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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

(Mark One)

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

For the fiscal year ended MAY 31, 2006

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

For the transition period from ______________ to ______________

Commission file number: 000-51775

STERLING GROUP VENTURES, INC.
(Exact name of small business issuer in its charter)

Nevada	72-1535634
(State or other jurisdiction of incorporation	(I.R.S. Employer Identification No.)
or organization)
900 – 789 West Pender Street
Vancouver BC	V6C 1H2
(Address of principal executive offices)	(Zip Code)

Issuer’s telephone number: (604) 893-8891

Securities Registered Under Section 12(b) of the Exchange Act:
None

Securities Registered Under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value
(Title of class)

Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 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 [   ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in
this form, and no disclosure will 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-KSB or any amendment to this Form
10-KSB. [X] 

The issuer's revenues for its most recent fiscal year ended May 31, 2006 were $4,193.

Aggregate market value of the voting and non-voting share of Common Stock held by non-affiliates was
approximately $4,195,500 based on the closing trading price for the common equity as of July 26, 2006 (at $0.20
per share closing price).

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(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the
Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [   ]   No [X] 

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the Issuer's classes of common stock, as of the latest practicable
date: 40,277,500 common shares issued and outstanding as of July 26, 2006.

Transitional Small Business Disclosure Format (Check one): Yes [   ]   No [X] 

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STERLING GROUP VENTURES, INC.
FORM 10-KSB
INDEX

		Page
Part I
Item 1.	Description of Business	4
Item 2.	Description of Property	6
Item 3.	Legal Proceedings	12
Item 4.	Submission of Matters to a Vote of Security Holders	12
Part II
Item 5.	Market for Common Equity and Related Stockholder Matters	12
Item 6.	Management's Discussion and Analysis or Plan of Operation	14
Item 7.	Financial Statements	21
Item 8.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	21
Item 8A.	Controls and Procedures	21
Item 8B.	Other Information	22
Part III
Item 9.	Directors, Executive Officers, Promoters and Control Persons	22
Item 10.	Executive Compensation	23
Item 11.	Security Ownership of Certain Beneficial Owners and Management And Related Stockholder Matters	25
Item 12.	Certain Relationships and Related Transactions	26
Part IV
Item 13.	Exhibits, Financial Statements and Schedules and Reports on Form 8-K	26
Item 14.	Principal Accountant Fees and Services	27
	Signatures	28

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PART I

Item 1. Description of Business.

Cautionary Statement Regarding 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", that 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 “CA $” refer to Canadian Dollars 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", and "Sterling" mean Sterling Group Ventures, Inc., unless otherwise indicated.

Sterling is an exploration stage company. There is no assurance that commercially viable mineral deposits exist on the claims that we have under option. Further exploration will be required before a final evaluation as to the economic and legal feasibility of the claims is determined.

Business Development During Last Three Years

We were incorporated in the state of Nevada on September 13, 2001. Since our incorporation, we have engaged in the business of exploration and development of a mineral property. We have not been involved in any bankruptcy, receivership or similar proceeding, nor has there been any material reclassification or merger, consolidation or purchase or sale of a significant amount of assets not in the ordinary course of business.

Our Current Business

We were incorporated in the State of Nevada on September 13, 2001 and established a fiscal year end of May 31. We are a start-up, exploration stage company engaged in the search and exploration of lithium and related minerals; There is no assurance a commercially viable mineral deposit exists on any of our properties. Further exploration will be required before a final evaluation as to the economic and legal feasibility of our claims is determined. We have not yet generated or realized any revenues from our business operations. Our statutory registered agent's office is located at 251 Jeanell Drive, No. 3, Carson City, Nevada 89703 and our business office is located at 900 – 789 West Pender Street, Vancouver, B.C., Canada, V6C 1H2. Our telephone number is: (604) 893-8891.

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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 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 with Beijing Mianping Salt Lake Research Institute (“Mianping”) 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.

Pursuant to the Agreement, the parties have agreed to set up a Cooperative Company, Tibet Saline Lake Mining High-Science & Technology Co. Ltd. (the “Cooperative”) to develop DXC Salt Lake. The objective of the Cooperative is to use the funds provided by Sterling through MEH and the skills and technology provided by Mianping to produce lithium carbonate (Li2CO3) and borate from brine. MEH is to own 65% and Mianping 35% of the Cooperative.

JIAJIKA PROJECT

On September 16, 2003, the Company, through its wholly owned subsidiary, Micro Express Ltd. (“Micro”), entered into an agreement with Sichuan Province Mining Ltd. to acquire a 75% interest in a 30-year mining joint venture company. The joint venture company will hold the mining licenses to develop the Jiajika spodumene property located in the Sichuan Province of China for the extraction of lithium and lithium salts.

On March 18, 2004, Micro and Sichuan Province Mining Ltd. amended the initial capacity to 240,000 tonnes/annum pursuant to the mining permit contract signed between Sichuan Province Mining Ltd. and Sichuan Bureau of Land and Resources. The total investment required is estimated at 88.5 million Chinese Yuan (US$10.8 million) for the initial capacity of 240,000 t/a. The initial registered capital is 56 million Chinese Yuan (US$6.8 million). Sichuan Province Mining Ltd. will contribute 14 million Chinese Yuan (US$1.7 million) including the mining permits to hold 25% of the JV company. Micro will contribute 42 million Chinese Yuan (US$ 5.1 million) to hold 75% of the JV company.

On May 24, 2004, the Jiajika mining permit was issued to Sichuan Province Mining Ltd.

On April 5, 2005, the Company through Micro, signed a joint venture contract with Sichuan Province Mining Ltd. for the establishment of Jihai Lithium Ltd. and the development of the Jiajika lithium deposit. Pursuant to the Contract, the project will be developed in two (2) stages.

On March 3, 2006, the Company, through its wholly owned subsidiary, Micro Express Ltd. (“Micro”), signed an agreement (the “Agreement”) with Sichuan Province Mining Ltd. (“SPM”) with respect to Micro’s early investment in the Sichuan Jiajika Spodumene project.

Pursuant to the Agreement, the parties have confirmed that Micro’s early investment of 2.48 million Yuan (RMB) to the Sichuan Jiajika Spodumene project shall be paid back at a rate of 1.2 million Yuan (RMB) before April 15, 2006 and 1.28 million Yuan (RMB) before March 30, 2007. Payment shall be made directly to Micro by SPM. If SPM does not make the payment of 1.28 million to Micro before March 30, 2007, then 1.28 million yuan will be converted into Micro’s interest in the Jiajika project of SPM using the formula:1.28 million Yuan divided by the registered capital contribution in the Jiajika project by SPM, multiplied by 100%. Neither party shall have any other liabilities to the other party and the Agreement shall replace all previously signed agreements, contracts and MOU between Micro and SPM. SPM has made payment of 500,000 Yuan (RMB) as of May 31, 2006.

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LUSHI PROJECT

On April 10, 2004, the Company, through Micro, entered into a formal joint venture agreement with Lushi Guanpo Minerals Development Ltd. of Lushi in Henan Province of China. The purpose of the joint venture agreement was to bring the project into production, with Micro holding a 90% interest in the project. The property is approximately 100 square km in area and Lushi holds three mining permits. The mining permits for this property expired in March 2005. Due to the negative results of due diligence performed for the LUSHI project, the Company decided not to proceed with this project.

DX POLYMETALLIC PROJECT

On March 2, 2005, the Company, through its wholly owned subsidiary, Makaelo Limited (“Makaelo”), a BVI company, entered into a Joint Venture Agreement with Aifeng Li, an individual residing in Anyang, Henan Province of China. Pursuant to the Agreement, the parties will set up a Joint Venture company in Inner Mongolia for the exploration and development of copper and silver in the areas of Donggou and Xiaoxigou. Aifeng Li will contribute all the necessary exploration licenses, achievements and geological data to the Joint Venture in exchange for 48% of the Joint Venture company, while the Company will finance the cost of exploration in return for 52% of the Joint Venture company. The Company expects the cost of exploration to be approximately $630,000 to be contributed over three years. The joint venture contract is in the process of being negotiated.

DAHONGLIUTAN (“DHLT”) PROJECT

On May 21, 2005, the Company, through its wholly-owned subsidiary, Huyana Ventures Limited (“Huyana”), signed a letter of intent (“LOI”) with Xinjiang Hetian Xinlong Mining Co. Ltd. for the development of Dahongliutan (“DHLT”) spodumene deposit. Pursuant to the LOI, the parties agreed to set up a Joint Venture Company in Hetian City of Xinjiang Province in China to share the benefits, risks and losses of the project. However, due to the negative results of the due diligence performed on the DHLT project, the Company decided not to proceed with this project and the letter of intent expired.

OTHERS

On June 19, 2005, the Company signed a Cooperative Agreement with Jianzhong Chemicals Corporation (“JIANZHONG”) for the possible development of the Lithium Metal and Lithium Salt Projects with JIANZHONG. There has been no further negotiations or development of this project as of the present date.

Item 2. Description of Property

Overview

On January 20, 2004, the Company acquired all the issued and outstanding shares of Micro Express Ltd. (“Micro”) for 25,000,000 common shares of the Company. Micro is a company incorporated in the British Virgin Islands and has been inactive from incorporation until the year 2003. Since then, Micro has entered into several agreements to develop industrial mineral properties in China.

Through the acquisition of Micro, the Company holds the following property interests:

(a) Jiajika Spodumene Property

On September 16, 2003, Micro entered into an agreement with Sichuan Province Mining Ltd. to acquire 75% interest in a 30-year mining joint venture company. The joint venture company will hold the mining licenses to develop the Jiajika spodumene property located in Sichuan Province of China for the extraction of lithium and lithium salts. The initial capacity of the mine will be 240,000 tonnes/annum (t/a) and will be increased to 900,000 t/a in stages. The Company, through Micro, is required to contribute an estimated 42 million Chinese Yuan (US$ 5.1 million) as registered capital to earn its 75% interest in the joint venture company for the initial capacity of 240,000 t/a. An initial contribution of $150,000 was made by the Company as part of the contribution to obtain the mining permit according to the contract signed between our Chinese partner and the Sichuan Bureau of Land and Resources.

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On April 5, 2005, Micro signed a joint venture contract (the “Agreement”) with a Chinese partner for the establishment of a joint venture company, Jihai Lithium Ltd. (“Jihai”), and the development of the Jiajika lithium deposit in Kangding District, Sichuan Province, China. Pursuant to the Agreement, the project will be developed in two (2) stages with the development of a production facility with an initial processing capacity of 240,000 tonnes of spodumene ore per year in Stage I and then the processing capacity will be increased to 900,000 t/a in Stage II.

On March 3, 2006, Micro signed an agreement (the “Agreement”) with Sichuan Province Mining Ltd. (“SPM”) with respect to Micro’s early investment in the Sichuan Jiajika Spodumene project.

Pursuant to the Agreement, the parties have confirmed that Micro’s early investment of 2.48 million Yuan (RMB) to the Sichuan Jiajika Spodumene project shall be paid back at a rate of 1.2 million Yuan (RMB) before April 15, 2006 and 1.28 million Yuan (RMB) before March 30, 2007. Payments are to be made directly to Micro by SPM. If SPM does not make the payment of 1.28 million to Micro before March 30, 2007, then 1.28 million yuan will be converted into Micro’s interest in Jiajika project of SPM using the formula: 1.28 million Yuan divided by the registered capital contribution in Jiajika project by SPM, multiplied by 100%. Neither party shall have any other liabilities to the other party and the Agreement shall replace all previously signed agreements, contracts and MOU between Micro and SPM.

As at May 31, 2006, the Company incurred expenses of $397,919 related to the Jiajika Spodumene Property, and received property cost recovery of RMB500,000 ($62,350).

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

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(b) Lushi Spodumene Property

On December 28, 2003, Micro entered into a Letter of Intent to earn an interest of between 90% to 92% in a 30-year mining joint venture. The Joint Venture will hold the rights to develop the Lushi spodumene property located in Henan Province, China. The Company shall contribute the total investment in the project. The amount of the investment will be determined by a pre-feasibility study. On April 10, 2004, the Company entered the formal joint-venture agreement with the Chinese party with the intent of bringing the project into production and in exchange for 90% of the interest of the joint venture. However, due to the negative results of the due diligence performed on the Lushi project, the Company decided not to proceed with this project.

As at May 31, 2006, the Company incurred expenses of $72,912 related to the Lushi Spodumene Property.

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

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Through its wholly-owned subsidiary, Makaelo Limited (“Makaelo”), the Company has the following property interests:

(a) DX Polymetallic Project

On March 2, 2005, Makaelo entered into a joint venture Agreement with a Chinese citizen who holds two exploration permits for a copper project (“the Project”) in Inner Mongolia, China.

The Project is comprised of two exploration permits, Donggou and Xiaoxigou, covering an area of about 52 square kilometers. The Project is located in the Inner Mongolia region of China. The Company has the right to earn 52% of a cooperative joint venture company by spending RMB 5,200,000 ($626,400) for the exploration in the permit areas over three years with the first year contributing not less than RMB2,000,000 ($240,900). After the Company has earned a 52% interest in the cooperative company, contributions to fund the exploration and development of the Project will be made pro rata. The interest of the Chinese party will be diluted to not less than 10% if it elects not to make cash contributions. The joint venture contract is in the process of being negotiated. No further progress has been made in negotiations as of the present date.

As at May 31, 2006, the Company incurred expenses of $51,757 related to the DX Polymetallic Property.

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

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Through its wholly-owned subsidiary, Huyana Ventures Limited (“Huyana”), the Company has the following property interests:

(a) DHLT Spodumene Property

On May 21, 2005, Huyana signed a letter of intent (the “LOI”) with a Chinese partner for the development of Dahongliutan (“DHLT”) spodumene deposit located in Xinjiang Province of China. A joint venture company in Hetian City of Xinjiang Province in China will be set up for the development and operation of the DHLT spodumene deposit in the areas that the Chinese partner has mining permit and where the Chinese partner is applying for additional mining permits. The business of the joint venture company will include mining and processing spodumene and comprehensive utilization of other associated rare metals. The Company shall contribute the total investment in the project in exchange for an 80% interest in the joint venture. Pursuant to the LOI, the terms of the joint venture were to be decided upon further negotiations and due diligence between the parties and would have been subject to a formal contract to be signed by both parties. However, due to the negative results of due diligence for DHLT project, the Company decided not to proceed with this project and the letter of intent expired.

As at May 31, 2006, the Company incurred expenses of $8,209 related to the DHLT Spodumene Property.

The location of the property is shown in following map.

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Through its wholly-owned subsidiary, Micro Express Holdings Inc. (“MEH”), the Company has the following property interests:

(a) DXC Salt Lake Property

On July 11, 2005, the Company signed a letter of intent with Beijing Mianping Salt Lake Research Institute 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, MEH signed an agreement with Beijing Mianping Salt Lake Research Institute (“Mianping”) 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.

Pursuant to the Agreement, the parties agreed to set up a Cooperative Company, Tibet Saline Lake Mining High-Science & Technology Co. Ltd. (the “Cooperative”), to develop the DXC Salt Lake property. The objective of the Cooperative is to use the funds provided by Sterling through MEH and the skills and technology provided by Mianping to produce lithium carbonate (Li2CO3) and borate from brine. MEH is to own 65% and Mianping 35% of the Cooperative.

It is anticipated that the total investment in the Cooperative will be approximately 240 million RMB Yuan (or approximately US$30 million) and will result in production of 5,000 tonnes per year of lithium carbonate and by products (sodium borate). Mianping guarantees the production cost of lithium carbonate will be less than 11,000 RMB yuan per tonne (or approximately US $1,356 per tonne).

Lithium carbonate 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.

As at May 31, 2006, the Company incurred expenses of $236,759 related to the DXC Salt Lake Property.

The location of the property is shown in following map.

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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 3. Legal Proceedings

We know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 4. Submissions of Matters to a Vote of Security Holders

Within the current fiscal year, no matters have been submitted to a vote of security holders.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters

Overview

Our common stock is traded on the OTC Bulletin Board 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, 2004 and 2005 and 2006. The quotations below reflect inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions.

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Pacific Stock Transfer Company is the registrar and transfer agent for our common shares, and is located at Suite 240, 500 East Warms Springs Road, Las Vegas, Nevada 89119 (Telephone: (702) 361-3033; Facsimile: (702) 433-1979).

As of May 31, 2006, the shareholders' list of our common shares showed 31 registered shareholders and 40,277,500 shares outstanding.

We have not declared any dividends since incorporation and do not anticipate that we will do so in the foreseeable future. Although there are no restrictions that limit the ability to pay dividends on our common shares, our intention is to retain future earnings for use in our operations and the expansion of our business.

Equity Compensation Plan Information

On May 12, 2004, the Company registered a 2004 incentive stock option plan consisting of 3,636,000 common shares. As of the year ended May 31, 2006, 3,636,000 options were issued and outstanding to various consultants, officers or directors. The above options are exercisable at US$0.50 per share with expiry date of February 3, 2009. 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 is 6,041,625 as of May 31, 2006. As of the date of this report, none of the above options have been exercised.

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Recent Sales of Unregistered Securities

In February 2004, the Company commenced a private placement of up to 5,000,000 units at a price of $0.50 per unit for total proceeds of $2,500,000. Each unit consists of one common share and one non-transferable share purchase warrant entitling the holder to purchase one additional common share for two years, at a price of $0.50 per share in the first year and $0.75 in the second year (“A” warrant), with a expire date of February 16, 2006. Upon exercising an “A” warrant, the holder of each unit will have one common share and one additional non-transferable share purchase warrant at a price of $1.00 (“B” warrant) for another year, with a expiry date on February 16, 2007.

A 7% finder’s fee will be paid in units with the same terms. As of May 31, 2006, the finder's fee of 101,500 units with the aforementioned terms was issued.

As at May 31, 2006, the Company received total subscriptions of $1,858,000 for 3,716,000 units.

On December 18, 2004, the Company issued 100,000 shares with a fair value of $42,000 to a consultant for investor relation services for a period of one year.

Share Purchase Warrants

During the year ended May 31, 2006, there were no warrants issued, exercised or cancelled.

On February 14, 2006, the Company reduced the exercise price of the 3,817,500 Series “A” Share Purchase Warrants from $0.75 to $0.50 each and extended the terms of Series “A” Share Purchase Warrants for two years to the earlier of:

(i)	February 16, 2008; or
(ii)	The 90th day after the day on which the weighted average trading price of the Company’s shares exceed $0.85 per share for 30 consecutive trading days.

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

As at May 31, 2006, the Company has a total of 3,817,500 Series “A” Share Purchase Warrants outstanding.

Changes in Securities

On January 20, 2004, the Registrant completed the acquisition of all of the issued and outstanding shares of Micro Express Ltd. pursuant to an Acquisition Agreement, filed as an exhibit to the Registrant’s Current Report on the 8-K filed January 29, 2004 and April 2, 2004. Pursuant to the transaction, the Registrant issued an aggregate of 25,000,000 shares of the Registrant’s common stock to the stockholders of Micro in exchange for 100% of the shares of Micro common stock. A majority of the shares were issued to Cobilco Inc. of which Raoul Tsakok is the owner (15,000,000 shares), and Richard Shao (4,000,000 shares). Mr. Tsakok and Mr. Shao areare officers or directors of the Registrant.

As of May 31, 2006, the Company had 40,277,500 common shares issued and outstanding.

Item 6. Management's Discussion and Analysis or Plan of Operation

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 lithium, lithium carbonate, other metals and chemicals, 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,

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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 that the company may not be able to raise the necessary capital, 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 lithium, beryllium, niobium, tantalum, and other metals, 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.

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-KSB. When used in this Form 10-KSB, 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.

Plan of Operations

Sterling is an exploration stage company and there is no assurance a commercially viable mineral deposit exists on any of the properties the company has claims over. Further exploration will be required before final evaluation as to the economic and legal feasibility of the claims is determined.

On January 20, 2004, the Company completed the acquisition of all of the issued and outstanding shares of Micro Express Ltd., a British Virgin Islands corporation (“Micro”) pursuant to an Acquisition Agreement, filed as an exhibit to a Form 8-K on January 29, 2004. Pursuant to the transaction, the Company issued an aggregate of 25,000,000 shares of common stock to the stockholders of Micro in exchange for 100% of the shares of Micro common stock.

Micro is a party to an agreement with Sichuan Province Mining Ltd, which is 40% owned by the Bureau of Sichuan Geology and Resources of Sichuan Government. Under the terms of the agreement, Micro has the right to acquire at least 75% of the shares of a co-operative joint-venture company. The Joint-venture will hold the necessary mining licenses. The business of the joint-venture company is to develop the Jiajika spodumene property for the extraction of lithium, lithium salts, and other minerals. The initial registered capital is 56 million Chinese Yuan (US$6.8 million). Sichuan Province Mining Ltd. will contribute 14 million Chinese Yuan (about US$1.7 million) including the mining permits and previous works to hold 25% of the JV company. Micro will contribute 42 million Chinese Yuan (about US$5.1 million) to hold 75% of the JV company. An initial contribution of $150,000 has been made by the Company as part of the contribution to obtain the mining permit pursuant to the contract signed between our Chinese partner and Sichuan Bureau of Land and Resource.

On April 10, 2004, Micro signed a joint venture agreement with Lushi Guanpo Minerals Development Ltd. (“Lushi”) of the Henan Province of China. Under the Agreement, Micro may earn more than 90% of the lithium project by taking the project into production. However, due to the negative results of due diligence for the Lushi project, the Company decided not to proceed with this project.

On March 2, 2005, the Company through its wholly-owned subsidiary, Makaelo Limited (“Makaelo”), a BVI company, entered into a Joint Venture Agreement with Aifeng Li, an individual residing in Anyang, Henan Province of China. Pursuant to the Agreement, the parties will set up a Joint Venture company in Inner Mongolia

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for the exploration and development of copper and silver in the areas of Donggou and Xiaoxigou. Aifeng Li will contribute all the necessary exploration licenses, achievements and geological data to the Joint Venture in exchange for 48% of the Joint Venture company, while the Company will finance the cost of exploration in return for 52% of the Joint Venture company. The Company expects the cost of exploration to be approximately $630,000 to be contributed over three years.

On April 5, 2005, the Company through Micro, signed a joint venture contract with Sichuan Province Mining Ltd. for the establishment of Jihai Lithium Ltd. and the development of the Jiajika lithium deposit.

On May 21, 2005, the Company through its wholly-owned subsidiary, Huyana Ventures Limited (“Huyana”), signed a letter of intent with Xinjiang Hetian Xinlong Mining Co. Ltd. for the development of Dahongliutan (DHLT) spodumene deposit. Pursuant to the LOI, the parties have agreed to set up a Joint Venture Company in Hetian City of Xinjiang Province in China to share the benefits, risks and losses of the project. . Due to the negative results of due diligence for DHLT project, the Company decided not to proceed with this project and the letter of intent expired.

On June 19, 2005, the Company signed a Cooperative Agreement (the “Agreement”) with Jianzhong Chemicals Corporation in Sichuan Province, China for the possible development of the Lithium Metal and Lithium Salt Projects in Sichuan Province, China. Under the terms of the Agreement, two joint venture companies will be set up, one for lithium metal production and the other for lithium salt production. It is intended that the final terms of the Agreement will be decided upon further negotiations between the parties to the Agreement and will be subject to a formal contract to be signed by both parties.

On July 11, 2005, the Company signed a letter of intent (the “LOI”) with Beijing Mianping Salt Lake Research Institute for the development of Dangxiongcuo salt lake property (“DXC Salt Lake”) in Nima county of Naqu district in Tibet, China. Pursuant to the LOI, 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 with Beijing Mianping Salt Lake Research Institute (“Mianping”) 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.

Pursuant to the Agreement, the parties have agreed to set up a Cooperative Company, Tibet Saline Lake Mining High-Science & Technology Co. Ltd. (the “Cooperative”) to develop DXC Salt Lake. The objective of the Cooperative is to use the funds provided by Sterling through MEH and the skills and technology provided by Mianping to produce lithium carbonate (Li2CO3) and borate from brine. MEH is to own 65% and Mianping 35% of the Cooperative.

It is anticipated that the total investment in the Cooperative will be approximately 240 million RMB Yuan (or approximately US$30 million) and will result in production of 5,000 tonnes per year of lithium carbonate and by products (sodium borate). Mianping guarantees the production cost of lithium carbonate will be less than 11,000 RMB yuan per tonne (or approximately US $1,356 per tonne).

On March 3, 2006, the Company, through its wholly owned subsidiary, Micro Express Ltd. (“Micro”), signed an agreement (the “Agreement”) with Sichuan Province Mining Ltd. (“SPM”) regarding Micro’s early investment in the Sichuan Jiajika Spodumene project.

Pursuant to the Agreement, the parties have confirmed that Micro’s early investment of 2.48 million Yuan (RMB) to the Sichuan Jiajika Spodumene project shall be paid back 1.2 million Yuan (RMB) before April 15, 2006 and 1.28 million Yuan (RMB) before March 30, 2007. Payments shall be made directly to Micro by SPM. If SPM does not make the payment of 1.28 million to Micro before March 30, 2007, then 1.28 million yuan will be converted into Micro’s interest in Jiajika project of SPM using the formula: 1.28 million Yuan divided by registered capital contribution in Jiajia project by SPM, multiplied by 100%. Neither party shall have any other liabilities to the other party and the Agreement shall replace all previous signed agreements, contracts and MOU between Micro and SPM.

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Results of Operations

The Company had no operating revenue except interest income of $4,193 for the year ended May 31, 2006 and interest income of $11,882 for the year ended May 31, 2005. The Company incurred expenses of $218,686 stemming from Accounting audit and legal fees, consulting fees, Mineral property costs (recovery), travel, and general and administrative expenditures as compared to $830,836 for the same period last year. The decrease of $612,150 was mainly due to the lack of mineral property costs in 2006 compared to 2005.

The following table shows the company’s mineral property costs in 2005 and 2006. The Company’s cost recovery in Jiajika Spodumene Property significantly decreased its expenses for the year ending May 31, 2006:

The Company also incurred expenses on the following related party transactions during year ended May 31, 2006:

	(a)	The Company was charged consulting fees during the year ended May 31, 2006 totalling $123,173 (2005: $98,862) by companies controlled by two directors of the Company.
	(b)	The Company was charged rental fees included in General and Administrative during the year ended May 31, 2006 totalling $10,016 (2005: $7,054) by a company controlled by a director of the Company.
	(c)	The Company was charged mineral property costs - consulting during the year ended May 31, 2006 in the amount of $43,296 (2005: $38,045) by a company controlled by a director of the Company.
	(d)	Included in accounts payable is $23,814 (2005: $8,909) which is due to the companies controlled by the directors of the Company for their services provided.

The Company expects the trend of losses to continue at an increasing rate until we can achieve commercial production on some of the mineral properties. However, there can be no assurance that commercial production will be possible on any of the properties in the near or distant future.

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Liquidity and Working Capital

As of May 31, 2006, the Company had total current assets of $401,468, and total liabilities of $77,361. The Company has a working capital surplus of $324,107 as a result of the proceeds of $1,858,000 from a private placement commenced in February 2004.

The Company has no other capital resources other than the ability to use its common stock to achieve additional capital or the exercise of the warrants by the unit holders.

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.

Limited Operating History; Anticipated Losses; Uncertainty of Future Results

Sterling is an exploration stage company and there is no assurance a commercially viable mineral deposit exists on any of the properties. Further exploration will be required before final evaluation as to the economic and legal feasibility is determined.

Sterling Group Ventures, Inc. has only a limited operating history upon which an evaluation of the Company and its prospects can be based. The Company's prospects must be evaluated with a view to the risks encountered by a company in an early stage of development, particularly in light of the uncertainties relating to the new and evolving distribution methods with which the Company intends to operate and the acceptance of the Company's business model. To the extent that such expenses are not subsequently followed by commensurate revenues, the Company's business, results of operations and financial condition will be materially adversely affected. There can be no assurance that the Company will be able to generate sufficient revenues from the sale of its products. If cash generated by operations is insufficient to satisfy the Company's liquidity requirements, the Company may be required to sell additional equity or debt securities. The sale of additional equity or convertible debt securities would result in additional dilution to the Company's stockholders.

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.

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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 exploration 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 exploration 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.

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.

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 Bulletin Board under the ticker symbol SGGV and is listed on Berlin Bremen Stock Exchange under the symbol GD7. As of May 31, 2006, there were approximately 40,277,500 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.

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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.

The effects of inflation have not had a material impact on its operation, nor is it expected to in the immediate future.

Political Risks

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.

Market Risk

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.

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.

The Company has sought to identify what it believes to be the most significant risks to its business, but cannot predict whether or to what extent any of such risks may be realized, nor can there be any assurances that the Company has identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to the Company's stock.

OUTLOOK

The Company is under going feasibility studies and engineering studies for the development of the DXC salt lake property in Tibet.

As a joint venture contract with the property owner has so far not been completed on acceptable terms, the Company may not proceed with the DX project for the exploration and development of copper and silver in the areas of Donggou and Xiaoxigou (DX) in Inner Mongolia, China.

The Company is also conducting due diligence and is in further negotiations for the possible development of the Lithium Metal and Lithium Salt Projects with Jianzhong Chemicals Corporation.

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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.

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.

Item 7. Financial Statements.

The response to this item is included as a separate Exhibit to this report. Please see pages F-1 through F-22

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

The Report of Independent Auditor's by Amisano Hanson for the audited consolidated financial statements for the year ended May 31, 2006, are included herein immediately preceding the audited financial statements.

Item 8. Changes In & Disagreements With Accountants on Accounting & Financial Disclosure

Amisano Hanson, Chartered Accountants (the “New Accountant”) has been engaged as principle independent accountants for Sterling Group Ventures, Inc. (the "Company") effective June 17, 2004 and until the New Accountant chooses to resign or the Company chooses to dismiss them. Amisano Hanson, Chartered Accountants replaces Cordovano and Honeck, P.C. (the "Former Accountant") as principal independent accountants as of June 17, 2004, the date the Former Accountants were dismissed by the Company. The decision to change accountants has been approved by the Company's board of directors.

Other than as disclosed in the previous paragraph, there have been no changes in or disagreements with our accountants on issues of accounting or financial disclosure since inception of Sterling on September 13, 2001.

Item 8A. Controls and Procedures

The registrant's Principal executive officers and principal financial officer, based on their evaluation of the registrant's disclosure controls and procedures (as defined in Rules 13a-14 ( c ) of the Securities Exchange Act of 1934 ) as of May 31, 2006 have concluded that the registrants' disclosure controls and procedures are adequate and effective to ensure that material information relating to the registrants and their consolidated subsidiaries is recorded, processed , summarized and reported within the time periods specified by the SEC' s rules and forms, particularly during the period in which this quarterly report has been prepared.

The registrants' principal executive officers and principal financial officer have concluded that there were no significant changes in the registrants' internal controls or in other factors that could significantly affect these

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controls subsequent to May 31, 2006, the date of their most recent evaluation of such controls, and that there was no significant deficiencies or material weaknesses in the registrant's internal controls.

Item 8B. Other Information

None.

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons

All directors of our 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:

Business Experience

The following sets forth the business experience of each of the Registrant'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 of Richco Investors Inc. for almost 20 years. He holds an MBA degree and is a Chartered Financial Analyst (CFA).

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.

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Patrick P. L. Chan, B.Comm, C.A. FHKSA, Director

Mr. Chan was born in Hong Kong and graduated from McGill University with a Bachelor of commerce degree in accounting and finance. He has more than 25 years of accounting and corporate finance experience in both North America and in Asia. Besides being a Chartered Accountant (CA), Mr. Chan is also a Fellow of the Hong Kong Society of Accountants (FHKSA). He was the partner in charge of Coopers and Lybrand Mergers and Acquisitions Group (now PriceWaterhouse Coopers) and left his practice in Toronto, Canada in 1993 to pursue operational and merchant banking opportunities in Asia and in The Peoples’ Republic of China. At present, Patrick is a senior member of the management team of a PRC beverage and consumer products company. In his career, Mr. Chan has served as a board of director member of listed companies and has provided corporate finance and strategic advice to many North America and Asian based public and private companies.

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.

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.

Item 10. Executive Compensation.

(a) Officers' Compensation.

Compensation paid by the Company for all services provided up to the fiscal year ended May 31, 2006 to each of the executive officers and to all officers as a group is set forth below.

SUMMARY COMPENSATION TABLE OF EXECUTIVES

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	(1)	800,000 options to purchase shares at $0.50 per share.
	(2)	800,000 options to purchase shares at $0.50 per share.
	(3)	200,000 options to purchase shares at $0.50 per share.

(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 has granted options to directors under its 2004 Incentive Stock Option Plan subsequently adopted.

SUMMARY COMPENSATION TABLE OF DIRECTORS
(For fiscal year ended May 31, 2006)

	(1)	800,000 options to purchase shares at $0.50 per share.
	(2)	800,000 options to purchase shares at $0.50 per share.
	(3)	300,000 options to purchase share at $0.50 per share.
	(4)	300,000 options to purchase share at $0.50 per share.

During the year ended May 31, 2004, we granted 2,100,000 stock options to our directors or officers. The options were granted at an exercise price of $0.50 per share with an expiry date of February 3, 2009. During the year ended May 31, 2006, no stock options were granted to our directors or officers.

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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 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth, as of July 26, 2006, 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 July 26, 2006, there were 40,277,500 common shares issued and outstanding.

	(1)	The address of each beneficial owner is 900 – 789 West Pender Street, Vancouver, BC V6C 1H2 Canada
	(2)	Based on 40,277,500 shares outstanding as of July 26, 2006 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.
	(4)	Raoul Tsakok has 800,000 options to purchase shares at $0.50 per share.
	(5)	Includes 800,000 options to purchase shares at $0.50 per share.
	(6)	Patrick Chan has 300,000 options to purchase shares at $0.50 per share.
	(7)	Includes 300,000 common shares and 300,000 “A” warrants and 300,000 “B” warrants held through Elkon Products Inc.
	(8)	Gerald Runolfson has 300,000 options to purchase share at $0.50 per share.

Changes in Control

We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our company.

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Item 12. Certain Relationships and Related Transactions.

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 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

a)	Financial Statements and Schedules. The following financial statements and schedules for the Company as of May 31, 2006 and 2005 are filed as part of this report.
	(1) Financial Statements of Sterling Group Ventures, Inc.

		Page
	Report of Independent Registered Public Accounting Firm	F-2
	Consolidated Balance Sheets	F-3
	Consolidated Statements of Operations	F-4
	Consolidated Statements of Stockholders’ Equity (Deficiency)	F-5 - F-6
	Consolidated Statements of Cash Flows	F-7 - F-8
	Schedule of Mineral Property Costs	F-9
	Notes to Consolidated Financial Statements	F-10 to F-22

(2) Financial Statement Schedules

All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

(3) Exhibits

The exhibits listed below are required by Item 601 of Regulation S-K. Each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K has been identified.

The following are exhibits to this Annual Report

31.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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b)	The following reports on Form 8-K were filed during the year ended May 31, 2006:

On June 3, 2005, the Company filed a report on Form 8-K under Items 8.01, and 9.01 disclosing that the Company received an independent geological report on the DX Polymetallic Property in Linxi County, Inner Mongolia, People’s Republic of China.

On June 24, 2005, the Company filed a report on Form 8-K under Items 8.01, and 9.01 disclosing that the Company signed a Cooperative Agreement with Jianzhong Chemicals Corporation for the possible development of the Lithium Metal and Lithium Salt Projects of Jianzhong Lithium and Calcium Corporation of JIANZHONG.

On July 18, 2005, the Company filed a report on Form 8-K under Items 1.01, and 9.01 disclosing that the Company signed a letter of intent with Beijing Mianping Salt Lake Research Institute for the development of the Dangxiongcuo salt lake property in Nima county of Naqu district in Tibet, China.

On September 21, 2005, the Company filed a report on Form 8-K under Items 1.01, and 9.01 disclosing that the Company, through its wholly-owned subsidiary, Micro Express Holdings Inc., signed a joint venture agreement with Beijing Mianping Salt Lake Research Institute for the establishment of Tibet Saline Lake Mining High-Science & Technology Co. Ltdand the development of the Dangxiongcuo salt lake property in Nima county of Naqu district in Tibet, China.

On March 3, 2006, the Company filed a report on Form 8-K under Items 1.01, and 9.01 disclosing that the Company, through its wholly-owned subsidiary, Micro Express Ltd., signed an agreement with Sichuan Province Mining Ltd. regarding early investment of Micro to Sichuan Jiajika Spodumene project.

On June 29, 2006, the Company filed a report on Form 8-K under Items 8.01, and 9.01 disclosing that the Company received a qualifying report detailing the initial assessment on the mining prospects of the DXC Salt Lake Property in Nima county of Naqu district in Tibet, China.

Item 14. Principal Accountant Fees and Services.

Audit Fees

Amisano Hanson ("AH") provided audit services to the Company in connection with its annual report for the fiscal year ended May 31, 2006 and 2005. The aggregate fees owned to AH for the May 31, 2006 year ended audit of the Company’s annual financial statements was $6,000 and the aggregate fees billed by AH for the fiscal year 2006 quarterly reviews of the Company was $11,165. The aggregate fees billed by AH for the May 31, 2005 year ended audit of the Company's annual financial statements was $11,606 and the aggregate fees billed by AH for the fiscal year 2005 quarterly reviews of the Company was $9,311.

Audit Related Fees

No fees were billed by AH 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 AH to the Company in 2006 for professional services rendered in connection with the preparation of the Company's tax returns for the period. No fees were billed by AH to the Company in 2005 for professional services rendered in connection with the preparation of the Company's tax returns for the year ended May 31, 2005.

All Other Fees

No fees were billed by AH to the Company for other professional services rendered or any other services not disclosed above during the period from June 1, 2005 to May 31, 2006 and no fees were bill by AH to the Company for other professional services rendered or any other services not disclosed above during the period from June 1, 2004 to May 31, 2005.

Audit Committee Pre-Approval

The Company's Board acts as the audit committee and had no "pre-approval policies and procedures" in effect for the auditors' engagement for the audit year 2006 and 2005.

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

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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
	By:	/s/ Raoul Tsakok
		Raoul Tsakok, Chairman and Chief Executive
		Officer
		Date: August 17, 2006

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
	By:	/s/ Raoul Tsakok
		Raoul Tsakok, Chairman and Chief Executive
		Officer
		Date: August 17, 2006

28

---

STERLING GROUP VENTURES, INC.

(An Exploration Stage Company)

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2006 and 2005

(Stated in US Dollars)

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Stockholders’ Equity (Deficiency)	F-5 - F-6
Consolidated Statements of Cash Flows	F-7 - F-8
Schedule of Mineral Property Costs	F-9
Notes to Consolidated Financial Statements	F-10 - F-22

F-1

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A PARTNERSHIP OF INCORPORATED PROFESSIONALS	AMISANO HANSON
	CHARTERED ACCOUNTANTS

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders,
Sterling Group Ventures, Inc.

We have audited the accompanying consolidated balance sheets of Sterling Group Ventures, Inc. (An Exploration Stage Company) and its subsidiaries as of May 31, 2006 and 2005 and the related consolidated statements of operations, stockholders' equity (deficiency) and cash flows for the years ended May 31, 2006 and 2005 and for the period from date of inception, July 27, 1994 to May 31, 2006. These consolidated 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 of America). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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 financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these 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, 2006 and 2005 and the results of their operations and their cash flows for the years ended May 31, 2006 and 2005 and for the period from date of inception, July 27, 1994 to May 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements referred to above have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is in the exploration stage, and has no established source of revenue and is dependent on its ability to raise capital from shareholders or other sources to sustain operations. These factors, along with other matters as set forth in Note 1, raise substantial doubt that the Company will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Vancouver, Canada	“AMISANO HANSON”
July 19, 2006	Chartered Accountants

F-2

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STERLING GROUP VENTURES, INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
May 31, 2006 and 2005
(Stated in US Dollars)

		2006			2005
ASSETS
Current
Cash and cash equivalents – Note 6	$	349,954		$	913,343
GST receivable		13,787			13,094
Prepaid expenses		1,196			28,093
Advance receivable – Notes 3 and 6		36,531			-
		401,468			954,530
Mineral property deposit – Note 4		124,600			-
Equipment – Note 5		2,986			4,091
	$	529,054		$	958,621
LIABILITIES
Current
Accounts payable and accrued liabilities – Note 6	$	77,361		$	45,727
STOCKHOLDERS’ EQUITY
Capital stock – Note 7
Common stock, $0.001 par value
500,000,000 authorized
40,277,500 issued and outstanding (2005: 40,277,500)		40,278			40,278
Additional paid-in capital		2,190,611			2,190,611
Warrants		40,110			40,110
Accumulated other comprehensive loss		(583	)		(583	)
Deficit accumulated during the exploration stage		(1,818,723	)		(1,357,522	)
		451,693			912,894
	$	529,054		$	958,621
Nature and Continuance of Operations – Note 1
Commitments – Notes 4 and 7

F-3

SEE ACCOMPANYING NOTES

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STERLING GROUP VENTURES, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended May 31, 2006 and 2005 and
for the period from July 27, 1994 (Date of Inception) to May 31, 2006
(Stated in US Dollars)

								July 27, 1994
								(Date of
		Years ended						Inception) to
		May 31,						May 31,
		2006			2005			2006
Expenses
Accounting, audit and legal fees	$	60,509		$	95,500		$	185,895
Bank charges		171			622			943
Consulting fees – Note 6		126,741			164,335			329,916
Depreciation		1,829			1,334			3,163
Filing and transfer agent fees		6,023			5,742			30,139
Foreign exchange loss (gain)		(5,906	)		2,433			(2,336	)
General and administrative – Note 6		13,006			16,790			32,959
Mineral property costs (recovery)
– Schedule A and Note 6		(28,073	)		468,818			458,498
Printing and mailing		1,523			5,789			16,883
Shareholder information and investor relations		21,553			38,147			59,700
Stock-based compensation		-			-			368,641
Travel and entertainment		21,310			31,326			103,689
Loss before other item		(218,686	)		(830,836	)		(1,588,090	)
Other items
Interest income		4,193			11,882			16,075
Allowance for doubtful collection – Note 4(b)		(246,708	)		-			(246,708	)
Net loss for the period	$	(461,201	)	$	(818,954	)	$	(1,818,723	)
Basic and diluted loss per share	$	(0.01	)	$	(0.02	)
Weighted average number of shares outstanding		40,277,500			39,897,967

F-4

SEE ACCOMPANYING NOTES

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STERLING GROUP VENTURES, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
for the period from July 27, 1994 (Date of Inception) to May 31, 2006
(Stated in US Dollars)

																	Deficit
														Accumulated			Accumulated
								Additional						Other			During the
		Common Shares						Paid-in						Comprehensive			Exploration
		Number			Par Value			Capital			Warrants			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 for the year		-			-			-			-			-			(1,860	)		(1,860	)
Balance, May 31, 2002		1			1			1,881			-			-			(9,762	)		(7,880	)
Net loss for 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 for the year		-			-			-			-			-			(527,446	)		(527,446	)

…/cont’d)

F-5

SEE ACCOMPANYING NOTES

---

Continued

STERLING GROUP VENTURES, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
for the period from July 27, 1994 (Date of Inception) to May 31, 2006
(Stated in US Dollars)

																	Deficit
														Accumulated			Accumulated
								Additional						Other			During the
		Common Shares						Paid-in						Comprehensive			Exploration
		Number			Par Value			Capital			Warrants			Loss			Stage			Total
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	)
Fair value of share purchase
warrants (finders’ fees)		-			-			(40,110	)		40,110			-			-			-
Issuance of shares for services
rendered		100,000			100			41,900			-			-			-			42,000
Net loss for the year		-			-			-			-			-			(818,954	)		(818,954	)
Balance, May 31, 2005		40,277,500			40,278			2,190,611			40,110			(583	)		(1,357,522	)		912,894
Net loss for the year		-			-			-			-			-			(461,201	)		(461,201	)
Balance, May 31, 2006		40,277,500		$	40,278		$	2,190,611		$	40,110		$	(583	)	$	(1,818,723	)	$	451,693

F-6

SEE ACCOMPANYING NOTES

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STERLING GROUP VENTURES, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended May 31, 2006 and 2005 and
for the period from July 27, 1994 (Date of Inception) to May 31, 2006
(Stated in US Dollars)

								July 27, 1994
								(Date of
		Years ended						(Inception) to
		May 31,						May 31,
		2006			2005			2006
Cash Flows from Operating Activities
Net loss for the period	$	(461,201	)	$	(818,954	)	$	(1,818,723	)
Add (deduct) items not affecting cash:
Stock compensation expenses		-			-			368,641
Depreciation		1,829			1,334			3,163
Permit and engineering studies		-			150,000			150,000
Shareholder information and investor relations		-			20,447			20,447
Foreign exchange translation adjustment		-			-			(106	)
Change in non-cash working capital items
related to operations:
GST receivable		(693	)		(7,257	)		(13,787	)
Prepaid expenses		26,897			(6,540	)		20,357
Advance receivable		(36,531	)		-			(36,531	)
Accounts payable and accrued liabilities		31,634			(29,469	)		77,361
Cash flows used in operating activities		(438,065	)		(690,439	)		(1,229,178	)
Cash Flows from Investing Activities
Advance on investment		-			-			(150,000	)
Mineral property deposit		(124,600	)		-			(124,600	)
Additions to equipment		(724	)		(5,425	)		(6,149	)
Cash flows used in investing activities		(125,324	)		(5,425	)		(280,749	)
Cash Flows from Financing Activities
Common stock		-			975,000			1,858,000
Amounts contributed by director		-			-			1,881
Cash flows provided by financing activities		-			975,000			1,859,881

…/cont’d

F-7

SEE ACCOMPANYING NOTES

---

Continued

STERLING GROUP VENTURES, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended May 31, 2006 and 2005 and
for the period from July 27, 1994 (Date of Inception) to May 31, 2006
(Stated in US Dollars)

								July 27, 1994
								(Date of
		Years ended						(Inception) to
		May 31,						May 31,
		2006			2005			2006
Net increase (decrease) in cash and cash equivalents		(563,389	)		279,136			349,954
Cash and cash equivalents, beginning of the period		913,343			634,207			-
Cash and cash equivalents, end of the period	$	349,954		$	913,343		$	349,954
Cash and cash equivalents consist of:
Cash	$	274,463		$	710,995		$	274,463
Term deposits		75,491			202,348			75,491
	$	349,954		$	913,343		$	349,954
Non-cash Transactions – Note 9

F-8

SEE ACCOMPANYING NOTES

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	STERLING GROUP VENTURES, INC.	Schedule A
	(An Exploration Stage Company)
	SCHEDULE OF MINERAL PROPERTY COSTS
	for the years ended May 31, 2006 and 2005 and
	for the period from July 27, 1994 (Date of Inception) to May 31, 2006
	(Stated in US Dollars)

F-9

SEE ACCOMPANYING NOTES

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STERLING GROUP VENTURES, INC.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2006 and 2005
(Stated in US Dollars)

Note 1	Nature and Continuance of Operations
	The Company is in the exploration stage. The Company has entered into several 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 property, 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 and 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, 2006, the Company had not yet achieved profitable operations, has accumulated losses of $1,818,723 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 Group Ventures Inc. was incorporated in the State of Nevada on September 13, 2001 and its fiscal year end is May 31.
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.

F-10

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Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2006 and 2005
(Stated in US Dollars) – Page 2

Note 2

Summary of Significant Accounting Policies – (cont’d)

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 Standard Board Statement No. 7 and Securities and Exchange Commission Act Guide 7 for its characterization of the Company as an exploration stage company.

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. and Makaelo Limited. All significant inter-company transactions and balances have been eliminated. The Company’s subsidiaries are 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 (formerly Micro Express (Lushi) Ltd.) was incorporated on August 18, 2004; Makaelo Holdings Inc. was incorporated on March 21, 2005 and Makaelo Limited was incorporated on February 14, 2005.

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

Acquisition and exploration costs are charged to operations as incurred until such time that proven or probable ore reserves are discovered. From that time forward, the Company will capitalize all costs to the extent that future cash flow from mineral reserves equals or exceeds the costs deferred. The deferred costs will be amortized over the recoverable reserves when a property reaches commercial production.

Exploration activities conducted jointly with others are reflected at the Company’s proportionate interest in such activities.

As at May 31, 2006, the Company did not have proven or probable ore reserves.

F-11

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Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2006 and 2005
(Stated in US Dollars) – Page 3

Note 2

Summary of Significant Accounting Policies – (cont’d)

Long-Lived Assets Impairment

Long-term assets of the Company are reviewed when changes in circumstances require as to whether their carrying value has become impaired, pursuant to guidance established in Statement of Financial Accounting Standards No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets”. Management considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist, the assets will be written down to 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.

Equipment

Equipment is stated at cost. Depreciation is provided on a straight-line basis over 3 years.

Income Taxes

The Company follows SFAS No. 109, “Accounting for Income Taxes”, which requires the use of the asset and liability method for accounting for income taxes. Under the asset and liability method of FAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry-forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled.

F-12

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Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2006 and 2005
(Stated in US Dollars) – Page 4

Note 2

Summary of Significant Accounting Policies – (cont’d)

Financial Instruments

The carrying value of cash and cash equivalents, cost recovery receivable and accounts payable and accrued liabilities approximates fair value because of 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.

Concentration of Credit Risk

The Company places its cash and cash equivalents with high credit quality financial institutions. As of May 31, 2006, the Company had no deposit in a bank beyond insured limits.

Basic Loss per Share

The Company reports basic loss per share in accordance with SFAS No. 128, “Earnings Per Share”. Basic loss per share is computed using the weighted average number of shares outstanding during the years. Diluted loss per share has not been provided as it would be antidilutive.

Comprehensive Loss

The Company reports comprehensive income (loss) in accordance with SFAS No. 130, “Reporting Comprehensive Income”. 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 SFAS No. 52, “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. Translation adjustments from the use of different exchange rates from period to period are included in the Comprehensive Income account in Stockholder’s Equity, if applicable.

F-13

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Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2006 and 2005
(Stated in US Dollars) – Page 5

Note 2

Summary of Significant Accounting Policies – (cont’d)

Foreign Currency Translation – (cont’d)

Transactions undertaken in currencies other than the functional currency of the entity are translated using the exchange rate in effect as of the transaction date. Any exchange gains and losses are included in the Statement of Operations.

Stock-based Compensation

The Company has elected to account for stock-based compensation following APB No. 25, “Accounting for Stock Issued to Employees”, and provide the disclosure required under SFAS No. 123, “Accounting for Stock-based Compensation”, as amended by SFAS No. 148, “Accounting for Stock-based Compensation – Transition and Disclosure, amendment of SFAS Statement No. 123”.

New Accounting Pronouncements

SFAS No. 123(R), “Share-Based Payment”, replaces SFAS No. 123, “Accounting for Stock-Based Compensation”, and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. This statement requires that the compensation cost relating to share-based payment transactions be recognized at fair value in the financial statements. The Company is required to apply this statement in the first annual period that begins after December 15, 2005. The adoption of SFAS No. 123(R) is expected to have no impact on the Company's financial statements.

SFAS No. 153, “Exchanges of Non-monetary Assets” – an amendment of APB Opinion No. 29, is effective for fiscal years beginning after June 15, 2005. This statement addresses the measurement of exchange of non-monetary assets and eliminates the exception from fair-value measurement for non-monetary exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29, “Accounting for Nonmonetary Transactions”, and replaces it with an exception for exchanges that do not have commercial substance. The adoption of SFAS No. 153 is not expected to have a significant impact on the Company's financial statements.

The EITF reached consensus on Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”, which provides guidance on determining when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. The FASB issued FSP EITF 03-1-1, “Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1”, “The Meaning of Other-Than-Temporary Impairment and Its Application to Investments”, which delays the effective date for the measurement and recognition criteria contained in EITF 03-1 until final application guidance is issued. The adoption of this consensus or FSP is expected to have no impact on the Company's financial statements.

F-14

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Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2006 and 2005
(Stated in US Dollars) – Page 6

Note 2

Summary of Significant Accounting Policies – (cont’d)

New Accounting Pronouncements – (cont’d)

SFAS No. 154, “Accounting Changes and Error Corrections”, a replacement of APB No. 20, “Accounting Changes”, and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”. SFAS No. 154 changes the requirements for the accounting for and reporting of a change in accounting principle. Previously, most voluntary changes in accounting principles required recognition via a cumulative effect adjustment within net income of the period of the change. SFAS No. 154 requires retrospective application to prior periods' financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, this statement does not change the transition provisions of any existing accounting pronouncements. The adoption of SFAS No. 154 is expected to have no impact on the Company's financial statements.

SFAS 155, “Accounting for Certain Hybrid Instrument”, amends SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”, to narrow the scope exception for interest-only and principal-only strips on debt instruments to include only such strips representing rights to receive a specified portion of the contractual interest or principal cash flows. SFAS 155 also amends SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”, to allow qualifying special-purpose entities to hold a passive derivative financial instrument pertaining to beneficial interests that itself is a derivative financial instrument. SFAS No. 155 is effective for fiscal years beginning after September 15, 2006. The adoption of SFAS No. 155 is expected to have no impact on the Company's financial statements.

SFAS No. 156, “Accounting for Servicing of Financial Assets, amends SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”, regarding (1) the circumstances under which a servicing asset or servicing liability must be recognized, (2) the initial and subsequent measurement of recognized servicing assets and liabilities, and (3) information required to be disclosed relating to servicing assets and liabilities. SFAS No. 156 is effective for fiscal years beginning after September 15, 2006. The adoption of SFAS No. 156 is expected to have no impact on the Company's financial statements.

In September 2005, the EITF reached consensus on Issue no. 05-08, “Income Tax Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature”. EITF 05-08 is effective for financial statements beginning in the first interim or annual reporting period beginning after December 15, 2005. The adoption of EITF 05-08 is expected to have no impact on the Company's financial statements

F-15

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Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2006 and 2005
(Stated in US Dollars) – Page 7

Note 2	Summary of Significant Accounting Policies – (cont’d)
	New Accounting Pronouncements – (cont’d)
	In September 2005, the EITF reached consensus on Issue 05-02, ‘The Meaning of “Conventional Convertible Debt Instrument” in EITF Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock”’. EITF 05-02 is effective for new instruments entered into and instruments modified in reporting periods beginning after June 29, 2005. The adoption of EITF 05-02 is expected to have no impact on the Company's financial statements.
	In September 2005, the EITF reached consensus on Issue No. 05-07, “Accounting for Modifications to Conversion Options Embedded in Debt Instruments and Related Issues”. EITF 05-07 is effective for future modifications of debt instruments beginning in the first interim or annual reporting period beginning after December 15, 2005. The adoption of EITF 05-07 is expected to have no impact on the Company's financial statements.
Note 3	Advance Receivable – Note 6
	Advance receivable is intended to be utilized against expenses in the year ended May 31, 2007.
Note 4	Mineral Properties

	a)	DX Polymetallic Project
		On March 2, 2005, the Company, through its wholly-owned subsidiary, Makaelo Limited, entered into a joint venture agreement with a Chinese citizen who holds two exploration permits for a copper project (“the Project”) in Inner Mongolia, China.
		The Project is comprised of two exploration permits, Donggou and Xiaoxigou, covering an area of about 52 square kilometers. The Project is located in Inner Mongolia. The Company has the right to earn 52% of a cooperative joint venture company by spending RMB 5,200,000 ($650,000) for the exploration in the permit areas over three years with the first year contributing not less than RMB2,000,000 ($240,900). The Company did not complete the required expenditures within the first year and is attempting to renegotiate this agreement. After the Company has earned 52% interest of the cooperative company, contributions to fund the exploration and development of the Project will be made pro rata. The interest of the Chinese party will be diluted to not less than 10% if it elects not to make cash contributions.
		As at May 31, 2006, the Company had incurred $51,757 in the DX Polymetallic Property.

F-16

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Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2006 and 2005
(Stated in US Dollars) – Page 8

Note 4

Mineral Properties – (cont’d)

	b)	Jiajika Spodumene Property
		On April 5, 2005, the Company, through its wholly-owned subsidiary Micro Express Ltd. (“MEL”), signed a joint venture contract with a Chinese partner for the establishment of a joint venture company, Jihai Lithium Ltd. and the development of the Jiajika lithium deposit in Kangding District, Sichuan Province, China. On March 3, 2006, both parties agreed to terminate the joint venture and the Chinese partner will pay back RMB2,480,000 ($309,058) incurred by MEL on the project. The Chinese partner shall pay RMB1,200,000 ($149,520) and RMB1,280,000 ($159,538) before April 15, 2006 and March 30, 2007, respectively. If the Chinese partner does not pay the RMB1,280,000, the amount will be converted into an interest in the Jiajika project based on the percentage of MEL’s investment as to the total investment in the Jiajika project. As at May 31, 2006, the Company had received RMB500,000 ($62,350) and a receivable of RMB1,980,000 ($246,708) was recorded. As the Chinese partner has not paid the remaining RMB700,000 ($87,170) and the recoverability of the RMB1,280,000 ($159,538) is uncertain, the Company has recorded an allowance for doubtful collection totalling $246,708.
		As at May 31, 2006, the Company had incurred $397,919 in the Jiajika Spodumene Property.
	c)	Dangxiongcuo Salt Lake Project
		On September 16, 2005, the Company, through its wholly owned subsidiary, Micro Express Holdings Inc. (“Micro”), signed an agreement (the “Agreement”) for the development of Dangxiongcuo salt lake property (“DXC Salt Lake”) in Nima county of Naqu district in Tibet, China. The Agreement follows a Letter of Intent signed between the parties on July 11, 2005.
		Pursuant to the Agreement, the parties have agreed to set up a Cooperative Company, (the “Cooperative”) to develop the DXC Salt Lake. The objective of the Cooperative is 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, will own 65% of the Cooperative. It is anticipated that the total investment in the Cooperative will be approximately RMB240,000,000 (approximately $29,900,000).
		As of May 31, 2006, the Company has advanced RMB1,000,000 ($124,600) to the joint venture partner in China as project deposit which will be used as part of the transfer fee for the mining permit. The Company is required to open a special project account within ten business days after the agreement is signed and deposit RMB3,000,000 (US$370,000) (paid). The Company also incurred $236,759 in mineral property costs.

F-17

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Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2006 and 2005
(Stated in US Dollars) – Page 9

Note 4

Mineral Properties – (cont’d)

	d)	Lushi Spodumene Property
		On December 28, 2003, the Company, through MEL, entered into a Letter of Intent to earn an interest of between 90% to 92% in a 30-year mining joint venture which will hold the rights to develop the Lushi Spodumene property located in Henan Province, China. The Company shall contribute the total investment in the project. The amount of the investment will be determined by a pre-feasibility study. On April 10, 2004, the Company entered into a formal joint venture agreement with its Chinese partner to commence earning its 92% interest.
		As at May 31, 2006, the Company had incurred $72,912 in the Lushi Spodumene Property and had abandoned the property.
	e)	DHLT Spodumene Property
		On May 21, 2005, the Company, through its wholly-owned subsidiary, Huyana Ventures Limited (“Huyana”), signed a letter of intent (the “LOI”) with a Chinese partner for the development of Dahongliutan (“DHLT”) spodumene deposit located in Xinjiang Province of China. A joint venture company in Hetian City of Xinjiang Province in China will be set up to conduct the development and operation of the DHLT spodumene deposit in the areas that the Chinese partner has mining permits and where the Chinese partner is applying for additional mining permits. The business of the joint venture company will include mining and processing spodumene and comprehensive utilization of other associated rare metals. The Company shall contribute the total investment in the project for an 80% interest in the joint venture. The terms of the joint venture will be decided upon further negotiations and due diligence between the parties and will be subject to a formal contract to be signed by both parties.
		As at May 31, 2006, the Company had incurred $8,209 in the DHLT Spodumene Property and had abandoned the property.

Note 5

Equipment

			2006
						Accumulated
			Cost			Amortization			Net
	Computer equipment	$	6,149		$	3,163		$	2,986
			2005
						Accumulated
			Cost			Amortization			Net
	Computer equipment	$	5,425		$	1,334		$	4,091

Equipment is located in Canada.

F-18

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Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2006 and 2005
(Stated in US Dollars) – Page 10

Note 6	Related Party Transactions
	The Company was charged consulting fees during the year ended May 31, 2006 totalling $123,173 (2005: $98,862) by companies controlled by two directors of the Company.
	The Company was charged rental fees included in General and Administrative during the year ended May 31, 2006 totalling $10,016 (2005: $7,054) by a company controlled by a director of the Company.
	The Company was charged mineral property costs - consulting during the year ended May 31, 2006 in the amount of $43,296 (2005: $38,045) by a company controlled by a director of the Company.
	Cash and cash equivalents at May 31, 2006 include $290,194 (2005: $NIL) held in trust by a director of the Company.
	Included in advance receivable is $33,595 (2005: $Nil) advanced to the Vice-President of Micro.
	Included in accounts payable is $23,814 (2005: $8,909) which is due to the companies controlled by the directors of the Company for their services provided.
Note 7	Capital Stock
	Commitments:

	a)	Capital Stock
		On January 20, 2004, the Company’s Board of Directors approved the acquisition of all the issued and outstanding shares of MEL for 25,000,000 common shares of the Company. MEL is a company incorporated in British Virgin Islands and has been inactive since incorporation until 2003. MEL has entered into several joint venture agreements to develop industrial mineral properties in China. MEL was controlled by directors of the Company. Micro Express Holdings Inc. was incorporated on February 25, 2004 by the Company to hold the Company’s investment in MEL. The business combination has been accounted for as a reverse acquisition whereby the purchase method of accounting has been used with MEL being the accounting parent and the Company being the accounting subsidiary. These consolidated financial statements include the operations of the Company, being the accounting subsidiary, from the date of acquisition.

F-19

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Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2006 and 2005
(Stated in US Dollars) – Page 11

Note 7	Capital Stock – (cont’d)
	Commitments: – (cont’d

	a)	Capital Stock – (cont’d)
		The Company has arranged a private placement of up to 5,000,000 units at $0.50 per unit for total proceeds of $2,500,000. 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 (Note 7(c)). Upon exercise of the share purchase warrant, an additional share purchase warrant will be granted at $1.00 per share, expiring February 16, 2007. As at May 31, 2006, the Company has received total subscriptions of $1,858,000 for 3,716,000 units. Finder's fee of 101,500 units with the aforementioned terms was issued.
		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.
	b)	Stock Options
		On February 3, 2004, the Board of Directors of the Company has approved the 2004 Stock Option Plan which allows the Company to grant up to 3,636,000 stock options as an incentive to directors, officers, employees and consultants.
		During the year ended May 31, 2006, no stock options were granted, exercised or cancelled.
		As at May 31, 2006, there were a total of 3,636,000 stock options outstanding to directors and officers of the Company exercisable at $0.50 per share, expiring on February 3, 2009.
	c)	Share Purchase Warrants
		During the year ended May 31, 2006, there were no warrants issued, exercised or cancelled.
		During the year ended May 31, 2005, 2,051,500 share purchase warrants were issued, including 101,500 warrants with a fair value of $40,110 for a finder’s fee. During the year ended May 31, 2004, 1,766,000 share purchase warrants were issued. No warrants were exercised or cancelled during the year ended May 31, 2005.
		As at May 31, 2006, the Company has a total of 3,817,500 Series ‘A’ share purchase warrants outstanding. Each warrant entitled the holder thereof the right to purchase one common share at $0.75 per share expiring on February 16, 2006. Upon exercising of the warrant, an additional share purchase warrant will be granted at $1.00 per share expiring on February 16, 2007.

F-20

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Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2006 and 2005
(Stated in US Dollars) – Page 12

Note 7

Capital Stock – (cont’d)

Commitments: – (cont’d

	c)	Share Purchase Warrants – (cont’d)
		On February 14, 2006, the Company reduced the exercise price of the 3,817,500 Series “A” Share Purchase Warrants from $0.75 to $0.50 each and extended the terms of Series “A” Share Purchase Warrants for two years to the earlier of:
		i)	February 16, 2008; and
		ii)	The 90th day after the day on which the weighted average trading price of the Company’s shares exceed $0.85 per share for 30 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 (i) or (ii) as described above.

The fair values of the warrants granted to the finders range from $0.24 to $0.54 per share and were estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used: dividend yield of 0%, expected volatility from 73.5% to 92.5%, risk-free interest rate from 2.99% to 3.27%, and an expected life of from 1.25 to 1.5 years.

Note 8	Deferred Tax Assets
	There is no current or deferred tax expense for the years ended May 31, 2006 and 2005, due to the Company's loss position. The Company has fully reserved for any benefits of these losses. The deferred tax consequences of temporary differences in reporting items for financial statement and income tax purposes are recognized, as appropriate.
	Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Management has considered these factors in reaching its conclusion as to the valuation allowance for financial reporting purposes. The income tax effect of temporary differences comprising the deferred tax assets and deferred tax liabilities on the accompanying consolidated balance sheets is a result of the following:

			2006			2005
	Deferred tax assets	$	252,182		$	170,332
	Valuation allowance		(252,182	)		(170,332	)
	Net deferred tax assets	$	-		$	-

F-21

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Sterling Group Ventures, Inc.
(An Exploration Stage Company)
Notes to the Consolidated Financial Statements
May 31, 2006 and 2005
(Stated in US Dollars) – Page 13

Note 8	Deferred Tax Assets – (cont’d)
	All of the net operating loss carryforwards was generated by the parent company. The Company does not file a consolidated tax return because all of its subsidiaries are foreign corporations. Pursuant to the Tax Reform Act of 1986, annual utilization of the Company’s net operating loss carryforwards may be limited if a cumulative change in ownership of more than 50% is deemed to occur within any three year period.
Note 9	Non-cash Transactions
	Investing and financing activities that do not have a direct impact on current cash flows are excluded from the cash flow statement. During the year ended May 31, 2005, the Company issued 101,500 common shares at a value of $50,750 as commission paid to the broker for a private placement and issued 100,000 common shares at a value of $42,000 for investor relations’ services. As at May 31, 2005, $21,553 was included in prepaid expenses and $20,447 was expensed. These transactions were excluded from the statements of cash flows.
Note 10	Comparative Figures
	Certain of the May 31, 2005 comparative figures have been reclassified to conform with the current year’s presentation.
Note 11	Foreign Currency Risk
	The Company is exposed to fluctuations in foreign currencies through amounts held in China in RMB:
	- cash $232,008;
	- cost recovery receivable $246,708; and
	- mineral property deposits $124,600.
Note 12	Income Taxes
	No provision for income taxes has been provided for in these financial statements due to the net loss. At May 31, 2006, the Company has net operating loss carryforwards, which expire commencing in 2022, totalling approximately $741,713, the benefit of which has not been recorded in the financial statements.

F-22

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