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## Currency risk 

Concurrently with the adoption of the US dollar as the functional currency, effective July 1, 2010, the Company exposure to currency risk is to the extent the financial instruments held by the Company are not denominated in US dollars. Prior to July 1, 2010, as the functional currency was the Canadian dollar, the Company’s exposure to foreign currency risk was to the extent financial instruments were not denominated in Canadian dollars. 

As at June 30, 2011 and June 30, 2010, the Company is exposed to currency risk through the following assets and liabilities denominated in Malaysian ringgit (RM): 

<img src='content_image/248744.jpg'>

Based on the above net exposures as at June 30, 2011, and assuming that all other variables remain constant, a 5% depreciation or appreciation of the RM against the US dollar would result in an increase/decrease of approximately $83,000 (2010 – $143,000) in the Company’s net earnings (losses). 

As at June 30, 2011, the Company is exposed to foreign currency risk through the following assets denominated in CAD dollars: 

<img src='content_image/248743.jpg'>

Based on the above net exposures as at June 30, 2011, and assuming that all other variables remain constant, a 5% depreciation or appreciation of the Canadian dollar against the US dollar would result in an increase/decrease of approximately $494,000 (2010 – $142,000) in the Company’s net earnings (losses). 

In August, 2010, the Company received net proceeds of $11,001,196 from the convertible notes and forward gold sale. The contracts contain a number of derivative components that would cause exposure to foreign currency risk. The Company has not hedged against the foreign currency risk exposure. The derivative components associated to foreign currency fluctuation are adjusted to fair value at each period and gains or losses are recorded to the statement of operations (refer to note 11). 

## Commodity and other price risk 

The Company is exposed to the risk of fluctuation in prevailing commodity prices on gold it produces. Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices other than those arising from interest rate risk or foreign currency risk. On August 11, 2010, the Company issued the convertible notes which contain derivative liabilities. The Company values such derivative liabilities at fair market price using the Black-Scholes option pricing model with reference to the volatility of its own stock estimated using historical closing market prices and record gains and losses to other income. Assuming that all other variables remain constant, a 5% depreciation or appreciation of the Company’s share market price would result in an increase/decrease of approximately $ 400,000 in the Company’s net earnings (losses). 

