regionally, the relative humidity is high and reasonably consistent year round, ranging from an average of approximately 83% in April to 93% in November and December.   Storms often occur in Quang Nam Province in September, October and November and cause heavy rain and strong winds with an average speed of 65 kilometres/hr and a maximum of approximately 140 kilometres/hr.
 
The Phuoc Son Gold Property is located in the central highlands, an area that is one of the poorest regions of Vietnam. The local economy is primarily subsistence agriculture although local ongoing highway construction has provided a source of employment.  Artisanal mining is ongoing on the Property and while this activity has reduced from past periods it is not strongly discouraged by the government as it helps reduce unemployment and stimulate the local economy.  Olympus is doing its best to keep this activity in check. These miners may be suitable candidates for future Olympus development and mining operations.
 
 
 
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Nearby communities include Phuoc Duc Commune (population ~1,990) and Kham Duc District Town (population ~6,560), where PSGC has its local headquarters. Although Kham Duc has a district hospital with out-patient facilities and limited trauma casualty facilities, health care and education facilities are considered inadequate, with a distinct division in the standard of services and socio-economic opportunity available to ethnic minorities.
 
Electricity is provided from the Vietnam national grid supplying 1.6 MW at 22 kV supply. Telecommunications facilities are good and include internet and cell phone service. Water, although often polluted by the artisanal mining, is readily available on and near the Property. The population density within the Dak Sa Valley is approximately 25 per km2. Except for small-scale slash and burn agriculture, the topographic relief in the area of the project area is unfavorable for farming activities.
 
Geology of Phuoc Son Property
 
Two major stratigraphic units are present on the Property as follows:
 
Kham Duc Formation (Proterozoic): This formation consists largely of sedimentary rock.
 
Avuong Formation (Paleozoic): This formation is distinctive as it hosts significant amounts of mafic volcanic rock types.
 
The most significant fault related to mineralization on the Property is the Dak Sa fault zone (“DSFZ”). The DSFZ runs North-South for over five kilometres through the centre of the Dak Sa Prospect (host to the South (Bai Dat) and North (Bai Go) deposits). The DSFZ appears to be primarily a thrust fault and features prominent gold mineralized quartz vein/breccias.
 
The Phuoc Son gold deposits are typical of those occurring within orogenic belts elsewhere in the world.
 
History of Exploration on the Phuoc Son Gold Property
 
A regional stream sediment survey was originally conducted in the Phuoc Son area in the early 1990’s, by a cooperative agreement between Indochina Goldfields Ltd and the Geological Survey of Vietnam. As a result of this, exploration licenses were applied for to cover geochemical anomalies in the Phuoc Son area. These applications were acquired from Indochina Goldfields by Olympus Pacific Minerals in 1997.
 
Olympus commenced exploration in 1998 and subsequently conducted staged exploration (carried out on behalf of Olympus through and by NVMC), including: inspection of artisanal underground workings, geological mapping, bedrock, float and channel sampling, soil geochemical surveying, geophysical surveys (ground magnetic surveying & self-potential) and diamond drilling. The initial exploration stages (Oct 1998 to Dec 2003) are described as follows:
 
· Stage 1 (October 1998 – March 1999): reconnaissance surveying of the then 100 km2 license area, identification of the three major mineralized shear structures, and commencement of detailed exploration over the first of these structures (the Dak Sa shear zone);
 
· Stage 2 (April 1999 – December 1999): continuation of detailed exploration over the southern end of the Dak Sa shear zone (including mapping/sampling and diamond drilling six holes at Bai Dat) and follow-up exploration at other sites (particularly at K7) within the balance of the license area;
 
 
 
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· Stage 3 (January 2000 to June 2000): grid soil sampling in the Dak Sa & K7 shear zones, rock sampling, geological mapping, pan concentrate survey, diamond drilling of 29 holes at Bai Dat, Bai Cu, Bai Chuoi and Bai Go, within the Dak Sa shear zone;
 
· Stage 4 (July 2000 to December 2000): detailed geological mapping, nine km2soil survey north of Bai Go, rock geochemistry, petrology and diamond drilling of 17 holes at Bai Dat, Bai Cu, Bai Chuoi and Bai Go;
 
· Stage 5 (January 2001–December, 2001): continuation of drilling with 31 additional holes at the Bai Go, Bai Gio and Bo prospects, as well as geological mapping, rock and soil geochemistry, pitting, surface and underground channel sampling, petrology, and gridding at other prospects including K7, Hoa Son, Tra Lon, Suoi Cay, Vang Nhe, Khe Rin, Khe Do and Khe Cop;
 
· Stage 6 (January 2002 to December, 2002): scout drilling at the Khe Rin, North Khe Do, Khe Do, Bai Buom, Tra Long and K7 prospects (32 drillholes), as well as pitting at Nui Vang, geological mapping/sampling, soil geochemistry, ground magnetometer surveying at Khe Rin-Khe Do and Bai Buom, reconnaissance mapping elsewhere, including Vang Nhe, Tra Long, K7 and Hoa Son; commencement of mine scoping studies at Dak Sa; and
 
· Stage 7 (January 2003 to December 31, 2003): in-fill, step-out and geotechnical diamond drilling at Bai Dat, Bai Go, Bai Chuoi and Bai Cu (27 holes); preparation of mineral resource estimates for the Bai Dat and Bai Go deposits; continuation of the scoping studies. A diamond drilling program was completed at Bai Chuoi sector (between the Bai Dat and Bai Go deposits) and soil geochemical surveys were being conducted elsewhere on the property. As at December 31, 2003, accumulated deferred exploration costs were $3,320,716 and mineral properties was $904,605 for the Phuoc Son Gold Property.
 
Since January 2004, the exploration focus in the Dak Sa Zone has been onin-fill and step-out drilling to confirm deposit extents, upgrade and estimate resources to JORC/NI43-101 status, support tenure applications and the establishment of mining operations. Descriptions of the work completed each year are as follows:
 
In 2004: deep C-horizon soil geochem, ground magnetic and radiometric surveying were completed at the South Bai Cu, Round Hill, Ca Creek, Dak Sa, North Dak Sa, Bai Gio East, Bai Gio North, Hoa Son, K7 East and Tra Long prospects. A small orientation SP (self potential geophysics), program was completed at Nui Vang prospect.  Geological mapping was conducted at Dak Sa, Quartz Creek, South Bai Cu, Round Hill, K7 and Ca Creek prospects. A BLEG and stream sediment sample program was completed over the northern section of the Phuoc Son investment licence not covered by previous surveys.  Diamond drill programs were carried out at Bai Cu (4 holes), Bai Chuoi (one hole), Round Hill (5 holes), Nui Vang (3 holes), K7 (3 holes), Bai Gio North (6 holes), and Khe Rin (7 holes) prospects. Two metallurgic drill holes were completed at Dak Sa – South Deposit (one hole), and North Deposit (one hole). A geophysical consultant from Canada visited the property and filtered/processed all previous magnetic data to facilitate improved anomaly resolution.  Based on what management considered to be favorable results, exploration continued into 2005.   During the year ended December 31, 2004, $1,095,335 was incurred on mineral properties for the Phuoc Son Gold Property, excluding the impact of the vend-in transaction described in Item 4.D.1.
 
In 2005: Self Potential (SP), geophysical programs were completed over the Dak Sa sector, Hoa Son, Bai Gio North, Bai Gio East and Bai Cu prospects.  Trenching and sampling at Bai Gio North and Bai Gio East was completed.  Geological mapping was completed at Bai Gio North, Bai Gio East, Hoa Son and Bai Chuoi. Exploration diamond drilling programs were conducted at Bai Go North (one hole), North Deposit (9 holes), South Deposit (16 holes) and Bai Chuoi (3 holes). An intensive re-logging program was carried out on North Deposit drill core during the year, combined with structural studies and new drill sections prepared and reviewed for Dak Sa. Resource estimates were completed to update the South Deposit ore body, incorporating the results of the in-fill drill program. The results of exploration were favorable in 2005, especially in the Dak Sa area, resulting in further exploration work in 2006.   During the year ended December 31, 2005, other capital expenditures of $1,805,607 were incurred for the Phuoc Son Gold Property.
 
 
 
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In 2006: the Company had completed 63 drill holes totalling approximately 11,330 metres, mainly focusing on the North (Bai Go) Deposit, South (Bai Dat) Deposit, and other exploration holes on assorted priority targets in the Dak Sa area. These ongoing exploration activities resulted in additional positive drill results at Phuoc Son.   Over the course of 2006, the North Deposit was significantly enlarged and then extended in excess of 900 metres in a north-south orientation.  The drilling also confirmed that the deposit remains open for further expansion.   In April 2006 resource estimates were updated internally by qualified persons using the original resource estimates audited by an independent engineering firm, as a base document.  The April 2006 update was on the North Deposit ore body, incorporating the results of drilling to March 31, 2006. An in-house technical report was completed with respect to the North and South Deposits.  An engineering firm was selected to complete an independent review of this technical report that would result in an issuance of a compliant independent Technical Report in Form 43-101F1 to NI 43-101.  During the year ended December 31, 2006, other capital expenditures of $2,458,242 were incurred for the Phuoc Son Gold Property.
 
In 2007: 11,170 meters were drilled in 37 drill holes. The company reviewed all Dak Sa (VN 320) exploration results to date and conducted an updated resource assessment (released on 15/1/2008)based on drilling up to October 2007.Measured and Indicated resources were stated to be 600,260 tonnes at an average grade of 10.95 g/t for 211,325 ounces of gold. The M & I total comprised Measured Resources of 157,450 tonnes, grading 13.06g/t and Indicated Resources of 442,810 tonnes, grading 10.2g/t. Additional resources of 425,610 ounces are contained within the Inferred category (1,955,400 tonnes at 6.77 g/t).Reference is made to the technical report “Preliminary Assessment of the Phuoc Son Project” dated December 2007 posted on www.sedar.com under the Company’s filings for further details. Based largely upon this report, the decision was made to commence preliminary studies to determine the commercial viability of proposed mining development. During the year ended December 31, 2007, other capital expenditures of $5,064,000 were incurred.
 
In 2008: The Company completed 22 drill holes totalling 8,558 meters.  Exploration work defined the “productive” Dak Sa shear deposit over a strike length of approximately five kilometers, expanded the Dak Sa resource base, and confirmed that the mineralization remained open along strike. During the fourth quarter of 2008 work was undertaken to re-evaluate the Reserves and Resources in the Phuoc Son Gold Property following drilling programs completed earlier in the year.  The Proven and Probable Reserve Estimates, based on drilling up to December 31, 2008, stood at 930,390 tonnes at an average grade of 7.79 g/t for 233,150 ounces of gold.  Measured and Indicated resources, based on drilling up to December 2008, stood at 709,670 tonnes at an average grade of 10.76 g/t for 245,470 ounces of gold. The Measured and Indicated total comprised Measured Resources of 163,320 tonnes, grading 12.76g/t and Indicated Resources of 546,350 tonnes, grading 10.16g/t. Additional resources of 401,640 ounces of gold are contained within the Inferred category (1,884,200 tonnes at 6.63 g/t).Also during 2008, the Phuoc Son Technical Report confirmed the feasibility of the Company’s goal to design and construct an efficient and environmentally sound operation that will bring economic benefits to the region and the shareholders. On March 26, 2008, the Company received a positive independent feasibility study in the Phuoc Son Technical Report, which confirmed the feasibility of the Company’s goal to design and construct an efficient and environmentally sound operation that will bring economic benefits to the region and the shareholders. On this basis, the Company determined to bring the Phuoc Son Gold Property into production. On August 28, 2008 the Company received approval from the Vietnamese authorities to conduct a trial test of the toll treatment of Phuoc Son ore at its Bong Mieu plant, with a view towards partially self-funding the Phuoc Son processing plant.  The Company commenced sourcing high-grade ore from the Phuoc Son mine in a trial trucking and toll treatment operation in August 2008.  The trial treatment operation was carried out over three months.  Based upon the results of this test, the Co