Lionsgold Regulatory News (LION)

30 May 2012

Kolar Gold Ltd

Update Letter to Shareholders

Kolar Gold Limited (AIM: KGLD) ("Kolar Gold" or "the Company") the Indian gold exploration and mine development company, is pleased to provide an update letter to shareholders on its projects in India and corporate developments to date.

Dear Shareholder,

Your company was admitted to AIM almost a year ago and over that time significant progress has been made both operationally and in respect of corporate activities. We want to ensure that shareholders are fully aware of the large gold opportunity that is unfolding in India, the progress being made on the ground, the challenges facing us, as well as the considerable rewards that management is striving to deliver for the Company.

Therefore, I am writing to you in the first of a proposed bi-annual letter on progress at Kolar Gold with an aim to keep shareholders informed of the Company's activities. In addition, we wish to reiterate our near term milestones and value steps. I encourage you also to visit our website.

Operational Activity

Your company has made good progress this year having mobilised two rigs for drilling targets in the South Kolar block and conducted 40 km of Induced Polarisation ("IP") surveying. Our attention for the rest of this calendar year will be focussed on the continued exploration over South Kolar PL (GP13), to upgrade the resource at Mallappakonda and prioritise new drill targets for the next 160 hole drill programme proposed at South Kolar. Exploration work in the form of a two rig drill programme over North Kolar PL (GP2) is expected to commence later this year as soon as the pending license application is granted.

Drilling Programme at South Kolar Project (GP13)

Diamond drilling commenced in February 2011 in the South Kolar Licence area and to date 8,000m of both Reverse Circulation (RC) and diamond drilling has been completed on our target prospects. Drilling has principally targeted known zones of mineralisation and extensions of auriferous lodes previously mined at the Chigargunta mine in the south and the Bisanatham mine in the north of the licence area.

Drilling at NE Chigargunta, the Chigargunta Eastern lodes and the Mallappakonda deposit has validated historical drilling results and has provided valuable fresh geological data on the host rocks and structural controls to mineralisation.

Highlight Results include:

North East Chigargunta:

• KCN-02: 4.74m at 24.7g/t gold from 79.74m to 84.48m

• KCN-05: 0.50m at 160.2 g/t gold from 117.14m to 118.89m

• KCN-05: 3.65m at 4.6g/t gold from 20.54m to 24.19m (HW lode)

• KCN-05: 2.60m at 6.0g/t gold from 134.04m to 136.64m (FW lode)

• KCN-10: 1.00m at 12.1g/t gold from 45.65m to 46.65m

• KCN-14: 1.10m at 16.4g/t gold from 45.29m to 46.39m

North Chigargunta Eastern Lodes:

• KCE 01: 0.5m @ 4.90g/t from 41.55m & 1.0m @ 3.36g/t from 43.55m

• KCE 02: 11.5m @ 1.21g/t from 82.84m incl. 1.5m @ 4.74g/t from 92.84m

• KCE 06: 2.0m @ 3.04g/t from 14.3m and 3.0m @ 3.1g/t from 28.3m

Mallapakonda:

• KMK 02: 21.5m @ 5.5g/t from 98m

• KMK 03: 19m @ 2.7g/t from 121.5m

Induced Polarisation at South Kolar Project (GP13)

To assist identification of new priority targets at South Kolar, we undertook 40 line km of detailed IP surveys in November 2011. The IP survey confirmed the continuity of auriferous structures previously mined at the Chigargunta and Old Bisanatham mines. A number of significant anomalies also exist along the north-south trend of the greenstone belt indicating a number of good target areas for drilling.

Additional Exploration at South Kolar Project (GP13)

Over the last year, the Company has generated a large database of information comprising ASTER imaging, close spaced ground magnetics, IP surveys, mapping, RC and diamond drilling. This data is presently being combined with further detailed mapping and soil geochemistry and reinterpreted in order to assist identification of larger structural anomalies and likely mineralisation trends. 

We also propose to resource drill from underground at the Mallapakonda deposit from two existing adits.

2012 Operational Plan

The operational plan for the remainder of 2012 is to:

- complete, integrate and re-interpret the detailed mapping and geophysics structural interpretation of South Kolar to determine location of new drill targets;

- commence new 160 drill hole programme at South Kolar PL (GP13);

- complete a resource upgrade at Mallappakonda;

- commence underground drilling at Mallappakonda deposit;

- secure North Kolar PL (GP2) and start work programme; and

- continue expansion of geological team.

Corporate Activity

Acquisition of Remaining Kolar Gold Projects

We continue to work closely with GMSI and SUN Mining to progress the North and East Kolar tenement approvals which are in the final stages with the Federal Government.

BGML Acquisition / Indian Mining Regime

The Company continues to make progress with the Government of India and is encouraged with the recent agreement in the Supreme Court to proceed with the sale and revival of the BGML mine by tender process. We now await the court order to ratify this process and the issue of the sale tender documents which have been drafted by Ernst & Young as advisors to the government.

India Gold Consolidation

The Company continues to review and investigate quality gold projects in India in order to build our position as a leading Indian gold exploration and development company. The board believes that acquiring significant resource ounces through sensible M&A opportunities is an attractive strategic move to establish our solid first mover advantage and increase valuation.

Funding / Fundraising Activity 

As announced in our half yearly results in March, the Company has £9.0mn cash deposits. The bulk of these funds have been earmarked as consideration for the exercise of the options over the remaining tenements (£4.7m) and undertaking the Group's exploration activities (£3.2m) on these tenements during 2012.

Management Miletones for 2012

- Mallapakonda resource update, H1

- Results of detailed mapping of South Kolar, early H2

- Commencement of new drill programme at South Kolar PL (GP13), early H2

- BGML court order to proceed with tender, H2

- North Kolar PL (GP2) granted, H2

- Pursue acquisition of additional gold opportunities in India, H2

Management in London

Management plan to visit London again between June 18-21 to update shareholders on corporate and operational developments. We will also present at the Proactive Investor Forum in London on the 20th June.

An updated presentation will be put onto our website as of tomorrow [31 May 2012] for your reference.

We hope this update has helped inform you on some of our achievements to date and our immediate plans to realise the significant gold opportunity that exists for us in India.

Best Regards,

Nicholas Spencer

Chief Executive Officer

Kolar Gold Limited

A copy of this letter is available on the Company's website at www.kolargold.com.au

About Kolar Gold Limited:

Kolar Gold is an Indian gold exploration and development company, listed on the AIM market (Ticker: KGLD) that has an experienced international board and strong local partners.

KGL has rights to explore and develop one prospecting licence and 13 further licence applications in the

Kolar Gold Belt, an 80 kilometre long Archaean

Greenstone Belt, in Southern India. The Kolar Gold Belt is one of the most prospective underdeveloped

Archaean Greenstone Belts in the world and is regarded by the Competent Person Mr Andrew J Vigar of Mining Associates Limited, as comparable to the Archaean Greenstone Belts of South Africa, Canada and Western Australia which have similar geology, structure and style of mineralisation. This project area includes 32 known mineralised prospects and covers 568 square kilometres in the southern states of Andhra Pradesh, Karnataka and Tamil Nadu. KGL commenced exploration on the first Prospecting Licence in South Kolar in February 2011.

KGL is also jointly pursuing, with the mine employee unions, the acquisition and revival of the neighbouring historic Kolar Gold Fields which has produced 25 million ounces of gold at 15.9 grams per tonne over 120 years until closure in 2001. The Federal cabinet has approved the sale and revival of the mine and the case is presently in the Supreme Court for approval.