the Royal Thai Board of Investment. Subject to meeting Board of Investment conditions, the benefits of these approvals include an exemption from corporate income tax until November 2009, with a reduction of 50% of the standard rate (currently 30%) available for 5 years thereafter based on a production of 178,416 ounces of gold and 583,733 ounces of silver per year. This will be reviewed by Kingsgate as part of the planned expansion. In addition, there are no withholding taxes applicable on dividends remitted to Australia during the initial tax exemption period.

As a result of the profit generated by the sale of shares in Goldstar Resources and the positive re-valuation of the Andean Resources shareholding, previously unbooked tax losses were taken into account in determining the 2006/07 tax expense.

Risk management
Kingsgate became an unhedged gold producer in June 2007, with all gold production after that date being delivered into the prevailing spot gold price.

The Company previously held a gold hedge book due to the original mine development being 100% debt financed in 2000 when gold prices were US$260-270 per ounce. A decision was made early in the 2005/06 financial year to aggressively deliver into the gold hedge positions with the view to providing increased exposure to a forecast rising gold price.

Most of the gold produced during the past financial year, 58,780 ounces (68% of production), was delivered into hedge positions at US$316 per ounce.

Dividends
A final dividend of 5 cents per share was paid to shareholders during the year relating to the 2005/06 year. No dividends have been declared for the year ended June 2007.

Selldown to Thai interests
In November 2006, Thai interests, under the entity Empire Asia Co. Ltd, established by a group of prominent Thai business persons as an investment company, purchased preference shares in the Thai subsidiary, Akara, to hold 52% of the issued capital. These additional shares have a pre-determined 12% coupon return instead of access to cashflow. Kingsgate has retained all of the ordinary shares in Akara.

This transaction allows Kingsgate shareholders to maintain their existing economic interest and management control in Akara as the operator of the Chatree Gold Mine. The Thai interests have representation on the board of Akara and have shared their valuable business experience in Thailand.

The issue of the preference shares successfully satisfied the requirement to bring majority Thai shareholders into Akara after five years of 100% foreign ownership, as granted by the Thai Board of Investment at the time of approval for the Chatree Mine development. Akara received approvals from the Ministry of Commerce for the transaction and confirmation on the fulfilment of Thai ownership obligations from the Board Of Investment.

This structure will remain in place until an Initial Public Offering (IPO) of Akara occurs on the Stock Exchange of Thailand (SET), currently scheduled to occur within the next two years. The IPO will comply with Thai foreign ownership laws.

Business development
Kingsgate divested its 19.7% holding in Victorian gold explorer Goldstar Resources NL in December 2006, which crystallised a profit

of $9 million on an initial investment of $4 million, 18 months earlier.

Kingsgate’s major shareholding in Andean Resources Limited (Andean) has been maintained as a passive investment. Andean is listed on the Australian and Toronto Stock Exchanges. A scrip-based takeover bid which closed in July 2006 resulted in Kingsgate holding a 22.4% strategic interest in the Patagonian gold explorer. Two private placements occurred during the year, where Kingsgate was not offered to participate, which diluted the holding to 18.5%. Due to continued exploration success at Andean’s flagship project, Cerro Negro, in Santa Cruz province, Argentina, and the secondary listing on the Toronto Stock Exchange, the value of the position has increased by $35 million at 30 June 2007.

Kingsgate now trades over-the-counter on NASDAQ in the USA as an American Depository Receipt (ADR) under the code OTC:KSKGY to allow US domestic funds easier access to holding shares in the Company.