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## b. Financial Instrument Risk Exposure 

The Company’s financial instruments are exposed to certain financial risks, including market risk, credit risk, and liquidity risk. 

## (i) Market risk 

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk is comprised of three types of risk: foreign currency risk, price risk and interest rate risk. 

## Currency risk 

The Company is exposed to foreign currency risk to the extent financial instruments held by the Company are not denominated in US 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: 

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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 Malaysian ringgit against the U.S. dollar would result in an increase/decrease of approximately $83,000 (2010 – $143,000) in the Company’s net income (loss). 

As at June 30, 2011 and June 30, 2010, the Company is exposed to foreign currency risk through the following assets denominated in CAD$ dollars: 

<img src='content_image/235199.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 US dollar against the Canadian dollar would result in an increase/decrease of approximately $494,000 (2010 – $142,000) in the Company’s net income (loss). 

On August 11, 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 any of its gold sales. The derivative components associated to foreign currency fluctuation are fair valued at each period and gains or losses are recorded to its income (refer to note 11). 

## Other price risk 

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 derivate liabilities at fair market price using the Black-Scholes option pricing model and record gains and losses to other income. 

