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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

Form 10-K

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

For the fiscal year ended May 31, 2011

OR

[   ] 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 area code (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 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
$2,522,748 based on the closing trading price for the common equity as of
November 30, 2010 (at $0.105 average ask and bid price).

The number of shares of common stock, par value $0.001 per
share, outstanding as of August 22, 2011 was 75,730,341.

Documents incorporated by reference: None.

1

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|STERLING GROUP VENTURES INC.
|----------------------------
|Form 10-K                   
|TABLE OF CONTENTS           

|           |                                                                                                                    | Page
|---------- | ------------------------------------------------------------------------------------------------------------------ | ----
|           |                                                                                                                    |     
|PART I    
|Item 1.    | Business                                                                                                           | 4   
|Item 1A.   | Risk Factors                                                                                                       | 8   
|Item 1B.   | Unresolved Staff Comments                                                                                          | 10  
|Item 2.    | Properties                                                                                                         | 10  
|Item 3.    | Legal Proceedings                                                                                                  | 16  
|Item 4.    | (Removed and
      Reserved)                                                                                       | 16  
|           |                                                                                                                    |     
|           | PART II                                                                                                            |     
|Item 5.    | Market for Registrant's Common
      Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 16  
|Item 6.    | Selected Financial
      Data                                                                                      | 18  
|Item 7.    | Management's Discussion and
      Analysis of Financial Condition and Results of Operations                        | 18  
|Item 7A.   | Quantitative
      and Qualitative Disclosures About Market Risk                                                   | 21  
|Item 8.    | Financial Statements and Supplementary
      Data                                                                  | 22  
|Item 9.    | Changes in
      and Disagreements With Accountants on Accounting and Financial Disclosure                         | 45  
|Item 9A.   | Controls and Procedures                                                                                            | 45  
|Item 9B.   | Other Information                                                                                                  | 45  
|           |                                                                                                                    |     
|           | PART III                                                                                                           |     
|Item 10.   | Directors, Executive Officers
      and Corporate Governance                                                       | 46  
|Item 11.   | Executive Compensation                                                                                             | 48  
|Item 12.   | Security Ownership of Certain
      Beneficial Owners and Management and Related Stockholder Matters               | 49  
|Item 13.   | Certain Relationships
      and Related Transactions and Director Independence                                     | 50  
|Item 14.   | Principal Accountant Fees and
      Services                                                                       | 50  
|           |                                                                                                                    |     
|           | PART IV                                                                                                            |     
|Item 15.   | Exhibits and
      Financial Statement Schedules                                                                   | 51  
|           |                                                                                                                    |     
|SIGNATURES

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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 lithium in Tibet, China and phosphate through its recent
acquisition of Chenxi County Hongyu Mining Co. Ltd. (Hongyu) in Hunan, China.
There is no assurance it 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.

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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 17, 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. On July 8, 2011, Sterling acquired a 90% interest in
Hongyu and issued 10,000,000 shares of the Companys common stock to existing
Hongyu shareholders as part of the transaction.

In addition to lithium, we are a mining company engaged in the
search, exploration and development of phosphate and related minerals through
our recent acquisition of Chenxi County Hongyu Mining Co. Ltd. We have not yet
generated or realized any revenues from our business operations. 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 40% to 5%. 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.

Lithium and Lithium Carbonate Overview

Lithium is a solid soft alkali metal which has an atomic number
of 3 and is the lightest of all metals, with a density of about half of that of
water. The metal is naturally occurring in minute amounts in ore and brine
deposits. The major ores used to mine lithium are spodumene, petalite and
lepidolite. While spodumene is the most common lithium ore mined, it is also
more expensive than mining brine deposits as the process is more
complicated.

Lithium carbonate (Li2CO3) occurs naturally in brine or salt
lake deposits or water and is the starting point in the manufacturing of lithium
and various lithium chemicals which are used in batteries, ceramics and glass,
in primary aluminum production, in the manufacture of lubricants and greases,
drugs and others products.

According to the Mineral Information Institute (MII), most
lithium is recovered from brine, or water with a high concentration of lithium
carbonate. Brines trapped in the Earths crust (called subsurface brines) are
the major source material for lithium carbonate. These sources, which are
recovered generally through solar evaporation, are less expensive to mine than
sources from rock such as spodumene, petalite, and other lithium-bearing
minerals.

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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 is 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 is
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. The recording date is
November 10, 2009. The mining permit allows initial production up to 100,000
tonnes phosphate ore per year.

The Agreements also required an investment company to be
incorporated in Hong Kong (the Investment Company) which would be owned 20% by
the Hongyu Shareholders and 80% by Sterling. The Investment Company acquired 90%
of Hongyu with the other 10% of Hongyu transferred to nominees of Sterling. Upon
completion of the acquisition, Hongyu became a Hong Kong / China joint venture
company and within five business days of the approval of such joint venture
company by the appropriate Chinese authorities, Sterling is required to pay RMB
2,000,000 to the Hongyu Shareholders. During the acquisition phase, Sterling
would ensure that Hongyus net assets retain a minimum value of RMB 5,000,000.
At any time 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 to them all subject to the
rules and requirements of the US regulatory bodies bearing jurisdiction. If
Sterling does not complete taking over Hongyu through the Investment Company
within three months after signing the Agreements, Sterling should pay RMB
200,000 to the Hongyu Shareholders as down payment.

Pursuant to the Agreements, Hongyu agreed to surrender its
future exclusive cooperative rights to Sterling, and the Hongyu Shareholders
agreed that Sterling should have all Hongyu's title and interest in any
phosphate properties, including but not limited to the GP Property, and Sterling
shall 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.

During the year ended May 31, 2011, the Investment Company was
incorporated in Hong Kong under the name Silver Castle Investments Ltd (Silver
Castle). Sterling paid RMB 200,000 ($30,862) to the Hongyu shareholders as down
payment on December 14, 2010. Hunan Provincial Government issued a Certificate
of Approval for establishment of Hong Kong invested Hongyu on May 16, 2011.

Subsequent to the year ended May 31, 2011, Sterling has
received all required approvals from the Chinese authorities for the acquisition
of Hongyu pursuant to the Agreements dated October 18, 2010. Hongyu received an
amended business license on June 14, 2011. On July 5, 2011, Sterling issued
10,000,000 shares of its common stock to existing Hongyu shareholders and
obtained the remaining 20% of Silver Castle that it did not previously own and
paid the balance of RMB 1,800,000 Yuan ($279,504) to the Hongyu shareholders as
consideration for the acquisition on July 8, 2011. As a result, Silver Castle
became a wholly owned subsidiary of Sterling holding 90% of Hongyu with other
10% held by the nominees of Sterling.

Hongyu is currently preparing plans to put its phosphate
deposit into production.

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.

5

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DXC Salt Lake Project

On July 11, 2005, the Company signed a letter of intent with
Beijing Mianping Salt Lake Research Institute (Mianping) for the development
of Dangxiongcuo (DXC) salt lake property in Nima county of Naqu district in
Tibet, China. Pursuant to the Letter of Intent, the parties have agreed to set
up a Joint Venture Company in Tibet, China to share the benefits, risks and
losses of the project.

On September 16, 2005, the Company through its wholly owned
subsidiary, Micro Express Holdings Inc. (MEH), signed an agreement (the
Mianping Agreement) with Beijing Mianping Salt Lake Research Institute for the
development of Dangxiongcuo salt lake property in Nima county of Naqu district
in Tibet, China. The Agreement follows a Letter of Intent signed between the
parties on July 11, 2005.

Mianping which is a private company holds the exploration
permit on the Dangxiongcuo Salt Lake and the surrounding area issued by Tibet
Bureau of Land and Resources of China. Dangxiongcuo Salt Lake is a classic brine
type deposit. The number of the exploration permit is 5400000620013. The area
covered by the permit is 89.06 km2 (8,906 hectares) and it was valid until Feb
23, 2007. The recording date is February 24, 2006. Mianping has renewed its
permit on March 4th 2007. The new number is 5400000730283. The area
covered by the permit is 89.06 km2 (8,906 hectares) and it was valid until March
14th 2008. The recording date is March 4, 2007. The license is now
under renewal process. There is a mandated routine for converting this
exploration permit into a mining permit.

Pursuant to the Mianping Agreement signed on September 16,
2005, the parties agreed to set up a Cooperative Company (the Cooperative) to
develop DXC Salt Lake. The objective of the Cooperative was to use the funds
provided by Sterling through MEH and the skills and technology provided by
Mianping to produce lithium carbonate (Li2CO3), potash and other chemicals from
brine. MEH was to own 65% and Mianping to own 35% of the Cooperative. It was
anticipated that the total investment in the Cooperative shall be approximately
240 million RMB (or approximately US$35 million) and would result in production
of 5,000 tonnes per year of lithium carbonate and by products (potash and other
chemicals). Mianping guaranteed the production cost of lithium carbonate would
be less than 11,000 RMB per tonne (or approximately US $1,600 per tonne).

On July 3, 2007, MEH received a letter from Mianping stating
that the agreement between MEH and Mianping should be deemed terminated as a
result of lack of progress in the approval for the establishment of the joint
venture company and was considering a lawsuit against the Company and MEH. MEH
had responded that Mianpings claim had no legal grounds as the lack of progress
was not caused by MEH or the Company. There has been no legal action to date and
none is expected. By letter dated August 25, 2008, Mianping had confirmed to the
Companys auditor 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. dated July 8, 2008.

On July 8, 2008, the Company signed an agreement (the
"Agreement") with Zhong Chuan International Mining Holding Co., Ltd. ("Zhong
Chuan"), Ximing Sun and Charles Yan - shareholders of Monte Sea Holdings Ltd.
(collectively hereinafter "Monte Sea Shareholders") to restructure the
transactions contemplated under the Mianping Agreement signed by Mianping and
MEH on September 16, 2005. Pursuant to the Agreement, the parties wish to
establish a Sino-foreign cooperative joint venture company ("CJV") for the
purpose of applying for and holding required approvals, permits and licenses
with respect to the development of the Dangxiongcuo Salt Lake property (the
"Property") located in Tibet of China.

Zhong Chuan is a Chinese mining company with connections and
mineral properties in Tibet, China. Zhong Chuan is interested in expanding into
lithium business. Zhong Chuan has also acquired interests in certain other salt
lakes in Tibet ("Other Interests"). Monte Sea Shareholders are the shareholders
holding all the issued and outstanding shares in the stock of Monte Sea Holdings
Ltd. ("Monte Sea"), a company incorporated in Hong Kong.

Under the Agreement, the Mianping Agreement between Mianping
and the Company shall be replaced and superseded by this Agreement upon this
Agreement becoming effective. Upon this Agreement being effective and
termination of the Mianping Agreement, Zhong Chuan shall cause Mianping to repay
to the Company RMB 6,000,000 ($875,000) by depositing the said amount into an
account designated by the Company. Mianping has not paid the Company the
required amount anticipated from the termination of the agreement.

The Parties agree that Zhong Chuan shall cause an operating
company ("Opco") to be established in Tibet prior to the establishment of the
CJV for the purpose of applying for and holding required approvals, permits and
licenses with respect to the development of the Property. The Opco shall hold
all such approvals, permits and licenses in trust for the CJV, and pursuant to
the letters and spirit of this Agreement.

6

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Under the Agreement, Monte Sea Shareholders and Zhong Chuan
shall cause the CJV to be established within 90 days from date of this
Agreement, subject to required regulatory approval and based on a joint venture
agreement by way of acquisition of interest in the Opco by Monte Sea, or by way
of incorporation under the Chinese laws. Monte Sea shall hold up to 65% but no
less than 51% of shares in the CJV. CJV shall own and hold all Mianping's
(and/or Opco's) title to and interest in any exploration or mining licenses in
lithium resources in Tibet including the Exploration license and Other
Interests.

If for any Chinese regulatory or policy reasons, Monte Sea is
not permitted to have more than fifty-one percent (51%) interest in the CJV,
then Monte Sea and Zhong Chuan shall cause the JV Agreement to be revised such
that:

(a) Mont Sea shall have a forty-nine percent (49%) interest in
the CJV;

(b) Mont Sea shall be entitled to receive returns on its
investment in the CJV on a priority and accelerated basis until its investment
in the CJV and the Property is fully recovered; and

(c) Mont Sea shall be permitted to manage the daily operation
of the CJV pursuant to a management agreement to be entered into between Mont
Sea and Zhong Chuan, on terms and conditions satisfactory to Sterling.

The Parties shall cause all necessary corporate actions to be
taken to approve and effect the transactions contemplated above, and to make any
adjustment, registration or filings necessary to meet applicable regulatory
requirements.

Upon signing of this Agreement and subject to applicable
regulatory approval, Monte Sea Shareholders shall subscribe for 5,000,000 units
(the "Units") to be issued by the Company at $0.15 per unit. Each Unit shall
consist of One (1) common share in the stock of the Company, and One (1) warrant
which shall entitle Monte Sea Shareholders to purchase One (1) common share in
the stock of the Company at $0.16 per share within two (2) years from the date
of the issuance of the Units.

Subject to applicable regulatory approval, the Company shall
cause 200,000,000 shares to be issued to Monte Sea Shareholders within ten (10)
working days from the date transfer of the Exploration License to the CJV is
approved by the Chinese regulators, in exchange for all the shares then issued
and outstanding in the stock of Monte Sea and held by Monte Sea shareholders
(the "Share Exchange"). The Share Exchange may be conducted and completed at an
earlier date so long as the Company and Monte Sea Shareholders may agree in
writing.

Subject to applicable regulatory approval, the Company shall
cause 87,910,000 shares in the capital of the Company to be issued to Monte Sea
Shareholders at no additional cost, upon receipt by the CJV of a mining license
and such other permits or approvals for the Property, permitting the full
exploitation and development of the Property.

The Company shall use its best efforts to secure business
relationships with selected major companies outside China in the form of equity
participation or off-take arrangement for lithium products from the CJV.

The Company intends to, when and as required by the CJV,
arrange and complete financing for the operation of the CJV. There are no
assurances that the Company will be able to obtain such financing.

Zhong Chuan shall, together with Monte Sea Shareholders,
provide funds no less than RMB 100,000,000 (or US dollar equivalent thereof) for
the purpose of meeting registered capital payment requirements in the
registration and operation of the CJV. Zhong Chuan shall keep other Parties
informed of any development in the registration of the CJV and transfer of the
Exploration License.

Monte Sea Shareholders shall, together with Zhong Chuan, make
funds available for the purpose of acquisition and meeting registered capital
payment requirements in the registration and operation of the CJV.

CJV will be located in Tibet, China and will develop
Dangxiongcuo lithium property, extract and process commercially lithium
carbonate using internationally advanced technologies.

In July 2009, the Company received verbal termination of the
Agreement with Zhong Chuan, as advised by third party legal counsel, at a
meeting in Beijing, China. Formal written notice has not been received from
Zhong Chuan. 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 repaid the
required amount as anticipated by the Agreement to date. This unfortunate delay
on the part of Zhong Chuan places the termination it gave the Company in dispute
as the termination is conditional upon repayment of the required funds. At this
point then, the termination is incomplete. The Company is pursuing Zhong Chuan
to complete the termination, as the Company deems, is mandated by the
Agreement.

7

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As a result, the company is now in negotiation with Mianping to
sell the project back to them.

Employees

At present, we have no employees, 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.

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 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 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 companys properties have not been examined in the field by
professional geologists or mining engineers. There is no assurance that
commercial quantities of ore will be discovered on any of the Companys
properties. There is also no assurance that, even if commercial quantities of
ore are discovered, a mineral property 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.

8

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The exploration process is conducted in phases. When each phase
of a project is completed, and upon analysis of the results of that phase, the
Company will make a decision whether to proceed with each successive phase of
the exploration program. There is no assurance that projects will be carried to
completion.

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, 2011, there were approximately 65,730,341
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
stockerholders.

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.

9

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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 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. As
of August 2011, the outlook remains uncertain as growth in the US and Europe
experienced another downturn such that another recession is now possible in the
US and Europe.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTY

Gaoping Phosphate Property

Gaoping Phosphate which is part of Tanjiachang phosphate
district is located in NEE 80°direction of Chenxi County town with straight-line
distance 26 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 districts
ranges:Longitude East 110° 25 '15 "- 110° 30 '00", Latitude North 28°00
'00"-28° 07'30". The area is about 32km2.

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

10

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The property is located in Tanjiachang of Chenxi county, Hunan
Province of China. Chenxi county is about 250 km from Zhangjiajie city and about
120 km from Huaihua city. Both cities have airports. The roads from the cities
to Chenxi are well paved. The property is about 38 km from Chenxi County. The
road from County to the property is paved. The property is in mountain area and
elevation is about 700 meters. The mountain is quite steep.

Hongyu currently holds a mining permit allowing 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 ore of the deposit is mainly consisted of
crytocrysta-microcrystal phosphorite with small volume of tiny oolite and it is
a marine sediment deposit with banded texture. According to weathering and
oxidization level, the ore can be defined as weathered and primary types. Under
weathering effect, carbonate content can be decreased and phosphorite minerals
can be enriched while vein mineral and structure & texture of ore changed
and forming weathered ore. The changing of grade and thickness of weathered ore
is relatively big in the deposit while that is small for primary ore. After
weathering, the grade would increase 5- 8% and the ore grade can reach around
28% after simple washing by water. It can be utilized directly in phosphate
fertilizer processing then.

Strata outcropped in this mine area include Jiangkou Formation,
Xiangmeng Formation and Hongjiang Formation of Lower Sinian, Jinjiadong
Formation, Liuchapo Formation of Upper Sinian and Xiaoyanxi Formation of Lower
Cambrian. Phosphorite deposit of Tanjiachang mining area is in interlayers or
interbeddings of phosphorite and mudstone, silty platy shale within middle
section of Jinjiadong Formation, Upper Sinian, and the geology structure is
simple. The strata strike NNE and dip into SEE in general.

Phosphorite is in yellow platy shale and epizonal metamorphism
clastic rock, mainly mudstone, of middle section of Jinjiadong Formation, Upper
Sinian, and it is in layer structure. The ore layers are made of several tens of
siliceous phosphorite layers with thickness mostly 2- 6m. The ore is made of
dark grey siliceous and cal-siliceous phosphorite and ore mineral is minicrystal
apatite. Ore texture is mainly with microcrystal texture then colloidal texture.
Structure is mainly massive structure then bending and thin stratiform
structure, etc. The grade (P2O5content) is 19.8% and it
can increase with weathering effect becoming stronger. The phosphorite in Tanjiachang phosphate zone is
siliceous and cal-siliceous phosphorite and the grade is medium, mainly in
Chinese standard level III. The grade of hand- collecting sample is relative
higher and can be close to or reach Chinese standard level I. Nature type of ore
is in mainly massive shape or bending shape. The deposit is in shallow marine
sediment deposit type.

11

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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 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. There are none specific geology works had been done for phosphorite
deposit within Tanjiachang and the institute (Chemical Geology Exploration
Institute, Hunan Province) has 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. It has been defined as
Tanjiachang and they submitted General Geological Survey Design for
Tanjiachang Phosphorite Mining Area, Chenxi county of Hunan Province.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
so far.

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
    1450
    5967
    5 linesTrenching and Logging
    m3
    1521.3
    1200
    1125
    3846.3
    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


The deposit range is in mountain area of Xiangxi (west Hunan
Province) region and elevation is from 237.1m (minimum) to 985.8m (maximum) with
maximum relative elevation difference of 748.7m (500- 600m in general). The
terrain is seriously incised and with relatively developed vegetation
conditions. Water system is mainly made of hill streams in shape of comb
generally running from north to south and injecting to River Yuan. The water
volume is related to local climate and the local climate type of Tanjiachang is
subtropical humid one, with annual average temperature 16.5 degree and
frost-free season/period 270 days. The precipitation is concentrated from April
to August with flood frequently. It is arid in autumn and winter seasons and the
stream will become very small and even drought. The area is also the
2nd largest timber producing basis and the main product is Matsuyama
tree. The general agriculture product is rice and others include sweet potatoes,
oil, tea and tung, etc. The nature economy condition within Tanjiachang is poor.
Water and power resources are fully supplied and manpower is mainly in
agriculture and its sideline producing industry, timber managements.
Telecommunication is very good. Cellular phone can be accessed in the property
area. Transportation is good and truck can arrive in the property area.

During the application of mining permit period, major workload
accomplished include 6 GPS control surveys, 17 engineering survey points,
geology mapping in scale of 1:5000 with area of 0.75km2, 3 geology section
lines mapping with length 1500m, investigating and clearing 8 trenches and 6
old workings, slag removal with volume 100m3, 4 existing inclined shafts survey,
39 samples sampling and assaying, 10 small weight tests. In total, there are 6
participants involved in this work and 9 months spent from November 2006 to
March 2007.

Water comes from mountain springs. River Yuan is nearby, and
ships can navigate the river. The power line is connected to the mining site
already.

12

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The stratum of phosphorite deposit is stable with shallow
buried-depth and geology structure is simple. According to requirements of
general geology survey, geology mapping and surface trenches have been done in
the round exploration work, and original geology logging and channel samples for
phosphorite chemical assay all have been gotten to control deposit scale,
occurrence and measure ore quality, ore type generally. Then estimation of
geology prospective resources has been reached and data has been collected for
further detailed geology exploration. Self- checking, peer review and technique
director checking of data have been conducted during general geology survey
period and the principles of accordance of report & map, physical sample
& map, report & physical sample, relevant words & relevant physical
sample have been insisted. The quality is guaranteed and the records of peer
review of onsite data and detailed technique director checking has been kept.
The data without checking and reviewing record cant be used in comprehensive
compilation.

Through onsite survey and by onsite geology cross-section
mapping and united geology mapping, the geology map with scale of 1:10,000 has
been drafted and the base map is topography map with scale of 1:10,000 published
by Hunan Provincial Bureau of Surveying and Mapping. The mapping area is
31.90km2 and the mapping method is tracing assisted by crossing method.

Geology mapping unit is mainly for stratigraphic formations and
lithology sections have been divided within ore-bearing Jinjiadong Formation.
Upper and lower sections have been differentiated for Xiaoyanxi Formation,
Cambrian for the lithology variation and lithology characteristics are
obvious.

Geology mapping spot spacing is mainly 100- 150m in ore-bearing
strata to control ore layer and its top and bottom plates. The spot spacing of
none ore strata is 150 -250m. In total, 1494 geology observation points have
been surveyed.

The data of geology point observation is with good quality and
the logs are true and complete reflecting the true onsite geology conditions.
The location of geology points is measured by geology compass and according to
terrain features. The stratum boundary points take account of 50- 60% of total
geology points.

Trenches has been done to disclose the phosphorite ore layers
with spacing 400m (mainly 300- 500m) and totally 47 trenches have been finished
with earthwork volume 3846.3 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). The trenches, operation 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.

Basic assay samples all came from channel sampling of trench
projects and the samples are with representative and following 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 make sure the
lithology and mineral compositions. Totally, 73 samples have been collected.
Based on basic assay results, combination sample analysis has been done on
backup samples from selected representatives 12 trenches to make sure benefit
and harmful components. The major parameter of combination analysis is sample
length.

SJT Phosphate Property of Shimen Phosphate
Project

Shimen county located in west Hunan province of China and is
rich in phosphate. Shimen is one of tenth large phosphate areas in China, which
holds 78% of Hunan Provinces phosphate resources. However, currently local
miners only mine near surface high grade ores. Shimen government wants to
comprehensively utilize the resources. Under the agreement with Shimen county,
Shimen county allows Sterling to conduct due diligence on the SJT 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. Sterling intents to review
available information, and conduct own technical due diligence. If the due
diligence is completed and satisfied to Sterling, Sterling will set up a joint
venture in Shimen County for developing the SJT Property.

SJT phosphate property is shallow marine sedimentary phosphate
deposit and occurred in Doushantuo formation of Sinian. The location of the
property is shown in the following map.

13

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DXC Salt Lake Property

Dangxiongcuo Salt Lake (DXC) is located in the south-western
part of Xizang plateau in Nima County, Tibet of China. The geographic
co-ordinates are between 86°38'00" and 86°49'00" east and 31°30'00" to 31°40'00"
north.

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



14

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Access to Tibet is through Lhasa which has a good efficient
international airport. Road access into the property area is difficult at best.
The road heads northwest from Lhasa to the town of Zamsar then northeast. This
first 200 km is good paved road. Then down into the valley turning right onto a
rough gravel road near the Nam Tsho Salt Lake. Thence around the eastern and
northern side of the Nam Tsho Lake and on 300 kilometers to the isolated village
of Pankgo. Thence proceed 400 kilometers to the City of Nima. Thence proceed
another 90 kilometers of very rough road down to the DXC. The trip takes 26
hours of difficult 4X4 driving from Lhasa.

The deposit is a large salt lake 55.53 km2 (5,553 hectares) in
area with a maximum depth of 14 m. Brines are a common source of lithium and the
DXC Salt Lake is a classic surface brine type deposit as compared with
subsurface brine deposit in South America. This type of deposit is known
throughout the world where ever desert climates allow evaporite deposits to
form. Mineralization in the lake is in the form of dissolved salts of sodium,
potassium, lithium and boron, as chlorides, oxides, sulfates and carbonates.
These can be recovered through fractional precipitation of the various salts by
the evaporation of the water. Variations in salinity, pH and temperature
determine which compound will form crystals and precipitate from the brine.

In 1980s, 1: 1,000,000 regional geology was conducted by the
Tibet Regional Geology Brigade. 1: 250,000 regional geology was conducted by the
Jiangxi Regional Geology Brigade in 2004. In 1999, two Chinese geologists
conducted preliminary study in the area. In 2002, Mianping started exploration
work in the area. 1:50,000 geology investigation and hydrogeology was
conducted.1:2,000 salt field site engineering geology and topography mapping was
conducted. 20,000 square meters salt field was built in 2003. In 2004, 10,000
square meters of the salt field was revamped. In December 2005, Sterling and
Mianping commissioned the Tibet Geothermal brigade to conduct measurements for
the 20 km2 salt field (1:2,000 and 1:5,000). In March 2006, Sterling and
Mianping commissioned the Zhengzhou Comprehensive Utilization Institute of China
Academy of Geology to conduct the purification test for the DXC salt lake rough
concentrate. In 2006, the Tibet Geothermal Brigade conducted the geothermal
exploration work. In May 2006, a Canadian standard NI 43-101 report was
conducted by a qualified geologist. In June 2006, Mianping finished Chinese
geology report and the report has passed the auditing of Ministry of Land and
Resources of China. Since 2005, a technical team from Mianping has been working
on the DXC Salt Lake site to conduct salt field technical test, weather
monitoring and related tests and monitoring according to the plan designed by
Sterling and Mianping.

There is almost no local infrastructure. The only solar power,
water, and roads are those installed by the Mianping. Beicun village at the head
of the lake appeared to have perhaps 300 people, local Tibetan herdsman of the
Han ethnic group. They are mainly occupied with herding yaks, sheep, goats, and
a few horses. They plant small gardens of barley and vegetables but are not self
sufficient and import food stuffs from outside. Although people would be
available from this village to work on a project in this area the skill level
would be very low. Communication with the outside world is by satellite
telephone. The nearest land line is at Nima a distance of 90 km away. Shipment
of product does not seem to be a problem as numerous heavy trucks were noted all
along the road to the property. National rail service is available from Naqu
about 700 km distance to the east.

Generally, the physiography could be termed basin and range
with broad valleys between sharp ridges and arretes. The valleys are generally
gentle in profile both laterally and longitudinally with small to medium rivers
coursing through the bottoms of the valleys. Few of the rivers are bridged and
most of the crossings are by shallow fords. Along these tracks for much of the
route were seen numerous large trucks of 30  40 tonnes. Most were freighting
bagged material, probably salt from one of the salt lake operations. There are
no services along the route except for Pankgo and Nima. The DXC Salt Lake sits
in a rather confined basin between high rugged ridges. There are numerous
benches or beaches around the lake indicating lake levels at one time were 200
meters above the present levels of the lake, as the last glaciation receded.

Vegetation throughout the plateau is sparse grasses which have
been grazed down to the root level. Sheep, goats and yaks graze in large herds
on what appeared to be very lean fodder. Herdsmen and herdswomen tend these
flocks with no visible support and often many miles from the nearest shelter.
Some of the herdsmen seem to rely on the 125cc motor bike for transportation.
The women appeared mainly to walk. Occasional five tonne trucks were seen
hauling personal belongings grossly overloaded with household items and
people.

In June 2006, Mianping finished a Chinese geology report
(Chinese reserve report) and the report passed the auditing of the Ministry of
Land and Resources of China on September 13, 2006 which is the basis for
converting the exploration permit into a mining permit. Mianping led by
Professor Mianping Zheng, an academician of Chinese Academy of Engineering, is
still collecting information such as yearly weather information, wind
information and brine chemistry using a test pond system. Development plans are
being studied.

Mianping has installed solar power, water, and roads on the
site. Water comes from mountain springs. There are several rivers which flow
into the lake area.

DXC salt lake Sampling by Mianping was done on a 2 km X 2 km
grid with 106 samples taken at 16 sample points at various depths. Location
control was provided by GPS. If the water depth was less than 2 meters deep, one
sample was taken; if the water depth was between 2 and 10 meters, then two samples were
taken at 3 and 8 meters and if the water was deeper than 10 meters then three
samples were taken. Each sample consisted of two 500 ml. bottles of brine.

15

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The sampling method used a standard water sampling technique
where a bottle is lowered into the lake to the required depth, the stopper
removed, and the bottle allowed to fill. AAS analytical techniques were used to
determine the composition of the brine sample. This sampling program was
repeated several times during the various seasons of the year. Several hundred
samples have been collected in this way and analyzed by Mianping at their AAS
laboratory on site.

Two samples were collected by Norm Tribe, an independent
geologist, for the confirmation of Mianpings assay and analyzed by an
independent laboratory, ALS Canada Ltd., in Vancouver, BC, Canada in June 2006.
The results indicate that the concentration of salts is comparable with the
results provided by Mianping. The lake water returned values of 376 ppm lithium,
893 ppm boron and 11,300 ppm potassium. This sample was collected from DXC Lake
at a depth of 1.0 meter.

Mianpings analytical procedures were also reviewed by the
Resources & Reserve Audit Center of Ministry of Land and Resources of
China.

As of the date of this report, the application to establish a
joint venture has not yet been approved by the regulators in Tibet, China

As at May 31, 2011, the Company incurred expenses of $1,042,167
related to the DXC Salt Lake Property.

Sterling is currently in the process of selling its interest in
the project.

For further discussion of our interests in DXC Salt Lake
Property, see the discussion of the agreements under "DXC Salt Lake Project"
contained in Item 1. Business.

ITEM 3. LEGAL PROCEEDINGS

We have no knowledge of any pending or threatened material
litigation, settlement of litigation, or other material claim involving us.

ITEM 4. REMOVED AND RESERVED

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND 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, 2010 and 2011. The
quotations below reflect inter-dealer prices, without retail markup, markdown or
commission and may not represent actual transactions.

16

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Quarter Ended
    
    High ($)
    
    
    Low ($)August 31, 2009
    
    0.12
    
    
    0.01November 30, 2009
    
    0.06
    
    
    0.03February 28, 2010
    
    0.08
    
    
    0.03May 31, 2010
    
    0.04
    
    
    0.03August 31, 2010
    
    0.05
    
    
    0.02November 30, 2010
    
    0.13
    
    
    0.02February 28, 2011
    
    0.36
    
    
    0.06May 31, 2011
    
    0.26
    
    
    0.15


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 22, 2011, 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.

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

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).
Additional 752,500 units were issued as finders fees.

The Company also received $144,300 from the exercise of 801,666
Series C Warrants at $0.18 per share and issued 801,666 common shares for the
exercise of these warrants during the year ended May 31, 2011

On May 25, 2011, the Company issued 350,000 shares to a
consultant for its services.

On July 5, 2011, the Company issued 10,000,000 common shares to
the Hongyu shareholders pursuant to the Agreements signed on October 18,
2010.

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. 15% of the issued and outstanding shares of the Company were 9,859,551
as of May 31, 2011.

During the year ended May 31, 2010, no stock options were
outstanding, granted or exercised.

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.

At May 31, 2011, there were 4,700,000 stock options outstanding
with an exercise price at $0.25 each expiring on February 3, 2019.

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 plans4,700,000
    $0.25
    5,159,551


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.

17

---

On February 14, 2011, the Company re-extended the expiry date
of 3,817,500 Share Purchase Warrants (the 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.

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 16, 2012; 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.

As of May 31, 2011 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.

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 is a Chinese private mining company with connections and
resources in Hunan, China. 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, the company has been inactive with
no 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. The recording date is November 10, 2009. The mining permit
allows initial production up to 100,000 tonnes phosphate ore per year.

18

---

The Agreements also require an investment company to be
incorporated in Hong Kong (the Investment Company) which will be owned 20% by
the Hongyu Shareholders and 80% by Sterling. The Investment Company will acquire
90% of Hongyu with the other 10% of Hongyu being transferred to the nominees of
Sterling. Upon completion of this acquisition, Hongyu will become a Hong Kong /
China joint venture company and within five business days of the approval of
such joint venture company by the appropriate Chinese authorities, Sterling will
pay RMB 2,000,000 to the Hongyu Shareholders. During the acquisition phase, Sterling will ensure that Hongyus net
assets retain a minimum value of RMB 5,000,000. At any time when requested by
Sterling, the Hongyu Shareholders agree 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 to them all subject to the rules and requirements of
the US regulatory bodies bearing jurisdiction. If Sterling does not complete
taking over Hongyu through the Investment Company within three months after
signing the Agreements, Sterling shall pay RMB 200,000 to the Hongyu
Shareholders as down payment.

Pursuant to the Agreements, Hongyu agrees to surrender its
future exclusive cooperative rights to Sterling, and the Hongyu Shareholders
agree that Sterling shall have all Hongyu's title and interest in any phosphate
properties, including but not limited to the GP Property, and Sterling shall
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.

During the year ended May 31, 2011, Silver Castle Investments
Limited, incorporated in Hong Kong, was set up. Sterling paid RMB 200,000
($30,862) to the Hongyu shareholders as down payment on December 14, 2010. Hunan
Provincial Government issued a Certificate of Approval for establishment of Hong
Kong invested Hongyu on May 16, 2011.

Subsequent to the year ended May 31, 2011, Sterling has
received all required approvals from Chinese authorities for the acquisition of
Hongyu pursuant to the Agreements dated October 18, 2010. Hongyu received
amended business license on June 14, 2011. On July 5, 2011, Sterling issued
10,000,000 shares of the its common stock to Hongyu shareholders and the balance
of RMB 1,800,000 Yuan ($279,504) was paid to the Hongyu shareholders as
consideration for the acquisition. As a result, Silver Castle Investments Ltd.
became a wholly owned subsidiary of Sterling holding 90% of Hongyu with other
10% held by the nominees of Sterling.

Sterling is currently preparing plans to put its phosphate
deposit into production.

Results of Operations

The Company had no operating revenue except interest income of
$140 for the year ended May 31, 2011 and interest income of $412 for the year
ended May 31, 2010. The comprehensive loss increased to $1,863,447 for the year
ended May 31, 2011, as compared to $213,704 for the year ended May 31, 2010
mainly due to the increase of audit and professional fees, investor relations,
travel, and stock-based compensation expenses of $1,692,526 with respect to
granting options and the Series D warrants and as a result of extending the
Series A warrants.

For the year ended May 31, 2011 relative to the year ended May
31, 2010, audit and professional fees increased by $10,661, foreign exchange
loss increased by $12,186, investor relations increased by $17,298, travel
increased by $14,827, and Stock-based compensation expense increased by
$1,600,822, mainly due to the granting of stock options as well as the extension
of the Series A warrants, which are non cash items.

The Company also incurred expenses on the following related
party transactions during the year ended May 31, 2011:

| | (a) | The Company was charged consulting fees for
      administrative, corporate, financial, and management services during the
      year ended May 31, 2011 totalling $23,840 (2010: $22,625) by companies
      controlled by a director of the Company.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                       
| | (b) | The Company was charged rental fees included in general
      and administrative expense during the year ended May 31, 2011 totalling
      $1,091 (2010: $12,847) by a company controlled by a director of the
      Company.                        
| |     |                                                                                                                                                                                                                                                       
| | (c) | Cash held in trust at May 31, 2011 includes $43,312
      (2010: $33) held in trust by a director of the Company.                                                                                                                                     
| |     |                                                                                                                                                                                                                                                       
| | (d) | Included in accounts payable and accrued liabilities is
      $524,233 (2010: $509,990) which was due to companies controlled by the
      directors of the Company for their services
provided.                                                      

The Company expects the trend of losses to continue.

Liquidity and Working Capital

As of May 31, 2011, the Company had total current assets of
$2,221,931, and total liabilities of $551,277. As of May 31, 2011, the Company
had cash and cash held in trust of $2,138,827 and working capital of $1,670,654.

19

---

Cash used in operating activities for the year ended May 31,
2011 was $140,649 as compared to cash used in operating activities for the year
ended May 31, 2010 of $54,787. The increase in cash used in operating activities
was primarily due to the increase in cash expenditures for travel, audit and
professional fees as well as the increase in accounts payable and accrued
liabilities.

According to the agreement signed with Zhong Chuan
International Mining Holdings Co. Ltd. (Zhong Chuan) on July 8, 2008, Beijing
Mianping Salt Lake Research Institute (Mianping) will repay the Company RMB
6,000,000 ($875,000) and Monte Sea Shareholders shall subscribe for 5,000,000
units (the "Units") to be issued by the Company at $0.15 per unit. As a result,
the Company expected its working capital to rise in the amount of $750,000 to a
total of $1,625,000 including the repayment of approximately RMB 6,000,000
($875,000) described earlier to meet its short term working capital
requirements.

However, in July 2009, the Company received verbal termination
of the Agreement with Zhong Chuan, as advised by third party legal counsel, at a
meeting in Beijing, China. Formal written notice has not been received from
Zhong Chuan. 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 repaid the
required amount as anticipated by the Agreement to date. This unfortunate delay
on the part of Zhong Chuan places the termination it gave the Company in dispute
as the termination is conditional upon repayment of the required funds. At this
point, the termination is incomplete.

During the year ended May 31, 2011, the Company received
$2,000,000 through the subscription of 20,000,000 Units that consist of one
common share and a warrant entitling the investor to purchase an additional
common share for $0.15 expiring on January 31, 2012 and the Company also
received $144,300 through the exercise of 801,666 Series C Warrants by the
warrants holders.

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. The Companys current cash can meet its short
term need. The cash will be mainly used for mining property acquisition, general
administrative, corporate (legal, accounting and audit), 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 operational 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, 2011, we were not involved in any form of
off-balance sheet arrangement.

Application of Critical Accounting Policies

Our consolidated financial statements and accompanying notes
are prepared in accordance with generally accepted accounting principles in the
United States. Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management's application of accounting policies. We believe that
understanding the basis and nature of the estimates and assumptions involved
with the following aspects of our consolidated financial statements is critical
to an understanding of our financial statements. We further 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

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, 2011 and
2010, the Company did not have proven or probable ore reserves.

20

---

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 Topic 718-10 compensation expenses is
amortized on a straight-line basis over the requisite service period which
approximates the vesting period 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, 2011 and 2010 using
the assumptions more fully described in Note 5(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, 2011, the Company had not yet achieved profitable
operations and has accumulated losses of $5,522,205 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.

Sterling is involved in the development of lithium in Tibet,
China and phosphate in Hunan, China. Both 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.

21

---

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

|                                                                                   | Page 
|---------------------------------------------------------------------------------- | -----
|Report of Independent Registered
      Public Accounting Firm                      | 23   
|Consolidated Balance Sheets                                                        | 24   
|Consolidated Statements
      of Operations                                        | 25   
|Consolidated Statements of Changes in Stockholders'
      Equity (Capital Deficit) | 26-27
|Consolidated Statements
      of Cash Flows                                        | 28   
|Notes to the Consolidated Financial Statements                                     | 29-44

22

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|                 | Tel: 604688 5421            | BDO Canada LLP
|---------------- | --------------------------- | --------------
|Fax: 604688 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,          
|------------------------------
|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, 2011 and 2010, 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, 2011. 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, 2011 and 2010,
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, 2011, 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 Accountants

Vancouver, Canada August 18, 2011

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.

23

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|STERLING GROUP VENTURES, INC. 
|------------------------------
|(An Exploration Stage Company)
|CONSOLIDATED BALANCE SHEETS   
|May 31, 2011 and 2010         

|                                                                                                                                                               |   | May 31,    |   |   | May 31,    |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|Stated in U.S.
      dollars                                                                                                                                   |   | 2011       |   |   | 2010       |  
|                                                                                                                                                               |   |            |   |   |            |  
|ASSETS                                                                                                                                                         |   |            |   |   |            |  
|                                                                                                                                                               |   |            |   |   |            |  
|Current Assets                                                                                                                                                 |   |            |   |   |            |  
|Cash                                                                                                                                                           | $ | 2,095,515  |   | $ | 192,502    |  
|Cash held in trust - Note 4                                                                                                                                    |   | 43,312     |   |   | 33         |  
|GST/HST receivable                                                                                                                                             |   | 7,917      |   |   | 4,000      |  
|Prepaid expenses and other receivable                                                                                                                          |   | 75,187     |   |   | 12         |  
|Total current assets                                                                                                                                           |   | 2,221,931  |   |   | 196,547    |  
|                                                                                                                                                               |   |            |   |   |            |  
|Advance on investment - Note 3(a)                                                                                                                              |   | 55,945     |   |   | -          |  
|Equipment                                                                                                                                                      |   | 1,358      |   |   | 47         |  
|                                                                                                                                                               |   |            |   |   |            |  
|Total Assets                                                                                                                                                   | $ | 2,279,234  |   | $ | 196,594    |  
|                                                                                                                                                               |   |            |   |   |            |  
|LIABILITIES AND STOCKHOLDERS'
      EQUITY (CAPITAL DEFICIT)                                                                                                   |  
|                                                                                                                                                               |   |            |   |   |            |  
|Current Liabilities                                                                                                                                            |   |            |   |   |            |  
|Accounts payable and other accrued liabilities
      - Note 4                                                                                                  | $ | 551,277    |   | $ | 522,516    |  
|                                                                                                                                                               |   |            |   |   |            |  
|Stockholders' Equity (Capital Deficit)                                                                                                                         |   |            |   |   |            |  
|Common Stock : $0.001 Par Value
      - Note 5 
            Authorized : 500,000,000 
            Issued and Outstanding : 65,730,341 (2010:
      43,826,175) |   | 65,730     |   |   | 43,826     |  
|Additional Paid In Capital - Note 5(c)                                                                                                                         |   | 7,185,014  |   |   | 3,289,592  |  
|Accumulated Other Comprehensive
      Loss                                                                                                                     |   | (582       | ) |   | (583       | )
|Deficit accumulated during the exploration stage                                                                                                               |   | (5,522,205 | ) |   | (3,658,757 | )
|Total Stockholders' Equity (Capital Deficit)                                                                                                                   |   | 1,727,957  |   |   | (325,922   | )
|                                                                                                                                                               |   |            |   |   |            |  
|Total Liabilities and Stockholders' Equity
      (Capital Deficit)                                                                                             | $ | 2,279,234  |   | $ | 196,594    |  

See accompanying notes to consolidated financial statements

24

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|STERLING GROUP VENTURES, INC.                                              
|---------------------------------------------------------------------------
|(An Exploration Stage Company)                                             
|CONSOLIDATED STATEMENTS OF OPERATIONS                                      
|For the years ended May 31, 2011 and 2010 and                              
|for the period from July 27, 1994 (date of inception)
      to May 31, 2011

|                                                     |   |                     |   |   |            |   |   | July 27, 1994 |  
|---------------------------------------------------- | - | ------------------- | - | - | ---------- | - | - | ------------- | -
|                                                     |   |                     |   |   |            |   |   | (Date of      |  
|                                                     |   |                     |   |   |            |   |   | inception)    |  
|                                                     |   | Years ended May 31, |   |   | to May 31, |  
|Stated in U.S.
      dollars                         |   | 2011                |   |   | 2010       |   |   | 2011          |  
|                                                     |   |                     |   |   |            |   |   |               |  
|Expenses                                             |   |                     |   |   |            |   |   |               |  
|Accounting, audit, legal and professional fees       | $ | 75,377              |   | $ | 64,716     |   | $ | 510,401       |  
|Bank charges                                         |   | 551                 |   |   | 228        |   |   | 2,465         |  
|Consulting fees - Note 4                             |   | 26,206              |   |   | 22,625     |   |   | 737,834       |  
|Depreciation                                         |   | 103                 |   |   | 407        |   |   | 9,402         |  
|Filing fees and transfer agent                       |   | 7,069               |   |   | 5,074      |   |   | 48,689        |  
|Foreign exchange loss (gain)                         |   | 18,269              |   |   | 6,083      |   |   | (5,157        | )
|General and administrative - Note 4                  |   | 6,756               |   |   | 18,673     |   |   | 123,971       |  
|Mineral property costs - Note 3                      |   | -                   |   |   | -          |   |   | 1,264,394     |  
|Printing and mailing                                 |   | -                   |   |   | -          |   |   | 16,883        |  
|Shareholder information and investor
      relations |   | 17,298              |   |   | -          |   |   | 78,528        |  
|Stock-based compensation - Note 5 (b) (c)            |   | 1,692,526           |   |   | 91,704     |   |   | 2,646,248     |  
|Travel and entertainment                             |   | 19,433              |   |   | 4,606      |   |   | 146,471       |  
|Recovery of doubtful collection                      |   | -                   |   |   | -          |   |   | (272,358      | )
|Allowance for doubtful collection                    |   | -                   |   |   | -          |   |   | 246,708       |  
|                                                     |   |                     |   |   |            |   |   |               |  
|                                                     |   | (1,863,588          | ) |   | (214,116   | ) |   | (5,554,479    | )
|                                                     |   |                     |   |   |            |   |   |               |  
|Other item                                           |   |                     |   |   |            |   |   |               |  
|Interest income                                      |   | 140                 |   |   | 412        |   |   | 32,274        |  
|                                                     |   |                     |   |   |            |   |   |               |  
|                                                     |   |                     |   |   |            |   |   |               |  
|Net loss for the period                              | $ | (1,863,448          | ) | $ | (213,704   | ) | $ | (5,522,205    | )
|                                                     |   |                     |   |   |            |   |   |               |  
|Currency translation adjustment                      |   | 1                   |   |   | -          |   |   | (582          | )
|                                                     |   |                     |   |   |            |   |   |               |  
|Comprehensive loss for the period                    | $ | (1,863,447          | ) | $ | (213,704   | ) | $ | (5,522,787    | )
|                                                     |   |                     |   |   |            |   |   |               |  
|Basic and diluted loss per share                     | $ | (0.04               | ) | $ | (0.00      | ) |   |               |  
|                                                     |   |                     |   |   |            |   |   |               |  
|Weighted average number of shares outstanding        |   | 50,337,093          |   |   | 43,826,175 |   |   |               |  

See accompanying notes to consolidated financial statements

25

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|STERLING GROUP VENTURES, INC.                                                    
|---------------------------------------------------------------------------------
|(An Exploration Stage Company)                                                   
|CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
      (CAPITAL DEFICIT)
|For the period from July 27, 1994 (date of inception)
      to May 31, 2011      

|                                                                             |  |            |   |   |               |   |   |            |   |   |               |   |   | Deficit         |   |   |          |  
|---------------------------------------------------------------------------- |  | ---------- | - | - | ------------- | - | - | ---------- | - | - | ------------- | - | - | --------------- | - | - | -------- | -
|                                                                             |  |            |   |   |               |   |   |            |   |   | Accumulated   |   |   | **Accumulated** |   |   |          |  
|                                                                             |  |            |   |   | Stock         |   |   | Additional |   |   | Other         |   |   | During The      |   |   |          |  
|                                                                             |  | Common     |   |   | **Amount At** |   |   | Paid In    |   |   | Comprehensive |   |   | **Exploration** |   |   |          |  
|Stated in U.S.
      dollars                                                 |  | Shares     |   |   | Par Value     |   |   | Capital    |   |   | Income (Loss) |   |   | Stage           |   |   | Total    |  
|                                                                             |  |            |   |   |               |   |   |            |   |   |               |   |   |                 |   |   |          |  
|                                                                             |  |            |   |   |               |   |   |            |   |   |               |   |   |                 |   |   |          |  
|Balance, July 27, 1994 (Date of inception)                                   |  | -          |   | $ | -             |   | $ | -          |   | $ | -             |   | $ | -               |   | $ | -        |  
|Common stock                                                                 |  | 1          |   |   | 1             |   |   | -          |   |   | -             |   |   | -               |   |   | 1        |  
|Amount contributed by director                                               |  | -          |   |   | -             |   |   | 1,881      |   |   | -             |   |   | -               |   |   | 1,881    |  
|Net 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   | )
|Issuance of common shares for reverse acquisition                            |  | 25,000,000 |   |   | 25,000        |   |   | (23,119    | ) |   | -             |   |   | -               |   |   | 1,881    |  
|Outstanding 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    |   |   | -             |   |   | -               |   |   | 883,000  |  
|Stock-based compensation                                                     |  | -          |   |   | -             |   |   | 368,641    |   |   | -             |   |   | -               |   |   | 368,641  |  
|Net loss of the year                                                         |  | -          |   |   | -             |   |   | -          |   |   | -             |   |   | (527,446        | ) |   | (527,446 | )
|Balance, May 31, 2004                                                        |  | 38,126,000 |   | $ | 38,126        |   | $ | 1,215,873  |   | $ | (583          | ) | $ | (538,568        | ) | $ | 714,848  |  
|Issuance of shares for cash pursuant to a private
      placement - at $0.50 |  | 1,950,000  |   |   | 1,950         |   |   | 973,050    |   |   | -             |   |   | -               |   |   | 975,000  |  
|Issuance of shares for finder's fee of private placement                     |  | 101,500    |   |   | 102           |   |   | 50,648     |   |   | -             |   |   | -               |   |   | 50,750   |  
|Finders' fees                                                                |  | -          |   |   | -             |   |   | (50,750    | ) |   | -             |   |   | -               |   |   | (50,750  | )
|Issuance of shares for services rendered                                     |  | 100,000    |   |   | 100           |   |   | 41,900     |   |   | -             |   |   | -               |   |   | 42,000   |  
|Net loss of the year                                                         |  | -          |   |   | -             |   |   | -          |   |   | -             |   |   | (818,954        | ) |   | (818,954 | )
|Balance, May 31, 2005                                                        |  | 40,277,500 |   | $ | 40,278        |   | $ | 2,230,721  |   | $ | (583          | ) | $ | (1,357,522      | ) | $ | 912,894  |  
|Net loss for the year                                                        |  | -          |   |   | -             |   |   | -          |   |   | -             |   |   | (461,201        | ) |   | (461,201 | )
|Balance, May 31, 2006                                                        |  | 40,277,500 |   | $ | 40,278        |   | $ | 2,230,721  |   | $ | (583          | ) | $ | (1,818,723      | ) | $ | 451,693  |  
|Issuance of shares for cash pursuant to a private
      placement - at $0.15 |  | 2,750,300  |   |   | 2,750         |   |   | 409,795    |   |   | -             |   |   | -               |   |   | 412,545  |  
|Issuance of shares for finder's fee of private placement                     |  | 123,690    |   |   | 124           |   |   | 21,522     |   |   | -             |   |   | -               |   |   | 21,646   |  
|Finders' fees                                                                |  | -          |   |   | -             |   |   | (21,646    | ) |   | -             |   |   | -               |   |   | (21,646  | )
|Share issuance costs                                                         |  | -          |   |   | -             |   |   | (3,687     | ) |   | -             |   |   | -               |   |   | (3,687   | )
|Issuance of shares for services rendered                                     |  | 350,000    |   |   | 350           |   |   | 48,650     |   |   | -             |   |   | -               |   |   | 49,000   |  
|Net 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   |  
|Issuance of shares for services rendered at $0.06                            |  | 324,685    |   |   | 324           |   |   | 19,156     |   |   | -             |   |   | -               |   |   | 19,480   |  
|Revaluation of share purchase warrants                                       |  | -          |   |   | -             |   |   | 409,525    |   |   | -             |   |   | -               |   |   | 409,525  |  
|Net 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     |   |   | -             |   |   | -               |   |   | 83,852   |  
|Net 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     |   |   | -             |   |   | -               |   |   | 91,704   |  
|Net 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 | )

See accompanying notes to consolidated financial statements

26

---

|                                                                             |  |            |  |   |           |  |   |            |   |   | Accumulated   |   |   | **Accumulated** |   |   |            |  
|---------------------------------------------------------------------------- |  | ---------- |  | - | --------- |  | - | ---------- | - | - | ------------- | - | - | --------------- | - | - | ---------- | -
|                                                                             |  |            |  |   | Stock     |  |   | Additional |   |   | Other         |   |   | During The      |   |   |            |  
|                                                                             |  | Common     |  |   | Amount At |  |   | Paid In    |   |   | Comprehensive |   |   | **Exploration** |   |   |            |  
|Stated in U.S.
      dollars                                                 |  | Shares     |  |   | Par Value |  |   | Capital    |   |   | Income (Loss) |   |   | Stage           |   |   | Total      |  
|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  |   |   | -             |   |   | -               |   |   | 2,000,000  |  
|Issuance of shares for finder's fee of private
      placement               |  | 752,500    |  |   | 752       |  |   | (752       | ) |   | -             |   |   | -               |   |   | -          |  
|Issuance of shares for execise of "C" warrants - at $0.18                    |  | 801,666    |  |   | 802       |  |   | 143,498    |   |   | -             |   |   | -               |   |   | 144,300    |  
|Issuance of shares for services rendered                                     |  | 350,000    |  |   | 350       |  |   | 80,150     |   |   | -             |   |   | -               |   |   | 80,500     |  
|Stock-based compensation                                                     |  | -          |  |   | -         |  |   | 1,692,526  |   |   | -             |   |   | -               |   |   | 1,692,526  |  
|Currency translation adjustment                                              |  | -          |  |   | -         |  |   | -          |   |   | 1             |   |   | -               |   |   | 1          |  
|Net loss for the period                                                      |  | -          |  |   | -         |  |   | -          |   |   | -             |   |   | (1,863,448      | ) |   | (1,863,448 | )
|Balance, May 31, 2011                                                        |  | 65,730,341 |  | $ | 65,730    |  | $ | 7,185,014  |   | $ | (582          | ) | $ | (5,522,205      | ) | $ | 1,727,957  |  

See accompanying notes to consolidated financial statements

27

---

|STERLING GROUP VENTURES, INC.                                              
|---------------------------------------------------------------------------
|(An Exploration Stage Company)                                             
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                      
|For the years ended May 31, 2011 and 2010 and                              
|for the period from July 27, 1994 (date of inception)
      to May 31, 2011

|                                                                                                |   |                     |   |   |            |   |   | July 27, 1994 |  
|----------------------------------------------------------------------------------------------- | - | ------------------- | - | - | ---------- | - | - | ------------- | -
|                                                                                                |   |                     |   |   |            |   |   | (Date of      |  
|                                                                                                |   |                     |   |   |            |   |   | inception)    |  
|                                                                                                |   | Years ended May 31, |   |   | to May 31, |  
|Stated in U.S.
      dollars                                                                    |   | 2011                |   |   | 2010       |   |   | 2011          |  
|Cash flows from operating activities                                                            |   |                     |   |   |            |   |   |               |  
|Net loss for the period                                                                         | $ | (1,863,448          | ) | $ | (213,704   | ) | $ | (5,522,205    | )
|Adjustments to reconcile net loss
      to net cash provided by (used in) operating activities  |   |                     |   |   |            |   |   |               |  
|Stock compensation expenses                                                                     |   | 1,692,526           |   |   | 91,704     |   |   | 2,646,248     |  
|Depreciation                                                                                    |   | 103                 |   |   | 407        |   |   | 9,402         |  
|Permit and engineering studies                                                                  |   | -                   |   |   | -          |   |   | 150,000       |  
|Shareholder information and investor
      relations                                            |   | 80,500              |   |   | -          |   |   | 100,947       |  
|Accounting, audit and legal fees                                                                |   | -                   |   |   | -          |   |   | 49,000        |  
|Translation adjustment                                                                          |   | 1                   |   |   | -          |   |   | (105          | )
|                                                                                                |   |                     |   |   |            |   |   |               |  
|Changes in non-cash working capital items related
      to operations                           |   |                     |   |   |            |   |   |               |  
|GST/HST refundable                                                                              |   | (3,917              | ) |   | 5,577      |   |   | (7,917        | )
|Prepaid expenses and other receivable                                                           |   | (75,175             | ) |   | 258        |   |   | (53,634       | )
|Accounts payable and accrued liabilities                                                        |   | 28,761              |   |   | 60,971     |   |   | 570,757       |  
|Net cash used in operating activities                                                           |   | (140,649            | ) |   | (54,787    | ) |   | (2,057,507    | )
|                                                                                                |   |                     |   |   |            |   |   |               |  
|Cash flows from investing activities                                                            |   |                     |   |   |            |   |   |               |  
|Advance on investment                                                                           |   | (55,945             | ) |   | -          |   |   | (205,945      | )
|Additions to equipment                                                                          |   | (1,414              | ) |   | -          |   |   | (10,760       | )
|Net change in cash held in trust                                                                |   | (43,279             | ) |   | 55,287     |   |   | (43,312       | )
|Net cash flows used in investing activities                                                     |   | (100,638            | ) |   | 55,287     |   |   | (260,017      | )
|                                                                                                |   |                     |   |   |            |   |   |               |  
|Cash flows from financing activities                                                            |   |                     |   |   |            |   |   |               |  
|Net proceeds on issuance of common stock                                                        |   | 2,144,300           |   |   | -          |   |   | 4,411,158     |  
|Amounts contributed by director                                                                 |   | -                   |   |   | -          |   |   | 1,881         |  
|Net cash flows provided by financing activities                                                 |   | 2,144,300           |   |   | -          |   |   | 4,413,039     |  
|                                                                                                |   |                     |   |   |            |   |   |               |  
|                                                                                                |   |                     |   |   |            |   |   |               |  
|Net increase in cash                                                                            |   | 1,903,013           |   |   | 500        |   |   | 2,095,515     |  
|Cash - beginning of period                                                                      |   | 192,502             |   |   | 192,002    |   |   | -             |  
|Cash - end of period                                                                            | $ | 2,095,515           |   | $ | 192,502    |   | $ | 2,095,515     |  
|                                                                                                |   |                     |   |   |            |   |   |               |  
|                                                                                                |   |                     |   |   |            |   |   |               |  
|Supplemental Information :                                                                      |   |                     |   |   |            |   |   |               |  
|Cash paid for :                                                                                 |   |                     |   |   |            |   |   |               |  
|Interest                                                                                        | $ | -                   |   | $ | -          |   | $ | -             |  
|Income taxes                                                                                    | $ | -                   |   | $ | -          |   | $ | -             |  
|Non-cash Transactions :                                                                         |   |                     |   |   |            |   |   |               |  
|Issuance of shares for commission
      paid to broker for private placement                    | $ | 75,250              |   | $ | -          |   | $ | 147,646       |  
|Issuance of shares for services rendered                                                        | $ | 80,500              |   | $ | -          |   | $ | 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        |  

See accompanying notes to consolidated financial statements

28

---

|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (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, confirmation of the Companys
  interest in the underlying properties, 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, 2011, the Company
  had not yet achieved profitable operations and has accumulated losses of $5,522,205
  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.

|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:

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.

29

---

|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (Stated in US Dollars)       

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

Principles of Consolidation

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, and Silver Castle Investments Ltd. All inter-company
  transactions and account balances have been eliminated. 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, and Silver Castle Investments Ltd. was incorporated in Hong
  Kong on October 13, 2010.

Cash and Cash Equivalents

For the purposes of the statements of
  cash flows, the Company considers all highly liquid investments with original
  maturities of three months or less to be cash equivalents.

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, 2011 and 2010, the Company did not have proven or probable ore
  reserves.

Impairment of Long-lived Assets

In accordance with Financial Accounting
  Standards Board FASBASC 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 recognized
  at May 31, 2011 and 2010.

30

---

|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (Stated in US Dollars)       

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

Equipment

Equipment is carried at cost and consists
  of computer equipment. Depreciation is provided on a straight-line basis over
  the useful life of the equipment being 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 base 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 2009, through 2011
  are subject to audit or review by the US tax authority, where as fiscal 2005
  through 2011 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:

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.

31

---

|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (Stated in US Dollars)       

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

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, 2011.

The Companys financial instruments
  consist of cash, cash held in trust, 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, 2011, the Company had 29,270,000
  (2010  6,691,490) common share equivalents in respect to options and warrants.
  Because the Company incurred a loss, diluted loss per share is the same as basic
  loss per share.

Concentration of Credit Risk

The Company places its cash and cash
  equivalents with high credit quality financial institutions. As of May 31, 2011,
  the Company had no deposit in a bank beyond insured limits.

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.

Foreign Currency Translation

Foreign currency transactions are translated
  into US dollars, the functional and reporting currency, 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.

32

---

|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (Stated in US Dollars)       

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

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 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 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, 2011 and May 31, 2010 using the assumptions more fully
  described in Note 5(b) (c).

Comparative Figures

Certain comparative figures have been
  reclassified to conform to current years presentation.

Recent Accounting Pronouncements

Except as noted below, the Company has
  evaluated all recent accounting pronouncements and believes that none of them
  will have a material effect on the Companys consolidated financial statements.

In January 2010, the FASB issued Accounting
  Standards Update 2010-06 (ASU 2010-06), Improving Disclosures about Fair
  Value Measurements, which is included in the ASC in Topic 820 (Fair Value
  Measurements and Disclosures). ASU 2010-06 requires new disclosures on the amount
  and reason for transfers in and out of Level 1 and 2 fair value measurements.
  ASU 2010-06 also requires disclosure of activities, including purchases, sales,
  issuances, and settlements within the Level 3 fair value measurements and clarifies
  existing disclosure requirements on levels of disaggregation and disclosures
  about inputs and valuation techniques. ASU 2010-06 is effective for interim
  and annual reporting periods beginning after December 15, 2009. The adoption
  of ASU 2010-06 did not have a material impact on the Companys financial
  statements.

In April 2010, the FASB issued ASU 2010-13,
  "Compensation - Stock Compensation (Topic 718)." This Update provides amendments
  to Topic 718 to clarify that an employee share-based payment award with an exercise
  price denominated in the currency of a market in which a substantial portion
  of the entity's equity securities trades should not be considered to contain
  a condition that is not a market, performance, or service condition. Therefore,
  an entity would not classify such an award as a liability if it otherwise qualifies
  as equity. The amendments in ASU 2010-13 are effective for fiscal years, and
  interim periods within those fiscal years, beginning on or after December 15,
  2010. It is applicable to the Companys fiscal year beginning June 1, 2011.
  The Company is currently evaluating this guidance, but does not expect its adoption
  will have a material effect on its consolidated financial statements.

In December 2010, the FASB also issued
  ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary
  Pro Forma Information for Business Combinations to clarify the reporting
  of pro forma financial information related to business combinations of public
  entities and expand certain supplemental pro forma disclosures. This guidance
  is effective prospectively for business combinations that occur on or after
  the beginning of the fiscal year beginning on or after December 15, 2010, with
  early adoption permitted. It is applicable to the Companys fiscal year
  beginning June 1, 2011. The Company is currently evaluating this guidance, but
  does not expect its adoption will have a material effect on its consolidated
  financial statements.

33

---

|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (Stated in US Dollars)       

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

Recent Accounting Pronouncements
   (contd)

In May 2011, the FASB issued 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. This ASU is effective for interim and annual periods
  beginning after December 15, 2011. The adoption of this ASU is not expected
  to have a significant impact on the Companys fair value measurements,
  financial condition, results of operations or cash flows.

In June 2011, the FASB issued ASU 2011-05,
  Comprehensive Income (Topic 220): Presentation of Comprehensive Income.
  This ASU will require 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.
  This standard is effective for interim and annual periods beginning after December
  15, 2011. Because this ASU impacts presentation only, it will have no effect
  on the Company's financial condition, results of operations or cash flows.

34

---

|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (Stated in US Dollars)       

|Note 3 | Mineral Properties
|------ | ------------------

Summary of mineral properties expenses
  for the cumulative period from date of inception (July 27, 1994) to May 31,
  2011:

DXCSalt LakeSummary of mineral
        property expenditures
      
      PropertyFrom Date of Inception (July
        27, 1994) to May 31, 2011Balance, May 31, 2005
      $
      -Administrative
      
      5,560Consulting fees
      
      46,629Engineering studies
      
      26,933Feasibility study
      
      29,080Geophysical study
      
      31,114Legal fees
      
      623Topography measurement
      
      32,266Travel
      
      30,953Wages and benefits
      
      33,601Balance, May 31, 2006
      
      236,759Administrative
      
      5,200Consulting fees
      
      134,580Engineering studies
      
      38,063Mining permit
      
      382,920Topography measurement
      
      15,001Legal fees
      
      9,695Travel
      
      53,262Wages and benefits
      
      35,687Balance, May 31, 2007
      
      911,167Administrative
      
      706Consulting fees
      
      60,548Travel
      
      5,456Legal fees
      
      11,566Balance, May 31, 2008
      
      989,443Administrative
      
      867Consulting fees
      
      27,890Travel
      
      16,959Legal fees
      
      7,008Balance, May 31,
        2009
      
      1,042,167Balance, May 31, 2010
      
      1,042,167Balance, May 31,
        2011
      $
      1,042,167


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.

35

---

|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (Stated in US Dollars)       

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

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 and covers 42.5 hectares.

The Agreements also require an investment
  company to be incorporated in Hong Kong (the Investment Company)
  which will be owned 20% by the Hongyu Shareholders and 80% by the Company. The
  Investment Company will acquire 90% of Hongyu with the other 10% of Hongyu being
  transferred to the nominees of Sterling. Upon completion of this acquisition,
  Hongyu will become a Hong Kong / China joint venture company and within five
  business days of the approval of such joint venture company by the appropriate
  Chinese authorities, the Company will pay RMB 2,000,000 ($310,366) to the Hongyu
  Shareholders. During the acquisition phase, the Company will ensure that Hongyus
  net assets retain a minimum value of RMB 5,000,000 ($771,545). At any time when
  requested by the Company, the Hongyu Shareholders agree 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 to them all subject to the rules
  and requirements of the US regulatory bodies bearing jurisdiction. If the Company
  does not complete taking over Hongyu through the Investment Company within three
  months after signing the Agreements, the Company shall pay RMB 200,000 to the
  Hongyu Shareholders as down payment.

Pursuant to the Agreements, Hongyu agrees
  to surrender its future exclusive cooperative rights to the Company, and the
  Hongyu Shareholders agree 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 shall 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.

On October 13, 2010, the Company incorporated
  the Investment Company called Silver Castle Investments Ltd. (Silver Castle)
  in Hong Kong. The acquisition of Hongyu is in process and the Company paid RMB
  200,000 ($30,862) to the Hongyu shareholders as a down payment on December 14,
  2010, the Company has 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.

As of May 31, 2011, the Company has
  not incurred mineral property costs on this property.

See Note 8.

36

---

|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (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) 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 240 million RMB (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, Beijing
  Mianping Salt Lake Research Institute (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.

On July 8, 2008, the Company signed
  an agreement (the "Agreement") with the shareholders of Monte Sea Holdings Ltd.
  ("Monte Sea Shareholders") and Zhong Chuan to restructure the transactions contemplated
  under the September 16, 2005 agreement. The parties wish to jointly develop
  the DXC Salt Lake property and lithium resources in Tibet including an exploration
  license, and elsewhere (the Property), by way of a cooperative joint
  venture. Monte Sea Shareholders and Zhong Chuan are to provide RMB100,000,000
  ($14,584,000) to finance the DXC property to production.

Pursuant to the Agreement, the parties
  wish to establish a Sino-foreign cooperative joint venture company ("CJV") for
  the purpose of applying for and holding required approvals, permits and licenses
  with respect to the development of the Property.

The Parties agree that an operating
  company ("Opco") will be established in Tibet prior to the establishment of
  the CJV for the purpose of applying for and holding required approvals, permits
  and licenses with respect to the development of the Property. The Opco shall
  hold all such approvals, permits and licenses in trust for the CJV.

Under the Agreement, the CJV will be
  established within 90 days from date of this Agreement, subject to required
  regulatory approval and based on a joint venture agreement by way of acquisition
  of interest in the Opco by Monte Sea Holdings Ltd. (Monte Sea),
  or by way of incorporation under the Chinese laws. Monte Sea shall hold up to
  65% but no less than 51% of shares in the CJV. CJV shall own and hold all the
  Property.

If for any Chinese regulatory or policy
  reasons, Monte Sea is not permitted to have more than fifty-one percent (51%)
  interest in the CJV, then the CJV agreement will be revised such that:

| | (i)   | Monte Sea shall have a forty-nine percent (49%) interest
        in the CJV;                                                                                                                            
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                         
| | (ii)  | Monte Sea shall be entitled to receive returns on its
        investment in the CJV on a priority and accelerated basis until its investment
        in the CJV and the Property is fully recovered; and
| |       |                                                                                                                                                                                                         
| | (iii) | Monte Sea shall be permitted to manage the daily operation
        of the CJV pursuant to a management agreement to be entered into on terms
        and conditions satisfactory to the Company.        

37

---

|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (Stated in US Dollars)       

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

b) Dangxiongcuo Salt Lake Project
   (contd)

Upon the Agreement being effective and
  termination of the agreement dated September 16, 2005, the Company will be repaid
  RMB6,000,000 (approximately $875,000). As of May 31, 2011, the Company has received
  $nil in regards to this agreement.

Upon signing of this Agreement and subject
  to applicable regulatory approval, Monte Sea Shareholders shall subscribe for
  5,000,000 units (the "Units") to be issued by the Company at $0.15 per Unit.
  Each Unit shall consist of one common share in the stock of the Company, and
  one warrant which shall entitle the Monte Sea shareholders to purchase one common
  share in the stock of the Company at $0.16 per share within two years from the
  date of the issuance of the Units. As of May 31, 2011, Monte Sea Shareholders
  have subscribed for nil units in regards to this agreement.

Subject to applicable regulatory approval,
  the Company shall cause 200,000,000 shares to be issued to the Monte Sea Shareholders
  within ten working days from the date transfer of the exploration license to
  the CJV is approved by the Chinese regulators, in exchange for all the shares
  then issued and outstanding in the stock of Monte Sea and held by Monte Sea
  Shareholders (the "Share Exchange"). The Share Exchange may be conducted and
  completed at an earlier date as long as the Company and Monte Sea Shareholders
  may agree in writing. This transaction would be accounted for as a reverse acquisition.
  As of May 31, 2011, the exploration license has not been transferred and no
  shares have been issued.

Subject to applicable regulatory approval,
  the Company shall cause 87,910,000 shares in the capital of the Company to be
  issued to the Monte Sea Shareholders at no additional cost, upon receipt by
  the CJV of a mining license and such other permits or approvals for the Property,
  permitting the full exploitation and development of the Property. As of May
  31, 2011, no shares were issued in regards to this Agreement.

The Company intends to, when and as
  required by the CJV, arrange and complete financing for the operation of the
  CJV.

Zhong Chuan shall, together with Monte
  Sea Shareholders, provide funds no less than RMB 100,000,000 (or US dollar equivalent
  thereof) for the purpose of meeting registered capital payment requirements
  in the registration and operation of the CJV. Zhong Chuan shall keep other Parties
  informed of any development in the registration of the CJV and transfer of the
  exploration license.

The application to establish a joint
  venture has not yet been approved by the regulators in Tibet, China.

As of May 31, 2011, the Company has
  incurred a total of $1,042,167 in mineral property costs on this property.

The Company received verbal termination
  of the Agreement with Zhong Chuan in July 2009, as advised by 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 is incomplete.

38

---

|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (Stated in US Dollars)       

|Note 4 | Related Party Transactions
|------ | --------------------------

The Company was charged consulting fees
  for administrative, corporate, financial, engineering, and management services
  during the year ended May 31, 2011 totalling $23,840 (2010: $22,625) by companies
  controlled by a director of the Company.

The Company was charged rental fees
  included in general and administrative expense during the year ended May 31,
  2011 totalling $1,091 (2010: $12,847) by a company controlled by a director
  of the Company.

Cash held in trust at May 31, 2011 includes
  $43,312 (2010: $33) held in trust by a director of the Company for Company related
  expenses.

Included in accounts payable and accrued
  liabilities is $524,233 (2010: $509,990) which was due to companies controlled
  by the directors of the Company for their services provided.

These transactions were measured at
  the exchange amount which represented the amount of consideration established
  and agreed to by the related parties.

|Note 5 | Capital Stock
|------ | -------------

a) Capital Stock

During the year 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.

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.

39

---

|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (Stated in US Dollars)       

|Note 5 | Capital Stock - (contd)
|------ | ------------------------

b) Stock Options

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.

During the year ended May 31, 2010,
  no stock options were granted or exercised.

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:

2011Risk free interest rate
      
      2.74%Expected life of options in years
      
      7.83 yearsExpected volatility
      
      238.7%Dividend per share
      $
      0.00


During the year ended May 31, 2011,
  the weighted average fair value of options granted was $0.25 per share. The
  Company recognized a total stock based compensation expense of $1,175,000 for
  options granted and vested using the Black-Scholes option pricing model.

At May 31, 2011, there were 4,700,000
  stock options (2010: nil) outstanding and exercisable with an exercise price
  at $0.25 each expiring on February 3, 2019.

c) Share Purchase Warrants

Changes in share purchase warrants for
  the years ended May 31, 2011 and 2010 are summarized as follows:

AverageNumber of
      
      
      exerciseshares
      
      
      priceBalance, May 31, 2010
      
      6,691,490
      
      $
      0.363Granted
      
      20,752,500
      
      
      0.150Exercised
      
      (801,666
      )
      
      0.180Expired
      
      (2,072,324
      )
      
      0.180Balance, May 31, 2011
      
      24,570,000
      
      $
      0.204


Share purchase warrants outstanding
  at May 31, 2011:

Series
      Number
      Price
      Expiry Date"A"
      3,817,500
      $ 0.50
      February 16, 2012"D"
      20,752,500
      $ 0.15
      January 31, 201224,570,000


40

---

|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (Stated in US Dollars)       

|Note 5 | Capital Stock - (contd)
|------ | ------------------------

c) Share Purchase Warrants - (contd)

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 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 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.

41

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|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (Stated in US Dollars)       

|Note 5 | Capital Stock - (contd)
|------ | ------------------------

c) Share Purchase Warrants 
  (contd)

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.

|Note 6 | Foreign Currency Risk
|------ | ---------------------

The Company is exposed to fluctuations
  in foreign currencies through amounts held in China in RMB:
  - Cash held in trust $43,312 (2010 - $33)

The Company is exposed to fluctuations
  in foreign currencies through amounts held in Canada in CAD:
  - Cash $42,891 (2010 - $105,544)

|Note 7 | Deferred Tax Assets
|------ | -------------------

The Company's income tax expense for
  the years ended May 31, 2011 and 2010 differed from the United States statutory
  rates:

2011
      
      
      2010Effective tax rate
      
      35%
      
      
      35%Statutory rate applied to loss before income
        taxes
      $
      (652,200
      )
      $
      (74,800
      )Increase in income taxes resulting from:Foreign
        income taxed at other than US statutory rates
      
      1,800
      
      
      1,600Non-deductible expenses
      
      -
      
      
      -Permanent differences
      
      300
      
      
      32,100Other
      
      (63,000
      )Change in valuation allowance
      
      713,100
      
      
      41,100Income tax expense
      $
      -
      
      $
      -


42

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|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (Stated in US Dollars)       

|Note 7 | Deferred Tax Assets  (contd)
|------ | ------------------------------

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

2011
      
      
      2010Deferred income tax assets (liability)Equipment
      $
      3,600
      
      $
      3,600Mineral
        property and related deferred explorations
      
      -
      
      
      520,600Stock based compensation
      
      624,500
      
      
      -Net operating
        losses
      
      1,009,900
      
      
      400,7001,638,000
      
      
      924,900Valuation
        allowance
      
      (1,638,000
      )
      
      (924,900
      )$
      -
      
      $
      -


At May 31, 2011, the Company has incurred
  accumulated net operating losses totaling approximately $2,891,000 (2010: $2,721,000)
  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:

2022
      
      7,0002023
      
      20,0002024
      
      159,0002025
      
      819,0002026
      
      461,0002027
      
      864,0002028
      
      107,0002029
      
      162,0002030
      
      122,0002031
      
      170,000$
      2,891,000


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.

43

---

|Sterling Group Ventures, Inc.             
|------------------------------------------
|(An Exploration Stage Company)            
|Notes to Consolidated Financial Statements
|May 31, 2011 (Stated in US Dollars)       

|Note 8 | Subsequent Event
|------ | ----------------

Subsequent to the year ended May 31,
  2011, the Company has received all required approvals from Chinese authorities
  for the completion of its acquisition of Hongyu pursuant to the Agreements dated
  October 18, 2010. 10,000,000 shares of the Companys common stock have
  been issued and the balance of RMB 1,800,000 Yuan ($279,504) was paid to the
  Hongyu shareholders as consideration for the acquisition. The Company through
  its wholly owned subsidiary, Silver Castle Investments Ltd. holds 90% of Hongyu
  with other 10% of Hongyu held by the nominees of the Company.

44

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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 has evaluated the effectiveness
of the Company's disclosure controls and procedures as of the end of the period
of the report, May 31, 2011 and has concluded that the disclosure controls, and
procedures was effective based upon their evaluation as of the evaluation
date.

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

The Companys management, including its chief executive officer
and chief financial officer, is responsible for establishing and maintaining
adequate internal control over our 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.

An evaluation was performed under the supervision and with the
participation of the Companys management, including the chief executive officer
and the chief financial officer, of the effectiveness of the design and
operation of the Company's internal controls over financial reporting as defined
in Rules 13a-15(e) or 240.15d -15(e) of the Securities Exchange Act of 1934, as
amended, as of May 31, 2011. Based on that evaluation, our management, including
the Chief Executive Officer and Chief Financial Officer, concluded that the
Company's internal controls over financial reporting are effective.

This annual report does not include an attestation report of
our registered public accounting firm regarding internal control over financial
reporting. Managements report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit our company to provide only managements report
in this annual report.

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.

45

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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
    48
    January 21, 2004Raoul Tsakok
    Chairman of the Board, CEO
    61
    January 21, 2004Gerald Runolfson
    Director
    69
    April 5, 2004Robert Smiley
    Director
    67
    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 30 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 35 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.

46

---

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 Richco Investors Inc. and
Drucker, Inc. and a director of 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.

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.                                           

Employees

At present, we have no employees, 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.

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. During the year ended May 31, 2011, 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.

47

---

ITEM 11. EXECUTIVE COMPENSATION

(a) Officers' Compensation.

Compensation paid by the Company for all services provided up
to the fiscal years ended May 31, 2011 and 2010 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, 2011 and 2010)

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
    2010
    0
    0
    0
    0
    02011
    0
    0
    0
    50,000
    50,000Raoul Tsakok Chairman
    2010
    0
    0
    0
    0
    02011
    0
    0
    0
    50,000
    50,000Kathy Wang Secretary
    2010
    0
    0
    22,625
    0
    22,6252011
    0
    0
    23,840
    75,000
    98,840Officers as A Group
    2010
    0
    0
    22,625
    0
    22,6252011
    0
    0
    23,840
    175,000
    198,840


|(1) | Executive officers did not receive any salary during the
      fiscal years ended May 31, 2011 or 2010.                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 5(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, 2011 and 2010)

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
    2010
    0
    0
    0
    0
    0
    02011
    0
    0
    0
    150,000
    0
    150,000Richard Shao Director
    2010
    0
    0
    0
    0
    0
    02011
    0
    0
    0
    150,000
    0
    150,000Gerald Runolfson Director
    2010
    0
    0
    0
    0
    0
    02011
    0
    0
    0
    150,000
    0
    150,000Robert G. Smiley Director
    2010
    0
    0
    0
    0
    0
    02011
    0
    0
    0
    150,000
    0
    150,000Directors as a Group
    2010
    0
    0
    0
    0
    0
    02011
    0
    0
    0
    600,000
    0
    600,000


|(1) | Please refer Note 5(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.

48

---

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END(For
fiscal years ended May 31, 2011 and 2010)

Name
    Number of securities Underlying
      Unexercised Options (#) Exercisable
    Number of Securities Underlying
      Unexercised Options (#) Unexercisable
    Number of Securities Underlying
      Unexercised Unearned 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 22, 2011, 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 22, 2011, there were 75,730,341 common
shares issued and outstanding.

Title of Class
    Name and Address of Beneficial
      Owner (1)
    Amount and Nature of Beneficial
      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%


49

---

| | (1) | The address of each beneficial owner is 308  1228
      Marinaside Cr., Vancouver, BC V6Z 2W4 Canada                                                                                                                                                                                                       
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Based on 75,730,341 shares outstanding as of August 22,
      2011 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 22, 2011, 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.

ITEM 14. PRINCIPAL ACCOUNTANT 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, 2011 and
May 31, 2010. The aggregate fees billed by BDO for the May 31, 2011 year ended
audit and the fiscal year 2011 quarterly reviews of the Company was $46,195. The
aggregate fees billed by BDO for the May 31, 2010 year ended audit and the
fiscal year 2010 quarterly reviews of the Company was $37,838.

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 that are not disclosed in "Audit Fees" above.

Tax Fees

No fees were billed by BDO to the Company in the years ended
May 31, 2011 and 2010 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, 2011 and 2010.

50

---

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

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                      | 23   
|Consolidated Balance Sheets                                                        | 24   
|Consolidated Statements
      of Operations                                        | 25   
|Consolidated Statements of Changes in Stockholders'
      Equity (Capital Deficit) | 26-27
|Consolidated Statements
      of Cash Flows                                        | 28   
|Notes to the Consolidated Financial Statements                                     | 29-44

|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 52 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.                            
| | --- | ---------------------------------------------------------
| |     |                                                          
| |     | (Registrant)                                             
| | By: | /s/ Richard Shao                                         
| |     | Richard Shao, President and Chief Financial
      Officer
| |     | Date: August 25, 2011                                    
| |     |                                                          
| | By: | /s/ Raoul Tsakok                                         
| |     | Raoul Tsakok, Chairman and Chief Executive
      Officer 
| |     | Date: August 25, 2011                                    

Pursuant to the requirements of the 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.

| | By: | /s/ Richard Shao                                         
| | --- | ---------------------------------------------------------
| |     | Richard Shao, President and Chief Financial
      Officer
| |     | Date: August 25, 2011                                    

| | By: | /s/ Raoul Tsakok                                        
| | --- | --------------------------------------------------------
| |     | Raoul Tsakok, Chairman and Chief Executive
      Officer
| |     | Date: August 25, 2011                                   

51

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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).                                                                                                            
|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).                                                                                                                                                                                            

52

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