The delay to the granting of the new Chatree North Mining Leases has constrained the Company’s ambitions. Our team, including the new Thai investors, has been working through a complex approval process and we are confident that the leases will be granted within the term of the current government, given that the Environmental Impact Assessment for Chatree North was approved in April 2007.

Without the new Mining Leases, considerable pressure has been placed on the Company, both fiscally and operationally, which resulted in a loss (after tax) of $12.6 million after several years of profitability. This was a direct result of low grade material being processed from the current leases and then delivering the gold production into out-of-the-money gold hedges at US$316 per ounce, when the spot gold price has averaged US$634 per ounce for the year. The current lease area is being slowly depleted and ore feed is being supplemented from low grade stockpiles to keep the processing plant operating at full capacity.

Steps have been taken to mitigate the impact of the delay to accessing the new lease areas. A focus was placed on proving up more ore feed within the current leases and the

Company became unhedged in June 2007. Kingsgate is now benefiting from a bouyant gold price. With the improved grades in the Chatree North Mine Leases, once access is gained, we anticipate a return to strong profitability.

No dividend was announced this year as a result of the unfavourable fiscal year performance, but our policy of returning a large share of profits, after taking into account capital requirements, will continue as the Company becomes profitable once more.

During the year, the Company restructured its Thai subsidiary, Akara Mining Limited (Akara), to meet Thai ownership obligations. This was achieved while maintaining the economic benefit and control of Akara previously enjoyed by the Company’s shareholders.

The Company’s investments have performed well, with the sale of its investment in Goldstar Resources NL providing a $9 million profit in December 2006. Kingsgate has maintained its shareholding in Andean Resources Ltd. Although the Board was disappointed that the takeover was not successful, the value of the investment has increased by approximately $35 million.

Our predominantly Thai mine site personnel are to be congratulated on continuing to maintain Chatree as the world’s safest gold mine. This year, Akara became the first mining company in the world to attain the Social Accountability SA 8000 standard, the global benchmark in Corporate Social Responsibility in ensuring a fair and equitable workplace. This is an example of a combined effort by the Board, management and all of our workers and contractors to continually strive for the world’s best practice at Chatree.

The Directors are confident that the new Chatree North Mining Leases will be granted. These leases will create a new future for Kingsgate as they will allow access to higher grade material and an expansion of the treatment plant to 5 million tonnes per year. While the past 12 months was a tough year, the Board and management see a brighter future close at hand.