Conroy Diamonds and Gold P.l.c. Annual Report and

Conroy Diamonds and Gold P.l.c.

Annual Report and Financial Statements 2006

Index

2 Chairman’sStatement

5 CompanyInformation

7 Directors’Report

10 IndependentAuditors’Report

12 ProfitandLossAccount

13 BalanceSheet

14 CashFlowStatement

15 StatementofAccountingPolicies

17 NotestotheFinancialStatements

C o n r o y D i a m o n D s a n D G o l D P. l . c .F i n a n C i a l s t a t e m e n t s

31May2006

TogetherwithDirectors’andIndependentAuditors’Reports

Annual Repor t and Financial Statements 2006Conroy Diamonds and Gold P. l .c .�

TheprimaryobjectiveofyourCompanyistoestablishanewgoldprovinceinIrelandthroughthediscoveryandbringingintoproductionofoneormoregolddeposits.OurexplorationtodateintheLongford-DownMassifhasestablishedagoldtrendextendingforatleastfiftymilesalongstrikefromCo.Armagh,throughCo.MonaghanandintoCo.Cavan.Adetailedmulti-componentairbornegeophysicalsurveyhasnowbeencompletedoverapproximately90percent.ofyourCompany’slicences-anareaofabout500squaremiles.TheresultsofthesurveyareexpectedtocomplementyourCompany’sextensivedatabaseofresultsfromsoilsampling,trenchinganddrillingprogrammes,togetherwithitsLandsatEnhancedThematicMapper(ETM)andDigitalTerrainModel(DTM)data.Together,thisinformationwillprovideamorecomprehensivegeologicalpictureoftheentirelicencearea,enhanceyourCompany’sunderstandingoftheareaandhighlightitspotentialtohostoneormoremajorgolddeposits.

Aspartofaprogrammetofocusonthegolddiscoveriesithasmadeonitslicences,yourCompanyisundertakingadetailedreviewoftheTullybuck-LisglassansectorofthegoldtrendinCountyMonaghan,thelocationofyourCompany’sfirstdiscoveryintheArmagh-MonaghanGoldBelt.Amongstotherthings,thisreviewisexpectedtoassisttheCompanyinrefiningitsgeologicalmodelforthatsector.TheCompanyhasalsoenjoyedfurtherexplorationsuccessinthissectorsincetheinitialdiscovery

wasmadeandasaresulttheTullybuck-LisglassanrepresentsjustasmallpartofthelargerClontibretgoldtarget.TheClontibrettargetcoversanareameasuring�.5squarekmsandalsotakesinseveralothergolddiscoveriesmadebyyourCompany.

TheassetsacquiredinFinlandfromConroyP.l.c.onashareexchangebasisincludenineexplorationlicencesintheCentralLaplandGreenstoneBelt,togetherwithanextensivegeologicalandgeophysicaldatabase.YourdirectorsbelievethatFinlandhasexcellentprospectsforgoldandtheseprospectsareunderdevelopedbyworldstandards.

ThegoldexplorationassetsacquiredinFinlandsupplementtheCompany’sexistinggoldinterestsintheLongford-DownMassifandwill,intheDirectors’opinion,exposetheCompanytonewandexcitinggoldexplorationopportunitiesinanareathatishighlyprospective.Finlandisaminingfriendlycountrywithawell-developedinfrastructure,andgeologicalpotentialforlargegolddeposits.

MostofFinlandliesontheso-calledBalticShield–theancientcratonicmassformingthecoreofNorthWesternEurope.However,thishasnotbeensubjectedtothesameexplorationeffortseeninothershieldareasoftheworld(e.g.SouthernAfrica,WesternAustralia,Canada)andgoldinFinlandhasbeenlargelyproducedasaby-productofminingoperationsinmassivebasemetalsulphidedeposits.

C h a i r m a n ’ s s t a t e m e n t

DearShareholder

IhavegreatpleasureinpresentingyourCompany’sAnnualReportandFinancialStatementsforthetwelvemonthsended31May2006,aperiodwhichhascontinuedtobringexplorationsuccessinIreland.Sincetheyear-endyourCompanyhasacquiredgoldexplorationassetsinFinlandfromConroyP.l.c.andnowhasactiveexplorationprogrammesinplaceinbothIrelandandFinland.

Captiontogohere

3

Airborne Geophysical Study of the Longford-Down Massif carried out with a DHC Twin-Otter with two magnetometers, 4 frequency EM and gamma-ray spectrometry. The survey was flown on a 200m line spacing at an altitude of 55m.

StudiesbytheGeologicalSurveyofFinland(GTK)haveresultedinareappraisalofFinland’soverallmineralendowment.ThesestudieshaveindicatedahighpotentialforgoldincentralLapland.By1991,thefirstgoldmineinFinlandwasinoperation,andthiswasfollowedbythediscoveryoftheSuurikuusikkogolddepositinthecentralLaplandGreenstoneBelt,whichisestimatedtohavearesourceofover�millionozofgoldandisnowunderdevelopmentbytheCanadiangoldminingcompanyAgnico-EagleMinesLimited.

ThepreviousowneroftheassetshascarriedoutanactiveexplorationprogrammeforgoldinFinlandandhasacquiredasignificantknowledgeofthestyleofgolddepositionandmineralisation,particularlyinthecentralLaplandGreenstoneBelt.Ithasbuiltupanextensivedatabaseongoldoccurrencesinthearea,includingacomprehensiveoverview,detailedaeromagneticdata,andareviewoftheentireGTKgeochemicaldatabase(sampleper�squarekilometres).Theanalysisofthedatawasfollowedbythecollectionandanalysisofover�,300geochemicalsamples.ThiswasundertakenbytheGTKonbehalfofthepreviousownerandresultedintheidentificationoffourareasofparticularlyattractiveprospectivityforgoldinthecentralLaplandGreenstoneBelt.

TheCompanyproposestocontinuewiththeexplorationprogrammeovertheprospectiveareas,whichhavebeenidentifiedandwillalsocontinuetoemploy,undercontract,theservicesoftheGTK.

ThestrategyoftheCompanyinFinlandwillbetoidentifyeconomicgolddepositsandultimatelyincreaseshareholdervalue.

AsIamthelargestshareholderinConroyP.l.c.,andotherDirectorsoftheCompanyarealsoshareholdersandDirectorsofbothcompanies,anExtraordinaryGeneralMeetingwasheldonWednesday1November�006,whichresolvedtoproceedwiththeacquisitionofthegoldexplorationassetsinFinlandofConroyP.l.c.Thesehavebeenindependentlyvaluedate1millionbyTheCSAGroup,aworldwideexplorationmanagementconsultancy.

TheseassetswereacquiredbyyourCompanyfore1million(£675,300),whichwassatisfiedbytheissueof19,�9�,�86newOrdinaryShares,valuedat3.5ppershare(theaveragemiddlemarketsharepriceoftheCompany’sOrdinarySharesinthe3monthspriortothedateofthetransaction).Followingthistransaction,ConroyP.l.c.holds18.�6percent.oftheissuedsharecapitaloftheCompany.

FinancialsTheprofitaftertaxationfortheyearended31May�006wase35�,153(�005:losse513,��7)andthenetassetsasat31May�006weree5,77�,3�5(�005:e�,61�,�13).

Annual Repor t and Financial Statements 2006Conroy Diamonds and Gold P. l .c .�

AuditorsOn13June�006Deloitte&TouchewereappointedasauditorstotheCompany.

Directors,ConsultantsandStaff.IwouldliketoexpressmydeepappreciationofthesupportanddedicationoftheDirectors,consultantsandstaff,whichhasmadepossiblethecontinuedprogressandsuccesswhichyourCompanyhasachieved.

IamverypleasedtowelcomeDavidWathentoourBoard.Hisextensiveexperienceinstockbrokingandcorporatefinance,whichincludesthenaturalresourcessector,willbeavaluableassetinhelpingtheCompanydevelopandimplementplanstoadvanceourgoldprojectsinIreland.

IregrettoreportwithdeepsadnessthedeathofDrPamelaConroy.DrConroywasafoundingdirectoroftheCompany.Herdedication,experience,adviceandsupport,contributedsignificantlytothesuccessofyourCompany.

FutureOutlookTheCompanywillcontinuewithitsassetexplorationprogrammeswithaviewtoestablishinganewgoldprovinceinIreland,throughthediscoveryandbringingintoproductionofoneormoregolddeposits,anddevelopingthegoldinterestsinFinland.

ProfessorRichardConroyChairman

F i n l a n D

Annual Repor t and Financial Statements 2006Conroy Diamonds and Gold P. l .c . 5

C o m P a n y i n F o r m a t i o n

DirectorsProfessorRichardConroyChairman*

MaureenT.AJonesManaging Director*

JamesP.JonesFCAFinance Director*+

LouisJ.MaguireNon-Executive Director*+§

MichaelE.PowerNon-Executive Director§

HenryH.RennisonNon-Executive Director+

C.DavidWathen(appointed 10 October 2006)Non-Executive Director* Member of the Executive Committee

+ Member of the Remuneration Committee

§ Member of the Audit Committee

CompanySecretaryandRegisteredOfficeJamesP.JonesFCA10UpperPembrokeStreetDublin�Ireland

AuditorsDeloitte&ToucheCharteredAccountantsDeloitte&ToucheHouseCharlotteQuay,Limerick

RegistrarsCapitaCorporateRegistrarsP.l.cUnit5ManorStreetBusinessParkManorStreetDublin7www.capitacorporateregistrars.ie

NominatedAdviserJohnEast&PartnersLimitedCrystalGate�8-30WorshipStreetLondonEC�A�AH

BrokerCityCapitalSecuritiesLtd�JohnCarpenterStreetLondonEC�Y�AH

DublinStockbrokersDolmenButlerBriscoeDolmenHouse�EarlsfortTerraceDublin�

LegalAdvisersWilliamFrySolicitorsFitzwiltonHouseWiltonPlaceDublin�

Roschier-HolmbergKeskuskatu7A00100HelsinkiFinland

HeadOfficeConroyDiamondsandGoldP.l.c10UpperPembrokeStreetDublin�Tel:353-1-6618958Fax:353-1-66�1�13

ForfurtherinformationvisittheCompany’swebsiteat:www.conroydiamondsandgold.com

orcontact:

CityofLondonPRTritonCourt,FinsburySquareLondonEC�A1BRTel:��-�0-76�8-5518

Professor Richard ConroyChairman

Maureen JonesManaging Director

James P. JonesFinance Director

Louis MaguireNon-Executive Director

Michael E. PowerNon-Executive Director

Henry H. RennisonNon-Executive Director

David WathenNon-Executive Director

Annual Repor t and Financial Statements 2006Conroy Diamonds and Gold P. l .c .6

Working in Coreshed and out in the field in the Longford-Down Massif

Annual Repor t and Financial Statements 2006Conroy Diamonds and Gold P. l .c . �

TheDirectorspresenttheirannualreport,togetherwiththeauditedfinancialstatementsofConroyDiamondsandGoldP.l.c.fortheyearended31May�006.

PrincipalActivitiesandBusinessReviewThecurrentfocusoftheCompany’sactivitiesisgoldexplorationonamajorgeologicalstructureinIrelandknownastheLongford-DownMassif.TheCompanyholdsprospectinglicencesoveranareaofalmost1,500squarekilometresonthisstructure.

ExplorationwithintheCompany’slicenceareahasdemonstratedanextensivegoldbeltwhichextendsoveradistanceofapproximately18kmfromCountyArmaghintoCountyMonaghan.

FutureDevelopmentoftheBusinessItistheintentionoftheDirectorstocontinuetodeveloptheactivitiesoftheCompany,concentratingparticularlyongold.Furtherstrategicopportunitiesinmineralresources,bothinIrelandandabroad,willbesoughtbytheCompany.

RisksandUncertaintiesTheCompany’sactivitiesaredirectedtowardsthediscovery,evaluationanddevelopmentofmineraldeposits. Explorationforanddevelopmentofmineraldepositsisspeculative. Whilsttherewardscanbesubstantial,thereisnoguaranteethatexplorationontheCompany’spropertieswillleadtothediscoveryofcommerciallyextractablemineraldeposits.Thefuturenetassetvalueistherefore,interalia,dependentonthesuccessorotherwiseoftheCompany’sfutureexplorationprogrammes.Whetheramineraldepositwillbecommerciallyviableinaminingoperationdependsonanumberoffactors,suchasthegradeofthedeposit,pricesofthecommoditiesbeingexploited,currencyfluctuations,proximitytoinfrastructure,financingcostsandgovernmentregulations,includingregulationsrelatingtoprices,taxes,royalties,landtenure,landuse,importandexportregulationsandenvironmentalprotection.

ResultsfortheYearandStateofAffairsat31May2006Theprofitandlossaccountfortheyearended31May�006andthebalancesheetatthatdatearesetoutonpages1�and13respectively. TheCompanyrecordedaprofitforthefinancialyearofe35�,153(�005-Losse513,��7). Theprofitincludedanon-recurringcreditofe607,197rewaiverofdirectors’remuneration(Note9).Takingaccountoftheprofitandnetproceedsofashareissuewhichraisede807,759,theshareholders’fundsincreasedtoe5,77�,3�5at31May�006frome�,61�,�13at31May�005.

ImportantEventssincetheYearEndSubsequenttoyearend,On1November�006theCompanyacquiredthegoldinterestsofConroyPlc,whichincludedanumberofclaims(licenceareas)inFinlandwhichhavepotentialgoldprospectsandanextensivedatabase.Thepurchaseconsiderationofe1,000,000wassatisfiedbytheissueof19,�9�,�86ordinarysharesofe0.03each.

DirectorsTheDirectorswhoservedduringtheyearareasfollows:R.T.W.L.Conroy P.ConroyJ.P.Jones L.J.MaguireM.T.A.Jones M.E.PowerH.H.Rennison

TheBoardreports,withgreatsadnessandregret,thedeathofDrPamelaConroyon�6December�005.DrConroyhadbeenadirectorofyourCompanysinceitsfoundation.Herdedication,experience,adviceandsupportcontributedtoamajordegreeinthesuccessofyourCompany.

InaccordancewiththeCompany’sArticlesofAssociation,MrL.J.MaguireandMrM.E.Power willretirebyrotationand,beingeligible,willofferthemselvesforre-electionattheAnnualGeneralMeeting.

SincethelastAnnualGeneralMeeting,on10October�006,MrDavidWathenhasbeenappointeddirector.MrWathennowretiresinaccordancewiththeCompany’sArticlesofAssociationand,beingeligible,offershimselfforre-election.

D i r e C t o r s ’ r e P o r tfortheYearEnded31May�006


Directors’andSecretary’sShareholdingsandOtherInterestsTheinterestsoftheDirectorsandSecretary,allofwhichwerebeneficiallyheld,intheordinarysharecapitaloftheCompanyat31May�005and31May�006wereasfollows:

At31May2005 At31May2006

Ordinary Ordinary Sharesof Sharesof €0.03Each Options €0.03Each Options Warrants

R.T.W.L.Conroy 3,800,010 �,100,000 9,�50,0�0 �,��5,000 �1,36�,�93

P.Conroy 500,010 1�5,000 - - -

M.T.A.Jones 755,010 1,150,000 880,010 1,150,000 13,839,858

J.P.Jones 350,010 8�5,000 �75,010 8�5,000 8,058,1�9

H.H.Rennison 330,010 50,000 330,010 50,000 1,�50,��7

M.E.Power - - 175,000 - 301,03�

L.J.Maguire 310,010 50,000 310,010 50,000 1,�50,��7

Detailsofthewarrants,allofwhichweregrantedduringtheyearandareexercisablecurrently,areasfollows:Directors At31May2006 Price€ ExpiryDateR.T.W.L.Conroy �1,36�,�93 0.037 15November�015

M.T.A.Jones 13,839,858 0.037 15November�015

J.P.Jones 8,058,1�9 0.037 15November�015

L.J.Maguire 1,�50,��7 0.037 15November�015

M.E.Power 301,03� 0.037 15November�015

H.H.Rennison 1,�50,��7 0.037 15November�015

Detailsoftheoptions,allofwhichareexercisablecurrently,areasfollows: Granted At31 During At31 PriceDirectors May2006 Year May2005 € ExpiryDate

R.T.W.L.Conroy 1,1�5,000 1�5,000 1,000,000 0.�539 �December�010

R.T.W.L.Conroy 500,000 - 500,000 0.08 1�March�013

R.T.W.L.Conroy 600,000 - 600,000 0.10 �6November�013

M.T.A.Jones 3�5,000 - 3�5,000 0.�539 �December�010

M.T.A.Jones 375,000 - 375,000 0.08 1�March�013

M.T.A.Jones �50,000 - �50,000 0.10 �6November�013

J.P.Jones �75,000 - �75,000 0.�539 �December�010

J.P.Jones �75,000 - �75,000 0.08 1�March�013

J.P.Jones �75,000 - �75,000 0.10 �6November�013

P.Conroy - (1�5,000) 1�5,000 0.�539 �December�010

H.H.Rennison 50,000 - 50,000 0.�539 �December�010

L.J.Maguire 50,000 - 50,000 0.�539 �December�010


Exceptasdisclosedabove,neithertheDirectorsnortheirfamilieshadanybeneficialinterestinthesharecapitaloftheCompany.TherehavebeennocontractsorarrangementsenteredintoduringthefinancialyearinwhichaDirectoroftheCompanyhadamaterialinterestandwhichweresignificantinrelationtotheCompany'sbusiness.

SubstantialShareholdingsSofarastheBoardisaware,nopersonorcompany,otherthantheDirectors'interestsdisclosedaboveandtheshareholderslistedbelow,held3%ormoreoftheissuedordinarysharecapitaloftheCompanyat31May�006 NumberName ofShares %

GartmoreFundManagersLimited 1�,310,000 1�.�5

MrBruceRowan 10,�50,000 1�.01

PoliticalDonationsTherewerenopoliticaldonationsduringtheyear.

BooksofAccountThemeasureswhichtheDirectorshavetakentoensurethatproperbooksofaccountarekeptaretheadoptionofsuitablepoliciesforrecordingtransactions,assetsandliabilities,theemploymentofappropriatelyqualifiedstaffandtheuseofcomputeranddocumentarysystems.TheCompany'sbooksofaccountarekeptat10UpperPembrokeStreet,Dublin�.

Directors’ResponsibilityStatementCompanylawrequirestheDirectorstopreparefinancialstatementsforeachyearwhichgiveatrueandfairviewofthestateofaffairsoftheCompanyandoftheprofitorlossoftheCompanyforthatyear. Inpreparingthefinancialstatements,theDirectorshave:

• selectedsuitableaccountingpoliciesandthenappliedthemconsistently;

• madejudgementsandestimatesthatarereasonableandprudent;

• preparethefinancialstatementsonthegoingconcernbasisunlessitisinappropriatetopresumethattheCompanywillcontinueinbusiness.

TheDirectorsareresponsibleforkeepingproperaccountingrecordswhichdisclosewithreasonableaccuracyatanytimethefinancialpositionoftheCompanyandtoenablethemtoensurethatthefinancialstatementscomplywiththeCompaniesActs,1963to�005. TheyarealsoresponsibleforsafeguardingtheassetsoftheCompanyandhencefortakingreasonablestepsforthepreventionanddetectionoffraudandotherirregularities.

AsexplainedinNote1tothefinancialstatements,theDirectorshavereviewedcashflowprojectionsandotherrelevantinformationandaresatisfiedthattheCompanywillbeabletocontinueinoperationfortheforeseeablefuture. Accordingly,thefinancialstatementshavebeenpreparedonthegoingconcernbasis.

AuditorsTheauditors,Deloitte&Touche,CharteredAccountants,wereappointedduringtheyearandhaveexpressedtheirwillingnesstocontinueinofficeinaccordancewithSection160(�)oftheCompaniesAct,1963.

OnbehalfoftheBoard

R.T.W.L.Conroy J.P.JonesDirector Director

15November�006


WehaveauditedthefinancialstatementsofConroyDiamondsandGoldP.l.c.fortheyearended31May�006whichcomprisetheProfitandLossAccount,theBalanceSheet,theCashFlowStatement,theStatementofAccountingPoliciesandtherelatednotes1to17.ThesefinancialstatementshavebeenpreparedundertheaccountingpoliciessetoutintheStatementofAccountingPolicies.

Thisreportismadesolelytothecompany'smembers,asabody,inaccordancewithSection193oftheCompaniesAct1990.Ourauditworkhasbeenundertakensothatwemightstatetothecompany’smembersthosematterswearerequiredtostatetotheminanauditors’reportandfornootherpurpose.Tothefullestextentpermittedbylaw,wedonotacceptorassumeresponsibilitytoanyoneotherthanthecompanyandthecompany’smembersasabody,forourauditwork,forthisreport,orfortheopinionswehaveformed.

RespectiveresponsibilitiesofdirectorsandauditorsThedirectorsareresponsibleforpreparingtheAnnualReport,includingassetoutintheStatementofDirectors’Responsibilities,thepreparationofthefinancialstatementsinaccordancewithapplicablelawandaccountingstandardsissuedbytheAccountingStandardsBoardandpublishedbytheInstituteofCharteredAccountantsinIreland(GenerallyAcceptedAccountingPracticeinIreland).

Ourresponsibilities,asindependentauditors,aretoauditthefinancialstatementsinaccordancewithrelevantlegalandregulatoryrequirements,therulesoftheLondonStockExchangefortheAlternativeInvestmentMarketandInternationalStandardsonAuditing(UKandIreland).

Wereporttoyououropinionastowhetherthefinancialstatementsgiveatrueandfairview,inaccordancewithGenerallyAcceptedAccountingPracticeinIreland,andareproperlypreparedinaccordancewithIrishstatutecomprisingtheCompaniesActs,1963to�005.Wealsoreporttoyouwhetherinouropinion:

properbooksofaccounthavebeenkeptbythecompany;whether,atthebalancesheetdate,thereexistsafinancialsituationrequiringtheconveningofanextraordinarygeneralmeetingofthecompany;andwhethertheinformationgiveninthedirectors'reportisconsistentwiththefinancialstatements.Inaddition,westatewhetherwehaveobtainedalltheinformationandexplanationsnecessaryforthepurposesofourauditandwhetherthecompany'sbalancesheetanditsprofitandlossaccountareinagreementwiththebooksofaccount.

Wealsoreporttoyouif,inouropinion,anyinformationspecifiedbylawortherulesoftheLondonStockExchangefortheAlternativeInvestmentMarketregardingdirectors'remunerationanddirectors'transactionsisnotdisclosedand,wherepracticable,includesuchinformationinourreport.

WereadtheotherinformationcontainedintheAnnualReportandconsideredwhetheritisconsistentwiththeauditedfinancialstatements.TheotherinformationcomprisesonlytheReportoftheDirectorsandtheChairman’sStatement.Weconsidertheimplicationsforourreportifwebecomeawareofanyapparentmisstatementormaterialinconsistencywiththefinancialstatements.Ourresponsibilitiesdonotextendtootherinformation.

BasisofauditopinionWeconductedourauditinaccordancewithInternationalStandardsonAuditing(UKandIreland)issuedbytheAuditingPracticesBoard.Anauditincludesexamination,onatestbasis,ofevidencerelevanttotheamountsanddisclosuresinthefinancialstatements.Italsoincludesanassessmentofthesignificantestimatesandjudgementsmadebythedirectorsinthepreparationofthefinancialstatementsandofwhethertheaccountingpoliciesareappropriatetothecircumstancesofthecompany,consistentlyappliedandadequatelydisclosed.

Weplannedandperformedourauditsoastoobtainalltheinformationandexplanations

i n D e P e n D e n t a u D i t o r s ’ r e P o r ttotheShareholdersofConroyDiamondsandGoldP.l.c.


whichweconsiderednecessaryinordertoprovideuswithsufficientevidencetogivereasonableassurancethatthefinancialstatementsarefreefrommaterialmisstatement,whethercausedbyfraudorotherirregularityorerror.Informingouropinionweevaluatedtheoveralladequacyofthepresentationofinformationinthefinancialstatements.

MineralInterestsInformingouropinionwehaveconsideredtheadequacyofthedisclosuresmadeinthefinancialstatementsconcerningthevaluationofmineralinterestsof€5,781,855includedinthebalancesheet.Therealisationofthemineralinterestsbythecompanyisdependentonsuccessfuldevelopmentofeconomicreserves.WedrawattentiontofurtherdetailsgiveninNotes1and6.Ouropinionisnotqualifiedinthisrespect.

OpinionInouropinionthefinancialstatements:

• giveatrueandfairview,inaccordancewithGenerallyAcceptedAccountingPracticeinIreland,ofthestateofaffairsofthecompanyasat31May�006andoftheprofitfortheyearthenended;and

• havebeenproperlypreparedinaccordancewiththeCompaniesActs,1963to�005.

Wehaveobtainedalltheinformationandexplanationsweconsiderednecessaryforthepurposesofouraudit.Inouropinionproperbooksofaccounthavebeenkeptbythecompany.Thecompany’sbalancesheetanditsprofitandlossaccountareinagreementwiththebooksofaccount.

Inouropiniontheinformationgiveninthedirectors'reportisconsistentwiththefinancialstatements.

Thenetassetsofthecompany,asstatedinthebalancesheetaremorethanhalftheamountofitscalled-upsharecapitaland,inouropinion,onthatbasistheredidnotexistat31May�006afinancialsituationwhich,underSection�0(1)oftheCompanies(Amendment)Act,1983,wouldrequiretheconveningofanextraordinarygeneralmeetingofthecompany.

Deloitte & touche CharteredAccountantsandRegisteredAuditorsLimerick

15November�006

Annual Repor t and Financial Statements 2006Conroy Diamonds and Gold P. l .c .1�

P r o F i t a n D l o s s a C C o u n t FortheYearEnded31May�006

Notes 2006 �005 € €

OperatingExpenses –recurring 2 (254,316) (515,�05) –non-recurring 9 607,197 -

OtherIncome 1,272 1,958

Profit/(Loss)onordinaryactivities 3 354,153 (513,��7)

Taxonprofitonordinaryactivities 4 - -

Profit/(Loss)retainedfortheYear 354,153 (513,��7)

Earnings/(Loss)perordinaryshare –Basic 5 €0.0048 (€0.008) –Fullydiluted 5 €0.0044 -

Therearenorecognisedgainsorlossesotherthantheprofitfortheyear.Theaboveallresultfromcontinuingoperations.

Theaccompanyingnotesformanintegralpartofthisprofitandlossaccount.


ApprovedbytheDirectorson15November�006


Notes 2006 2005 € €

FixedAssets

Mineralinterests 6 5,781,855 6,0�3,7�6

Tangibleassets 7 43,635 53,015

5,825,490 6,096,7�1

CurrentAssets

Debtors 8 55,835 39,0�0

Cashatbankandinhand 312,397 6�,689

368,232 101,709

Creditors:Amountsfallingduewithinoneyear 9 (419,397) (1,586,037)

NetCurrentLiabilities (51,165) (1,�8�,3�8)

NetAssets 5,774,325 �,61�,�13

CapitalandReserves

Calledupsharecapital 10 2,591,820 �,1�6,3�0

Capitalconversionreservefund 10 30,617 30,617

Sharepremium 10 5,069,866 �,707,607

Profitandlossaccount 12 (1,917,978) (�,�7�,131)

Shareholders’Funds–allequity 13 5,774,325 �,61�,�13

Theaccompanyingnotesformanintegralpartofthisbalancesheet.


ApprovedbytheDirectors15November�006

B a l a n C e s h e e t31May�006

Annual Repor t and Financial Statements 2006Conroy Diamonds and Gold P. l .c .1�

Notes 2006 2005 € €

NetCash(Outflow)/InflowfromOperatingActivities 14A (1,951) 73,638

CapitalExpenditureandFinancialInvestments 14B (556,100) (888,353)

NetCashOutflowbeforeFinancing (558,051) (81�,715)

Financing 14B 807,759 359,5��

Increase/(Decrease)inCash 14C 249,708 (�55,173)

Theaccompanyingnotesformanintegralpartofthiscashflowstatement.


ApprovedbytheDirectorson15November�006

C a s h F l o w s t a t e m e n t FortheYearEnded31May�006


ThefinancialstatementshavebeenpreparedunderthehistoricalcostconventioninaccordancewithapplicableaccountingstandardsgenerallyacceptedinIrelandandIrishstatutecomprisingtheCompaniesActs,1963to�005. TheCompany'sprincipalaccountingpoliciesaresetoutbelow. Allofthesepolicieshavebeenappliedconsistentlythroughouttheyearandthepreviousyear.

A. MineralInterests

(i) Exploration,appraisalanddevelopmentexpenditure TheCompanyaccountsformineralexpenditureunderthe'fullcost'methodofaccounting.

Exploration,appraisalanddevelopmentexpenditureisincurredonacquiring,exploringortestingexplorationprospects. Alllease,licenceandpropertyacquisitioncosts,geologicalandgeophysicalcostsandotherdirectcostsofexploration,appraisalanddevelopmentarecapitalised. Theamountcapitalisedincludesotheroperatingexpensesdirectlyrelatedtotheseactivities.

(ii) CostPools CostsrelatingtotheexplorationandappraisalofmineralinterestswhichtheDirectors

considertobeunevaluatedareinitiallyheldoutsidethecostpool.Costsheldoutsidethecostpoolarereassessedateachyearend. Whenadecisiontodeveloptheseinterestsistaken,orifthereisevidenceofimpairment,therelatedcostswillbetransferredtothecostpooloramortisedtotheprofitandlossaccountasnecessary.CostswillbecapitalisedwithingeographiccostpoolswhichinitiallycompriseIrelandandtherestoftheworld.

Proceedsfromanydisposalofpartorallofaninterestwhichisoutsidethecostpoolwillbecreditedtothatinterestwithanyexcessbeingcreditedtothecostpool.

(iii)CeilingTest Whenadecisiontodevelopmineralinterestsistaken,andtherelatedcostsaretransferred

tothecostpool,aceilingtestwillbecarriedoutateachbalancesheetdatetoassesswhetherthenetbookvalueofcapitalisedcostsinthepool,togetherwiththefuturecostsofdevelopmentofundevelopedreserves,iscoveredbythediscountedfuturenetrevenuesfromthereserveswithinthepool,calculatedatpricesprevailingattheyearend. Anydeficiencyarisingwillbeprovidedfortotheextentthat,intheopinionoftheDirectors,itisconsideredtorepresentapermanentdiminutioninthevalueoftherelatedasset,andwherearising,willbedealtwithintheprofitandlossaccountasadditionaldepreciation.

(iv) Depreciation Expenditurewithinthecostpoolwillbedepreciatedusingtheunitofproductionmethod

basedoncommercialreserves. Costsusedintheunitofproductioncalculationwillcomprisethenetbookvalueofcapitalisedcostsplustheanticipatedfuturecostsofdevelopmentoftheundevelopedreservesatcurrentyearendunescalatedprices. Changesincostandreserveestimatesaredealtwithprospectively.

s t a t e m e n t o F a C C o u n t i n G P o l i C i e s


B. IssueExpensesandSharePremiumAccount Issueexpensesarisingontheissueofequitysecuritiesarewrittenoff,inthefirstinstance,

againstthesharepremiumaccount,withanyissueexpensesinexcessofthebalanceonthesharepremiumaccountbeingwrittenofftotheprofitandlossaccount.

C. TangibleFixedAssets Tangiblefixedassetsarestatedatcostlessaccumulateddepreciation. Depreciationis

providedonastraightlinebasistowriteoffthecostlessestimatedresidualvalueoftheassetsovertheirestimatedusefullivesasfollows:

Motorvehicles 5yearsOfficeequipment 8years

D. Taxation Thechargefortaxationisbasedontheresultfortheyear.Deferredtaxationiscalculated

onthedifferencesbetweenthecompany’staxableprofitsandtheresultsasstatedinthefinancialstatementsthatarisefromtheinclusionofgainsandlossesintaxassessmentsinperiodsdifferentfromthosethatarerecognisedinthefinancialstatements.


1. OperationsandGoingConcern TheCompanyisanexplorationcompanyandiscurrentlyinvolvedinthedevelopmentof

mineralexplorationopportunities,principallyintheLongford-DownMassif.

Duringtheyeare807,759,netofexpenses,wasraisedbytheissueofnewsharecapital.TheproceedsoftheshareissuewereusedtofundtheCompany’songoingexplorationactivities.

Onthebasisofthecapitalfundingachievedtodateandexistingcommitmentsforfuturecapitalfundingtogetherwiththeveryencouragingresultsobtainedfromtheexplorationprogrammeandtheirreviewofprojectedcashflowinformationthedirectorsconsideritappropriatetopreparethefinancialstatementsonagoingconcernbasis.

2. OperatingExpenses-Recurring 2006 2005

€ €

Operatingexpenses(a) 599,005 1,097,110

TransfertoMineralInterests(Note6) (344,689) (581,905)

254,316 515,�05

(a) TheCompanyhadnineemployeesduringtheperiod(�005–ten).Theremunerationchargedduringtheperiodcomprisedsalariesofe�66,996,socialwelfarecostsofe�1,7��andpensioncostsofe3�,875(�005–e581,869,e30,373ande90,76�respectively).

3. ProfitonOrdinaryActivitiesbeforeTaxation Theprofitonordinaryactivitiesbeforetaxationisarrivedatafterchargingthefollowing

items,whicharestatedatamountspriortothere-allocationtomineralinterests:

2006 2005 € €

Auditors’remuneration 15,500 15,500

Directors’emoluments

• fees 56,265 79,359

• otherincludingpensioncontributions 151,125 �03,�1�

Depreciation 11,766 �3,088

n o t e s t o t h e F i n a n C i a l s t a t e m e n t sfortheyearended31May�006


4. TaxonprofitonOrdinaryActivities Notaxationchargearisesinthefinancialyearduetoutilisationoflossesincurredinprevious

years. Therewasnounprovideddeferredtaxationat31May�006(�005–eNil).

5. Earningsperordinaryshare Thecalculationofthebasicearningsperordinaryshareofe0.00�8(�005–Losse0.008)is

basedontheprofitforthefinancialyearofe35�,153(�005–Losse513,��7)andtheweightedaveragenumberofordinarysharesinissueduringtheyearof73,�57,�73(�005–6�,�87,011).

Thecalculationofthefullydilutedearningsperordinaryshareofe0.00��isbasedontheprofitforthefinancialyearofe35�,153andtheweightedaveragenumberofordinarysharesinissueonafullydilutedbasisduringtheyearof80,658,�17.SincetheCompanyincurredalossin�005theeffectofshareoptionsandwarrantswouldbeanti-dilutive.

6. MineralInterests Costsheldoutsidecostpool:

Total Gold €

Cost

At31May�005 6,0�3,7�6

Writebackofdirector’sremuneration(Note9) (815,585)

Expenditureduringtheperiod

-licenceandappraisalcosts �09,0�5

-otheroperatingcosts(Note�) 3��,689

At31May2006: 5,781,855

TheDirectorshaveconsideredtheproposedworkprogrammesforthesemineralinterests,presentlyheldoutsidethecostpools.Theyaresatisfiedthattherearenoindicationsofimpairment,butrecognisethatfuturerealisationofthemineralinterests,heldoutsidethecostpools,isdependentonfurthersuccessfulexplorationandappraisalactivitiesandthesubsequenteconomicproductionofthemineralreserves.


7. TangibleFixedAssets Office Motor

Equipment Vehicles Total € € €

Cost

31May�005 87,3�7 60,860 1�8,187

Additions �,386 - �,386

Disposals - (�8,060) (�8,060)

31May2006 89,713 12,800 102,513

AccumulatedDepreciation

31May�005 39,98� 55,188 95,17�

Depreciationcharge 11,�1� 55� 11,766

Disposals - (�8,060) (�8,060)

31May2006 51,198 7,680 58,878

NetBookValue

31May�005 �7,3�3 5,67� 53,015

31May2006 38,515 5,120 43,635

8. Debtors: 2006 2005

€ €

Amountsfallingduewithinoneyear

VATreceivable 9,215 1�0

Otherdebtors 46,620 38,880

55,835 39,0�0

Annual Repor t and Financial Statements 2006Conroy Diamonds and Gold P. l .c .�0

9. Creditors:Amountsfallingduewithinoneyear 2006 2005

€ €

Accrueddirectors’remuneration

-feesandsalaries 172,515 880,9�1

-pensioncontributions 34,875 �50,053

Otheraccruals 88,247 �39,�63

Shareholder'sloan 108,182 -

Duetorelatedundertaking(Note16) 15,578 15,600

419,397 1,586,037

DuringtheyearthedirectorsconsideredthefinancialpositionoftheCompanyandinparticularthelevelofcurrentliabilitieswhichmainlyarosefromtheaccrualofunpaiddirectors’feesandremunerationsinceincorporation. Therelevantindividualdirectorsagreedtowaivetheirentitlementtoallamountsaccruingfromincorporationupto31August�005,amountingtoe1,��,78�.Theamountthathadbeenallocatedtothegoldexplorationprogramme,e815,585wascreditedtomineralinterests(Note6)andthebalancewastreatedasanon-recurringcredittotheprofitandlossaccount.

10. CalledupShareCapitalandPremium

Authorised: 2006 2005

€ €

�00,000,000ordinarysharesof€0.03each 12,000,000 1�,000,000

IssuedandFullyPaid: Capital

Conversion Share ShareCapital ReserveFund Premium Number € € €

Startofyear 71,5��,011 �,1�6,3�0 30,617 �,707,607

Shareissues(a) 1�,850,000 ��5,500 - �1�,830

Issueexpenses - - - (50,571)

Endofyear 86,394,011 2,591,820 30,617 5,069,866

(a) InApril�006,1�,850,000ordinarysharesofe0.03wereissuedforaconsiderationof�psterlingpersharetofundfurthermineralexploration.Thisrealisede0.0578pershareresultinginapremiumofe0.0�78pershare.

Annual Repor t and Financial Statements 2006Conroy Diamonds and Gold P. l .c . �1

(b) At31May�005warrantsover�0,000,000sharesexercisableat3.75psterlingatanytimeupto�0January�009wereoutstanding.Duringtheyearended31May�006,�9,06�,190warrantswereissuedtotheDirectorsfornilconsiderationexercisableatasubscriptionpriceofe0.037(Sterling�.5p)pershareatanytimeupto15November�015.

(c) At31May�006,optionshadbeenissuedover5,�95,000shares(�005–5,005,000)Theseoptionsareexercisableatpricesrangingfrome0.0633toe0.�539andexpirebetween�December�010and�6November�013.

(d) Thesharepriceat31May�006was�.1�5psterling.Duringtheyearthepricerangedfrom1.6�5pto7.�5psterling.

11. Subsequentevent On1November�006theCompanyacquiredthegoldinterestsofConroyPlc,whichincluded

anumberofclaims(licenceareas)inFinlandwhichhavepotentialgoldprospectsandanextensivedatabase.Thepurchaseconsiderationofe1,000,000wassatisfiedbytheissueof19,�9�,�86ordinarysharesofe0.03each.

12. ProfitandLossAccount 2006 2005

€ €

At1June�005 (2,272,131) (1,758,88�)

Profit/(loss)forthefinancialyear 354,153 (513,��7)

At31May�006 (1,917,978) (�,�7�,131)

13. ReconciliationofMovementinShareholders’Funds 2006 2005

€ €

At31May�005 4,612,413 5,791,118

Profit/(loss)forthefinancialyear 354,153 (513,��7)

Shareissues,net 807,759 359,5��

Diamondinterestde-merger - (1,0�5,000)

At31May�006 5,774,325 �,61�,�13

Annual Repor t and Financial Statements 2006Conroy Diamonds and Gold P. l .c .��

14. NotestotheCashFlowStatement

A. ReconciliationofOperatingProfit/(Loss)toNetCashInflow/(Outflow)fromOperatingActivities:

2006 2005 € €

OperatingExpenses-Recurring (253,044) (513,��7)

Depreciation 11,766 �3,088

Lossondisposaloffixedassets - 7�

Writebackofdirectors’remunerationaccrual––creditedtoProfitandLoss 607,197 -–creditedtoMineralInterests 815,585 -

(Decrease)/IncreaseinCreditors (1,166,640) 557,697

(Increase)/DecreaseinDebtors (16,815) 6,0�6

NetCash(Outflow)/InflowfromOperatingActivities (1,951) 73,638

B. AnalysisofCashFlows

CapitalExpenditureandFinancialInvestment 2006 2005

€ €

Investmentinmineralinterests(excludingwrite-back) (553,713) (866,73�)

Purchaseoftangiblefixedassets (2,387) (�1,6�1)

(556,100) (888,353)

Financing

Issueofsharecapital,net 807,759 359,5��

249,708 359,5��

C. AnalysisandReconciliationofNetFunds 31May Cash 31May

2005 Outflow 2006

Cashatbankandinhand 6�,689 ��9,708 312,369

Annual Repor t and Financial Statements 2006Conroy Diamonds and Gold P. l .c . �3

15. CommitmentsandContingencies

ObligationsunderMineralInterests TheCompanyhasreceivedprospectinglicencesundertheRepublicofIrelandMineral

DevelopmentActs19�0to1995forareasinMonaghanandCavan.IthasalsoreceivedlicencesinNorthernIrelandforareasinArmaghandDowninaccordancewiththeMineralDevelopmentAct(NorthernIreland)1969.

TheCompanyhascertainobligationsinrespectoftheselicencesatyearendwhichcomprisetotalexpenditurecommitmentsasfollows:

2006 2005 € €

Commitmentsforexpenditure:

• duewithinoneyear 315,000 50,000

• duebetweentwoandfiveyears 630,000 350,000

945,000 �00,000

16. RelatedPartyTransactions Theamountduetorelatedpartiesofe15,578(Note9)relatestoadvancesreceivedfrom

ConroyP.l.c.andVATreclaimedbytheCompanyonbehalfofConroyPlc.Theseamountsareunsecured,interestfreeandhavenospecificrepaymentterms.

TheCompanyalsosharesaccommodationwithConroyPlcandKarelianDiamondResourcesP.l.c. TheCompanybearsitsappropriateshareoftherelatedcostsdirectly.

17. ApprovalofFinancialStatements. Thesefinancialstatementswereapprovedbytheboardon15November�006.

Annual Repor t and Financial Statements 2006Conroy Diamonds and Gold P. l .c .��

n o t i C e o F a n n u a l G e n e r a l m e e t i n G

NoticeisherebygiventhattheAnnualGeneralMeetingofConroyDiamondsandGoldP.l.c(the“Company”)willbeheldattheConradHotel,EarlsfortTerrace,Dublin�onFriday8thDecember�006,at�.30pmforthepurposesoftransactingthefollowingbusiness:

1. ToreceiveandconsidertheFinancialStatementsfortheyearended31stMay�006togetherwiththeDirectors’andIndependentAuditors’Reportsthereon(ResolutionNo.1)

2. Tore-electasDirectorsthefollowingpersons:

MrLouisJMaguire(ResolutionNo.�(a))MrMichaelEPower(ResolutionNo.�(b))MrCDavidWathen(ResolutionNo.�(c))

3. ToauthorisethedirectorstofixtheremunerationoftheAuditors(ResolutionNo.3)

4. Toconsiderand,ifthoughtfit,passthefollowingresolutionasanOrdinaryResolution(ResolutionNo.�)

“That,inaccordancewiththeprovisionsofSection�0oftheCompanies(Amendment)Act,1983,thedirectorsoftheCompanybegenerallyandunconditionallyauthorisedtoallot'relevantsecurities'(asdefinedbySection�0(10)oftheCompanies(Amendment)Act,1983)uptotheamountoftheauthorisedbutunissuedsharecapitaloftheCompanyatthedateofthisresolutionandtoallotandissueanysharespurchasedbytheCompanypursuanttotheprovisionsoftheCompaniesAct,1990andheldastreasurysharesandthattheauthorityherebygrantedshall,subjecttoSection�0(3)ofthesaidAct,expireonthe7December,�011unlesspreviouslyrenewed,variedorrevokedbytheCompany.”

5. Toconsiderand,ifthoughtfit,passthefollowingresolutionasaSpecialResolution(ResolutionNo.5)

“That,forthepurposesofSection��oftheCompanies(Amendment)Act,1983andsubjecttotheDirectorsbeingauthorisedpursuanttoArticle10oftheArticlesofAssociationoftheCompany,theDirectorsbeempoweredtoallotequitysecuritiesforcashpursuanttoandinaccordancewithArticle11oftheArticlesofAssociationoftheCompany.TheauthorityherebyconferredshallexpireatthecloseofbusinessonthedateofthenextAnnualGeneralMeetingoftheCompanyunlesspreviouslyrevokedorrenewedinaccordancewiththeprovisionsoftheCompanies(Amendment)Act,1983.”

6. Totransactanyotherbusiness.

ByOrderoftheBoard

Datedthis15thdayofNovember�006

JamesP.JonesSecretary

RegisteredOffice10UpperPembrokeStreet,Dublin�.

Notes1. The holders of the Ordinary Shares are entitled to attend and vote at the above General Meeting of

the Company. A holder of Ordinary Shares may appoint a proxy or proxies to attend, speak and vote instead of him/her. A proxy need not be a member of the Company

2. A Form of Proxy is enclosed for use by Shareholders unable to attend the meeting. Proxies to be valid must be lodged with the Company’s Registrars, Capita Corporate Registrars Plc, Manor Street Business Park, Manor Street, Dublin 7 not less than 48 hours before the time appointed for the holding of the meeting.

Conroy Diamonds and Gold P.l.c.

10 Upper Pembroke Street Dublin 2

Tel: 353-1-661 8958 Fax: 353-1-662 1213

For further information visit the Company’s website at: www.conroydiamondsandgold.com

Documents

Conroy Diamonds and Gold P.l.c. Annual Report and