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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year endedMay 31, 2013

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________to _____________.

Commission file number: **000-51775**

STERLING GROUP VENTURES,
INC.(Exact name of registrant as specified in its
charter)

|Nevada                                           | 72-1535634                          
|------------------------------------------------ | ------------------------------------
|(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.)
|organization)                                    |                                     
|                                                 |                                     
|308-1228 Marinaside Cr.                          |                                     
|Vancouver BC Canada                              | V6Z 2W4                             
|(Address of principal executive offices)         | (Zip Code)                          

Registrants telephone number, including areacode
(604) 689-4407

Securities registered pursuant to Section 12(b) of the Act:

|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|None                | None                                     

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001(Title of class)

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [ X ]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act.Yes [  
]     No [X]

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.Yes [X]     No
[   ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
ST (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).Yes [X]     No [   ]

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [   ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of large accelerated filer, accelerated
filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check
one):

|Large accelerated filer [   ] | Accelerated
      filer [ 
       ]
|----------------------------- | -----------------------------------
|Non-accelerated filer [   ]   | Smaller reporting company [X]      

Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Act). Yes [  
]     No [X]

The aggregate market value of the voting and non-voting share
of Common Stock held by non-affiliates of the registrant was approximately
$3,915,124 based on the closing trading price for the common equity as of
November 30, 2012 (at $0.07).

The number of shares of common stock, par value $0.001 per
share, outstanding as of August 26, 2013 was 75,730,341.

Documents incorporated by reference: None.

1

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STERLING GROUP VENTURES INC.MAY 31, 2012 ANNUAL
REPORT ON FORM 10-K

TABLE OF CONTENTS

|         |                                                                                                                          | Page
|-------- | ------------------------------------------------------------------------------------------------------------------------ | ----
|         | PART
      I                                                                                                             |     
|Item 1.  | Business                                                                                                                 | 4   
|Item 1A. | Risk Factors                                                                                                             | 7   
|Item 1B. | Unresolved Staff Comments                                                                                                | 9   
|Item 2.  | Properties                                                                                                               | 9   
|Item 3.  | Legal Proceedings                                                                                                        | 12  
|Item 4.  | Mine Safety
      Disclosures                                                                                            | 12  
|         |                                                                                                                          |     
|         | PART II                                                                                                                  |     
|Item 5.  | Market for Registrant's
      Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
      Securities | 12  
|Item 6.  | Selected
      Financial Data                                                                                            | 14  
|Item 7.  | Management's Discussion and
      Analysis of Financial Condition and Results of Operations                              | 14  
|Item 7A. | Quantitative
      and Qualitative Disclosures About Market Risk                                                         | 18  
|Item 8.  | Financial Statements and
      Supplementary Data                                                                        | 18  
|Item 9.  | Changes in
      and Disagreements With Accountants on Accounting and Financial Disclosure                               | 43  
|Item 9A. | Controls and Procedures                                                                                                  | 43  
|Item 9B. | Other
      Information                                                                                                  | 43  
|         |                                                                                                                          |     
|         | PART III                                                                                                                 |     
|Item 10. | Directors, Executive
      Officers and Corporate Governance                                                             | 44  
|Item 11. | Executive
      Compensation                                                                                             | 45  
|Item 12. | Security Ownership of
      Certain Beneficial Owners and Management and Related Stockholder Matters                     | 47  
|Item 13. | Certain
      Relationships and Related Transactions and Director Independence                                           | 48  
|Item 14. | Principal Accounting Fees
      and Services                                                                             | 48  
|         |                                                                                                                          |     
|         | PART IV                                                                                                                  |     
|Item 15. | Exhibits and
      Financial Statement Schedules                                                                         | 49  
|         |                                                                                                                          |     
|         | SIGNATURES                                                                                                               |     

2

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Cautionary Statement Regarding Forward-Looking Statements

Safe Harbor Statement under the United States Private
Securities Litigation Reform Act of 1995: Except for the statements of
historical fact contained herein, the information constitutes "forward-looking
statements" within the meaning of the Private Securities Litigation reform Act
of 1995. Such forward looking statements, including but not limited to those
with respect to the price of phosphate, potassium, nitrogen, and other
commodities, the timing and amount of estimated production, costs of production,
reserve determination and reserve conversion rates, involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievement of the Company to be materially different from any
future results, performance or achievements expressed or implied by such forward
looking statements. Such factors include, among others, risks relating to the
integration of the acquisition, risks relating to international operations,
risks relating to joint venture operations, the actual results of current
exploration activities, the actual results of current reclamation activities,
conclusions of economic evaluations, changes in project parameters as plans
continue to be refined, future prices of phosphate, potassium, nitrogen,
fertilizer and other commodities, as well as those factors affecting the mineral
industry. Although the Company has attempted to identify important factors that
could cause actual results to differ materially, there may be other factors that
cause results not to be as anticipated, estimated or intended. There can be no
assurance that such statements will prove to be accurate as actual results and
future events could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on forward-looking
statements.

This annual report contains forward-looking statements as that
term is defined in the Private Securities Litigation Reform Act of 1995. These
statements relate to future events or our future financial performance. Some
discussions in this report may contain forward-looking statements that involve
risk and uncertainty. A number of important factors could cause our actual
results to differ materially from those expressed in any forward-looking
statements made by us in this report. Forward-looking statements are often
identified by words like: believe, expect, estimate, anticipate,
intend, project and similar expressions or words which, by their nature,
refer to future events.

In some cases, you can also identify forward-looking statements
by terminology such as may, will, should, plans, predicts, potential
or continue or the negative of these terms or other comparable terminology.
These statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
"Risk Factors", which may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
these forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.

Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles. All references to  $ refer to US Dollars, all
references to CA $ refer to Canadian Dollars, all references to RMB refer to
Chinese Yuan and all references to "common shares" refer to the common shares in
our capital stock.

As used in this annual report, the terms "we", "us", "our",
the Company and "Sterling" mean Sterling Group Ventures, Inc., unless
otherwise indicated.

Sterling is a mining and exploration company, involved in the
development of Gaoping property, a phosphate deposit through its acquisition of
Chenxi County Hongyu Mining Co. Ltd. (Hongyu) in Hunan, China, and is developing
a mining operation on the Gaoping property. There is no assurance we will be
able to commercially develop mineral deposits on the claims that we have under
option. Further exploration may be required before a final evaluation as to the
economic and legal feasibility of the claims is determined.

3

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PART I

ITEM 1. BUSINESS.

General

We were incorporated in the state of Nevada on September 13,
2001 and established a fiscal year end of May 31. Since our incorporation, we
have engaged in the business of mining exploration and development. On January
20, 2004, Sterling completed the acquisition of all of the issued and
outstanding shares of Micro Express Ltd. (Micro), which was incorporated on
July 27, 1994 and engaged in exploration and development of Lithium. Pursuant to
the transaction, the Company issued an aggregate of 25,000,000 shares of
Sterlings common stock to the stockholders of Micro in exchange for 100% of the
outstanding shares of Micros common stock. The business combination was
accounted for as a reverse acquisition whereby the purchase method of accounting
was used with Micro being the accounting parent and the Company being the
accounting subsidiary. The Company has since terminated the joint venture
agreements related to the Lithium projects in 2011 as more fully described
herein. On July 8, 2011, Sterling acquired a 90% interest in Chenxi County
Hongyu Mining Co. Ltd. (Hongyu) and issued 10,000,000 shares of the Companys
common stock to the existing Hongyu shareholders as part of the transaction.

We are a mining company principally engaged in the search,
exploration and development of phosphate and related minerals through our recent
acquisition of Chenxi County Hongyu Mining Co. Ltd. Our statutory registered
agent's office is located at 123 West Nye Lane, Suite 129, Carson City, Nevada
89706 and our business office is located at 308-1228 Marinaside Cr., Vancouver,
B.C., Canada, V6Z 2W4. Our telephone number is (604) 689-4407 and fax number is
(604) 408-8515.

Phosphate Overview

Phosphate rock is a general description applied to several
kinds of rock which contain significant concentrations of phosphate minerals,
which are minerals that contain the phosphate ion in their chemical structure,
and is the eleventh most abundant element in the lithosphere.

Many kinds of rock contain mineral components containing
phosphate or other phosphorus compounds in small amounts. However, rocks which
contain phosphate in quantity and concentration which are economic to mine as
ore, for their phosphate content, are not particularly common. The two main
sources for phosphate are guano, formed from bird droppings, and rocks
containing concentrations of the calcium phosphate mineral, apatite.

In general, lower concentrations of phosphate and lower quality
deposits require increasing amounts of energy and chemicals in order to produce
phosphate and can represent a significant increase in costs.

Phosphorus, P in the table of elements, is present in every
living cell in both plants and animals and is essential to the process of
photosynthesis in plants. As such, phosphorus, among other fertilizers, is
essential to plant growth. Plants absorb phosphorus through the soil as various
forms of phosphate. Besides nitrogen and potassium, phosphorus is one of the
three nutrients required for plant growth and cannot be substituted. It is also
insoluble so that it can be washed easily.

Phosphate content in currently mined rocks can range anywhere
from 5% to 40%. Thus, the rocks must be processed to remove the bulk of the
contained minerals and impurities normally through washing as the initial step
thus increasing phosphate grades.

Gaoping Phosphate Project

On October 18, 2010, Sterling Group Ventures, Inc. (Sterling)
signed two agreements (the Agreements) with Chenxi County Hongyu Mining Co.
Ltd. (Hongyu) and its shareholders (Hongyu Shareholders) regarding the
Gaoping phosphate mine (the GP Property) located in Tanjiachang village,
Chenxi County, Hunan Province, China and other phosphate resources in Hunan
Province.

Hongyu is a Chinese private mining company with connections and
resources in Hunan, China. Hongyu was an inactive company holding a mining
permit and a deposit of $122,134 placed with local land administrative bureau
for undertaking the restoration of land to its present condition when the lease
term expires after the property is mined. Hongyu is interested in exploring,
developing and expanding its Phosphate business. Hongyu is the holder of a
mining permit (the Permit) in the GP Property located in Tanjiachang
village, Chenxi County, Hunan Province, China. Due to lack of funds, Hongyu was
inactive without current operations being conducted. The GP Property is a
sedimentary phosphate type deposit. The number of the mining permit is 4300002009116120048322. The area covered by
the Permit is 0.425 km2 (42.5 hectares) and it is valid until November 10, 2014
and can be renewed. The recording date is November 10, 2009. The mining permit
allows initial production up to 100,000 tonnes of phosphate ore per year.

4

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The Agreements required an investment company to be
incorporated in Hong Kong (the Investment Company) which is to be owned 20% by
the Hongyu Shareholders and 80% by Sterling. On October 13, 2010, the Investment
Company was incorporated in Hong Kong under the name Silver Castle Investments
Ltd. (Silver Castle). Silver Castle acquired 90% of Hongyu with the other 10%
of Hongyu transferred to the nominees of Sterling. Upon completion of this
acquisition, Hongyu became a Hong Kong / China joint venture company. Sterling
received all required approvals from Chinese authorities for the completion of
its acquisition of Hongyu pursuant to the Agreements dated October 18, 2010. The
Company paid a total RMB 2,000,000 ($310,438) to the Hongyu Shareholders with
RMB 200,000 (US$30,934) paid as down payment on December 14, 2010 and the
remaining RMB1,800,000 ($279,504) paid on July 8, 2011 for completion of the
transaction.

Pursuant to the Agreements, Hongyu agreed to surrender its
future exclusive cooperative rights to Sterling, and the Hongyu Shareholders
agreed that Sterling shall have all Hongyu's title and interest in any phosphate
properties, including but not limited to the GP Property, and Sterling should
arrange for the financing of building a mining and processing plant on the GP
Property together with other facilities required for a mining operation thereon.

When requested by Sterling, the Hongyu Shareholders agreed to
sell their 20% interest in the Investment Company to Sterling for the issuance
of 10,000,000 common shares of Sterlings capital stock. On July 5, 2011,
Sterling issued 10,000,000 shares to the Hongyu Shareholders with the closing
market price of the shares at $0.22 for acquiring the remaining 20% equity
interest in Silver Castle from the Hongyu Shareholders. As a result of this
transaction, Sterling effectively controls 100% of Hongyu through its wholly
owned subsidiary, Silver Castle Investments Ltd. which holds 90% of Hongyu with
the other 10% held by the nominees of Sterling.

Sterling through its subsidiary company, Silver Castle
Investments Ltd., also signed a letter of intent for a larger area known as
Tanjiachang Exploration Concession with Chenxi County Merchants Bureau, Hunan
Province, China. Tanjiachang Exploration Concession is surrounding the Gaoping
Mining permit.

Hongyu is currently working on putting its phosphate deposit
into production. As mining license was obtained for the Gaoping Phosphate
Property and a Chinese engineering report was completed, Hongyu moved into the
development stage of this property in the early 2012. On February 13, 2012,
Hongyu received approval for installing the power line for the Gaoping Phosphate
Property. Hongyu also reached understanding for land rental with local village
committee on March 17, 2012. Hongyu signed and completed land rental agreement
with each family in the mining area on March 27, 2012. On April 1, 2012, Hongyu
also received conditional safety approval from Supervision and Management Bureau
for Safety Operation of Chenxi County and the project is essentially ready to
begin production on a small scale basis to be further ramped up as the
development and production plan takes effect. The conditional safety approval
which expires on March 30, 2014 unless extended is expected to become final
after inspection when the mine construction is completed. On April 22, 2012,
Hongyu signed a mining agreement with the mining contractor, Yichang Rongchang
Mining Co. Ltd., to be the operator of the mining and production activities on
the project. On June 16, 2012, Hongyu completed power line construction. On July
19, 2012, Hongyu received the explosive operation permit. Accommodation for
mining people has been built and our mining contractor has started excavation
works. An onsite office and accommodation for workers and mining management are
complete and Hongyus management is currently working onsite. The water supply
for the mining operation and living quarters is connected to the site. The road
to the mining site has been completed. Three adits have been dug and they will
be used to access the phosphorite along its strike length.

On March 10, 2013, Hongyu signed a profit sharing agreement
with Yichang Baolin Mining Engineering Co. Ltd (Baolin) for mining and
processing ore from the Project. Baolin has a processing plant using a scrubbing
processing which can process up to 100,000 t/a. However, Baolin is also building
a new processing plant near Gaoping property to reduce the transportation cost.
Hongyu has also signed an agreement with the Yichang Yinuo Biotech Co. Ltd
(Yinuo) to jointly produce and market bio-phosphate fertilizer. Yinuo has its
own microbial inoculants and its fertilizer market brand is Mingxinglinde which
is an organic biofertilizer. The aforementioned progress is presented as an
interim measure to gauge the ease and efficiency of the mining process together
with the efficacy of the contractual arrangements made to produce and market the
ore.

The Company will monitor the production and marketing with the
goal of increasing production and sales over time in a measured and economically
viable manner. Hongyu has so far mined about 1,843 tonnes of ore.

5

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Shimen Phosphate Project

On November 10, 2010, Sterling signed a letter of intent (the
"LOI") with Shimen County Merchants Bureau, Hunan Province, China regarding the
development of Shimen Phosphate project.

Under the terms of the LOI, Sterling will conduct due diligence
on the Shujiatai phosphate property located in Shimen County, Hunan Province,
China (the "SJT Property") within one and half years and update any Chinese
study reports if necessary to build a mining, processing and chemical plant.
After the due diligence is completed, Sterling will set up a joint venture in
Shimen County for developing the SJT Property. However, due to the negative
results of the due diligence performed on the Shimen project, the Company
decided not to proceed with this project and the letter of intent expired on May
10, 2012.

DXC Salt Lake Lithium Project

On September 16, 2005, the Company, through its wholly owned
subsidiary, Micro Express Holdings Inc. (Micro), signed an agreement (the
Mianping Agreement) with Beijing Mianping Salt Lake Research Institute
(Mianping) for the development of Dangxiongcuo salt lake property (DXC Salt
Lake) in Nima county of Naqu district in Tibet, China.

Pursuant to the Mianping Agreement, the parties agreed to set
up a Cooperative Company (the Cooperative) to develop the DXC Salt Lake. The
objective of the Cooperative was to use the funds provided by the Company and
the skills and technology provided by the other party to produce lithium
carbonate and borate from brine. The Company, through Micro, was to own 65% of
the Cooperative. It was anticipated that the total investment in the Cooperative
would be approximately RMB 240 million (or approximately US$35 million). The
Cooperative Company was never set up. On July 3, 2007, Micro received a letter
from the other party to the Mianping Agreement stating that the agreement
between Micro and the other party should be deemed terminated as a result of
lack of progress in the approval for the establishment of the joint venture
company and is considering a lawsuit against the Company and Micro. Micro has
responded that the other partys claim has no legal grounds as the lack of
progress is not caused by Micro. There has been no legal action to date and none
is expected. By letter dated August 25, 2008, Mianping has confirmed that the
agreement dated September 16, 2005 was terminated effective July 8, 2008. This
agreement was replaced by the agreement with Zhong Chuan International Mining
Holdings Co. Ltd. (Zhong Chuan) dated July 8, 2008 (the Agreement).

In July 2009, the Company received verbal termination of the
Agreement with Zhong Chuan as advised by the third party legal counsel at a
meeting in Beijing, China. The Agreement, in effect, allows Zhong Chuan to
terminate the Agreement if it pays the Company double the amount of funds paid
by the Company to date to secure and develop the DXC Project. Zhong Chuan has
not paid the required amount anticipated by the Agreement to date. The delay in
payment has delayed the termination process. At this point, the termination was
incomplete.

As Zhong Chuan did not fulfill the terms of the Agreement, DXC
Salt Lake project was delayed again. The Company renegotiated with Mianping
which still holds DXC Salt Lake project. On October 31, 2011, the Company and
its wholly owned subsidiary, Micro Express Holdings Inc. (collectively "Micro
Express"), signed an agreement (the "Termination Agreement") with Beijing
Mianping Salt Lake Research Institute and Tibet Sunrise Mining Development Ltd.
which is the actual control person of Beijing Mianping Salt Lake Research
Institute (collectively "Sunrise") regarding amending and terminating the
Mainping Agreement dated September 16, 2005 between Micro Express Holdings Inc.
and Beijing Mianping Salt Lake Research Institute for the development of the
Dangxiongcuo (DXC) Salt Lake Project located in Nima County, Tibet, China.

Pursuant to the Termination Agreement, the parties confirmed
that when Sunrise completes its shareholder's change and increases its
registered capital to RMB 100 million, Sunrise warrants and agrees to pay lump
sum RMB 10 million to Micro Express immediately in exchange of the original
receipts in total amount of RMB 6,218,451 which Micro Express has spent for the
DXC project and the receipt of RMB 3,781,549 from Micro Express. Upon receipt of
full payment of RMB 10,000,000 from Sunrise, Micro Express shall quitclaim all
of its interest in and to the DXC project and the Mianping Agreement and
amendments thereto, if any, shall be deemed to be null and void effective
immediately. On June 21, 2012, the Company received the full payment of
RMB10,000,000 (approximately $1,571,600) from Sunrise. The termination of the
DXC Lithium Project was complete.

Employees

At present, we have 12 employees in China. We have no employees
in Canada, other than our officers and directors. Our officers and directors do
not have employment agreements with us, except consulting agreements which can
be cancelled on 30-days notice.

6

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ITEM 1A. RISK FACTORS

We have sought to identify what we believe to be the most
significant risks to our business. However, we cannot predict whether, or to
what extent, any of such risks may be realized nor can we guarantee that we have
identified all possible risks that might arise. Investors should carefully
consider all of such risk factors before making an investment decision with
respect to our Common Stock. We provide the following cautionary discussion of
risks, uncertainties and possible inaccurate assumptions relevant to our
business. These are factors that we think could cause our actual results to
differ materially from expected results. Other factors besides those listed here
could adversely affect us.

Factors That May Affect Future Results and Market Price
of Stock

The business of the Company involves a number of risks and
uncertainties that could cause actual results to differ materially from results
projected in any forward-looking statement, or statements, made in this report.
These risks and uncertainties include, but are not necessarily limited to the
risks set forth below. The Company's securities are speculative and investment
in the Company's securities involves a high degree of risk and the possibility
that the investor will suffer the loss of the entire amount invested.

There is Substantial Doubt About the Companys Ability to
Continue as a Going Concern

Sterling is engaged in acquisition, exploration and development
of mineral properties. The Company has acquired the Gaoping phosphate properties
located in Chenxi County, Hunan Province, China. The Company has not yet
achieved profitable operations and is dependent on its ability to raise capital
from shareholders or other sources to meet its obligations and repay its
liabilities arising from normal business operations when they come due. These
factors raise substantial doubt that the Company will be able to continue as a
going concern.

Lack of Technical Training of Management

The Management of our Company has academic and scientific
experience related to mining issues but lacks technical training and experience
exploring for, commissioning and operating a mine. With no direct training or
experience in these areas, management may not be fully aware of many of the
specific requirements related to working within this industry. The decisions and
choices may not take into account standard engineering or managerial approaches
mineral exploration companies commonly use. Consequently, operations, earnings
and the ultimate financial success of the Company could suffer irreparable harm
due to managements lack of experience in this industry. The company has
recently hired an experienced mining engineer.

Exploration Risk

Development of mineral properties is contingent upon obtaining
satisfactory exploration results. Mineral exploration and development involves
substantial expenses and a high degree of risk, which even a combination of
experience, knowledge and careful evaluation may not be able to adequately
mitigate.

The Gaoping property has been examined in the field by
professional geologists/mining engineers. The Company received the national
instrument 43-101 report (Canadian Standard). Professional geologist also made
an exploration proposal for Tanjiachang Exploration Concession which is
surrounding Gaoping property which is under letter of intent with Chenxi County
Merchants Bureau, Hunan Province, China. There is no assurance that exploration
license for Tanjiachang Exploration Concession will be issued. There is no
assurance that commercial quantities of ore will be discovered on Tanjiachang
Exploration Concession. There is also no assurance that, even if commercial
quantities of ore are discovered, Tanjiachang Exploration Concession will be
brought into commercial production. The discovery of mineral deposits is
dependent upon a number of factors not the least of which is the technical skill
of the exploration personnel involved. The commercial viability of a mineral
deposit, once discovered, is also dependent upon a number of factors, some of
which are the particular attributes of the deposit, such as size, grade and
proximity to infrastructure, metal prices and government regulations, including
regulations relating to royalties, allowable production, importing and exporting
of minerals, and environmental protection. In addition, assuming discovery of a
commercial ore body, depending on the type of mining operation involved, several
years can elapse from the initial phase of drilling until commercial operations
are commenced. Most of the above factors are beyond the control of the Company.

The properties may need exploration and such exploration
processes shall be conducted in phases. When each phase of a particular project
is completed, and upon analysis of the results thereto, the Company will make a
decision on whether to proceed with each successive phase of the exploration
program. There is no assurance that projects will be carried to completion.

7

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Limited Management Resource Development
Experience

The Company does not have a track record of exploration and
mining operation history. The Company's management has limited experience in
mineral resource development and exploitation, and has relied on and may
continue to rely upon consultants and others for development and operation
expertise. The company recently hired an experienced mining engineer.

Limited Financial Resources

Furthermore, the Company has limited financial resources with
no assurance that sufficient funding will be available to it for future
exploration and development or to fulfill its obligations under current
agreements. There is no assurance that the Company will be able to obtain
adequate financing in the future or that the terms of such financing will be
favorable. Failure to obtain such additional financing could result in delay or
indefinite postponement of further exploration and development of its
projects.

Limited Public Market, Possible Volatility of Share
Price

The Company's Common Stock is currently quoted on the NASD OTC
QB under the ticker symbol SGGV and is listed on Berlin Bremen Stock Exchange
under the symbol GD7. As of May 31, 2013, there were 75,730,341 shares of common
stock outstanding. There can be no assurance that a trading market will be
sustained in the future.

Dependence on Executive Officers and Technical
Personnel

The success of our business plan depends on attracting
qualified personnel, and failure to retain the necessary personnel could
adversely affect our business. Competition for qualified personnel is intense,
and we may need to pay premium wages to attract and retain personnel. Attracting
and retaining qualified personnel is critical to our business. Inability to
attract and retain the qualified personnel necessary would limit our ability to
implement our business plan successfully.

Need for Additional Financing

The Company believes it has sufficient capital to meet its
short-term cash needs, including the costs of compliance with the continuing
reporting requirements of the Securities Exchange Act of 1934. However, if
losses continue, it may have to seek loans or equity placements to cover
longer-term cash needs to continue operations and expansion.

No commitments to provide additional funds have been made by
management or other stockholders. Accordingly, there can be no assurance that
any additional funds will be available to the Company to allow it to cover
operation expenses.

If future operations are unprofitable, it will be forced to
develop another line of business, or to finance its operations through the sale
of assets it has, or enter into the sale of stock for additional capital, none
of which may be feasible when needed. The Company has no specific management
ability or financial resources or plans to enter any other business as of this
date.

Dilution to the Existing Shareholders

The Company has no other capital resources other than the
ability to use its common stock to raise additional capital or the exercise of
the warrants by the unit holders, which will significantly dilute the Company's
stockholders.

Market Risk and Political Risks

The Company does not hold any derivatives or other investments
that are subject to market risk. The carrying values of any financial
instruments, approximate fair value as of those dates because of the relatively
short-term maturity of these instruments, which eliminates any potential market
risk associated with such instruments.

The market in China is monitored by the government, which could
impose taxes or restrictions at any time which would make operations
unprofitable and infeasible and cause a write-off of investment in the mineral
properties. Other factors include political policy on foreign ownership,
political policy to open the doors to foreign investors, and political policy on
mineral claims and metal prices.

8

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The disruptions in the financial markets and economic
conditions have adversely affected the US and the world economy. Turmoil in
global credit markets and turmoil in the geopolitical environment in many parts
of the world have adversely affected global economic conditions. There can be no
assurances that government responses to the disruptions in financial markets
will restore investor confidence and economic activity. This could affect our
ability to raise capital.

Additionally, the uncertain economic environment may cause
farmers to use less fertilizer to cut costs, which will adversely affect the
demand for phosphate. A similar situation occurred in 2008 leading to a sharp
decline in phosphate prices.

The Hongyus phosphate deposit is located in China which, as a
result of its operations, exposes the Company to political and market risks in
China. Exports of phosphate rock are currently subject to an export tax due to
domestic phosphate requirements.

Other Risks and Uncertainties

The business of mineral deposit exploration and development
involves a high degree of risk. Few properties that are explored are ultimately
developed into production. Other risks facing the Company include competition,
reliance on third parties and joint-venture partners, environmental and
insurance risks, political and environmental instability, statutory and
regulatory requirements, fluctuations in mineral prices and foreign currency,
share price volatility, title risks, and uncertainty of additional
financing.

Since October 2008, a severe general downturn in the U. S.
economy and global economy slowdown which already affected the securities
markets took place. Such a deleterious turn of events has made it much more
difficult for the Company to access financing should it be required to do so.
The outlook remains uncertain as growth in the US and Europe experienced another
downturn such that another recession is now possible in Europe.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTY

Gaoping Phosphate Property

Gaoping Phosphate which is surrounded by Tanjiachang Phosphate
Exploration Concession is located in NEE 80°direction of Chenxi County town with
distance 38 km and is under jurisdiction of Tanjiachang village, Chenxi county
of Hunan Province.

Geographical coordinates of mining permits ranges:
Longitude East 110°26 ′15 ′′~110°27 ′05′′, Latitude North 28°01
′49′′~28°03′14′′.

Geological coordinates of Tanjiachang Phosphate Exploration
Concessions ranges: Longitude East 110° 25 ′15 ′′~ 110° 30 ′00′′, Latitude
North 28°00 ′00′′~28° 07′30′′. The area is about 32 km2.

The location of the property is shown in the following map.

9

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The property is located in Hunan Province in South Eastern
China some 250 kilometers west of the Provincial Capital of Changsha and 120
kilometers north east of the regional center of Huaihua and 38 kilometers east
of the County seat at Chenxi. There are several flights per day into Changsha
from Beijing or Shanghai and three flights per week into Huaihua. Several daily
bus schedules are available from Changsha to Huaihua and Chenxi. This trip takes
about six hours and leaves every couple of hours. Huaihua is a city of about six
million people. The County of Chenxi has a population of five million and the
city of Chenxi is the county seat. Chenxi has no air service and is quite
agrarian in its culture.

The Gaoping Phosphate property consists of a mining permit
outlined by the following UTM Coordinates:

1. X=3102000 Y=37444690
    2. X=3102985 Y=374449253. X=3103920 Y=37445430
    4. X=3104210 Y=374453005. X=3104593 Y=37445604
    6. X=3104555 Y=374457157. X=3104215 Y=37445465
    8. X=3103910 Y=374456009. X=3102915 Y=37445065
    10. X=3102000 Y=37444850


The Gaoping mining permit was issued on November 10, 2009 and
valid until November 10, 2014. The number of the permit is
4300002009116120048322. The permit is 0.425 km2 and the elevation is
from +600mto+510m. These 10 boundary points of Gaoping mining permit are
surveyed by official land surveyors.

The mining permit allows initial production up to 100,000
tonnes phosphate ore per year. In order to acquire more resources under the
mining permit, Hongyu needs to invest not less than RMB 20 million Yuan in
county including paying resource fees to the Chinese government according to
related Chinese regulations and applies to expand the scale of current mining
permit through the legal process in China.

The Tanjiachang phosphate district is located in the
Xiuxi-Luojiawan anticlinorium and Tanjiachang syncline. The strata generally
occur in an undeformed or weak monoclinal structure. Strata outcropping in
Tanjiachang region ranges from Banxi Group of Upper Proterozoic to Cambrian of
the Lower Paleozoic.

Strata outcropping in the mine area includes Jiangkou
Formation, Xiangmeng Formation and Hongjiang Formation of Lower Sinian and
Jinjiadong Formation, Liuchapo Formation of Upper Sinian and Xiaoyanxi Formation
of Lower Cambrian. The phosphorite deposits lie in the middle part of Jinjiadong
Formation. The phosphorite is Interbedded with argillaceous & silty platy
shale. The deposit is in shallow marine sediment deposit type.

The regional geological structure is relatively complicated and
the main structure is Xiuxi- Luojiawan Anticlinorium with many cross faults.
Geological structure of mine area is relatively simple in general. The strata
strikes NNE and dips SEE.

10

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The main mineral resource with industrial significance in this
region is the phosphorite, and is the middle to lower part of Jinjiadong
Formation, Upper Sinian. Some Pb- Zn mineralization has been discovered in the
lower part of the Jinjiadong Formation and Cu mineralization has been discovered
in middle part of the sandy slabby shale beds. The lower part is green grey
laminar sandy slate. Manganese carbonate within black platy shale of Xiangmeng
Formation could set up local industry scale operations. Manganese carbonate is
easy to process, with good market conditions, providing realistic opportunities
to do exploration and development.

There is a history of mining in the Gaoping area. In the past,
numerous artisanal lead zinc mines have been worked. In the permit area the
phosphorite has been mined for many years and there are at least ten adits old
and new, which have accessed the phosphorite and where the local artisanal
miners have harvested this material for sale to the local agriculture industry.

Regional Geology Survey with scale of 1:200,000 had been done
by Regional Geology Survey Team of Hunan Provincial Geology in 1970s and
Mineral Resources Bureau and Regional Geology Survey Report (in scale of
1:200,000) and Regional Mineral Resources Report have been submitted. The No.
407 Geology Team from Hunan Provincial Geology and Mineral Resources Bureau
launched the General Survey for Pb-Zn Mineralization in Upper-Jingzhuxi,
Lower-Jingzhuxi inside Tanjiachang mining area and Dabanlin outside of
Tanjiachang, etc in 1980s. They drilled five boreholes but the data is
unavailable for data collection. Chemical Geology Exploration Institute, Hunan
Province had organized early stage big area scouting and field trips in
September to October 1992 and chose Jingzhuxi section as the General Geology
Survey working area in the year of 1993 which has been defined as Tanjiachang.As the General Geology Survey work moving forward, Tanjiachang
Phosphorite Mining Area becomes enlarged step by step and it has been divided
into three sections of Jingzhuxi, Gaoping and Wenshuitang.

The following table summarizes the geological works conducted
by Chemical Geology Exploration Institute, Hunan Province.

Item
    unit
    Quantity
    sub-total
    Remarks1993
    1994
    19951:10000 Geology Mapping
    km2
    10.9
    10.5
    10.5
    31.91:1000 Onsite Geology Section Mapping
    m
    2305
    2212
    1,450
    5,967
    5 linesTrenching and Logging
    m3
    1,521.3
    1,200
    1,125
    3,846.3
    47 linesChannel Sampling & Basic Assay
    
    121
    126
    144
    391Identification of Rock and Minerals
    
    30
    22
    21
    73Small Weight Sample Testing
    
    30
    20
    25
    75Basic Chemical Assay
    
    121
    126
    144
    391Assembly Assay
    
    
    6
    6
    12


Trenches have been created to disclose the phosphorite ore
layers with spacing 400m (mainly 300- 500m) and a total of 47 trenches have been
finished with earthwork volume of 3,846.3 m3. The operation of
trenches is accurate and the spacing is tried to be placed evenly. All the
trenches have demonstrated good surface control effects on ore layers except for
TC20 (the surface cover is too thick and it cant control ore layers) and
TC 47 (ore layers are missing due to fault) according to Chemical Geology
Exploration Institute, Hunan Province. The trenches and sampling are all
following State Code of Original Geology Logging General Principles for Solid
Mineral Exploration Registration (china)and data has been logged in
time.

11

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Basic assay samples all came from channel sampling of trench
projects and the samples are representative and following China State Code and
Geology Standard. The scale of channel sampling is 5cm*3cm and the length is
mainly 1m, separately sampled from different layers. Totally, 391 samples have
been sampled from ore layers and their top and bottom plates. The samples have
been prepared in time according with ID, tag, record and onsite logs. Small
weight samples have been collected with representative year by year in history
and certain related relationship has been detected between density of
phosphorite and P2O5content. In general, the density and
grade are with positive correlation. The petrology identification and testing
samples are coming during onsite geology section survey to determine the
lithology and mineral compositions. Totally, 73 samples have been collected.
Based on basic assay results, composite sample has been made on backup samples
from selected representatives 12 trenches to determine the useful and harmful
components in the ore.

There are at least ten exploration adits driven into favorable
locations along the mountain side. The artisans essentially find an outcrop move
six to ten meters below the bed and drive into the mountain. Those adits,
intersect the phosphorite and are turned into producing mines. By building a
chute off the end of the waste pile at the entrance to the adit, the
infrastructure for an artisanal mining operation is complete. The transportation
infrastructures is completed by building a service road under the chute and
loading the phosphorite onto the truck for haulage to the buyer in Chenxi.
Contract haulers do the hauling. No drilling has been done on the property. Some
exploratory trenching has been done at the various outcrops along the sidehill
to test the validity of the above described adit exploration methods. Five
samples were collected by Norm Tribe - an independent geologist from the active
adits along the strike of the phosphorite bed. The results vary from
19.40%P2O5to 32.86% P2O5.The assays of the samples collected serve to verify the existence and
grade of the deposit.

Hunan has a humid, subtropical climate. The monsoon rain falls
mostly in April, May, and June. July and August are hot and humid. Annual
rainfall is 1,250 - 1,750 millimeters (49.2 to 68.9 inches) in Chenxi and is
probably higher at the property due to an increase in elevation. Temperatures
are 4oC to 8oC in January and 26oC to
30oC in July. The area is said to have a variety of animals including
70 kinds of mammals, including tigers, bears and macaques, 310 kinds of birds,
over 70 kinds of creeping animals and over 160 kinds of fish. The mining permit
is in mountainous terrain with steep hill sides forested with native species and
some planted pine forest. No wildlife was noted in the area. The valley bottoms
are developed into terraced rice paddies. The coincident phosphate deposits
which have been cut by the erosion of the steeply incised valleys has rendered
these valley bottoms very fertile. Local infrastructure is at a low level but
adequate for small mining. The roads are adequate for start up, the population
is moderate with a collection of experienced miners available in the area. A
moderate level power line passes through the property but would require
upgrading for heavy industrial use. Artisanal miners working the property at
this time are using readily available trucking contractors, to haul their
product to the railhead. Railhead infrastructure is available 58 kilometers away
at Chenxi. Water is abundant in the valley bottoms but will require some
infrastructure to accommodate the mining. Telecommunication is very good.
Cellular phone can be accessed in the property area. Transportation is good and
truck can arrive in the property area.

As of May 31, 2013, the Company has incurred mineral property
costs of $683,622 on the Gaoping Phosphate property

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERSAND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock

Our common stock is traded on the OTC QB under the symbol
SGGV. The table below sets forth the high and low sales prices for the
Companys common stock for the fiscal years ended May 31, 2012 & 2013. The
quotations below reflect inter-dealer prices, without retail markup, markdown or
commission and may not represent actual transactions.

12

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Quarter Ended
    High ($)
    Low ($)August 31, 2011
    0.23
    0.13November 30, 2011
    0.14
    0.06February 29, 2012
    0.15
    0.04May 31, 2012
    0.14
    0.08August 31, 2012
    0.12
    0.05November 30, 2012
    0.11
    0.06February 28, 2013
    0.10
    0.04May 31, 2013
    0.12
    0.05


Pacific Stock Transfer Company is the registrar and transfer
agent for our common shares, and is located at Suite 403, 4045 South Spencer
Street, Las Vegas, NV 89119 (Telephone: (702) 361-3033; Facsimile: (702)
433-1979).

On August 26, 2013, we had 75,730,341 shares of common stock
outstanding and we had approximately 60 stockholders of record plus common
shares held by brokerage clearing houses, depositories or other entity.

Dividend Policy

We currently intend to retain all future earnings to fund the
development and growth of our business. We have not paid dividends on our common
stock and do not anticipate paying cash dividends in the immediate future. We
did not repurchase any of our equity securities and have not adopted a stock
repurchase program.

Recent Sales of Unregistered Securities

On July 5, 2011, Sterling issued 10,000,000 shares to the
Hongyu Shareholders with the closing market price of the shares at $0.22 for
acquiring the remaining 20% equity interest in Silver Castle from the Hongyu
Shareholders.

Equity Compensation Plan Information

On February 3, 2004, the Board of Directors of the Company
approved the 2004 Stock Option Plan, which was also approved at the Companys
Annual Meeting of Shareholders on January 17, 2005, and registered on May 12,
2004. Pursuant to the stock option plan, the number of shares that may be issued
under the plan may not exceed 15% of the issued and outstanding shares of the
company. As of May 31, 2013, 15% of the issued and outstanding shares of the
Company were 11,359,551.

On April 27, 2011, the Company granted 4,700,000 stock options
to directors, officers and consultants at an exercise price of $0.25 each
expiring on February 3, 2019. The options were vested immediately.

On November 3, 2011, the Company granted 500,000 stock options
to a consultant at an exercise price of $0.25 each expiring on February 3, 2019.
The options were vested immediately.

At May 31, 2013, there were 5,200,000 stock options outstanding
with an exercise price at $0.25 each expiring on February 3, 2019. The option
plan was approved by the shareholders of the Company.

Number of securities to 
      be issued upon exercise
      of outstanding options
    Weighted-average 
      exercise price of
      outstanding options
    Number of securities remaining 
      available
    for future issuance under equity compensation plans5,200,000
    $0.25
    6,159,551


13

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Share Purchase Warrants

During the year ended May 31, 2011, there were 801,666 Series
C share warrants exercised at $0.18 per share and 2,072,324 C warrants
expired. The Company also issued 20,752,500 Series D share purchase warrants
at an exercise price of $0.15 each expiring on January 31, 2012.

On January 26, 2012, the Company extended the expiry date of
the 20,752,500 Series "D" Share Purchase Warrants (the "D" Warrants) to the
earlier of February 15, 2013 or the close of business on the 30th day after a
takeover bid for the Company's issued and outstanding share capital has been
made by a third party and approved by the shareholders of the Company. The
exercise price of the "D" Warrants remains unchanged at $0.15 per share.

On January 26, 2012, the Company re-extended the expiry date of
3,817,500 Series "A" share purchase warrants from February 16, 2012 to the
earlier of February 15, 2013 or the close of business on the 30th day after a
takeover bid for the Company's issued and outstanding share capital has been
made by a third party and approved by the shareholders of the Company. The
exercise price of the warrants remained unchanged at $0.50 per share.

Each Series A warrant entitles the holder thereof the right
to purchase one common share at $0.50 per share expiring on the earlier of:

|1) | February 15, 2013; or                                                                                                                                              
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) | The 30th day after the day on which the weighted average
      trading price of the Company's shares exceeds $0.80 per share for 20
      consecutive trading days.

Upon exercise of the Series "A" Share Purchase Warrant at $0.50
each, the holder will receive one Common Share of the Company and a Series "B"
Share Purchase Warrant exercisable at $1.00 expiring one year after the
occurrence of either (1) or (2) as described above.

On February 6, 2013, the Company re-extended the expiry date of
the 20,752,500 Series D Share Purchase Warrants (the D Warrants) to the
earlier of February 17, 2015 or the close of business on the 30th day after a
takeover bid for the Companys issued and outstanding share capital has been
made by a third party and approved by the shareholders of the Company. The
exercise price of the D Warrants remains unchanged at $0.15 per share.

On February 6, 2013, the Company re-extended the expiry date of
3,817,500 Series "A" share purchase warrants from February 15, 2013 to the
earlier of February 17, 2015 or the close of business on the 30th day after a
takeover bid for the Company's issued and outstanding share capital has been
made by a third party and approved by the shareholders of the Company. Upon
exercise of the Series A Share Purchase Warrants at $0.50 each, the holder
will receive one Common Share of the Company and a Series B Share Purchase
Warrant exercisable at $1.00 for another year.

As of May 31, 2013, the Company has a total of 3,817,500 and
20,752,500 Series A and D share purchase warrants outstanding,
respectively.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Introduction

The information presented here should be read in conjunction
with Sterling Group Venture Inc.'s financial statements and other information
included in this Form 10-K. When used in this Form 10-K, the words "expects,"
"anticipates," "estimates" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to risks and
uncertainties, including those set forth below under "Risks and Uncertainties,"
that could cause actual results to differ materially from those projected. These
forward-looking statements speak only as of the date hereof. The Company
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any statement is
based.

14

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Overview

Sterling is a mining company, and its objective is to become a
recognized leader in mineral property acquisition, exploration, development and
production.

On October 18, 2010, Sterling signed two agreements (the
"Agreements") with Chenxi County Hongyu Mining Co. Ltd. ("Hongyu") and its
shareholders ("Hongyu Shareholders") regarding the Gaoping phosphate mine (the
"GP Property") located in Tanjiachang village, Chenxi County, Hunan Province,
China and other phosphate resources in Hunan Province. Hongyu holds a business
license and a mining permit in the GP Property which is in effect until November
10, 2014 and covers 42.5 hectares.

The Agreements required an investment company to be
incorporated in Hong Kong (the Investment Company) which is to be owned 20% by
the Hongyu Shareholders and 80% by Sterling. On October 13, 2010, the Investment
Company was incorporated in Hong Kong under the name Silver Castle Investments
Ltd. (Silver Castle). Silver Castle acquired 90% of Hongyu with the other 10%
of Hongyu transferred to the nominees of Sterling. Upon completion of this
acquisition, Hongyu became a Hong Kong / China joint venture company. Sterling
received all required approvals from Chinese authorities for the completion of
its acquisition of Hongyu pursuant to the Agreements dated October 18, 2010.
Sterling paid a total RMB 2,000,000 ($310,438) to the Hongyu Shareholders with
RMB 200,000 (US$30,934) paid as down payment on December 14, 2010 and the
remaining RMB1,800,000 ($279,504) paid on July 8, 2011 for completion of the
transaction.

Pursuant to the Agreements, Hongyu agreed to surrender its
future exclusive cooperative rights to Sterling, and the Hongyu Shareholders
agreed that Sterling shall have all Hongyu's title and interest in any phosphate
properties, including but not limited to the GP Property, and Sterling should
arrange for the financing of building a mining and processing plant on the GP
Property together with other facilities required for a mining operation thereon.

When requested by Sterling, the Hongyu Shareholders agreed to
sell their 20% interest in the Investment Company to Sterling for the issuance
of 10,000,000 common shares of Sterlings capital stock. On July 5, 2011,
Sterling issued 10,000,000 shares to the Hongyu Shareholders with the closing
market price of the shares at $0.22 for acquiring the remaining 20% equity
interest in Silver Castle from the Hongyu Shareholders. As a result of this
transaction, Sterling effectively controls 100% of Hongyu through its wholly
owned subsidiary, Silver Castle Investments Ltd. which holds 90% of Hongyu with
the other 10% held by the nominees of Sterling.

Sterling through its subsidiary company, Silver Castle
Investments Ltd., also signed a letter of intent for a larger area known as
Tanjiachang Exploration Concession with Chenxi County Merchants Bureau, Hunan
Province, China. Tanjiachang Exploration Concession is surrounding the Gaoping
Mining permit.

Hongyu is currently working on putting its phosphate deposit
into production. Hongyu currently has received conditional safety approval which
expires on March 30, 2014 from Supervision and Management Bureau for Safety
Operation of Chenxi County, and approval for power line construction and the
explosive operation permit. On March 10, 2013, Hongyu signed a profit sharing
agreement with Yichang Baolin Mining Engineering Co. Ltd (Baolin) for mining
and processing ore from the Project. Baolin has a processing plant using a
scrubbing processing which can process up to 100,000 t/a. Baolin is also
building the new processing plant near Gaoping property to reduce the
transportation cost.

Results of Operations

The Company had no operating revenue except interest income of
$17,870 and other income of $1,461,588 from sale of DXC lithium project for the
year ended May 31, 2013 compared with interest income of $491 for the year ended
May 31, 2012. The comprehensive loss decreased to $119,329 for the year ended
May 31, 2013, as compared to $820,745 for the year ended May 31, 2012 mainly due
to the other income of $1,461,588 which offset the non-cash stock-based
compensation expenses of $924,923 for year ended May 31, 2013 due to the
extension of Series A and D warrants.

Consulting fees increased by $500,166 for the year ended May
31, 2013 when compared to the year ended May 31, 2012, because of the increase
in stock-based compensation as main part of consulting fees, stock-based
compensation increased to $924,923 in the year ended May 31, 2013 compared with
stock-based compensation of $424,479 in the year ended May 31, 2012 due to the
extension of warrants.

Accounting, audit, legal and professional fees decreased by
$10,702 for the year ended May 31, 2013 when compared to the year ended May 31,
2012.

15

---

Foreign exchange gain increased by $10,012 for the year ended
May 31, 2013 when compared to the year ended May 31, 2012, because of the
exchange rate fluctuation among US dollar, Canadian dollar and RMB.

Depreciation increased by $26,777 for the year ended May 31,
2013 when compared to the year ended May 31, 2012.

Mineral property costs increased by $366,962 for the year ended
May 31, 2013 when compared to the year ended May 31, 2012, because the Company
has started to develop the Gaoping phosphate property and build mining facility.

Investor relations costs decreased by $79,659 for the year
ended May 31, 2013 when compared to the year ended May 31, 2012, because $73,500
were paid by shares to a consultant for the investor relation services in the
year ended May 31, 2012.

The Company expects the trend of losses to continue until we
can achieve commercial production at the Gaoping phosphate project, of which
there can be no assurance as described in Risk Factors.

Liquidity and Working Capital

As of May 31, 2013, the Company had total current assets of
$2,075,117, and total current liabilities of $478,934. As of May 31, 2013, the
Company had cash of $2,036,805 and working capital of $1,596,183. A balance of
approximately $1,600,000 of cash was deposited in China and Hong Kong.

Cash provided in operating activities for the year ended May
31, 2013 was $853,574 as compared to cash used in operating activities for the
year ended May 31, 2012 of $379,773. The increase in cash provided in operating
activities was primarily due to the other income of $1,461,588 from the sale of
its DXC lithium project.

During the year ended May 31, 2013, the Company received the
other income of $1,461,588 from the sale of its DXC lithium project and its
working capital increased accordingly.

The Company has no other capital resources other than the
ability to use its common stock to raise additional capital or the exercise of
the warrants by the unit holders. If all warrants outstanding including bonus
warrants are exercised, the Company will receive approximately $10 million in
cash. The Companys current cash can meet its short term need. The cash will be
mainly used for mining property exploration and development, general
administrative, corporate (accounting, audit, and legal), financing and
management.

No other commitments to provide additional funds have been made
by management or other stockholders except as set forth above. Accordingly,
there can be no assurance that any additional funds will be available to the
Company to allow it to cover operation expenses. This raises substantial doubt
that the Company will be able to continue as a going concern unless additional
capital is raised.

Off-Balance Sheet Arrangements

As of May 31, 2013, we were not involved in any form of
off-balance sheet arrangement.

Application of Critical Accounting Policies

Our consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires that we make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. We base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances. We
evaluate our estimates and assumptions on an ongoing basis. Our actual results
may differ significantly from these estimates under different assumptions or
conditions. There have been no material changes to these estimates for the
periods presented in this report.

We believe that of our significant accounting policies, which
are described in Note 2 to our annual financial statements, the following
accounting policies involve a greater degree of judgment and complexity.
Accordingly, the following policies are the most critical to aid in fully
understanding and evaluating our financial condition and results of operations

Mineral Property Costs

16

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Costs of acquiring mineral properties are capitalized by the
project area unless the mineral properties do not have proven reserves. Costs to
maintain mineral rights and leases are expensed as incurred. When a property
reaches the production state, the related capitalized costs are amortized using
the unit of production method on the basis of annual estimates of ore reserves.
The Company does not consider a resource property to be at the development stage
until such time as either mineral reserve are proven or permits to operate the
mineral resource property are received and financing to complete the development
has been obtained. Development expenditures incurred subsequent to a development
decision, and to increase or to extend the life of existing production, are
capitalized and amortized on the unit of production method based upon estimated
proven and probable reserves or resources.

Management reviews the carrying value of mineral properties at
least annually and will recognize impairment in value based upon current
exploration results, and any impairment or subsequent losses are charged to
operations at the time of impairment. If a property is abandoned or sold, its
capitalized costs are charged to operations. Mineral property exploration costs
are expensed as incurred. Exploration activities conducted jointly with others
are reflected at the Companys proportionate interest in such activities. As at
May 31, 2013 and 2012, the Company did not have proven or probable ore reserves.

Stock-based Compensation

On June 1, 2006, the Company accounts for stock-based
compensation in accordance with ASC Topic 718-10, Compensation - Stock
Compensation  Overall.

In accordance with ASC 718-10, the compensation expense is
amortized on a straight- line basis over the requisite service period which
approximates the vesting period. ASC Topic 718-10 requires excess tax benefits
to be reported as a financing cash inflow rather than as a reduction of taxes
paid. The Company has elected to use the Black-Scholes option pricing model to
determine the fair value of options and the extension of the expiry date of
share purchase warrants previously granted. The Company has estimated the fair
value of share purchase warrants and options for the years ended May 31, 2013
and 2012 using the assumptions more fully described in Note 6(b) & (c) to
the financial statements

Foreign Currency Translation

Our functional and reporting currency is U.S. dollars. Our
consolidated financial statements are translated to U.S. dollars in accordance
with ASC 830, Foreign Currency Matters. Monetary assets and liabilities
denominated in foreign currencies are translated using the exchange rate
prevailing at the balance sheet date. Gains and losses arising on translation or
settlement of foreign currency denominated transactions or balances are included
in the determination of income. We have not, to the date of these consolidated
financial statements, entered into derivative instruments to offset the impact
of foreign currency fluctuations.

Use of Estimates

The preparation of consolidated financial statements in
conformity with GAAP requires management to make estimates and assumptions that
affect the amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenditures during the reporting period.
Actual results could differ from these estimates.

Going Concern

These consolidated financial statements have been prepared on a
going concern basis which assumes that adequate sources of financing will be
obtained as required, and that our assets will be realized and liabilities
settled in the ordinary course of business. These consolidated financial
statements do not include any adjustments related to the recoverability of
assets and classification of assets and liabilities that might be necessary if
we are unable to continue as a going concern.

In order to continue as a going concern, we require additional
financing. There can be no assurance that additional financing will be available
to us when needed or, if available, that it can be obtained on commercially
reasonable terms. If we are not able to continue as a going concern, we would
likely be unable to realize the carrying value of our assets reflected in the
balances set out in the preparation of the consolidated financial
statements.

At May 31, 2013, the Company had not yet achieved profitable
operations and has accumulated losses of $6,462,279 since its inception and
expects to incur further losses in the development of its business, all of which
casts substantial doubt about the Companys ability to continue as a going
concern. The Companys ability to continue as a going concern is dependent upon
its ability to generate future profitable operations and/or to obtain the
necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they
come due. Management has no formal plan in place to address this concern but
considers that the Company will be able to obtain additional funds by equity
financing and/or related party advances, however there is no assurance of
additional funding being available.

17

---

Sterling is involved in the development of Phosphate in Hunan,
China. The projects are not yet commercial and have not reached profitability.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

In addition to the U.S. Dollar, we conduct our business in
Chinese Yuan (RMB) and Canadian Dollar and, therefore, are subject to foreign
currency exchange risk on cash flows related to expenses and investing
transactions. In July 2005, the Chinese government began to permit the Chinese
Yuan to float against the U.S. Dollar. All of our costs to operate our Chinese
project are paid in Chinese Yuan and all of our costs to operate our principal
executive office in Canada are paid in Canadian dollar. Our exploration costs in
China may be incurred under contracts denominated in Chinese Yuan or U.S.
Dollars. If the Chinese Yuan continues to appreciate with respect to the U.S.
Dollar, our costs in China may increase. If the Canadian Dollar continues to
appreciate with respect to the U.S. Dollar, our costs in Canada may increase. To
date we have not engaged in hedging activities to hedge our foreign currency
exposure. In the future, we may enter into hedging instruments to manage our
foreign currency exchange risk or continue to be subject to exchange rate risk.
If the exchange rate increased by 10% , it is estimated that our costs would
have been approximately $64,000 lower in the year ended May 31, 2013. If the
exchange rate were 10% lower during the fiscal year, our costs would increase by
approximately $78,000.

Although inflation has not materially impacted our operations
in the recent past, increased inflation in China or Canada could have a negative
impact on our operating and general and administrative expenses, as these costs
could increase. China has recently experienced inflationary pressures, which
could increase our costs associated with our operations in China. If there are
material changes in our costs, we may seek to raise additional funds earlier
than anticipated.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

PageReport
      of Independent Registered Public Accounting Firm
    19Consolidated
      Balance Sheets
    20Consolidated
      Statements of Operations
    21Consolidated
      Statements of Changes in Stockholders' Equity (Capital Deficit)
    22-23Consolidated
      Statements of Cash Flows
    24Notes
      to the Consolidated Financial Statements
    25-42


18

---

|                  | Tel: 604 688 5421                 | BDO Canada LLP
|----------------- | --------------------------------- | --------------
|Fax: 604 688 5132 | 600 Cathedral Place              
|www.bdo.ca        | 925 West Georgia
      Street    
|                  | Vancouver BC V6C 3L2
      Canada

|                                                             
|-------------------------------------------------------------
|Report of Independent Registered Public Accounting
      Firm
|                                                             

To the Stockholders of,Sterling Group Ventures,
Inc.(An Exploration Stage Company)

We have audited the accompanying consolidated balance sheets of
Sterling Group Ventures, Inc. (the Company) (An Exploration Stage Company) and
its subsidiaries as of May 31, 2013 and 2012, and the related consolidated
statements of operations, cash flows and changes in stockholders equity
(capital deficit) for the years then ended and for the period from July 27, 1994
(Date of Inception) to May 31, 2013. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Sterling Group Ventures, Inc. and its subsidiaries as of May 31, 2013 and 2012,
and the results of its operations and its cash flows for the years then ended
and for the period from July 27, 1994 (Date of Inception) to May 31, 2013, in
conformity with accounting principles generally accepted in the United
States.

The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the consolidated financial statements, the Company is in the exploration
stage, has not yet achieved profitable operations and is dependent on its
ability to raise capital from shareholders or other sources to meet its
obligations and repay its liabilities arising from normal business operations
when they come due. These factors, along with other matters as set forth in Note
1, raise substantial doubt about the Companys ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

/s/ BDO Canada LLP

Chartered AccountantsAugust 27, 2013

BDO Canada LLP, a Canadian limited
liability partnership, is a member of BDO International Limited, a UK company
limited by guarantee, and forms part of the international BDO network of
independent member firms.

19

---

STERLING GROUP VENTURES, INC.(An Exploration Stage
Company)CONSOLIDATED BALANCE SHEETSMay 31, 2013 and
2012

|Stated in U.S.
      dollars                                                                                                                                   |   | May 31, 2013 |   |   | May 31, 2012 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------ | - | - | ------------ | -
|                                                                                                                                                               |   |              |   |   |              |  
|ASSETS                                                                                                                                                         |   |              |   |   |              |  
|                                                                                                                                                               |   |              |   |   |              |  
|Current Assets                                                                                                                                                 |   |              |   |   |              |  
|Cash and cash equivalents                                                                                                                                      | $ | 2,036,805    |   | $ | 1,262,278    |  
|GST/HST receivable                                                                                                                                             |   | 13,947       |   |   | 20,418       |  
|Prepaid expenses and other
      receivable                                                                                                                    |   | 24,365       |   |   | 31,629       |  
|Total current assets                                                                                                                                           |   | 2,075,117    |   |   | 1,314,325    |  
|                                                                                                                                                               |   |              |   |   |              |  
|Equipment - Note 4                                                                                                                                             |   | 196,353      |   |   | 153,392      |  
|Environmental deposit - Note 3(a)                                                                                                                              |   | 128,696      |   |   | 123,990      |  
|Mineral Properties - Note 3(a)                                                                                                                                 |   | 3,148,740    |   |   | 3,148,740    |  
|Total Assets                                                                                                                                                   | $ | 5,548,906    |   | $ | 4,740,447    |  
|                                                                                                                                                               |   |              |   |   |              |  
|                                                                                                                                                               |   |              |   |   |              |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                           |   |              |   |   |              |  
|                                                                                                                                                               |   |              |   |   |              |  
|Current Liabilities                                                                                                                                            |   |              |   |   |              |  
|Accounts payable and other
      accrued liabilities - Note 5                                                                                                  | $ | 478,934      |   | $ | 476,069      |  
|                                                                                                                                                               |   |              |   |   |              |  
|Deferred income tax liability - Note 3(a)                                                                                                                      |   | 732,687      |   |   | 732,687      |  
|Total Liabilities                                                                                                                                              |   | 1,211,621    |   |   | 1,208,756    |  
|                                                                                                                                                               |   |              |   |   |              |  
|Stockholders' Equity                                                                                                                                           |   |              |   |   |              |  
|Common Stock : $0.001 Par
      Value - Note 6       Authorized : 500,000,000
            Issued and Outstanding : 75,730,341
      (May 31, 2012: 75,730,341) |   | 75,730       |   |   | 75,730       |  
|Additional Paid In Capital - Note 6                                                                                                                            |   | 10,724,416   |   |   | 9,799,493    |  
|Accumulated Other
      Comprehensive Loss                                                                                                                     |   | (582         | ) |   | (582         | )
|Deficit accumulated during the exploration
      stage                                                                                                         |   | (6,462,279   | ) |   | (6,342,950   | )
|Total Stockholders' Equity                                                                                                                                     |   | 4,337,285    |   |   | 3,531,691    |  
|                                                                                                                                                               |   |              |   |   |              |  
|Total Liabilities and Stockholders'
      Equity                                                                                                               | $ | 5,548,906    |   | $ | 4,740,447    |  

See accompanying notes to consolidated financial statements

20

---

STERLING GROUP VENTURES, INC.(An Exploration Stage
Company)CONSOLIDATED STATEMENTS OF OPERATIONSFor the years
ended May 31, 2013 and 2012 andfor the period from July 27, 1994
(date of inception) to May 31, 2013

|                                                     |   |                     |   |   |            |   |   | July 27, 1994 |  
|---------------------------------------------------- | - | ------------------- | - | - | ---------- | - | - | ------------- | -
|                                                     |   |                     |   |   |            |   |   | (Date of      |  
|                                                     |   |                     |   |   |            |   |   | inception) to |  
|                                                     |   | Years ended May 31, |   |   | May 31,    |  
|Stated in U.S. dollars                               |   | 2013                |   |   | 2012       |   |   | 2013          |  
|                                                     |   |                     |   |   |            |   |   |               |  
|Expenses                                             |   |                     |   |   |            |   |   |               |  
|Accounting, audit,
      legal and professional fees | $ | 101,894             |   | $ | 112,596    |   | $ | 724,891       |  
|Bank charges                                         |   | 1,044               |   |   | 680        |   |   | 4,189         |  
|Consulting fees - Notes
      5, 6 (b & c)           |   | 950,743             |   |   | 450,577    |   |   | 4,785,402     |  
|Depreciation                                         |   | 30,485              |   |   | 3,708      |   |   | 43,595        |  
|Filing fees and
      transfer agent                 |   | 10,127              |   |   | 12,074     |   |   | 70,890        |  
|Foreign exchange loss (gain)                         |   | (32,557             | ) |   | (22,545    | ) |   | (60,259       | )
|General and
      administrative                     |   | 1,902               |   |   | 2,996      |   |   | 128,869       |  
|Mineral property costs - Note 3                      |   | 525,292             |   |   | 158,330    |   |   | 1,948,016     |  
|Printing and mailing                                 |   | 409                 |   |   | 5,549      |   |   | 22,841        |  
|Shareholder information and investor
      relations |   | 6,328               |   |   | 85,987     |   |   | 170,843       |  
|Travel and
      entertainment                       |   | 3,120               |   |   | 11,284     |   |   | 160,875       |  
|Recovery of doubtful collection                      |   | -                   |   |   | -          |   |   | (272,358      | )
|Allowance for doubtful
      collection              |   | -                   |   |   | -          |   |   | 246,708       |  
|                                                     |   | (1,598,787          | ) |   | (821,236   | ) |   | (7,974,502    | )
|                                                     |   |                     |   |   |            |   |   |               |  
|Other items                                          |   |                     |   |   |            |   |   |               |  
|Interest income                                      |   | 17,870              |   |   | 491        |   |   | 50,635        |  
|Other income - Note 3(b)                             |   | 1,461,588           |   |   | -          |   |   | 1,461,588     |  
|                                                     |   | 1,479,458           |   |   | 491        |   |   | 1,512,223     |  
|                                                     |   |                     |   |   |            |   |   |               |  
|Net loss for the period                              | $ | (119,329            | ) | $ | (820,745   | ) | $ | (6,462,279    | )
|                                                     |   |                     |   |   |            |   |   |               |  
|Currency translation
      adjustment                |   | -                   |   |   | -          |   |   | (582          | )
|                                                     |   |                     |   |   |            |   |   |               |  
|Comprehensive loss for the
      period              | $ | (119,329            | ) | $ | (820,745   | ) | $ | (6,462,861    | )
|                                                     |   |                     |   |   |            |   |   |               |  
|Basic and diluted loss per
      share               | $ | (0.00               | ) | $ | (0.01      | ) |   |               |  
|                                                     |   |                     |   |   |            |   |   |               |  
|Weighted average number of
      shares outstanding  |   | 75,730,341          |   |   | 74,774,057 |   |   |               |  

See accompanying notes to consolidated financial statements

21

---

STERLING GROUP VENTURES, INC.(An Exploration Stage
Company)CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(CAPITAL DEFICIT)For the period from July 27, 1994 (date of
inception) to May 31, 2013

DeficitAccumulated
    
    
    AccumulatedStock
    
    
    Additional
    
    
    Other
    
    
    During TheCommon
    
    
    Amount At
    
    
    Paid In
    
    
    Comprehensive
    
    
    **Exploration**Stated in U.S.
      dollars
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    Income (Loss)
    
    
    Stage
    
    
    TotalBalance, July 27, 1994 (Date of inception)
    
    -
    
    $
    -
    
    $
    -
    
    $
    -
    
    $
    -
    
    $
    -Common stock
    
    1
    
    
    1
    
    
    -
    
    
    -
    
    
    -
    
    
    1Amount contributed by director
    
    -
    
    
    -
    
    
    1,881
    
    
    -
    
    
    -
    
    
    1,881Net loss for the
      periods
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (7,902
    )
    
    (7,902
    )Balance, May 31, 2001
    
    1
    
    $
    1
    
    $
    1,881
    
    $
    -
    
    $
    (7,902
    )
    $
    (6,020
    )Net loss of the
      year
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (1,860
    )
    
    (1,860
    )Balance, May 31, 2002
    
    1
    
    $
    1
    
    $
    1,881
    
    $
    -
    
    $
    (9,762
    )
    $
    (7,880
    )Net loss of the
      year
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (1,360
    )
    
    (1,360
    )Balance, May 31, 2003
    
    1
    
    $
    1
    
    $
    1,881
    
    $
    -
    
    $
    (11,122
    )
    $
    (9,240
    )Reverse acquisition
    
    (1
    )
    
    (1
    )
    
    (1,881
    )
    
    -
    
    
    -
    
    
    (1,882
    )acquisition
    
    25,000,000
    
    
    25,000
    
    
    (23,119
    )
    
    -
    
    
    -
    
    
    1,881Outstanding common shares of Company prior to acquisition
    
    11,360,000
    
    
    11,360
    
    
    (10,883
    )
    
    (583
    )
    
    -
    
    
    (106
    )Issuance of shares for cash pursuant to a
      private placement - at $0.50
    
    1,766,000
    
    
    1,766
    
    
    881,234
    
    
    -
    
    
    -
    
    
    883,000Stock-based compensation
    
    -
    
    
    -
    
    
    368,641
    
    
    -
    
    
    -
    
    
    368,641Net loss of the year
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (527,446
    )
    
    (527,446
    )Balance, May 31, 2004
    
    38,126,000
    
    $
    38,126
    
    $
    1,215,873
    
    $
    (583
    )
    $
    (538,568
    )
    $
    714,848Issuance of shares for cash pursuant to a
      private placement - at $0.50
    
    1,950,000
    
    
    1,950
    
    
    973,050
    
    
    -
    
    
    -
    
    
    975,000Issuance of shares for finder's fee of private placement
    
    101,500
    
    
    102
    
    
    50,648
    
    
    -
    
    
    -
    
    
    50,750Finders' fees
    
    -
    
    
    -
    
    
    (50,750
    )
    
    -
    
    
    -
    
    
    (50,750
    )Issuance of shares for services rendered
    
    100,000
    
    
    100
    
    
    41,900
    
    
    -
    
    
    -
    
    
    42,000Net loss of the year
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (818,954
    )
    
    (818,954
    )Balance, May 31, 2005
    
    40,277,500
    
    $
    40,278
    
    $
    2,230,721
    
    $
    (583
    )
    $
    (1,357,522
    )
    $
    912,894Net loss for the year
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (461,201
    )
    
    (461,201
    )Balance, May 31, 2006
    
    40,277,500
    
    $
    40,278
    
    $
    2,230,721
    
    $
    (583
    )
    $
    (1,818,723
    )
    $
    451,693Issuance of shares for cash pursuant to a
      private placement - at $0.15
    
    2,750,300
    
    
    2,750
    
    
    409,795
    
    
    -
    
    
    -
    
    
    412,545Issuance of shares for finder's fee of private placement
    
    123,690
    
    
    124
    
    
    21,522
    
    
    -
    
    
    -
    
    
    21,646Finders' fees
    
    -
    
    
    -
    
    
    (21,646
    )
    
    -
    
    
    -
    
    
    (21,646
    )Share issuance costs
    
    -
    
    
    -
    
    
    (3,687
    )
    
    -
    
    
    -
    
    
    (3,687
    )Issuance of shares for services rendered
    
    350,000
    
    
    350
    
    
    48,650
    
    
    -
    
    
    -
    
    
    49,000Net loss for the
      year
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (864,485
    )
    
    (864,485
    )Balance, May 31, 2007
    
    43,501,490
    
    $
    43,502
    
    $
    2,685,355
    
    $
    (583
    )
    $
    (2,683,208
    )
    $
    45,066


22

---

Stated in U.S.
      dollars
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    Income (Loss)
    
    
    Stage
    
    
    TotalBalance, May 31, 2007
    
    43,501,490
    
    $
    43,502
    
    $
    2,685,355
    
    $
    (583
    )
    $
    (2,683,208
    )
    $
    45,066Issuance of shares for services rendered at $0.06
    

    324,685
    
    
    324
    
    
    19,156
    
    
    -
    
    
    -
    
    
    19,480Revaluation of share purchase warrants
    
    -
    
    
    -
    
    
    409,525
    
    
    -
    
    
    -
    
    
    409,525Net loss for the
      year
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (516,440
    )
    
    (516,440
    )Balance, May 31, 2008
    
    43,826,175
    
    $
    43,826
    
    $
    3,114,036
    
    $
    (583
    )
    $
    (3,199,648
    )
    $
    (42,369
    )Revaluation of share purchase warrants
    
    -
    
    
    -
    
    
    83,852
    
    
    -
    
    
    -
    
    
    83,852Net loss for the year
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (245,405
    )
    
    (245,405
    )Balance, May 31, 2009
    
    43,826,175
    
    $
    43,826
    
    $
    3,197,888
    
    $
    (583
    )
    $
    (3,445,053
    )
    $
    (203,922
    )Revaluation of share purchase warrants
    
    -
    
    
    -
    
    
    91,704
    
    
    -
    
    
    -
    
    
    91,704Net loss for the
      year
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (213,704
    )
    
    (213,704
    )Balance, May 31, 2010
    
    43,826,175
    
    $
    43,826
    
    $
    3,289,592
    
    $
    (583
    )
    $
    (3,658,757
    )
    $
    (325,922
    )Issuance of shares for cash pursuant to a private placement
      - at $0.10
    
    20,000,000
    
    
    20,000
    
    
    1,980,000
    
    
    -
    
    
    -
    
    
    2,000,000Issuance of shares for finder's fee of
      private placement
    
    752,500
    
    
    752
    
    
    (752
    )
    
    -
    
    
    -
    
    
    -Issuance of shares for exercise of "C" warrants - at $0.18
    
    801,666
    
    
    802
    
    
    143,498
    
    
    -
    
    
    -
    
    
    144,300Issuance of shares for services rendered
    
    350,000
    
    
    350
    
    
    80,150
    
    
    -
    
    
    -
    
    
    80,500Stock-based compensation
    
    -
    
    
    -
    
    
    1,692,526
    
    
    -
    
    
    -
    
    
    1,692,526Currency translation adjustment
    
    -
    
    
    -
    
    
    -
    
    
    1
    
    
    -
    
    
    1Net loss for the
      year
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (1,863,448
    )
    
    (1,863,448
    )Balance, May 31, 2011
    
    65,730,341
    
    $
    65,730
    
    $
    7,185,014
    
    $
    (582
    )
    $
    (5,522,205
    )
    $
    1,727,957Issuance of shares for acquisition of the subsidiary - at
      $0.22
    
    10,000,000
    
    
    10,000
    
    
    2,190,000
    
    
    -
    
    
    -
    
    
    2,200,000Stock-based compensation
    
    -
    
    
    -
    
    
    424,479
    
    
    -
    
    
    -
    
    
    424,479Net loss for the
      year
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (820,745
    )
    
    (820,745
    )Balance, May 31, 2012
    
    75,730,341
    
    $
    75,730
    
    $
    9,799,493
    
    $
    (582
    )
    $
    (6,342,950
    )
    $
    3,531,691Stock-based compensation
    
    -
    
    
    -
    
    
    924,923
    
    
    -
    
    
    -
    
    
    924,923Net loss for the year
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (119,329
    )
    
    (119,329
    )Balance, May 31,
      2013
    
    75,730,341
    
    $
    75,730
    
    $
    10,724,416
    
    $
    (582
    )
    $
    (6,462,279
    )
    $
    4,337,285


See accompanying notes to consolidated financial statements

23

---

STERLING GROUP VENTURES, INC.(An Exploration Stage
Company)CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years
ended May 31, 2013 and 2012 andfor the period from July 27, 1994
(date of inception) to May 31, 2013

|                                                                                                             |   |                     |   |   |           |   |   | July 27, 1994 |  
|------------------------------------------------------------------------------------------------------------ | - | ------------------- | - | - | --------- | - | - | ------------- | -
|                                                                                                             |   |                     |   |   |           |   |   | (Date of      |  
|                                                                                                             |   |                     |   |   |           |   |   | inception) to |  
|                                                                                                             |   | Years ended May 31, |   |   | May 31,   |  
|Stated in U.S.
      dollars                                                                                 |   | 2013                |   |   | 2012      |   |   | 2013          |  
|Cash flows from operating activities                                                                         |   |                     |   |   |           |   |   |               |  
|Net loss for the period                                                                                      | $ | (119,329            | ) | $ | (820,745  | ) | $ | (6,462,279    | )
|Adjustments to reconcile net loss to
      net cash provided by (used in)      operating
      activities    |   |                     |   |   |           |   |   |               |  
|Stock-based compensation                                                                                     |   | 924,923             |   |   | 424,479   |   |   | 3,995,650     |  
|Depreciation                                                                                                 |   | 30,485              |   |   | 3,708     |   |   | 43,595        |  
|Permit and engineering studies                                                                               |   | -                   |   |   | -         |   |   | 150,000       |  
|Shareholder information and
      investor relations                                                         |   | -                   |   |   | -         |   |   | 100,947       |  
|Accounting, audit and legal fees                                                                             |   | -                   |   |   | -         |   |   | 49,000        |  
|Unrealized FV adjustment on
      cash                                                                       |   | -                   |   |   | (3,300    | ) |   | (3,405        | )
|                                                                                                             |   |                     |   |   |           |   |   |               |  
|Changes in non-cash working capital items                                                                    |   |                     |   |   |           |   |   |               |  
|GST/HST refundable                                                                                           |   | 6,471               |   |   | (12,501   | ) |   | (13,947       | )
|Prepaid expenses and other
      receivable                                                                  |   | 8,248               |   |   | 43,533    |   |   | (1,853        | )
|Accounts payable and accrued liabilities                                                                     |   | 2,776               |   |   | (14,947   | ) |   | 558,586       |  
|Net cash provided by (used in) operating
      activities                                                    |   | 853,574             |   |   | (379,773  | ) |   | (1,583,706    | )
|                                                                                                             |   |                     |   |   |           |   |   |               |  
|Cash flows from investing activities                                                                         |   |                     |   |   |           |   |   |               |  
|Advance on investment                                                                                        |   | -                   |   |   | -         |   |   | (205,945      | )
|Additions to equipment                                                                                       |   | (79,135             | ) |   | (155,863  | ) |   | (245,758      | )
|Additions to mineral properties                                                                              |   | -                   |   |   | (280,651  | ) |   | (280,651      | )
|Net change in cash held in
      trust                                                                       |   | -                   |   |   | 43,312    |   |   | -             |  
|Net cash used in investing activities                                                                        |   | (79,135             | ) |   | (393,202  | ) |   | (732,354      | )
|                                                                                                             |   |                     |   |   |           |   |   |               |  
|Cash flows from financing activities                                                                         |   |                     |   |   |           |   |   |               |  
|Net proceeds on issuance of
      common stock                                                               |   | -                   |   |   | -         |   |   | 4,411,158     |  
|Amounts contributed by director                                                                              |   | 88                  |   |   | (60,262   | ) |   | (58,293       | )
|Net cash provided by (used in) financing
      activities                                                    |   | 88                  |   |   | (60,262   | ) |   | 4,352,865     |  
|                                                                                                             |   |                     |   |   |           |   |   |               |  
|Net increase (decrease) in cash                                                                              |   | 774,527             |   |   | (833,237  | ) |   | 2,036,805     |  
|Cash and cash equivalents - beginning of period                                                              |   | 1,262,278           |   |   | 2,095,515 |   |   | -             |  
|Cash and cash equivalents - end of
      period                                                              | $ | 2,036,805           |   | $ | 1,262,278 |   | $ | 2,036,805     |  
|                                                                                                             |   |                     |   |   |           |   |   |               |  
|Supplemental Information :                                                                                   |   |                     |   |   |           |   |   |               |  
|Cash paid for :                                                                                              |   |                     |   |   |           |   |   |               |  
|Interest                                                                                                     | $ | -                   |   | $ | -         |   | $ | -             |  
|Income taxes                                                                                                 | $ | -                   |   | $ | -         |   | $ | -             |  
|Non-cash Transactions :                                                                                      |   |                     |   |   |           |   |   |               |  
|Issuance of shares for commission paid to
      broker for private placement                                 | $ | -                   |   | $ | -         |   | $ | 147,646       |  
|Issuance of shares for
      services rendered                                                               | $ | -                   |   | $ | -         |   | $ | 171,500       |  
|Issuance of shares for settlement of accounts
      payable                                                  | $ | -                   |   | $ | -         |   | $ | 19,480        |  
|Issuance of share purchase
      warrants for finder's fee paid to       
      broker for private placement | $ | -                   |   | $ | -         |   | $ | 11,477        |  
|Issuance of shares for acquisition of the
      subsidiary                                                   | $ | -                   |   | $ | 2,200,000 |   | $ | 2,200,000     |  

See accompanying notes to consolidated financial statements

24

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 1 | Nature of Operations and Ability to Continue as a
      Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | Sterling Group Ventures, Inc. was incorporated in the
      State of Nevada on September 13, 2001 and its fiscal year-end is May 31.
      On January 20, 2004, the Company acquired all of the issued and
      outstanding shares of Micro Express Ltd. (Micro), which was incorporated
      on July 27, 1994. The business combination was accounted for as a reverse
      acquisition whereby the purchase method of accounting was used with Micro
      being the accounting acquirer and the Company being the accounting
      subsidiary. The cumulative figures are shown on a reverse acquisition
      basis with respect to the accounting acquirers date of inception, July
      27, 1994.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | Sterling Group Ventures, Inc. (the Company) is in the
      exploration stage. The Company has entered into joint venture agreements
      to explore and develop mineral properties located in China and has not yet
      determined whether these properties contain reserves that are economically
      recoverable. The recoverability of amounts from these properties will be
      dependent upon the discovery of economically recoverable reserves, the
      ability of the Company to obtain necessary financing to satisfy the
      expenditure requirements under the joint venture agreements and to
      complete the development of the properties and upon future profitable
      production or proceeds from the sale thereof.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | These consolidated financial statements have been
      prepared in accordance with generally accepted accounting principles
      applicable to a going concern, which assumes that the Company will be able
      to meet its obligations and continue its operations for its next fiscal
      year. Realization values may be substantially different from carrying
      values as shown as these financial statements do not give effect to
      adjustments that would be necessary to the carrying values and
      classification of assets and liabilities should the Company be unable to
      continue as a going concern. At May 31, 2013, the Company incurred a net
      loss of $119,329 during the year ended May 31, 2013 and a cumulative loss
      of $6,462,279 since its inception and expects to incur further losses in
      the development of its business, all of which casts substantial doubt
      about the Companys ability to continue as a going concern. The Companys
      ability to continue as a going concern is dependent upon its ability to
      generate future profitable operations and/or to obtain the necessary
      financing to meet its obligations and repay its liabilities arising from
      normal business operations when they come due. Management has no formal
      plan in place to address this concern but considers that the Company will
      be able to obtain additional funds by equity financing and/or related
      party advances; however there is no assurance of additional funding being
      available.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | These consolidated financial statements include the
      accounts of the Company and its wholly-owned subsidiaries, Micro Express
      Holdings Inc., Micro Express Ltd., Huyana Ventures Limited, Makaelo
      Holdings Inc., Makaelo Limited, Silver Castle Investments Limited (Silver
      Castle) and its 100% controlled subsidiary, Chenxi County Hongyu Mining
      Co. Ltd. ("Hongyu"). All inter-company transactions and account balances
      have been eliminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Note 2 | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | The consolidated financial statements of the Company have
      been prepared in accordance with generally accepted accounting principles
      in the United States of America. Because a precise determination of many
      assets and liabilities is dependent upon future events, the preparation of
      consolidated financial statements for a period necessarily involves the
      use of estimates, which have been made using careful judgement. Actual
      results may vary from these estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | The consolidated financial statements have, in
      managements opinion, been properly prepared within the framework of the
      significant accounting policies summarized below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

25

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 2 | Summary of Significant
      Accounting Policies  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Exploration Stage Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | The Company complies with Financial Accounting Standards
      Board (FASB) Accounting Standards Codification (ASC) Topic 915,
      Development Stage Entities and Exchange Commission Act Guide 7 for its
      characterization of the Company as an exploration stage company. Since its
      inception, the Company has been in the exploration stage. Planned
      activities involve bringing to production the phosphate property located
      in China.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | The Companys subsidiaries were all incorporated under
      the laws of the Territory of the British Virgin Islands on the following
      dates: Micro Express Holdings Inc. was incorporated on February 25, 2004;
      Micro Express Ltd. was incorporated on July 27, 1994; Huyana Ventures
      Limited was incorporated on August 18, 2004; Makaelo Holdings Inc. was
      incorporated on March 21, 2005, Makaelo Limited was incorporated on
      February 14, 2005, Silver Castle Investments Ltd. was incorporated in Hong
      Kong on October 13, 2010, and Chenxi County Hongyu Mining Co. Ltd. was
      incorporated in China on July 4, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Mineral Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Costs of acquiring mineral properties are capitalized by
      the project area unless the mineral properties do not have proven
      reserves. Costs to maintain mineral rights and leases are expensed as
      incurred. When a property reaches the production state, the related
      capitalized costs are amortized using the unit of production method on the
      basis of annual estimates of ore reserves. Management reviews the carrying
      value of mineral properties at least annually and will recognize
      impairment in value based upon current exploration results, and any
      impairment or subsequent losses are charged to operations at the time of
      impairment. If a property is abandoned or sold, its capitalized costs are
      charged to operations. Mineral property exploration costs are expensed as
      incurred. Exploration activities conducted jointly with others are
      reflected at the Companys proportionate interest in such activities. As
      at May 31, 2013 and 2012, the Company did not have proven or probable ore
      reserves.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Impairment of Long-lived Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | In accordance with ASC Topic 360-10, Property, Plant and
      Equipment - Overall, the carrying value of intangible assets and other
      long-lived assets is reviewed on a regular basis for the existence of
      facts or circumstances that may suggest impairment. The Company recognizes
      impairment when the sum of the expected undiscounted future cash flows is
      less than the carrying amount of the asset. Impairment losses, if any, are
      measured as the excess of the carrying amount of the asset over its
      estimated fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Asset Retirement Obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | The Company recognizes the fair value of a liability for
      an asset retirement obligation in the year in which it is incurred when a
      reasonable estimate of fair value can be made. The carrying amount of the
      related long-lived asset is increased by the same amount as the liability.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | Changes in the liability for an asset retirement
      obligation due to the passage of time will be measured by applying an
      interest method of allocation. The amount will be recognized as an
      increase in the liability and an accretion expense in the statement of
      operations. Changes resulting from revisions to the timing or the amount
      of the original estimate of undiscounted cash flows are recognized as an
      increase or a decrease in the carrying amount of the liability for an
      asset retirement obligation and the related asset retirement cost
      capitalized as part of the carrying amount of the related long-lived
      asset. No asset retirement obligation was required to be recognized at May
      31, 2013 and 2012.                                                                                                                                                                                                                                                                                                                       

26

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 2 | Summary of Significant
      Accounting Policies  (contd)                                                                                                                                                                                                   
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                               
|       | Property and Equipment                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                               
|       | Property and equipment is stated at cost. Depreciation is
      primarily computed using the straight-line method, by charges to
      operations in amounts estimated to allocate the cost of the assets over
      their estimated useful lives, as follows:

Asset
      classification
    
    Estimated useful lifeComputer equipment
    
    3 yearsAutomobile
    
    5 yearsOffice equipment
    
    3 yearsMachinery
    
    3 years


Income Taxes

The Company accounts for income taxes
under the provisions of ASC Topic 740, Income Taxes.Under ASC
Topic 740, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred income taxes are provided using the liability method. Under this
method, deferred income taxes are recognized for the tax consequences of
temporary differences by applying enacted statutory rates applicable to future
years to differences between the financial statement carrying amounts and the
tax bases of existing assets and liabilities. The tax basis of an asset or
liability is the amount attributed to that asset or liability for tax purposes.
The effect on deferred taxes of a change in tax rates is recognized in income in
the period of change. A valuation allowance is provided to reduce the amount of
deferred tax assets if it is considered more likely than not that some portion
of, or all of, the deferred tax assets will not be realized.

ASC Topic 740 contains a two-step
approach to recognizing and measuring uncertain tax positions taken or expected
to be taken in a tax return. The first step is to determine if the weight of
available evidence indicates that it is more likely than not that the tax
position will be sustained in an audit, including resolution of any related
appeals or litigation processes. The second step is to measure the tax benefit
as the largest amount that is more than 50% likely to be realized upon ultimate
settlement. The Company recognizes interest and penalties accrued on
unrecognized tax benefits within general and administrative expense. To the
extent that accrued interest and penalties do not ultimately become payable,
amounts accrued will be reduced and reflected as a reduction in general and
administrative expenses in the period that such determination is made. The tax
returns for fiscal 2010, through 2013 are subject to audit or review by the US
tax authority, where as fiscal 2006 through 2013 are subject to audit or review
by the Canadian tax authority.

Fair Value of Financial
Instruments

The Company applies the provisions of
ASC 820, Fair Value Measurements and Disclosures". ASC 820 defines fair value,
establishes a framework for measuring fair value under generally accepted
accounting principles and enhances disclosures about fair value measurements.
Fair value is defined under ASC 820 as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. Valuation techniques used
to measure fair value under ASC 820 must maximize the use of observable inputs
and minimize the use of unobservable inputs. The standard describes a fair value
hierarchy based on three levels of inputs, of which the first two are considered
observable and the last unobservable, that may be used to measure fair value
which are the following:

27

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 2 | Summary of Significant
      Accounting Policies  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | Fair Value of Financial Instruments  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | Level 1 - quoted prices (unadjusted) in active markets
      for identical assets or liabilities;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | Level 2 - observable inputs other than Level I, quoted
      prices for similar assets or liabilities in active markets, quoted prices
      for identical or similar assets and liabilities in markets that are not
      active, and model-derived prices whose inputs are observable or whose
      significant value drivers are observable; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | Level 3 - assets and liabilities whose significant value
      drivers are unobservable by little or no market activity and that are
      significant to the fair value of the assets or liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | The Company did not have any assets or liabilities stated
      at fair value utilizing Level 1, Level 2 or Level 3 inputs as at May 31,
      2013 or 2012.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | The Companys financial instruments consist of cash,
      GST/HST receivables and accounts payable and accrued liabilities. The
      carrying values of the Companys financial instruments approximate fair
      value due to the short maturity of these instruments. Unless otherwise
      noted, it is managements opinion that the Company is not exposed to
      significant interest, currency or credit risks arising from these
      financial instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | Basic Loss per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | The Company reports basic loss per share in accordance
      with the ASC Topic 260-10, Earnings Per Share - Overall. Basic loss per
      share is computed using the weighted average number of shares outstanding
      during the period. Diluted loss per share is computed similar to basic
      loss per share except that the denominator is increased to include the
      number of additional common shares that would have been outstanding if the
      dilutive potential common shares had been issued. In addition, in
      computing the dilutive effect of convertible securities, the numerator is
      adjusted to add back any convertible preferred dividend and the after-tax
      amount of interest in the period associated with any convertible debt. The
      numerator is also adjusted for any other changes in income or loss that
      would result from the assumed conversion of these potential common shares.
      Common share equivalents represent the dilutive effect of the assumed
      exercise of the outstanding stock options and warrants, using the treasury
      stock method, at either the beginning of the respective period presented
      or the date of issuance, whichever is later, and only if the common stock
      equivalents are considered dilutive based upon the Companys net loss
      position at the calculation date. At May 31, 2013, the Company had
      29,770,000 (2012 - 29,770,000) common share equivalents in respect to
      options and warrants. Because the Company incurred a loss, the dilutive
      impact of the outstanding options and warrants have been excluded as the
      impact would be anti-dilutive.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | Concentration of Credit Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | The Company places its cash and cash equivalents with
      high credit quality financial institutions in Canada, Hong Kong and China.
      As of May 31, 2013, the Companys maximum exposure to credit risk is the
      carrying value of the Companys cash, and other receivables. The market in
      China is monitored by the central government, which could impose taxes or
      restrictions at any time which would make operations unprofitable and
      infeasible and cause a write-off of investment in the mineral properties.
      Other factors include political policy on foreign ownership, political
      policy to open the doors to foreign investors, and political policy on
      mineral claims and metal prices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | Comprehensive Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       | The Company reports comprehensive income (loss) in
      accordance with ASC Topic 220-10, Comprehensive Income - Overall.
      Comprehensive loss is comprised of foreign currency translation
      adjustments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

28

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 2 | Summary of Significant Accounting Policies 
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | Foreign Currency Translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | Foreign currency transactions are translated into US
      dollars, the functional and reporting currency of the Company, by the use
      of the exchange rate in effect at the date of the transaction, in
      accordance with ASC Topic 830-20, Foreign Currency Matters - Foreign
      Currency Translation.                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | Assets and liabilities denominated in a foreign currency
      are translated at the exchange rate in effect at the period end and
      capital accounts are translated at historical rates. Income statement
      accounts are translated at the average rates of exchange prevailing during
      the period which approximates the exchange rate in effect at the date of
      the transaction. Translation adjustments from the use of different
      exchange rates from period to period are included in the Comprehensive
      Income account in Stockholders Equity, if applicable.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | Transactions undertaken in currencies other than the
      functional currency of the entity are translated using the exchange rate
      in effect as of the transaction date. Any exchange gains and losses are
      included in the Statement of Operations.                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | Stock-based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | The Company accounts for stock-based compensation in
      accordance with ASC Topic 718-10, Compensation - Stock
      Compensation  Overall. Under this application, the Company is
      required to record compensation expense, based on the fair value of the
      awards. In accordance with ASC 718-10, the compensation expense is
      amortized on a straight-line basis over the requisite service period. ASC
      Topic 718-10 requires excess tax benefits to be reported as a financing
      cash inflow rather than as a reduction of taxes paid.                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | The Company has elected to use the Black-Scholes option
      pricing model to determine the fair value of the options and the extension
      of the expiry dates of share purchase warrants previously granted. The
      Company has estimated the fair value of the options and share purchase
      warrants for the years ended May 31, 2013 and May 31, 2012 using the
      assumptions more fully described in Note 6(b) and (c).                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | The Company has evaluated all the recent accounting
      pronouncements and believes that none of them will have a material effect
      on the Companys consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                    

29

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 2 | Summary of Significant
      Accounting Policies  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | Recent Accounting
      Pronouncements (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | On June 1, 2012, the Company adopted the FASB ASU
      2011-04, Fair Value Measurement (Topic 820): Amendments to
      Achieve Common Fair Value Measurement and Disclosure Requirements in U.S.
      GAAP and IFRSs. This ASU is intended to result in convergence
      between U.S. GAAP and International Financial Reporting Standards (IFRS)
      requirements for measurement of and disclosures about fair value. The
      amendments are not expected to have a significant impact on companies
      applying U.S. GAAP. Key provisions of the amendment include: a prohibition
      on grouping financial instruments for purposes of determining fair value,
      except when an entity manages market and credit risks on the basis of the
      entitys net exposure to the group; an extension of the prohibition
      against the use of a blockage factor to all fair value measurements (that
      prohibition currently applies only to financial instruments with quoted
      prices in active markets); and a requirement that for recurring Level 3
      fair value measurements, entities disclose quantitative information about
      unobservable inputs, a description of the valuation process used and
      qualitative details about the sensitivity of the measurements. In
      addition, for items not carried at fair value but for which fair value is
      disclosed, entities will be required to disclose the level within the fair
      value hierarchy that applies to the fair value measurement disclosed. The
      adoption of this ASU did not have a significant impact on the Companys
      fair value measurements, financial condition, results of operations or
      cash flows as the companys financial instruments carrying values
      approximate fair value due to their short term nature.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | On June 1, 2012, the Company adopted the FASB ASU
      2011-05, Comprehensive Income (Topic 220): Presentation of
      Comprehensive Income. This ASU requires companies to present the
      components of net income and other comprehensive income either as one
      continuous statement or as two consecutive statements. It eliminates the
      option to present components of other comprehensive income as part of the
      statement of changes in stockholders' equity. The standard does not change
      the items which must be reported in other comprehensive income, how such
      items are measured or when they must be reclassified to net income. The
      adoption of this ASU did not have a material impact on the Companys
      financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | In January 2013, the FASB issued ASU No. 2013-01,
      Balance Sheet (Topic 210): Clarifying the Scope of Disclosures
      about Offsetting Assets and Liabilities. The new guidance clarifies
      the scope of the offsetting disclosures and addresses any unintended
      consequences as a result of ASU No. 2011-11, Balance Sheet (Topic
      210): Disclosures about Offsetting Assets and Liabilities.
      This guidance is effective for fiscal years beginning on or after January
      1, 2013, and interim periods within those annual periods. An entity should
      provide the required disclosures retrospectively for all comparative
      periods presented. The Company does not believe that the adoption of this
      guidance will have a material impact on its consolidated financial
      statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | In February 2013, the FASB issued ASU No. 2013-02,
      Comprehensive Income (Topic 220): Reporting of Amounts
      Reclassified Out of Accumulated Other Comprehensive Income.The
      new guidance requires an entity to report the effect of significant
      reclassifications out of accumulated other comprehensive income on the
      respective line items in net income if the amount being reclassified is
      required under GAAP to be reclassified in its entirety to net income. For
      other amounts that are not required under U.S. GAAP to be reclassified in
      their entirety to net income in the same reporting period, an entity is
      required to cross-reference other disclosures required under GAAP that
      provide additional detail about those amounts. This guidance is effective
      for fiscal years beginning on or after December 15, 2012, and interim
      periods within those annual periods. The Company will adopt this guidance
      during fiscal 2014, and is currently assessing the impact on its
      consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       | On February 28, 2013, the FASB issued Accounting
      Standards Update [ASU] 2013-04, entitled Obligations Resulting
      from Joint and Several Liability Arrangements for Which the Total Amount
      of the Obligation Is Fixed at the Reporting Date.The ASU
      2013-04 amendments add to the guidance in FASB Accounting Standards
      Codification[FASB ASC] Topic 405, entitled Liabilities and
      requirereporting entities to measure obligations resulting from
      certain joint and several liability arrangements where the total amount of
      the obligation is fixed as of the reporting date, as the sum of the
      following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

30

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 2 | Summary of Significant
      Accounting Policies  (contd)
|------ | -----------------------------------------------------------
|       |                                                            
|       | Recent Accounting
      Pronouncements (contd)           

| |  | The amount the reporting entity
      agreed to pay on the basis of its arrangement among co-obligors.
| | - | ------------------------------------------------------------------------------------------------------
| |  | Any additional amounts the
      reporting entity expects to pay on behalf of its co-obligors.        

On March 4, 2013, the FASB issued ASU
2013-05, Foreign Currency Matters (Topic 830): Parents Accounting for the
Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or
Groups of Assets within a Foreign Entity or of an Investment in a Foreign
Entity (ASU 2013-05). ASU 2013-05 updates accounting guidance related to the
application of consolidation guidance and foreign currency matters. This
guidance resolves the diversity in practice about what guidance applies to the
release of the cumulative translation adjustment into net income. This guidance
is effective for interim and annual periods beginning after December 15, 2013.
The Company does not anticipate that these changes will have a material impact
on its consolidated financial statements or disclosures.

On April 22, 2013, the FASB issued
Accounting Standards Update [ASU] 2013-07, entitled Liquidation Basis of
Accounting.With ASU 2013-07, the FASB amends the guidance in the FASB
Accounting Standards Codification[FASB ASC] Topic 205, entitled
Presentation of Financial Statements.The amendments serve to clarify
whenand howreporting entities should apply the liquidation basis
of accounting. The guidance is applicable to all reporting entities, whether
they are public or private companies or not-for-profit entities. The guidance
also provides principles for the recognition of assets and liabilities and
disclosures, as well as related financial statement presentation requirements.
The requirements in ASU 2013-07 are effective for annual reporting periods
beginning after December 15, 2013, and interim reporting periods within those
annual periods. Reporting entities are required to apply the requirements in ASU
2013-07 prospectively from the day that liquidation becomes imminent. Early
adoption is permitted. The adoption of ASU 2013-07 is not expected to have a
material effect on the Companys operating results or financial position.

31

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 3 | Mineral Properties                                                                                                                                                                                                              
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                 
|       | A summary of mineral properties costs for the cumulative
      period from date of inception (July 27, 1994) to May 31, 2013 were
      incurred and accounted for in the consolidated statement of operations as
      follows:

| |                                                |   | DXC       |  |   | Gaoping   |  |   |           | 
| | ---------------------------------------------- | - | --------- |  | - | --------- |  | - | --------- | 
| |                                                |   | Salt Lake |  |   | Phosphate |  |   |           | 
| | Summary of
      mineral property expenditures |   | Property  |  |   | Property  |  |   | Total     | 
| |                                                |   |           |  |   |           |  |   |           | 
| | Balance, May 31, 2005                          | $ | -         |  |   |           |  | $ | -         | 
| | Administrative                                 |   | 5,560     |  |   | -         |  |   | 5,560     | 
| | Consulting fees                                |   | 46,629    |  |   | -         |  |   | 46,629    | 
| | Engineering studies                            |   | 26,933    |  |   | -         |  |   | 26,933    | 
| | Feasibility study                              |   | 29,080    |  |   | -         |  |   | 29,080    | 
| | Geophysical study                              |   | 31,114    |  |   | -         |  |   | 31,114    | 
| | Legal fees                                     |   | 623       |  |   | -         |  |   | 623       | 
| | Topography measurement                         |   | 32,266    |  |   | -         |  |   | 32,266    | 
| | Travel                                         |   | 30,953    |  |   | -         |  |   | 30,953    | 
| | Wages and benefits                             |   | 33,601    |  |   | -         |  |   | 33,601    | 
| | Balance, May 31, 2006                          |   | 236,759   |  |   | -         |  |   | 236,759   | 
| | Administrative                                 |   | 5,200     |  |   | -         |  |   | 5,200     | 
| | Consulting fees                                |   | 134,580   |  |   | -         |  |   | 134,580   | 
| | Engineering studies                            |   | 38,063    |  |   | -         |  |   | 38,063    | 
| | Mining permit                                  |   | 382,920   |  |   | -         |  |   | 382,920   | 
| | Topography measurement                         |   | 15,001    |  |   | -         |  |   | 15,001    | 
| | Legal fees                                     |   | 9,695     |  |   | -         |  |   | 9,695     | 
| | Travel                                         |   | 53,262    |  |   | -         |  |   | 53,262    | 
| | Wages and benefits                             |   | 35,687    |  |   | -         |  |   | 35,687    | 
| | Balance, May 31, 2007                          |   | 911,167   |  |   | -         |  |   | 911,167   | 
| | Administrative                                 |   | 706       |  |   | -         |  |   | 706       | 
| | Consulting fees                                |   | 60,548    |  |   | -         |  |   | 60,548    | 
| | Travel                                         |   | 5,456     |  |   | -         |  |   | 5,456     | 
| | Legal fees                                     |   | 11,566    |  |   | -         |  |   | 11,566    | 
| | Balance, May 31, 2008                          |   | 989,443   |  |   | -         |  |   | 989,443   | 
| | Administrative                                 |   | 867       |  |   | -         |  |   | 867       | 
| | Consulting fees                                |   | 27,890    |  |   | -         |  |   | 27,890    | 
| | Travel                                         |   | 16,959    |  |   | -         |  |   | 16,959    | 
| | Legal fees                                     |   | 7,008     |  |   | -         |  |   | 7,008     | 
| | Balance, May 31,
      2009                    |   | 1,042,167 |  |   | -         |  |   | 1,042,167 | 
| | Balance, May 31, 2010                          |   | 1,042,167 |  |   | -         |  |   | 1,042,167 | 
| | Balance, May 31, 2011                          |   | 1,042,167 |  |   | -         |  |   | 1,042,167 | 
| | Administrative                                 |   | -         |  |   | 11,736    |  |   | 11,736    | 
| | Consulting fees                                |   | -         |  |   | 1,367     |  |   | 1,367     | 
| | Engineering studies                            |   | -         |  |   | 959       |  |   | 959       | 
| | Feasibility study                              |   | -         |  |   | 3,143     |  |   | 3,143     | 
| | Field supplies                                 |   | -         |  |   | 3,639     |  |   | 3,639     | 
| | Project design and safety reports              |   | -         |  |   | 25,143    |  |   | 25,143    | 
| | Technical reports                              |   | -         |  |   | 39,663    |  |   | 39,663    | 
| | Travel & promotion                             |   | -         |  |   | 35,324    |  |   | 35,324    | 
| | Wages and benefits                             |   | -         |  |   | 37,356    |  |   | 37,356    | 
| | Balance, May 31,
      2012                    | $ | 1,042,167 |  | $ | 158,330   |  | $ | 1,200,497 | 

32

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 3 | Mineral Properties 
      (contd)
|------ | -----------------------------------

| |                                                |   | DXC       |  |   | Gaoping   |  |   |           | 
| | ---------------------------------------------- | - | --------- |  | - | --------- |  | - | --------- | 
| |                                                |   | Salt Lake |  |   | Phosphate |  |   |           | 
| | Summary of
      mineral property expenditures |   | Property  |  |   | Property  |  |   | Total     | 
| |                                                |   |           |  |   |           |  |   |           | 
| | Balance, May 31, 2012                          | $ | 1,042,167 |  | $ | 158,330   |  | $ | 1,200,497 | 
| | Administrative                                 |   | -         |  |   | 21,561    |  |   | 21,561    | 
| | Consulting fees                                |   | -         |  |   | 23,437    |  |   | 23,437    | 
| | Engineering studies                            |   | -         |  |   | 266,644   |  |   | 266,644   | 
| | Field supplies                                 |   | -         |  |   | 84,177    |  |   | 84,177    | 
| | Recording fees                                 |   | -         |  |   | 2,235     |  |   | 2,235     | 
| | Travel & promotion                             |   | -         |  |   | 38,036    |  |   | 38,036    | 
| | Technical reports                              |   | -         |  |   | 6,963     |  |   | 6,963     | 
| | Wages and benefits                             |   | -         |  |   | 82,239    |  |   | 82,239    | 
| | Balance, May 31,
      2013                    | $ | 1,042,167 |  | $ | 683,622   |  | $ | 1,725,789 | 

Not included in the table above was a
total of $222,227 of costs incurred on other properties which were abandoned
during the years ended May 31, 2006, 2007 and 2009.

a)   Gaoping Phosphate
Property

On October 18, 2010, the Company
signed two agreements (the "Agreements") with Chenxi County Hongyu Mining Co.
Ltd. ("Hongyu") and its shareholders ("Hongyu Shareholders") regarding the
Gaoping phosphate mine (the "GP Property") located in Tanjiachang village,
Chenxi County, Hunan Province, China and other phosphate resources in Hunan
Province. Hongyu holds a business license and a mining permit in the GP Property
which is in effect until November 10, 2014.

The Agreements required an investment
company to be incorporated in Hong Kong (the Investment Company) which was to
be owned 20% by the Hongyu Shareholders and 80% by the Company. On October 13,
2010, the Investment Company was incorporated in Hong Kong under the name Silver
Castle Investments Ltd. (Silver Castle). Silver Castle acquired 90% of Hongyu
with the other 10% of Hongyu transferred to the nominees of the Company. During
the acquisition phase, the Company ensured that Hongyus net assets retained a
minimum value of RMB 5,000,000 ($771,545). Upon completion of this acquisition,
Hongyu became a Hong Kong / China joint venture company. The Company received
all required approvals from Chinese authorities for the completion of its
acquisition of Hongyu pursuant to the Agreements dated October 18, 2010. The
Company paid RMB 200,000 ($30,934) to the Hongyu shareholders as a down payment
on December 14, 2010, the Company also deferred $25,083 of legal fees related to
the acquisition of Hongyu which was recorded as Advance on Investment as at May
31, 2011. The remaining RMB1,800,000 ($279,504) was paid on July 8, 2011, to
complete the transaction, for a total of RMB 2,000,000 ($310,438).

Pursuant to the Agreements, Hongyu
agreed to surrender its future exclusive cooperative rights to the Company, and
the Hongyu Shareholders agreed that the Company shall have all Hongyu's title
and interest in any phosphate properties, including but not limited to the GP
Property, and the Company arranged for the financing of building a mining and
processing plant on the GP Property together with other facilities required for
a mining operation thereon.

33

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 3 | Mineral Properties 
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | a)   Gaoping
      Phosphate Property  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | When requested by the Company,
      the Hongyu Shareholders agreed to sell their 20% interest in the
      Investment Company to the Company for the issuance of 10,000,000 common
      shares of the Companys capital stock. On July 5, 2011, the Company issued
      10,000,000 shares to the Hongyu Shareholders with the closing market price
      of the shares at $0.22 for acquiring the remaining 20% equity interest in
      Silver Castle from the Hongyu Shareholders. As a result of this
      transaction, the Company effectively controls 100% of Hongyu through its
      wholly owned subsidiary, Silver Castle Investments Ltd. which holds 90% of
      Hongyu with the other 10% held by the nominees of the Company.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | The acquisition was treated as an
      acquisition of assets rather than a business combination because Hongyu
      does not constitute a business according to the definition of business
      under FASB ASC Topic 805 Business Combinations. The acquisition
      was accounted for based on the cash paid and quoted market price of the
      Companys common shares issued as part of the transaction.                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       | There were no liabilities assumed
      during the acquisition. Details of the purchase consideration and net
      assets acquired are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| | Purchase price:              |   |           |  
| | ---------------------------- | - | --------- | -
| | Cash
      consideration (1) | $ | 310,438   |  
| | Common shares (1)            |   | 2,200,000 |  
| | Transaction costs (2)        |   | 27,749    |  
| |                              | $ | 2,538,187 |  
| |                              |   |           |  
| | Allocated to:                |   |           |  
| | Environmental
      deposit  | $ | 122,134   |  
| | Mineral property             |   | 3,148,740 |  
| | Deferred tax liability       |   | (732,687  | )
| |                              | $ | 2,538,187 |  

(1) Consideration paid consisted of an
aggregate cash payment of RMB2,000,000 ($310,438) and issuance of 10,000,000
shares of common stock at $0.22 per share which was the closing price of the
Companys shares on the date of acquisition.

(2) Incurred in connection with the
acquisition were transaction costs of $27,749 which were included as part of the
purchase consideration.

As of May 31, 2013, the Company has
incurred mineral property costs of $683,622 on this property which have been
expensed to the statement of operations as disclosed in the table above.

34

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 3 | Mineral Properties  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | b)   Dangxiongcuo Salt Lake Project                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | On September 16, 2005, the Company, through its wholly
      owned subsidiary, Micro Express Holdings Inc. (Micro), signed an
      agreement (the Mianping Agreement) with Beijing Mianping Salt Lake
      Research Institute (Mianping) for the development of Dangxiongcuo salt
      lake property (DXC Salt Lake) in Nima county of Naqu district in Tibet,
      China.                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | On July 3, 2007, Micro received a letter terminating the
      agreement due to a lack of progress in the approval for the establishment
      of the joint venture company. By letter dated August 25, 2008, Mianping
      had confirmed that the agreement dated September 16, 2005 was terminated
      effective July 8, 2008. This agreement was replaced by the agreement with
      Zhong Chuan International Mining Holdings Co. Ltd. (Zhong Chuan) dated
      July 8, 2008 (the Agreement).                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | On October 31, 2011, the Company and its wholly owned
      subsidiary, Micro Express Holdings Inc. (collectively "Micro Express"),
      signed an agreement (the "Termination Agreement") with Beijing Mianping
      Salt Lake Research Institute and Tibet Sunrise Mining Development Ltd.
      which is the actual control person of Beijing Mianping Salt Lake Research
      Institute (collectively "Sunrise") regarding amending and terminating the
      agreement dated September 16, 2005 between Micro Express Holdings Inc. and
      Beijing Mianping Salt Lake Research Institute for the development of the
      Dangxiongcuo (DXC) Salt Lake Project located in Nima County, Tibet, China
      ( the "Mianping Agreement").
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | Pursuant to the Termination Agreement, the parties had
      Sunrise pay RMB 10 million ($1,570,200) to Micro Express immediately in
      exchange of the original receipts in total amount of RMB 6,218,451 which
      Micro Express had spent for the DXC project and the receipt of RMB
      3,781,549 from Micro Express. Micro Express quitclaimed all of its
      interest in and to the DXC project and the Mianping Agreement and
      amendments thereto, if any, shall be deemed to be null and void effective
      immediately after Micro Express received RMB 10 million from Sunrise.                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | As of May 31, 2013, the Company had incurred a total of
      $1,042,167 in mineral property costs on this property.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       | On June 21, 2012, the Company received the full payment
      of RMB 10,000,000 from Sunrise, and had quitclaimed all of its interest in
      and to the DXC lithium project and the Mianping Agreement and amendments
      thereto, if any, were null and void. RMB700,000 was incurred as expenses
      for the collection of the refund. The net amount, RMB9,300,000
      ($1,461,588) was recorded as other income in the consolidated statement of
      operations for the year ended May 31, 2013.                                                                                                                                                                                                                                   

35

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 4 | Equipment
|------ | ---------

May 31, 2013
    
    
    May 31, 2012Accumulated
    
    
    Net Book
    
    
    
    
    
    Accumulated
    
    
    Net BookCost
    
    
    Depreciation
    
    
    Value
    
    
    Cost
    
    
    Depreciation
    
    
    ValueComputer equipment
    $
    13,747
    
    $
    11,740
    
    $
    2,007
    
    $
    12,574
    
    $
    10,300
    
    $
    2,274Automobile
    
    60,239
    
    
    14,698
    
    
    45,541
    
    
    58,037
    
    
    2,554
    
    
    55,483Office equipment
    
    3,627
    
    
    1,473
    
    
    2,154
    
    
    3,494
    
    
    254
    
    
    3,240Machinery
    
    163,049
    
    
    16,398
    
    
    146,651
    
    
    3,797
    
    
    -
    
    
    3,797Construction in progress
    
    -
    
    
    -
    
    
    -
    
    
    88,598
    
    
    -
    
    
    88,598$
    240,662
    
    $
    44,309
    
    $
    196,353
    
    $
    166,500
    
    $
    13,108
    
    $
    153,392


|       | The depreciation for the year
      ended May 31, 2013 was $30,485 (2012: $3,708).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | The construction in progress represents the cost incurred
      for the extension of electric power line to the mining site which was
      reclassified to machinery in 2013.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Note 5 | Related Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | The Company was charged consulting fees for
      administrative, corporate, financial, engineering, and management services
      during the year ended May 31, 2013 totaling $23,831 (2012: $23,981) by
      companies controlled by a director of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | Included in accounts payable and accrued liabilities is
      $464,059 (May 31, 2012: $463,971) which was due to companies controlled by
      the directors for their services provided in a previous year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | These transactions were measured at the exchange amount
      which represented the amount of consideration established and agreed to by
      the related parties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Note 6 | Capital Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | a)   Capital Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | During the years ended May 31, 2004 and 2005, the Company
      completed a private placement of 3,716,000 units at $0.50 per unit for
      total proceeds of $1,858,000. Each unit consists of one common share and
      one share purchase warrant entitling the holder the right to purchase one
      common share at $0.75 per share, expiring on February 16, 2006 (the Series
      A Share Purchase Warrants). Upon exercise of the A share purchase
      warrant, an additional share purchase warrant will be granted at $1.00 per
      share, expiring February 16, 2007 (the Series B Share Purchase
      Warrants). An additional 101,500 units were issued as finders fees.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | On December 18, 2004, the Company issued 100,000 shares
      with a fair value of $42,000 to a consultant for investor relations
      services for a period of one year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       | During the year ended May 31, 2007, the Company completed
      a private placement of 2,750,300 units at $0.15 per unit for total
      proceeds of $412,545. Each unit consists of one common share and one share
      purchase warrant entitling the holder the right to purchase one common
      share at $0.18 per share expiring on December 29, 2006 (the Series C
      Share Purchase Warrants). An additional 123,690 units were issued as
      finders fees.                                                                                                                                                                                                                        

36

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 6 | Capital Stock  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | a)   Capital Stock  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | During the year ended May 31, 2008, the Company issued
      324,685 common shares at $0.06 per share to settle accounts payable of
      $19,480.                                                                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | During the year ended May 31, 2011, the Company completed
      a private placement of 20,000,000 units at $0.10 per unit for total
      proceeds of $2,000,000. Each unit consists of one common share and one
      share purchase warrant entitling the holder the right to purchase one
      common share at $0.15 per share expiring on January 31, 2012 (the Series
      D Share Purchase Warrants). An additional 752,500 units were issued as
      finders fees.                                                    
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On May 25, 2011, the Company issued 350,000 shares at a
      quoted market price of $0.23 each to a consultant for its services.                                                                                                                                                                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On July 5, 2011, Sterling issued 10,000,000 shares to the
      Hongyu Shareholders with the closing market price of the shares at $0.22
      for acquiring the remaining 20% equity interest in Silver Castle from the
      Hongyu Shareholders (Note 3).                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | b)   Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | During the year ended May 31, 2004, the Company granted
      2,100,000 fully vested stock options to directors and officers of the
      Company at an exercise price of $0.50 per share. These stock options
      expired on February 3, 2009.                                                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | Prior to the adoption of the accounting for stock based
      compensation on employees in 2005, the Company accounts for its stock
      based compensation plans using the intrinsic value method whereby no
      compensation costs had been recognized in the financial statements for
      stock options granted to employees and directors. If the fair value method
      had been used for options granted, a fair value of $504,000 would be
      recorded as compensation expenses during the year ended May 31, 2004.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | During the year ended May 31, 2004 the Company also
      granted 1,536,000 fully vested stock options to consultants at an exercise
      price of $0.50 per share. These stock option expired February 3, 2009. The
      fair value of options granted to non-employees and non-directors was
      $368,641 and had been recorded as stock-based compensation expense.                                                                                                                                                         
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | The fair value of each option grant was $0.24 and was
      estimated on the date of grant using the Black-Scholes option pricing
      model with the following assumptions used for the options granted on
      February 3, 2004: dividend yield of 0%, expected volatility of 51.15%,
      risk-free interest rate of 3.26%, and an expected life of 5 years.                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On April 27, 2011, the Company granted 4,700,000 stock
      options to employees and consultants at an exercise price of $0.25 each
      expiring on February 3, 2019. The options were vested immediately.                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On November 3, 2011, the Company granted 500,000 stock
      options to a consultant at an exercise price of $0.25 each expiring on
      February 3, 2019. The options were vested immediately.                                                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | The fair value of each option granted was estimated on
      the date of grant using the Black-Scholes option pricing model with
      weighted average assumptions for grants as follows:                                                                                                                                                                                                                                                                                                                                         

37

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 6 | Capital Stock  (contd)           
|------ | -----------------------------------
|       |                                    
|       | b)   Stock Options 
      (contd)

Year endedMay 31, 2012Risk free interest rate
    
    1.48%Expected life of options in years
    
    7.26 yearsExpected volatility
    
    233.3%Dividend per
      share
    $
    0.00


During the year ended May 31, 2012,
the weighted average fair value of options granted was $0.08 per share. The
Company recognized a total stock based compensation expense of $40,000 for
options granted and vested using the Black-Scholes option pricing model.

At May 31, 2013, there were 5,200,000
stock options (May 31, 2012: 5,200,000) outstanding and exercisable with an
exercise price at $0.25 each expiring on February 3, 2019, an aggregate
intrinsic value of $nil (May 31, 2012: $1,300,000) and a weighted average
remaining contractual term of 5.68 years (May 31, 2012: 6.82) .

c)   Share Purchase
Warrants

Changes in share purchase warrants for
the years ended May 31, 2013 and 2012 are summarized as follows:

WeightedAverageNumber of
    
    
    ExerciseShares
    
    
    PriceBalance, May 31, 2011
    
    24,570,000
    
    $
    0.204Granted
    
    -
    
    
    -Exercised
    
    -
    
    
    -Expired
    
    -
    
    
    -Balance, May 31, 2013 and 2012
    
    24,570,000
    
    $
    0.204


Share purchase warrants outstanding at
May 31, 2013:

Series
    Number
    Price
    Expiry Date"A"
    3,817,500
    $ 0.50
    February 17, 2015"D"
    20,752,500
    $ 0.15
    February 17, 201524,570,000


Each Series A warrant entitles the
holder thereof the right to purchase one common share at $0.50 per share
expiring on the earlier of:

38

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 6 | Capital Stock - (contd)                      
|------ | ----------------------------------------------
|       |                                               
|       | c)    Share
      Purchase Warrants - (contd)

| | 1) | February 16, 2008; or                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2) | The 30th day after the day on which the weighted average
      trading price of the Company's shares exceeds $0.80 per share for 20
      consecutive trading days.

Upon exercise of the Series "A" Share
Purchase Warrant at $0.50 each, the holder will receive one Common Share of the
Company and a Series "B" Share Purchase Warrant exercisable at $1.00 expiring
one year after the occurrence of either (1) or (2) as described above. The
Series "A" Share Purchase Warrants were originally issued in 2004 pursuant to a
private placement commenced in February 2004.

On February 7, 2008, the Company
extended the expiry date of the 3,817,500 Series A Share Purchase Warrants
from February 16, 2008 to February 16, 2009. The exercise price of the warrants
remains unchanged at $0.50 per share. The additional fair value of the 3,817,500
extended life Series A Share Purchase Warrants was estimated at $252,989 using
the Black-Scholes Option Pricing Model with the following weighted average
assumptions: dividend yield of 0%, expected volatility of 218.52%, risk free
interest rates of 2.08% and expected life of one year.

On February 6, 2009, the Company
re-extended the expiry date of 3,817,500 Series A Share Purchase Warrants from
February 16, 2009 to February 16, 2010. The exercise price of the warrants
remains unchanged at $0.50 per share. The additional fair value of the 3,817,500
extended life Series A Share Purchase Warrants was estimated at $35,593 using
the Black-Scholes Option Pricing Model with the following weighted average
assumptions: dividend yield of 0%, expected volatility of 223.36%, risk free
interest rates of 0.82% and expected life of one year.

On February 12, 2010, the Company
re-extended the expiry date of 3,817,500 Series "A" Share Purchase Warrants from
February 16, 2010 to February 16, 2011. The exercise price of the warrants
remains unchanged at $0.50 per share. The additional fair value of the 3,817,500
extended life Series A Share Purchase Warrants was estimated at $44,283 using
the Black-Scholes Option Pricing Model with the following weighted average
assumptions: dividend yield of 0%, expected volatility of 244%, risk free
interest rates of 0.56% and expected life of one year.

On February 14, 2011, the Company
re-extended the expiry date of 3,817,500 Series "A" Share Purchase Warrants from
February 16, 2011 to February 16, 2012. The exercise price of the warrants
remains unchanged at $0.50 per share. The additional fair value of the 3,817,500
extended life Series A Share Purchase Warrants was estimated at $517,526 using
the Black-Scholes Option Pricing Model with the following weighted average
assumptions: dividend yield of 0%, expected volatility of 201%, risk free
interest rates of 0.29% and expected life of one year.

On January 26, 2012, the Company
re-extended the expiry date of 3,817,500 Series "A" share purchase warrants from
February 16, 2012 to the earlier of February 15, 2013 or the close of business
on the 30th day after a takeover bid for the Company's issued and outstanding
share capital has been made by a third party and approved by the shareholders of
the Company. The exercise price of the warrants remained unchanged at $0.50 per
share. The additional fair value of the 3,817,500 extended life Series A Share
Purchase Warrants was estimated at $25,832 using the Black-Scholes Option
Pricing Model with the following weighted average assumptions: dividend yield of
0%, expected volatility of 155.80%, risk-free interest rates of 0.12% and
expected life of 1.05 years.

On February 6, 2013, the Company
extended the expiry date of 3,817,500 Series "A" Share Purchase Warrants (the
"A" Warrants) from February 15, 2013 to the earlier of February 17, 2015 or the
close of business on the 30th day after a takeover bid for the Company's issued
and outstanding share capital has been made by a third party and approved by the
shareholders of the Company. The exercise price of the warrants remained
unchanged at $0.50 per share. The additional fair value of the 3,817,500
extended life Series A Share Purchase Warrants was estimated at $108,603 using
the Black-Scholes Option Pricing Model with the following weighted average
assumptions: dividend yield of 0%, expected volatility of 169.44%, risk-free
interest rates of 0.27% and expected life of 2 years.

39

---

Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 6 | Capital Stock - (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | c)    Share
      Purchase Warrants - (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | On February 7, 2008, the Company extended the expiry date
      of the 2,873,990 Series C Share Purchase Warrants from February 29, 2008
      to February 27, 2009. The exercise price of the warrants remained
      unchanged at $0.18 per share. The additional fair value of the 2,873,990
      extended life Series C Share Purchase Warrants was estimated at $156,536
      using the Black-Scholes Option Pricing Model with the following weighted
      average assumptions: dividend yield of 0%, expected volatility of 222.09%,
      risk-free interest rates of 2.08% and expected life of one year.                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | On February 6, 2009, the Company re-extended the expiry
      date of 2,873,990 Series "C" share purchase Warrants from February 27,
      2009 to February 26, 2010. The exercise price of the warrants remains
      unchanged at $0.18 per share. The Series "C" Share Purchase Warrants were
      originally issued in September 2006 pursuant to a private placement
      commenced in August 2006. The additional fair value of the 2,873,990
      extended life Series C Share Purchase Warrants was estimated at $48,259
      using the Black-Scholes Option Pricing Model with the following weighted
      average assumptions: dividend yield of 0%, expected volatility of 244.01%,
      risk-free interest rates of 0.82% and expected life of one year.                                                                                                        
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | On February 12, 2010, the Company re-extended the expiry
      date of 2,873,990 the Series "C" share purchase Warrants from February 26,
      2010 to February 16, 2011. The exercise price of the warrants remains
      unchanged at $0.18 per share. The additional fair value of the 2,873,990
      extended life Series C Share Purchase Warrants was estimated at $47,421
      using the Black-Scholes Option Pricing Model with the following weighted
      average assumptions: dividend yield of 0%, expected volatility of 244%,
      risk-free interest rates of 0.56% and expected life of one year.                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | During the year ended May 31, 2011, 801,666 Series "C"
      Share Purchase Warrants with an exercise price of $0.18 per share were
      exercised for gross proceeds of approximately $144,300. On February 16,
      2011, the remaining Series "C" Share Purchase Warrants expired
      unexercised.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | On January 26, 2012, the Company extended the expiry date
      of the 20,752,500 Series "D" Share Purchase Warrants (the "D" Warrants) to
      the earlier of February 15, 2013 or the close of business on the 30th day
      after a takeover bid for the Company's issued and outstanding share
      capital has been made by a third party and approved by the shareholders of
      the Company. The exercise price of the "D" Warrants remains unchanged at
      $0.15 per share. The additional fair value of the 20,752,500 extended life
      Series D Share Purchase Warrants was estimated at $358,647 using the
      Black-Scholes Option Pricing Model with the following weighted average
      assumptions: dividend yield of 0%, expected volatility of 157.29%,
      risk-free interest rates of 0.12% and expected life of 1.05 years.                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | On February 6, 2013, the Company extended the expiry date
      of 20,752,500 Series "D" Share Purchase Warrants (the "D" Warrants) from
      February 15, 2013 to the earlier of February 17, 2015 or the close of
      business on the 30th day after a takeover bid for the Company's issued and
      outstanding share capital has been made by a third party and approved by
      the shareholders of the Company. The exercise price of the warrants
      remained unchanged at $0.15 per share. The additional fair value of the
      20,752,500 extended life Series D Share Purchase Warrants was estimated
      at $816,320 using the Black-Scholes Option Pricing Model with the
      following weighted average assumptions: dividend yield of 0%, expected
      volatility of 169.44%, risk-free interest rates of 0.27% and expected life
      of 2 years.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       | As a result of the extension of the warrants described
      above, the Company recorded stock-based compensation expenses of $924,923
      (2012: $424,479) as part of the consulting fees in the statement of
      operations for the year ended May 31, 2013.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

40

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Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 7 | Foreign Currency Risk                                                                                                                                                    
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                          
|       | The Company is exposed to fluctuations in foreign
      currencies through amounts held in China in RMB: Cash and cash equivalent
      $560,707 (May 31, 2012 - $10,924)
|       |                                                                                                                                                                          
|       | The Company is exposed to fluctuations in foreign
      currencies through amounts held in Canada in CAD: Cash $36,275 (May 31,
      2012 - $50,850)                    
|       |                                                                                                                                                                          
|       | The Company is exposed to fluctuations in foreign
      currencies through amounts held in Hong Kong in HKD: Cash $409 (May 31,
      2012 - $538)                       
|       |                                                                                                                                                                          
|Note 8 | Deferred Tax Assets                                                                                                                                                      
|       |                                                                                                                                                                          
|       | The Company's income tax expense for the years ended May
      31, 2013 and 2012 differed from the United States statutory rates:                                        

| |                                                             |   | 2013    |   |   | 2012     |  
| | ----------------------------------------------------------- | - | ------- | - | - | -------- | -
| |                                                             |   |         |   |   |          |  
| | Effective tax rate                                          |   | 35%     |   |   | 35%      |  
| |                                                             |   |         |   |   |          |  
| | Statutory rate applied to loss before
      income taxes    | $ | (41,200 | ) | $ | (287,300 | )
| | Increase in income taxes resulting from:                    |   |         |   |   |          |  
| | Foreign
      income taxed at other than US statutory rates |   | 60,600  |   |   | 13,600   |  
| | Non-deductible expenses                                     |   | -       |   |   | -        |  
| | Permanent differences                                       |   | -       |   |   | 300      |  
| | Other                                                       |   | -       |   |   | -        |  
| | Change in valuation allowance                               |   | (19,400 | ) |   | 273,400  |  
| | Income tax expense                                          | $ | -       |   | $ | -        |  

The significant components of the
Companys deferred tax assets are approximately as follows:

| |                                                          |   | 2013       |   |   | 2012       |  
| | -------------------------------------------------------- | - | ---------- | - | - | ---------- | -
| | Deferred income tax assets (liability)                   |   |            |   |   |            |  
| | Equipment                                                | $ | 4,900      |   | $ | 4,600      |  
| | Mineral property and
      related deferred explorations |   | (732,700   | ) |   | (732,700   | )
| | Stock
      based compensation                           |   | 1,096,800  |   |   | 773,000    |  
| | Net operating losses                                     |   | 790,300    |   |   | 1,133,800  |  
| |                                                          |   | 1,159,300  |   |   | 1,178,700  |  
| | Valuation allowance                                      |   | (1,892,000 | ) |   | (1,911,400 | )
| |                                                          | $ | (732,700   | ) | $ | (732,700   | )

41

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Sterling Group Ventures, Inc. (An Exploration Stage
Company) Notes to Consolidated Financial Statements May 31, 2013
(Stated in US Dollars)

|Note 8 | Deferred Tax Assets- (contd)                                                                                                                                                                                                                                                                                                                         
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                       
|       | At May 31, 2013, the Company has incurred accumulated net
      operating losses totaling approximately $2,447,000 (2012: $3,283,000)
      which are available to reduce taxable income in future taxation years. If
      not utilized to reduce future taxable income, the Companys net operating
      loss carryforwards will expire as follows:

Year of Expiry
    
    Amount2022
    
    7,0002023
    
    20,0002024
    
    159,0002025
    
    819,0002026
    
    461,0002027
    
    864,0002028
    
    107,0002029
    
    162,0002030
    
    122,0002031
    
    170,0002032
    
    392,0002033
    
    (836,000
    )$
    2,447,000


The amount taken into income as
deferred tax assets must reflect that portion of the income tax loss
carryforwards that is more likely-than-not to be realized from future
operations. The Company has chosen to provide an allowance of 100% against all
available income tax loss carryforwards, regardless of their time of expiry.

The Company operates in foreign
jurisdictions and is subject to audit by taxing authorities. These audits may
result in the assessment of amounts different than the amounts recorded in the
consolidated financial statements. The Company liaises with the relevant
authorities in these jurisdictions in regard to its income tax and other
returns. Management believes the Company has adequately provided for any taxes,
penalties and interest that may fall due.

42

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

a. 
           Evaluation of
Disclosure Controls and Procedures:

The management of the Company including its chief executive
officer and chief financial officer has evaluated the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e)
under the Exchange Act), as of the end of the period covered by this report and
has concluded that the disclosure controls, and procedures were effective based
upon their evaluation as of the end of the period covered by this report.

b.            
Management's Report on Internal Control over Financial Reporting

The Companys management, including our chief executive officer
and chief financial officer, is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal control over
financial reporting is a process designed by, or under the supervision of, our
chief executive and chief financial officers and implemented by our board of
directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures that: (i)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our assets; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of our management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements. Because of their inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
we conducted an assessment of the effectiveness of the design and operation of
the Companys internal controls over financial reporting based on certain
criteria established in Internal Control  Integrated 1992 Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on
this evaluation, management concluded that the Companys internal control over
financial reporting is effective as of May 31, 2013.

c.            
Changes in Internal Control over Financial Reporting:

There were no significant changes in the Companys internal
control over financial reporting identified in connection with the Companys
evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the
Exchange act that during the Company's last fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

43

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE

All directors of the Company hold office until the next annual
general meeting of the shareholders or until their successors are duly elected
and qualified. The officers of our company are appointed by our board of
directors and hold office until the earlier of death, retirement, resignation or
removal.

Our directors, executive officers and other significant
employees, their ages, positions held and duration each person has held that
position, are as follows:

Name
    Position Held with the Company
    Age
    Date First Elected / AppointedRichard Shao
    President, Director, CFO
    50
    January 21, 2004Raoul Tsakok
    Chairman of the Board, CEO
    63
    January 21, 2004Gerald Runolfson
    Director
    71
    April 5, 2004Robert Smiley
    Director
    69
    June 6, 2007


Business Experience

The following sets forth the business experience of each of the
Company's directors and executive officers:

Raoul N. Tsakok, Chairman

Mr. Tsakok has worked in the Investment Management business for
over 35 years. He has been Chairman of Sagit Investment Management Ltd. since
1987. He has been Chairman and director of Richco Investors Inc. and
Constitution Insurance Company of Canada. He holds an MBA degree.

Xuxin (Richard) Shao, President and Director

Mr. Shao was born and educated in China. He received his
degrees from engineering schools in China, specializing in mineral processing.
Between his Bachelor and Ph.D. degrees, he held a research engineer position
with the Chemical Mines Design and Research Institute of the Ministry of
Chemical Industry in Lianyun Harbour, Jiangsu, China. During his graduate
studies at the China University of Mining and Technology, he conducted research
on phosphate flotation using interfacial, colloidal and solution chemical
theories and authored and coauthored more than 50 research reports and
publications on this and other related subjects. After receiving his Ph.D. in
1990 from China University of Mining and Technology, Mr. Shao taught as an
associate Professor and was acting Department Head in Mineral Processing at the
China University of Mining and Technology for six years.

In 1996, Mr. Shao accepted a position as Research Scientist for
the Center for Applied Energy Research at the University of Kentucky in
cooperation with the Department of Energy of the US Federal Government. Since
1998, Dr. Shao has worked as an advisor to a number of companies in the
evaluation and processing of minerals in North America and China.

Gerald Runolfson, Professional Engineer, Director

Mr. Runolfson is a professional engineer (P. Eng.) and has been
in the construction industry for over 40 years. He is currently President and
controlling shareholder of Elkon Products Inc., a company that has the exclusive
distribution rights for all silica fume produced in Canada. Silica fume is used
in oil well cementing operation and concrete construction. Major customers
include Halliburton and BJ Services. Mr. Runolfson has been a Director of a
number of public companies.

Robert G. Smiley, J. D, Director

Mr. Smiley is a business consultant working with junior
companies. He has been self-employed in this capacity for the past ten years. He
is a former lawyer who specialized in oil and gas and securities law for
twenty-five years. He is currently president of Drucker, Inc. and a director of
Richco Investors Inc, Canadian Imperial Ventures Corp., Teuton Resource Corp.
and Silver Grail Resources Inc. He has served on the boards of a number of
junior and intermediate companies in the past.

44

---

Our directors, executive officers and control persons have not
been involved in any of the following events during the past five years:

| | 1. | any bankruptcy petition filed by or against any business
      of which such person was a general partner or executive officer either at
      the time of the bankruptcy or within two years prior to that
  time;                                                                                                            
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | any conviction in a criminal proceeding or being subject
      to a pending criminal proceeding (excluding traffic violations and other
      minor offences);                                                                                                                                                                 
| | 3. | being subject to any order, judgment, or decree, not
      subsequently reversed, suspended or vacated, of any court of competent
      jurisdiction, permanently or temporarily enjoining, barring, suspending or
      otherwise limiting his involvement in any type of business, securities or
      banking activities; or
| | 4. | being found by a court of competent jurisdiction (in a
      civil action), the Commission or the Commodity Futures Trading Commission
      to have violated a federal or state securities or commodities law, and the
      judgment has not been reversed, suspended, or
vacated.                                           

Audit Committee and Charter

We have an audit committee and audit committee charter. Our
audit committee is comprised of Mr. Raoul Tsakok, Mr. Richard Shao and Mr.
Robert Smiley. Mr. Raoul Tsakok qualifies as an "audit committee financial
expert" as defined in Item 407(5)(ii) of Regulation S-K. We believe that the
audit committee members are collectively capable of analyzing and evaluating our
financial statements and understanding internal controls and procedures for
financial reporting. During the year ended May 31, 2013, the audit committee met
six times. A copy of our audit committee charter is filed as an exhibit to the
Form 10-K on August 28, 2009.

The Audit Committee's responsibilities include:

- selecting and reviewing our independent registered public accounting firm
  and their services;
- reviewing and discussing the audited financial statements, related
  accounting and auditing principles, practices and disclosures with the
  appropriate members of management;
- reviewing and discussing our quarterly financial statements prior to the
  filing of those quarterly financial statements;
- establishing procedures for the receipt of, and response to, any complaints
  received regarding accounting, internal accounting controls, or auditing
  matters, including anonymous submissions by employees;
- reviewing the accounting principles and auditing practices and procedures
  to be used for the audit of our financial statements and reviewing the results
  of those audits; and
- monitoring the adequacy of our operating and internal controls as reported
  by management and the independent registered public accounting firm.

Code of Ethics

We have adopted a corporate code of ethics that applies to all
employees, including our directors and officers. A copy of the code of ethics is
filed as an exhibit to the Form 10-K on August 28, 2009. We believe our code of
ethics is reasonably designed to deter wrongdoing and promote honest and ethical
conduct; provide full, fair, accurate, timely and understandable disclosure in
public reports; comply with applicable laws; ensure prompt internal reporting of
code violations; and provide accountability for adherence to the code.

ITEM 11. EXECUTIVE COMPENSATION

(a) Officers' Compensation.

45

---

Compensation paid by the Company for all services provided up
to the fiscal years ended May 31, 2012 and 2013 to each of the executive
officers and to all officers as a group is set forth below.

SUMMARY COMPENSATION TABLE OF EXECUTIVES(For fiscal
years ended May 31, 2012 and 2013)

Cash Compensation
    Security Grants
    TOTAL 
    ($)Name and Principal 
      Position
    Year ended 
      May 31,
    Salary 
      ($) (1)
    Bonus 
      ($)
    All Other 
      Compensation 
        ($) (2)
    Option 
    Awards ($)(3)Richard Shao President
    2012
    0
    0
    0
    0
    02013
    0
    0
    0
    0
    0Raoul Tsakok Chairman
    2012
    0
    0
    0
    0
    02013
    0
    0
    0
    0
    0Kathy Wang Secretary
    2012
    0
    0
    23,981
    0
    23,9812013
    0
    0
    23,831
    0
    23,831Officers as A Group
    2012
    0
    0
    23,981
    0
    23,9812013
    0
    0
    23,831
    0
    23,831


|(1) | Executive officers did not receive any salary during the
      fiscal years ended May 31, 2012 or 2013.                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The amounts listed under the Column entitled All other
      Compensation in the Summary Compensation Table related to consulting
      fees earned during the period reported.
|(3) | Please refer Note 6(b) to the financial statements
      included herein.                                                                                                          

(b) Directors' Compensation

Directors who are also officers receive no cash compensation
for services as a director. However, the directors will be reimbursed for
out-of-pocket expenses incurred in connection with attendance at board and
committee meetings. The Company granted options to directors under its 2004
Incentive Stock Option Plan subsequently adopted.

SUMMARY COMPENSATION TABLE OF DIRECTORS(For fiscal
years ended May 31, 2012 and 2013)

Cash Compensation
    Security 
      Grants
    
    TOTAL 
    ($)Name and Principal 
      Position
    Year ended 
      May 31,
    Annual 
      Retainer Fees ($)
    Meeting 
      Fees ($)
    Consulting 
      Fees/ Other 
        Fees ($)
    Option 
      Awards ($)(1)
    All Other 
    Compensation ($)Raoul Tsakok Director
    2012
    0
    0
    0
    0
    0
    02013
    0
    0
    0
    0
    0
    0Richard Shao Director
    2012
    0
    0
    0
    0
    0
    02013
    0
    0
    0
    0
    0
    0Gerald Runolfson Director
    2012
    0
    0
    0
    0
    0
    02013
    0
    0
    0
    0
    0
    0Robert G. Smiley Director
    2012
    0
    0
    0
    0
    0
    02013
    0
    0
    0
    0
    0
    0Directors as a Group
    2012
    0
    0
    0
    0
    0
    02013
    0
    0
    0
    0
    0
    0


(1)        Please refer Note
6(b) to the financial statements included herein.

During the year ended May 31, 2011, we granted 3,100,000 stock
options to our directors or officers. The options are granted at an exercise
price of $0.25 per share and expiring on February 3, 2019.

46

---

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END(For
fiscal years ended May 31, 2013)

Name
    Number of 
      securities Underlying
      Unexercised Options (#) Exercisable
    Number of 
      Securities Underlying
      Unexercised Options (#) Unexercisable
    Number of 
      Securities Underlying
      UnexercisedUnearned Options (#)
    Option 
      Exercise Price ($)
    Option 
      Expiration Date
    Number 
      of Unvested Shares (#)
    Market 
      Value of Unvested Shares
      ($)
    Number of 
      Unearned Unvested
      Shares (#)
    Market Value 
      of Unearned Unvested
      Shares ($)Richard Shao President
    800,000
    0
    0
    $0.25
    Feb 3, 2019
    0
    0
    0
    0Raoul Tsakok Chairman
    800,000
    0
    0
    $0.25
    Feb 3, 2019
    0
    0
    0
    0Kathy Wang Secretary
    300,000
    0
    0
    $0.25
    Feb 3, 2019
    0
    0
    0
    0Gerald Runolfson Director
    600,000
    0
    0
    $0.25
    Feb 3, 2019
    0
    0
    0
    0Robert G. Smiley Director
    600,000
    0
    0
    $0.25
    Feb 3, 2019
    0
    0
    0
    0Total
    3,100,000
    0
    0
    
    
    0
    0
    0
    0


Directors are entitled to reimbursement for reasonable travel
and other out-of-pocket expenses incurred in connection with attendance at
meetings of our board of directors. Our board of directors may award special
remuneration to any director undertaking any special services on our behalf
other than services ordinarily required of a director. No director received
and/or accrued any compensation for their services as a director, including
committee participation and/or special assignments.

There are no management agreements with our directors or
executive officers and we do not anticipate that written agreements will be put
in place in the foreseeable future.

We have no plans or arrangements in respect of remuneration
received or that may be received by our executive officers to compensate such
officers in the event of termination of employment (as a result of resignation,
retirement, change of control) or a change of responsibilities following a
change of control.

There are no plans or arrangements in which we provide pension,
retirement or similar benefits for directors or executive officers. We have no
material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the Board of Directors or
a committee thereof.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of August 26, 2013, certain
information with respect to the beneficial ownership of our common shares by
each shareholder known to us to be the beneficial owner of 5% of our common
shares, and by each of our officers and directors. Each person has sole voting
power with respect to the common shares, except as otherwise indicated.
Beneficial ownership consists of a direct interest in the common shares, except
as otherwise indicated. As of August 26, 2013, there were 75,730,341 common
shares issued and outstanding.

Title of Class
    Name and Address ofBeneficial
      Owner (1)
    Amount and Nature ofBeneficial
      Ownership
    Percentage of Class(2)Common stock
    Raoul Tsakok
    15,800,000 (3) (5)
    20.86%Common stock
    Richard Shao
    4,800,000 (5)
    6.34%Common stock
    Gerald Runolfson
    2,000,000 (4)(6)
    2.64%Common stock
    Robert Smiley
    600,000 (6)
    0.79%TOTAL
    23,200,000
    30.63%


(1)        The address of
each beneficial owner is 308  1228 Marinaside Cr., Vancouver, BC V6Z 2W4 Canada

47

---

|(2) | Based on 75,730,341 shares outstanding as of August 26,
      2013 and, as to a specific person, shares issuable pursuant to the
      conversion or exercise, as the case may be, of currently exercisable or
      convertible debentures, share purchase warrants and stock options within
      60 days.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                             
|(3) | 15,000,000 common shares held through Cobilco Inc., a
      company 100% owned by Mr. Tsakok.                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                             
|(4) | Includes 800,000 common shares and 300,000 A warrants,
      and 300,000 B warrants held through Elkon Products Inc., a company 100%
      owned by Mr. Runolfson                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                             
|(5) | Includes 800,000 stock options.                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                             
|(6) | Includes 600,000 stock options.                                                                                                                                                                                                                                                                             

Changes in Control

As of August 26, 2013, management had no knowledge of any
arrangements which may at a subsequent date result in a change in control of the
Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE

There have been no transactions, or proposed transactions,
which have materially affected or will materially affect us in which any
director, executive officer or beneficial holder of more than 10% of the
outstanding common stock, or any of their respective relatives, spouses,
associates or affiliates, has had or will have any direct or material indirect
interest.

As at the date of this annual report, we do not have any
policies in place with respect to whether we will enter into agreements with
related parties in the future.

We have determined that Gerald Runolfson and Robert G. Smiley
are independent directors.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

BDO Canada LLP (BDO) provided audit services to the Company
in connection with its annual report for the fiscal years ended May 31, 2013 and
May 31, 2012. The aggregate fees billed by BDO for the May 31, 2013 year ended
audit and the fiscal year 2013 quarterly reviews of the Company was $67,821. The
aggregate fees billed by BDO for the May 31, 2012 year ended audit and the
fiscal year 2012 quarterly reviews of the Company was $81,141.

Audit Related Fees

No fees were billed by BDO to the Company for professional
services that are reasonably related to the audit or review of the Company's
financial statements.

Tax Fees

No fees were billed by BDO to the Company in the years ended
May 31, 2013 and 2012 for professional tax services.

All Other Fees

No fees were billed by BDO to the Company for other
professional services rendered or any other services not disclosed above during
the years ended May 31, 2013 and 2012.

Audit Committee Pre-Approval

The Audit Committee has the sole authority to appoint,
terminate and replace our independent auditor and to approve the scope, fees and
terms of all audit engagements, as well as all permissible non-audit engagements
of our independent auditor. All the services provided by the auditors were
approved by our Audit Committee.

All audit work was performed by the auditors' full time
employees.

48

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as
part of this report:

| | 1. | Financial Statements.
| | -- | ---------------------

Our consolidated financial statements are included in Part
II, Item 8 of this report:

|                                                                                   | Page 
|---------------------------------------------------------------------------------- | -----
|Report
      of Independent Registered Public Accounting Firm                      | 19   
|Consolidated
      Balance Sheets                                                  | 20   
|Consolidated
      Statements of Operations                                        | 21   
|Consolidated
      Statements of Changes in Stockholders' Equity (Capital Deficit) | 22-23
|Consolidated
      Statements of Cash Flows                                        | 24   
|Notes
      to the Consolidated Financial Statements                               | 25-42

| | 2. | Financial statement schedules and supplementary
      information required to be submitted.
| | -- | -------------------------------------------------------------------------------------------
| |    |                                                                                            
| |    | Schedules other than that listed above are omitted
      because they are not applicable.  
| |    |                                                                                            
| | 3. | Exhibits                                                                                   

A list of the exhibits filed or furnished with this report on
Form 10-K (or incorporated by reference to exhibits previously filed or
furnished by us) is provided in the Exhibit Index beginning on page 50 of this
report. Those exhibits incorporated by reference herein are indicated as such by
the information supplied in the parenthetical thereafter. Otherwise, the
exhibits are filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

STERLING GROUP VENTURES INC.

|By: | /s/ Raoul Tsakok                                                        
|--- | ------------------------------------------------------------------------
|    | Raoul Tsakok                                                            
|    | Chief Executive Officer and
      Director (Principal Executive Officer)
|    |                                                                         
|    | Date: August 28, 2013                                                   

Pursuant to the requirements of Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

|Signature                  | Title                                 | Date           
|-------------------------- | ------------------------------------- | ---------------
|                           |                                       |                
|/s/ Raoul Tsakok           |                                       |                
|Raoul Tsakok               | Chairman and Chief Executive Officer  | August 28, 2013
|                           | (Principal Executive Officer)         |                
|/s/ Richard Shao           |                                       |                
|Richard Shao               | President and Chief Financial Officer | August 28, 2013
|                           |                                       |                
|/s/ Robert Smiley          |                                       |                
|Robert Smiley              | Director                              | August 28, 2013
|                           |                                       |                
|/s/ Gerald
      Runolfson |                                       |                
|Gerald Runolfson           | Director                              | August 28, 2013

49

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Index of Exhibits

|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                           
|3.1     |  | Articles of
      Incorporation of the Company, (filed as Exhibit 3.1 to the Company's
      Registration Statement on Form SB-2 filed on July 26, 2002, and
      incorporated herein by reference).                                                                                                                                                                     
|3.2     |  | Bylaws of the Company (filed as
      Exhibit 3.2 to the Company's Registration Statement on Form SB-2 filed on
      July 26, 2002, and incorporated herein by reference).                                                                                                                                                                                               
|4.1     |  | Specimen stock
      certificate (filed as Exhibit 4.1 to the Company's Registration Statement
      on Form SB-2 filed on July 26, 2002, and incorporated herein by
      reference).                                                                                                                                                                                    
|10.1    |  | Acquisition Agreement between the
      Company and Micro Express Ltd., dated January 20, 2004. (Filed as Exhibit
      10.1 to the Company's current report on Form 8-K filed on January 29,
      2004, and incorporated herein by reference).                                                                                                                          
|10.2    |  | Joint Venture
      Contract between Micro Express Ltd. (the Companys wholly subsidiary) and
      Sichuan Province Mining Ltd., dated April 5, 2005 (Filed as Exhibit 10.1
      to the Company's current report on Form 8-K filed on April 11, 2005, and
      incorporated herein by reference).                                                                      
|10.3    |  | Agreement for Development of DXC
      Salt Lake Property between Micro Express Holdings Inc. (the Companys
      wholly subsidiary) and Beijing Mianping Salt Lake Research Institute,
      dated September 16, 2005 (Filed as Exhibit 10.1 to the Company's current
      report on Form 8-K filed on September 21, 2005, and incorporated herein by
      reference).
|10.4    |  | Agreement for
      Termination of Joint Venture between Micro Express Ltd. and Sichuan
      Province Mining Ltd., dated March 3, 2006 (Filed as Exhibit 10.1 to the
      Company's current report on Form 8-K filed on March 6, 2006, and
      incorporated herein by reference).                                                                                     
|10.5    |  | Agreement between the Company,
      Zhong Chuan International Mining Holding Co., Ltd., and shareholders of
      Monte Sea Holdings Ltd., dated July 8, 2008 (Filed as Exhibit 10.1 to the
      Company's current report on Form 8-K filed on July 15, 2008, and
      incorporated herein by reference).                                                              
|10.6    |  | Agreement between
      the Company, Hongyu Mining Co., Ltd. , and the shareholders of Hongyu
      Mining Co., Ltd., dated October 18, 2010 (Filed as Exhibit 10.1 to the
      Company's current report on Form 8-K filed on October 21, 2010, and
      incorporated herein by reference).                                                                             
|10.7    |  | Letter of Intent between the
      Company and Shimen County Merchants Bureau, dated November 10, 2010 (Filed
      as Exhibit 10.1 to the Company's current report on Form 8-K filed on
      November 16, 2010, and incorporated herein by reference).                                                                                                                  
|10.8    |  | Agreement for
      Termination of Joint Venture between the Company, Micro Express Holdings
      Inc. and Beijing Mianping Salt Lake Research Institute, dated October 31,
      2011 (Filed as Exhibit 10.1 to the Company's current report on Form 8-K
      filed on November 3, 2011, and incorporated herein by reference).                                        
|14.1    |  | Code of Ethics. (Filed as Exhibit
      14.1 to the Company's annual report on Form 10-K filed on August 28, 2009,
      and incorporated herein by reference).                                                                                                                                                                                                           
|31.1    |  | Certification of
      Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of
      2002. Filed herewith.                                                                                                                                                                                                                                                 
|31.2    |  | Certification of Chief Financial
      Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Filed
      herewith.                                                                                                                                                                                                                                                 
|32.1    |  | Certification of
      Chief Executive Officer Pursuant to 18 U.S.C. Sec. 1350 as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.                                                                                                                                                                                                  
|32.2    |  | Certification of Chief Financial
      Officer Pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 906
      of the Sarbanes-Oxley Act of 2002. Filed herewith.                                                                                                                                                                                                
|99.1    |  | Audit Committee
      Charter. (Filed as Exhibit 99.1 to the Company's annual report on Form
  10-K filed on August 28, 2009, and incorporated herein by reference).                                                                                                                                                                                                      
|101.INS |  | XBRL Instance Document. Furnished
      herewith.                                                                                                                                                                                                                                                                                                                         
|101.SCH |  | XBRL Taxonomy
      Extension Schema Document. Furnished herewith.                                                                                                                                                                                                                                                                                                        
|101.CAL |  | XBRL Taxonomy Extension
      Calculation Linkbase Document. Furnished herewith.                                                                                                                                                                                                                                                                                          
|101.DEF |  | XBRL Taxonomy
      Extension Definition Linkbase Document. Furnished herewith.                                                                                                                                                                                                                                                                                           
|101.LAB |  | XBRL Taxonomy Extension Label
      Linkbase Document. Furnished herewith.                                                                                                                                                                                                                                                                                                
|101.PRE |  | XBRL Taxonomy
  Extension Presentation Linkbase Document. Furnished herewith.                                                                                                                                                                                                                                                                                             

50

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