ADAVALE RESOURCES LIMITED — Annual Report 2011

Sep 28, 2011

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ASX RELEASE

2011 Annual Report and AGM

29-September-2011

Please find attached the Adavale Resources Limited 2011 Annual Report.

It is anticipated that the hard copy version of the Annual Report, along with the Notice of Meeting, will be distributed to shareholders mid October 2011.

Adavale Resources Limited will hold its 2011 Annual General Meeting on Friday 25 November 2011 at 10am (Sydney time) at the offices of Arthur Phillip Pty Ltd, Colonial Centre, Level 33, 52 Martin Place, Sydney, NSW.A2114

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Sylvie Dimarco Company Secretary Adavale Resources Limited

ADAVALE RESOURCES LIMITED

ACN 008 719 015

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 June 2011

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ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CONTENTS FOR THE YEAR ENDED 30 JUNE 2011

CORPORATE DIRECTORY	4
REVIEW OF OPERATIONS	5
CORPORATE GOVERNANCE STATEMENT	8
DIRECTORS’ REPORT	15
AUDITOR’S INDEPENDENCE DECLARATION	22
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011	23
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2011	24
CASH FLOW STATEMENTAS AT 30 JUNE 2011	25
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2011	26
NOTES TO THE FINANCIAL STATEMENTS	27
DIRECTORS’ DECLARATION	60
INDEPENDENT AUDIT REPORT FOR THE YEAR ENDED 30 JUNE 2011	61
ADDITIONAL INFORMATION	63

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ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CORPORATE DIRECTORY

Directors

Richard Poole Roger Steinepreis Philip Suriano John Risinger Mark Stevenson Seiki Takahashi (resigned on 3 December 2010)

Secretary

Sylvie Dimarco

Registered Office

Level 33, Colonial Centre 52 Martin Place SYDNEY NSW 2000

Telephone +(612) 9227 8900 Facsimile +(612) 9227 8901

Share Registry

Computershare Investor Services Pty Limited Level 3, 60 Carrington Street Sydney NSW 2000

Auditor

Robert Nielson Partners

Stock Exchange

Australian Securities Exchange Limited 20 Bridge Street SYDNEY NSW 2000

ASX Code

ADD (fully paid ordinary shares)

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ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

REVIEW OF OPERATIONS

Adavale Resources Limited (ARL) continues with its focus on exploration and development of coal projects in Indonesia and retains its interest in the Lake Surprise Uranium project in South Australia.

INDONESIA

During the year Adavale continued with its mandate to research and identify quality coal projects across Indonesia.

Offices have been established in Jakarta, Balikpapan and Samarinda with full time technical and legal staff, together with an established network of contacts and professionals.

The company has generated an extensive list of projects over the past year and continues to maintain and upgrade a core group of projects as part of its exploration portfolio. The ongoing process of project review is essential to maintaining a structured and valid portfolio in Indonesia where understanding complex ownership, forestry and legal issues is essential to success.

The Company has recognised the importance of establishing sound business relationships with prominent Indonesian partners and has entered into a joint venture with Mr Haryono Eddyarto, a well known businessman with over 34 years experience in the mining and coal industries. ANR and Mr Haryono have established Adavale Harner Resources (AHR) - 60% ANR and 40% Mr Haryono - to explore and develop coal assets in Indonesia.

ANR has appointed Mr Marshall Cooper as the Chief Executive Officer of its Indonesian coal interests. Mr Cooper is an Australian citizen who has living in the region for the past 22 years. Since 1997 he has been employed by Lippo Group and for the last 4 years has held the position of Chief Executive Advisor to the Chairman of Lippo Group Mining. During that time his role included acquisitions of projects, establishment of exploration programs, mergers and acquisitions, development and funding plans and positioning the mining business unit as the future leader of the Lippo Group.

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ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

REVIEW OF OPERATIONS

SUMATRA – TAPAN

ARL has completed a JORC exploration program on the Tapan Project in Sumatra. The project lies 120 km south of the capital of Padang. ADA Strategic, a Jakarta based consulting group, carried out the program and prepared a thorough report consistent with JORC code requirements.

Following the program an initial JORC compliant Inventory Coal Resource of 9.05Mt has been estimated within an 800ha portion of the concession area. The resource estimate is made up of 2.15Mt Measured, 1.5Mt Indicated and 5.4Mt Inferred. Studies on mine planning, haulage, processing, port and transhipment facilities have been carried out together with preliminary cash flow forecasts and capital costs to reach production. Adavale is completing the acquisition of PPA, the company that holds the exploration and exploitation IUP’s.

EAST KALIMANTAN

Adavale has researched numerous projects in East Kalimantan during the year and reviewed a number of offers. Proposals included schemes of work and joint ventures on concessions in the areas of Samarinda, Sebulu, Sepaku, Penajam and Grogot.

Preliminary agreements were reached on projects near Sangatta with the owners of PT. Gunung Mas Wisesa, PT Agroindo Bumi Perkasa and PT. Anugrah Rizki Gunung.

The projects lie in an area that hosts a number of world class coal deposits. AHR geologists and legal staff are finalising due diligence on forestry, legal and technical matters prior to commitment to drilling programs and formal documentations. During the year ARL carried out a short drilling program on a concession in the Samboja area held by PT. Mitra Energy Agung. Results front the program were inconclusive and ANR is waiting for the concession owner to carry out further reconnaissance drilling.

SOUTH KALIMANTAN

During the year AHR entered into a preliminary agreement to assume mining contracts on three concessions in the Batulicin area of South Kalimantan. PT. Trimitra Sembada, PT. Cahaya Alam Sejahtera and CV. Rahma. Batulicin is located 152 km north of the capital Banjarmasin. The three projects are located within 27km of Batulicin and are surrounded by world class coal mines. Due diligence and negotiations with the vendor continues

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ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

REVIEW OF OPERATIONS

LAKE SURPRISE - SOUTH AUSTRALIA (100% Adavale)

Adavale’s sedimentary uranium project at Lake Surprise in South Australia comprises EL 3622 and EL 3620 over an area of 1,836km2. Two prospect areas – Clayton Basin and Mumpie - have been the focus of exploration to date.Adavale is continuing to explore the project. Program’s during the year explored deeper targets in the Eyre Formation within the Mumpie prospect in order to test for uranium mineralisation similar to the Beverly and Beverly Four Mile deposits. Results were encouraging and extensions to testing the mineralization are planned

Adavale is in the process of compiling all exploration and data gathered to date and to complete a detailed report on the project. The Company will then consider whether to look for joint venture partners to continue the exploration program

Competent Persons Statements

The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Steven MacMillan who is a Member or Fellow of The Australasian Institute of Mining and Metallurgy.

Steven MacMillan is a full-time employee of the company. Steven MacMillan has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Steven MacMillan consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

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ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CORPORATE GOVERNANCE STATEMENT

This statement outlines the main Corporate Governance practices in place throughout the financial year, which comply with the Australian Stock Exchange (ASX) Corporate Governance Council recommendations, unless otherwise stated.

Role of the Board

The Board’s primary role is the protection and enhancement of long-term shareholder value.

To fulfil this role, the Board is responsible for the overall Corporate Governance of the consolidated entity including its strategic direction, establishing goals for management and monitoring the achievement of these goals.

Board Processes

The Board currently holds at least four scheduled meetings each year, plus strategy meetings and any extraordinary meetings at such other times as may be necessary to address any specific significant matters that may arise.

Composition of the Board

The names of the directors of the company in office at the date of this Statement are set out in the directors’ report of this financial report.

• the Board should comprise at least three directors;

• the Chairman of the Board should be an independent non-executive director;

• the Board should comprise a majority of non-executive directors, with at least 50 percent of the Board being

• independent non-executive directors;

• the Board should comprise directors with a broad range of expertise both nationally and internationally;

• directors appointed by the Board are subject to election by shareholders at the following annual general meeting and

• and thereafter directors (other than executive directors) are subject to re-election at least every three years. The tenure for executive director is linked to his holding of executive office.

The composition of the Board is reviewed on an annual basis to ensure that the Board has the appropriate mix of expertise and experience. When a vacancy exists, through whatever cause, or where it is considered that the Board would benefit from the services of a new director with particular skills, potential candidates are identified by the Board with advice from external consultants if necessary. The Board then appoints the most suitable candidate who must stand for election at the next general meeting of shareholders.

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ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CORPORATE GOVERNANCE STATEMENT (CONT)

Nomination Committee

Given the small size of the Board and of the Company, a nomination committee has not been established.

Evaluation of Board Performance

No performance evaluation for the Board and its members took place in the reporting period. Given the small size of the Board and of the Company, the directors are of the opinion that such a review is not efficient nor practicable.

Conflict of Interest

In accordance with the Corporations Act, 2001 and the Company’s constitution, directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company. Where the Board believes that a significant conflict exists, the director concerned does not receive the relevant board papers and is not present at the meeting whilst the item is considered.

Director Dealings in Company Shares

The Constitution permits directors and employees to acquire shares in the Company. Company policy prohibits directors and senior management from dealing in Company shares or exercising options;

• The date after 1 January that the Designated Officer or Employee receives a written preliminary Half Year Report

• and the time of release of the Appendix 4D Half Year Report to ASX;

• The date after 1 July that the Designated Officer or Employee receives a written preliminary Full Year Report and the time of release of the Appendix 4E Full Year Report to the ASX; and

• whilst in possession of price sensitive information.

Directors must obtain the approval of the Chairman of the Board and notify the Company Secretary once they sell or buy shares in the Company. In accordance with the provisions of the Corporations Act 2001 and the Listing Rules of the ASX, directors advise the Exchange of any transactions conducted by them in shares in the Company.

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ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CORPORATE GOVERNANCE STATEMENT (CONT)

Remuneration of Executives

Due to the small size of the Board and of the Company, a Remuneration Committee has not been established, but the Board establishes and monitors remuneration packages and policies applicable to the Chief Executive Officer, based on the performance in job and comparative remuneration packages in the market and financial position of the Company.

The remuneration levels for the Chairman and non-executive directors were established in February 2000, and have not changed since that time.

Remuneration levels are competitively set to attract and retain qualified and experienced directors, executives and staff. Where necessary, independent advice is sought on the appropriateness of remuneration packages, given trends in comparative companies and industry surveys and having regard for the overall performance of the Company.

Independent Professional Advice and Access to Company Information

Each director has the right of access to all relevant company information and to the Company’s executives and, subject to prior consultation with the Chairman, may seek independent professional advice at the consolidated entity’s expense. A copy of advice received by the director is made available to all other members of the Board.

Audit Committee

All members of the Committee must be non-executive directors. The role of the Committee is to advise on the establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of the consolidated entity.

It also gives the Board of Directors additional assurance regarding the quality and reliability of financial information prepared for use by the Board in determining policies or for inclusion in the financial report.

The external auditors and the Chief Executive Officer are invited to Audit Committee meetings at the discretion of the Committee.

Ordinarily the Committee meets at least twice during the year.

The responsibilities of the Audit Committee include:

• reviewing the financial report and other financial information distributed externally;

• reviewing any new accounting policies to ensure compliance with Australian Accounting Standards and generally accepted accounting principles;

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ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CORPORATE GOVERNANCE STATEMENT (CONT)

• reviewing the Company’s policies and procedures for convergence with International Financial Reporting Standards;

• reviewing external audit reports to ensure that where major deficiencies or breakdowns in controls or procedures have been identified appropriate and prompt remedial action is taken by management;

• reviewing the nomination and performance of the auditor. The current external auditors were appointed in 2006;

• considering whether non-audit services provided by the external auditor are consistent with maintaining the external auditor’s independence;

• liaising with the external auditors and ensuring that the annual and half-year statutory audits are conducted in an effective

• monitoring the establishment of an appropriate internal control framework and considering enhancements;

• monitoring the establishment of appropriate ethical standards;

• monitoring the procedures in place to ensure compliance with the Corporations Act, 2001 and ASX Listing Rules and all other regulatory requirements;

• addressing any matters outstanding with auditors, Australian Taxation Office, Australian Securities and Investments ASX and financial institutions; and

• improving the quality of the accounting function.

The Audit Committee reviews the performance of the external auditors on an annual basis and normally meets with them during the year as follows:

Audit Planning

• To discuss the external audit plan;

• To discuss any significant issues that may be foreseen;

• To discuss the impact of any proposed changes in accounting policies on the financial statements;

• To review the nature and impact of any changes in accounting policies adopted by the consolidated entity during the year;

• To review the fees proposed for the audit work to be performed.

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ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CORPORATE GOVERNANCE STATEMENT (CONT)

• To review the pro forma half-yearly and pro forma preliminary final report prior to lodgement of those documents with the ASX, and any significant adjustments required as a result of the audit;

• To make the necessary recommendation to the Board for the approval of these documents.

Half-year and annual reporting

• To review the results and findings of the auditor, the adequacy of accounting and financial controls, and to monitor the implementation of any recommendations made;

• To review the draft financial report and the audit report and to make the necessary recommendation to the Board for the of the financial report.

As required

To organise, review and report on any special reviews or investigations deemed necessary by the Board.

Internal Control Framework

The Board acknowledges that it is responsible for the overall internal control framework, but recognises that no cost effective internal control system will preclude all errors and irregularities. To assist in discharging this responsibility, the Board has instigated an internal control framework that can be described under the following headings:

• Financial reporting - there is a comprehensive monthly reporting system with monthly results being prepared and presented to the the Board within three weeks of the month end. The consolidated entity reports to shareholders half-yearly. The Chief Executive Officer states in writing to the Board that the Company’s financial reports present a true and fair view, in all material respects of the Company’s financial condition and operational results and are in accordance with relevant accounting standards.

• Continuous disclosure – the consolidated entity has a policy that all shareholders and investors have equal access to the Company’s information and has procedures to ensure that all price sensitive information is disclosed to the ASX in accordance with the continuous disclosure requirements of the Corporations Law and ASX Listing Rules.

• Quality and integrity of personnel – formal appraisals are conducted at least annually for all employees.

• Investment appraisal – the consolidated entity has clearly defined guidelines for capital expenditure. These include annual budgets, detailed appraisal and review procedures, and levels of approval authority.

• Internal Audit - the company does not have an internal audit function but utilises its financial resources as needed to assist the Board in ensuring compliance with internal controls.

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ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CORPORATE GOVERNANCE STATEMENT (CONT)

Business Risk Management

Comprehensive practices are established such that:

• Capital expenditure and revenue commitments above a certain size require prior Board approval;

• Occupational health and safety standards and management systems are monitored and reviewed to achieve high standards of

• performance and compliance with regulations; and

• Business transactions are properly authorised and executed.

Ethical Standards

All directors, managers and employees are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the consolidated entity.

The Role of Shareholders

The Board of Directors aims to ensure that the shareholders are informed of all major developments affecting the consolidated entity’s state of affairs. Information is communicated to shareholders as follows:

• The full annual financial report is available to all shareholders;

• the half-yearly report contains summarised financial information and a review of the operations of the consolidated entity during the period. The half-year reviewed financial report is prepared in accordance with the requirements of applicable Accounting Standards and the Corporations Act 2001 and is lodged with the Australian Securities and Investments Commission and the ASX. The financial report is sent to any shareholder who requests it;

• proposed major changes in the consolidated entity which may impact on share ownership rights are submitted to a vote of shareholders;

• notices of all meetings of shareholders.

Documents that are released publicly are made available on the consolidated entity’s internet web site at

www.adavaleresources.com.au

The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the consolidated entity’s strategy and goals. Important issues are presented to the shareholders as single resolutions.

The shareholders are requested to vote on the appointment and aggregate remuneration of directors, the granting of options and shares to directors and changes to the Constitution. Copies of the Constitution are available to any shareholder who requests it.

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ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CORPORATE GOVERNANCE STATEMENT (CONT)

Diversity

The board is committed to having an appropriate blend of diversity on the board and in the Group's senior executive positions. It recognises the benefits arising from board diversity and has established a policy regarding diversity.

The policy outlines requirements for the Board to develop measureable objectives for achieving diversity and annually assess both objectives and the progress in achieving those objectives. According, the Board has developed objects regarding gender diversity and aims to achieve these objectives over the next few years as director and senior executive positions become available.

		2011			2010
	No.		%	No.		%
Board representation	0		0%	0		0%
Key management personal representation	0		0%	0		0%
Group Representation	1		16%	1		14%

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ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS’ REPORT

The directors present their report on the Company and its controlled entities for the financial year ended 30 June 2011.

Directors

Name and Qualifications	Interests in Shares and	Experience and Special Responsibilities
	Options
Richard Poole,	50,796,085 fully paid	Mr Poole is a qualified lawyer who specialises in mergers
Non-Executive Director,	ordinary shares	and acquisitions. He is a principal of Arthur Phillip Pty
Chairman LLB, B Juris, B Comm		Limited and has been involved in a range of fund raising and
ASIA	27,004,435 options	advisory projects for public and private clients. He is
Appointed 12 July 2004		currently a director of Australian Power and Gas Limited and
		Resources & Energy Group Limited.
		Former Directorships Hudson Resources Limited,
		Merchant House International Limited, BBX Holdings
		Limited, Tiaro Coal Limited, Stirling Resources Limited
		and Strathfield Group Limited.
Roger Steinepreis	17,320,172 fully paid	Mr Steinepreis graduated from the University of Western
Non- Executive Director	ordinary shares	Australia where he completed his law degree. He was
LLB, B Juris		admitted as a barrister and solicitor of the Supreme Court of
Appointed 26 May 2006	2,500,000 options	Western Australia in 1987 and has been practicing as a
		lawyer in excess of 24 years.
		Current Directorships include Imugene Limited, Avonlea
		Minerals Limited, Firestrike Resources Limited and Apollo
		Consolidated Limited.
Philip Suriano	2,666,667 fully paid	Mr Suriano’s career stretches over both corporate banking
Non-Executive Director	ordinary shares	and the Australian television industry where he has gained
B Bus, Bkg & Fin, Monash		wide knowledge and experience in finance, operations and
Appointed 26 May 2006	20,000,000 options	sales Director of Laserbond Limited, Resources & Energy
		Group Limited and BBX Holdings Limited.
John Risinger	8,626,293 fully paid	Mr Risinger has over 35 years experience in the drilling
Executive Director	ordinary shares	industry and in managing drilling and operations in mineral
Appointed 16 April 2007		exploration. He has had many years experience at board
	20,000,000 options	level in a number of listed and unlisted public companies.
Mark Stevenson	21,254,314 fully paid	Mr Stevenson is President and CEO of Holloman Holdings
Non-Executive Director	paid ordinary shares	Corporation and has had over 30 years experience in
Appointed 16 April 2007		management, engineering and operations in the upstream Oil
		and Gas Industry. He holds a B.S. in Constructional
		Engineering from Texas Tech University, Lubbock Texas.

15

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS’ REPORT (CONT)

Company Secretary

Sylvie Dimarco Company Secretary, LLB Appointed 20 March 2009

The Company Secretary at the date of this report is Ms Sylvie Dimarco. Ms Dimarco holds a Bachelor of Laws from the University of Sydney and has practiced as commercial lawyer for eleven years. Ms Dimarco has experience in commercial, property and corporations law. Ms Dimarco is also a Company Secretary of Resources & Energy Group Limited and BBX Holdings Limited. Ms Dimarco is a Certificated member of the Chartered Secretaries of Australia. For the past four years Ms Dimarco has been working as the Compliance Officer of Arthur Phillip, an investment house and corporate advisor.

Directors’ Meetings

The number of directors’ meetings (including meetings of committees of directors and approvals by circular resolution) and number of meetings attended by each of the directors of the Company during the financial year were:

Director	Board	Meetings
	Eligible	Attended
R Poole	13	12
R Steinepreis	13	13
P Suriano	13	13
J Risinger	13	13
M Stevenson	13	13
S Takahashi *	5	4

All other business of the board was dealt with by circular resolutions. There were 11 circular resolutions during the year.

• S Takahashi resigned on 3 December 2010.

16

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS’ REPORT (CONT)

Principal Activities

The principal activities of the consolidated entity are mining explorations and development in Australia and Indonesia.

Adavale Resources Ltd has established itself in the coal industry in Indonesia and will continue to research and identify quality coal projects across Indonesia.

The company is also continuing exploration on its uranium project at Lake Surprise in South Australia as well as evaluating other uranium and coal exploration opportunities.

Review and Results of Operations

The consolidated loss of the company was $1,264,918 which compared with a net loss for the prior year of $2,069,737.

The loss from ordinary activities before income tax expense includes the following revenues and expenses disclosure is relevant in explaining the financial performance of the entity:

financial performance of the entity:
Loss from continuing operations Profit/(loss) from ordinary activities Revenue from continuing operations Expenses from continuing operations	2011 2010 $ $ 126,266 161,533 (1,391,184) (2,231,270)
	(1,264,918) (2,069,737)
	(1,264,918) (2,069,737)

Dividends

No dividends were paid during the financial year and the directors recommend that no dividend be paid in respect of the year ended 30 June 2011.

Significant Changes in the State of Affairs

Except for the matters discussed above or disclosed elsewhere in the attached financial statements, there were no significant changes to the state of affairs of the group during the year.

Events Subsequent to Balance Date

During the 2011 year, Adavale Resources Ltd entered into a Joint Venture in Indonesia to explore and mine coal in Indonesia. The effective start date of the Joint Venture will commence on 1 August 2011.

On 20 September 2011, Options were issued to Marshall Cooper (CEO of PT Adavale Nusantara Resources, subsidiary of Adavale Resources Limited) as part of his remuneration package.

On 28 September 2011, the board announced the appointment of Mr Haryono Eddyarto as a Non-Executive Director.

With the exception of the above, no matters or circumstances have arisen since the end of the year which significantly affected or may significant affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years.

17

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS’ REPORT (CONT)

Future Developments

The Company will continue to establish itself in the coal industry in Indonesia. The Company recognises the importance of establishing sound business relationships with prominent Indonesian partners.

Remuneration Report

Directors

The emoluments of each director of the Company are as follows:

(a) Company Directors’ remuneration 2011 Richard Poole i Roger Steinepreis ii Philip Suriano iii John Risinger iv Mark Stevenson Seiki Takahashi v 2010 Richard Poole i Roger Steinepreis ii Philip Suriano iii John Risinger iv Mark Stevenson Seiki Takahashi v	Salary Expatriate Share-Based & Fees Benefit & Super- Payment Total Remunerat'n annuation Shares & Options $ $ $ $ $ 24,000 - - - 24,000 24,000 - - - 24,000 144,000 - - 26,000 170,000 194,092 - 9,908 26,000 230,000 24,000 - - - 24,000 125 125
	410,217 0 9,908 52,000 472,125
	24,000 - - - 24,000 24,000 - - - 24,000 24,000 - - - 24,000 134,092 - 9,908 - 144,000 24,000 - - - 24,000 24,000 - - - 24,000
	254,092 - 9,908 - 264,000

i Fees payable to Mr Poole were paid to Arthur Phillip Pty Limited, a company controlled by him.

ii Fees payable to Mr Steinepreis were paid to Steinepreis Paganin, a firm of which he is a partner.

iii Fees payable to Mr Suriano were paid to Entertainment Marketing Enterprise Pty Ltd, a company controlled by him.

• iv Fees payable to Mr Risinger were paid directly or paid to Larca Pty Limited, a company controlled by him.

• v Seiki Takashahi resigned on 3 December 2010.

18

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS’ REPORT (CONT)

Key Management Personnel

The Group had no other key management personnel during the year.

(b) Remuneration Policies

The Board establishes and monitors the remuneration of the Chief Executive Officer. Currently no Chief Executive Officer has been appointed.

Remuneration levels are competitively set to attract and retain qualified and experienced directors, executives and staff, and having regard for the overall performance of the Company. Where necessary the Board obtains independent advice on the appropriateness of remuneration packages, given trends in comparative companies and industry surveys.

(c) Share Options Issued as Remuneration

					Exercise
Directors	Date of Grant	Type	Date of Expiry	Number	Price
John Risinger	8 December 2010	Class A	31 July 2014	5,000,000	$0.04
	8 December 2010	Class B	31 July 2014	5,000,000	$0.04
	8 December 2010	Class C	31 July 2015	5,000,000	$0.045
	8 December 2010	Class D	31 July 2016	5,000,000	$0.05
Phillip Suriano	8 December 2010	Class A	31 July 2014	5,000,000	$0.04
	8 December 2010	Class B	31 July 2014	5,000,000	$0.04
	8 December 2010	Class C	31 July 2015	5,000,000	$0.045
	8 December 2010	Class D	31 July 2016	5,000,000	$0.05

Indemnification of Officers and Auditors

The Company indemnifies, to the extent permitted by law, all directors and the company secretary of the Company and all former directors and company secretary, against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as directors or company secretary of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.

The Company also indemnifies the current directors and company secretary of its controlled entities for all liabilities to another person (other than the Company or a related body corporate) that may arise from their position, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.

The Company also indemnifies executive officers of the Company and its controlled entities for all liabilities to another person (other than the Company or a related body corporate) that may arise from their position in the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith.

19

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS’ REPORT (CONT)

The Company does not indemnify its auditors.

Options

At the date of this report the unissued ordinary shares of Adavale Resources Limited under option are as follows:-

				Exercise
Date of Grant	Type	Date of Expiry	Number	Price
21 February 2008	Series 3	30 November 2011	1,428,571	$0.21
21 February 2008	Series 4	1 December 2011	1,547,619	$0.21
8 December 2010	Unlisted	31 July 2014	65,697,879	$0.04
8 December 2010	Class A	31 July 2014	10,000,000	$0.04
8 December 2010	Class B	31 July 2014	10,000,000	$0.04
8 December 2010	Class C	31 July 2015	10,000,000	$0.045
8 December 2010	Class D	31 July 2016	10,000,000	$0.05
8 December 2010		31 July 2014	10,000,000	$0.04
20 September 2011	MOA	31 March 2014	10,000,000	$0.10
20 September 2011	MOB	31 March 2014	10,000,000	$0.10
20 September 2011	MOC	31 March 2014	10,000,000	$0.10

Environmental Issues

The Company’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory.

Non-Audit Services

The Board of directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the nature of the services disclosed below did not compromise the external auditor’s independence.

The following fees were paid or payable to Robert Nielson Partners for non-audit services provided during the year ended 30 June 2011:

Valuation of options	$ 870.00
	870.00

Auditor’s Independence Declaration

The auditor’s independence declaration for the year ended 30 June 2011 has been received and can be found on page 22.

20

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES DIRECTORS’ REPORT (CONT)

Proceedings on Behalf of the Company

No person has applied for leave of court to bring proceedings on behalf of the Company, or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

The Company was not a party to any such proceedings during the year.

Signed in accordance with a resolution of the directors:

==> picture [94 x 40] intentionally omitted <==

Richard Poole Chairman Sydney, 29 September 2011

21

robertnielsonpartners

ABN 65 141 087 768 chartered accountant business advisors

r n p

Level 7 280 George Street Sydney NSW 2000 Australia Box R176 Royal Exchange NSW 1225 Australia T 61 2 9235 0299 F 61 2 9222 1065 E enq@robertnielsonpartners.com.au

AUDITORS INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF ADAVALE RESOURCES LIMITED

I declare that to the best of my knowledge and belief, during the year ended 30 June 2011, there have been:

1. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

2. no contraventions of any applicable code of professional conduct in relation to the audit.

Robert Nielson Partners

==> picture [125 x 53] intentionally omitted <==

Robert Nielson Date 29 September 2011

Liability limited by a scheme approved under Professional Standards Legislation

22

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011

Notes 4 Audit Fee Exchange rate difference Share based expenses 7 7 7 7 Total comprehensive income/(loss) Earnings per Share attributable to the ordinary Other expenses from ordinary activities Profit / (Loss) from ordinary activities before income tax expense Income tax expense relating to ordinary activities Profit / (Net Loss) from ordinary activities after income tax expense Insurance Revenue from ordinary activities Other Revenue Total revenue shareholder of the company Share registry fees Management and administration Directors fees Write-off of exploration expenditure Impairment of exploration licence Employee expenses Premises expenses Contractor and consultants expenses Legal expenses Other comprehensive income for the year Basic (loss)/earnings per share – cents Earnings per Share from continuing operations: Basic (loss)/earnings per share – cents Diluted (loss)/earnings per share – cents Diluted (loss)/earnings per share – cents

2011 2010 $ $ 126,266 161,533 126,266 161,533 (313,970) (126,193) (23,000) (18,200) (32,559) (12,000) (353,959) (527,689) (90,770) (51,443) (21,886) - (134,339) (68,627) (15,000) (15,000) (120,125) (144,000) (32,259) (739,574) - (449,940) (71,403) - (52,000) - (129,914) (78,604) (1,391,184) (2,231,270) - - (1,264,918) (2,069,737) - - (1,264,918) (2,069,737) (0.48) (1.13) (0.48) (1.13) (0.48) (1.13) (0.48) (1.13) Consolidated

The accompanying notes form part of these financial statements

23

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 JUNE 2011

Notes CURRENT ASSETS Cash assets 8 Receivables 9 Other TOTAL CURRENT ASSETS NON-CURRENT ASSETS Receivables 9 Property, plant and equipment 10 Other 11 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Payables 12 Provisions 13 TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 15 Reserves Accumulated losses TOTAL EQUITY	2011 2010 $ $ 2,908,011 2,556,280 105,136 29,894 3,731 8,832 Consolidated
	3,016,878 2,595,006
	16,360 15,000 7,259 4,486 4,368,197 3,576,108
	4,391,816 3,595,594
	7,408,694 6,190,600
	174,151 266,978 15,754 6,193
	189,905 273,171
	189,905 273,171
	7,218,789 5,917,429
	37,326,273 34,771,995 43,433 31,433 (30,150,917) (28,885,999)
	7,218,789 5,917,429

The accompanying notes form part of these financial statements.

24

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2011

Notes Cash flows from operating activities Cash receipts in the course of operations Cash payments in the course of operations Interest received Net cash provided by/(used in) operating activities 22(b) Cash flows from investing activities Purchase of property, plant and equipment Net cash (used in) investing activities Cash flows from financing activities Issue of shares Costs of issue shares Net cash provided by (used in) financing activities Net increase/(decrease) in cash held Cash at beginning of financial year Cash at end of financial year 22(a) Development,exploration & evaluation expenses capitalised

2011 2010 $ $ 15,207 14,542 (1,464,720) (903,860) 115,596 157,451 (1,333,917) (731,867) (4,282) - (824,348) (1,532,994) (828,630) (1,532,994) 2,627,921 - (113,643) - 2,514,278 - 351,731 (2,264,861) 2,556,280 4,821,141 2,908,011 2,556,280 Consolidated

The accompanying notes form part of these financial statements.

25

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2011

Note ECONOMIC ENTITY Balance at 1 July 2009 Total comprehensive loss for the year Balance at 30 June 2010 Balance at 1 July 2010 Total comprehensive loss for the year Issue of shares Costs of shares Share based Balance at 30 June 2011	Share Accumulated Option Capital Losses Revaluation Total Reserves $ $ $ $ 34,771,995 (26,816,262) 31,433 7,987,166 - (2,069,737) - (2,069,737)
	34,771,995 (28,885,999) 31,433 5,917,429
	34,771,995 (28,885,999) 31,433 5,917,429 - (1,264,918) - (1,264,918) 2,627,921 - - 2,627,921 (113,643) - - (113,643) 40,000 - 12,000 52,000
	37,326,273 (30,150,917) 43,433 7,218,789

The accompanying notes form part of these financial statements.

26

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

1. REPORTING ENTITY

Adavale Resources Limited (the “Company”) is a company domiciled in Australia. The consolidated financial statements of the Company as at and for the year ended 30 June 2011 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in associates and jointly controlled entities. The Group is primarily involved in mining exploration.

The registered office of the Company is:

Adavale Resources Limited Level 33 Colonial Centre 52 Martin Place SYDNEY NSW 2000

The principal place of business is: Unit 8 & 9 88 Forrest Street COTTESLOE WA 6011

2. BASIS OF PREPARATION

(a) Statement of Compliance

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards including Accounting Standards interpretations, adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial report of the Group and the financial report of the Company comply with all Australian equivalents to International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).

The financial statements were authorised for issue on 29 September 2011 by the directors of the company.

(b) Use of estimates and Judgements

The preparation of the financial statements requires management to make judgements, estimates and assumptions that effect the application of accounting polices and the reported amounts of assets, liabilities, income and expenses.

The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group.

Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. All significant areas of estimation uncertainty and critical judgements in applying accounting policies have been disclosed in the following notes to the financial statements.

27

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Material accounting policies adopted in the preparation of this financial report are presented below. The financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by all entities in the Group unless otherwise stated.

(a) Principles of Consolidation

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Adavale Resources Limited (the parent entity) as at 30 June 2011 and the results of all controlled entities for the year then ended. Adavale Resources Limited and its controlled entities together are referred to in this financial report as the consolidated entity.

Controlled Entities

A controlled entity is any entity controlled by Adavale Resources Limited. Control exists where Adavale Resources Limited has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable are taken into account.

In the Company’s financial statements, investments in controlled entities are carried at cost. A list of controlled entities is contained in Note 21 of the accounts.

Where controlled entities have entered or left the economic entity during the year, their financial statements have been included from the date control was obtained or until the date control ceased.

Minority equity interests in the equity and results of the entities that are controlled are shown as a separate item in the Consolidated financial report.

Transactions Eliminated on Consolidation

Unrealised gains and losses and inter-entity balances resulting from transactions with or between controlled entities are eliminated on consolidation.

28

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT).

(b) Revenue Recognition

Revenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST). Exchanges of goods or services of the same nature and value without any cash consideration are not recognised as revenues.

Interest Revenue

Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.

Sale of Non-Current Assets

The gross proceeds of non-current asset sales are included as revenue at the date control of the asset passes to the buyer, usually when an unconditional contract of sale is signed.

The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal.

(c) Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position.

Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities, which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(d) Foreign Currency Transactions and Balances

Functional and Presentation Currency

The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.

29

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT).

• (d) Foreign Currency Transactions and Balances (cont)

Transaction and Balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year end exchange rate. Non-monetary items measured at historical cost continued to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at their fair value are reported at the exchange rate at the date when fair values were determined.

The Company subsidiary, PT Adavale Nusantara transacts in USD. The monetary items are translated into AUD, using the average exchange rate for reporting purposes. The non-monetary items are translated into AUD, using the year end exchange rate for reporting purposes.

Exchange differences arising on the translation of monetary items are recognised in the profit and loss, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement.

Foreign Operations

The financial results and position of foreign operations whose functional currency is different from the Group’s presentational currency are translated as follows:

• Assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;

• Income and expenses are translated at average exchange rates for the period; and

• Retained earnings are translated at the exchange rates prevailing at the date of the transaction.

The transactions are translated to Australian Dollars which is the Company's functional currency.

Exchange differences arising on translation of foreign operations with functional curerncies other than Australian dollars are recognised in the comprehensive income.

(e) Taxation

The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income).

Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses.

Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability, where there is no effect on accounting or taxable profit or loss.

30

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT).

Deferred tax assets and liabilities are calculted at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled adn their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and usused tax losses are recongised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

(f) Financial Instruments

Recognition

Financial instruments are initially measured at cost on trade date basis, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below.

Financial Assets at Fair Value Through Profit and Loss

A financial instrument is classified in this category if acquired principally for the purpose of selling in the short term, or if so designated by management and within the requirements of AASB 139: Recognition and Measurement of Financial Instruments. Realised and unrealised gains and losses arising from changes in the fair value of these assets are included in the income statement in the period in which they arise.

Loans and Receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at cost using the effective interest rate method.

Held-to-Maturity Investments

These investments have fixed maturities and it is the company’s intention to hold these investments to maturity. Any held-to-maturity investments held by the company are stated at amortised cost using the effective interest rate method.

Available-for-Sale Financial Instruments

Available-for-sale financial instruments include any financial assets not included in the above categories. Available-for-sale financial

31

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT).

Financial Liabilities

Non-derivative financial instruments are recognised at amortised cost, comprising original debt less principal payments and amortisation.

Fair Value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the value of all unlisted securities, including recent arms length transactions, reference to similar instruments and option pricing models.

Impairment

At each reporting date, the company assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the comprhensive income statement.

(g) Impairment of Assets

At each reporting date the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the compehensive income statement.

(h) Receivables

The collectability of debts is assessed at balance date and specific provision is made for any doubtful accounts.

(i) Investments

Controlled Entities

Investments in controlled entities are carried in the Company’s financial statements at the lower of cost and recoverable amount.

(j) Depreciation and amortisation

Useful Lives

All assets, including intangibles, have limited useful lives and are depreciated/amortised using the diminishing value method, with the exception of finance lease assets which are amortised over the term of the relevant lease, or where it is likely the consolidated entity will obtain ownership of the asset, the life of the asset.

Assets are depreciated or amortised from the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and held ready for use. Goodwill balances are reviewed annually and any balance representing future benefits for which the realization is considered to be no longer probable are written off.

Depreciation and amortisation rates and methods are reviewed annually for appropriateness. When changes are made, adjustments are reflected prospectively in current and future periods only. Depreciation and amortisation are expensed.

The depreciation/amortisation rates used for each class of asset during the current and prior year are as follows:

32

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT).

	2011	2010
Plant and Equipment	3-5 years	3-5 years
Field Equipment	3-5 years	3-5 years

(k) Payables

Liabilities are recognised for amounts to be paid in the future for goods or services received.

(l) Employee Benefits

Provision is made for the Company’s liability for employee benefits arising from services rendered by employees to balance date.

(m) Provisions

A provision is recognised when a legal or constructive obligation exists as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation.

(n) Cash

For the purposes of the statement of cash flows, cash includes deposits at call with financial institutions and other highly liquid investments with short periods to maturity which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts.

(o) Earnings per Share

• (i) Basic earnings per share:

Basic earnings per share is determined by dividing net profit after income tax attributable to members of the

• Company by the weighted average number of ordinary shares outstanding during the financial year.

• (ii) Diluted earnings per share:

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

33

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT).

(p) Exploration Expenses Capitalised

Exploration and evaluation expenditure

Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied:

• (i) the rights to tenure of the area of interest are current; and

• (ii) at least one of the following conditions is also met:

• (a) the exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale; or

(b) exploration and evaluation activities in the area have not, at the reporting date, reached a stage which permits a reasonable assessment of the existence, or otherwise, of economically recoverable reserves and active and significant operations in, or relating to, the area of interest are continuing.

(p) Exploration Expenses Capitalised (cont)

Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation and amortisation of assets used in exploration and evaluation activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to operational activities in a particular area of interest.

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the exploration and evaluation asset (for the cash generating unit(s) to which it has been allocated being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years.

Where a decision has been made to proceed with development in respect of a particular area of interest, the relevant exploration and evaluation asset is tested for impairment and the balance is then reclassified to development.

(q) Intangible assets

The intangible assets of the Company are exploration licenses acquired during the year ended 30 June 2007. The licenses are measured at cost less accumulated impairment losses. A review of the exploration licences occur each year

34

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT).

(r) Segment Reporting

As of 1 July 2009 the company presents operating segments based on information reported internally. Due to the adoption of IFRS 8 Operating segments, the accounting policy was changed in respect of segment operating disclosures.

Comparative segment information has been re-presented in conformity with the transitional requirements of the standard. Since the change in accounting policy only impacts presentation and disclosure aspects there is no impact on earnings per share.

An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses, including revenues and expenses that relate to transaction with any of the Company’s other components.

Unallocated items comprising mainly of head office assets, expenses and liabilities.

(s) Share Based Payments

The performance securities issued to the Directors is recognised as a share-based payment expense, with a corresponding increase in equity.

It is measured by fair value of the equity at the grant date. Fair value is meansured by the use of a Black Scholes model.

The purpose of performance securities are to provide cost effective consideration to directors for their ongoing commitment and contribution to the Company in their respective roles as Directors.

(t) Critical Accounting Estimates and Judgements

Impairment Testing

The directors evaluate estimates and judgements incorporated into the financial report based on historial and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Critical estimates and judgements relating to the impairment testing of assets of the Group are as follows:

Exploration and Evaluation Expenditure:

The Group capitalises expenditure relating to exploration and evaluation where it is considered likely to be recoverable or where the activities have not reached a stage that permits a reasonable assessment of the existence of reserves.

The Group assess impairment at the end of each reporting period by evaluating conditions and events specific to the Group. As a result of their testing, they have exploration and evaluation assets valued at $4,368,197 (2010: $3,576,108).

Adavale Resources Limited has written off $32,259 of costs for 4 Indonesian projects in the 2011 year (2010: $739,574 of costs were written off for Australian projects).

(u) Parent Entity Financial Information

The financial information for the parent entity, Adavale Resources Lmited, disclosed in note 26 has been parepared on the same basis as the basis of the consolidated fianncial staetments of the Group.

35

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT).

The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods and which the Group has decided not to early adopt. A discussion of those future requirements and their impact on the Group is as follows:

AASB 9: Financial Instruments (December 2010) (applicable for annual reporting periods commencing on or after 1 January 2013).

This Standard is applicable retrospectively and includes revised requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements for financial instruments. The Group has not yet determined any potential impact on the financial statements.

AASB 124: Related Party Disclosures (applicable for annual reporting periods commencing on or after 1 January 2011).

This Standard removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities and clarifies the definition of a “related party” to remove inconsistencies and simplify the structure of the Standard. No changes are expected to materially affect the Group.

AASB 1053: Application of Tiers of Australian Accounting Standards and AASB 2010–2: Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements [AASB 1, 2, 3, 5, 7, 8, 101, 102, 107, 108, 110, 111, 112, 116, 117, 119, 121, 123, 124, 127, 128, 131, 133, 134, 136, 137, 138, 140, 141, 1050 & 1052 and Interpretations 2, 4, 5, 15, 17, 127, 129 & 1052] (applicable for annual reporting periods commencing on or after 1 July 2013).

AASB 1053 establishes a revised differential financial reporting framework consisting of two tiers of financial reporting requirements for those entities preparing general purpose financial statements:

• Tier 1: Australian Accounting Standards; and

• Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements.

Tier 2 of the framework comprises the recognition, measurement and presentation requirements of Tier 1, but contains significantly fewer disclosure requirements.

The following entities are required to apply Tier 1 reporting requirements (ie full IFRS):

• for-profit private sector entities that have public accountability; and

• the Australian Government and state, territory and local governments.

Since the Group is a for-profit private sector entity that has public accountability, it does not qualify for the reduced disclosure requirements for Tier 2 entities.

AASB 2010–2 makes amendments to Australian Accounting Standards and Interpretations to give effect to the reduced disclosure requirements for Tier 2 entities. It achieves this by specifying the disclosure paragraphs that a Tier 2 entity need not comply with as well as adding specific “RDR” disclosures.

AASB 2010–2 makes amendments to Australian Accounting Standards and Interpretations to give effect to the reduced disclosure requirements for Tier 2 entities. It achieves this by specifying the disclosure paragraphs that a Tier 2 entity need not comply with as well as adding specific “RDR” disclosures.

AASB 2009–12: Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052] (applicable for annual reporting periods commencing on or after 1 January 2011).

36

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT).

AASB 2009–14: Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement [AASB Interpretation 14] (applicable for annual reporting periods commencing on or after 1 January 2011).

This Standard amends Interpretation 14 to address unintended consequences that can arise from the previous accounting requirements when an entity prepays future contributions into a defined benefit pension plan.

This Standard is not expected to impact the Group.

AASB 2010–4: Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, AASB 7, AASB 101 & AASB 134 and Interpretation 13] (applicable for annual reporting periods commencing on or after 1 January 2011).

This Standard details numerous non-urgent but necessary changes to Accounting Standards arising from the IASB’s annual improvements project. Key changes include:

clarifying the application of AASB 108 prior to an entity’s first Australian-Accounting-Standards financial statements;

adding an explicit statement to AASB 7 that qualitative disclosures should be made in the context of the quantitative disclosures to better enable users to evaluate an entity’s exposure to risks arising from financial instruments;

amending AASB 101 to the effect that disaggregation of changes in each component of equity arising from transactions recognised in other comprehensive income is required to be presented, but is permitted to be presented in the statement of changes in equity or in the notes;

adding a number of examples to the list of events or transactions that require disclosure under AASB 134; and

making sundry editorial amendments to various Standards and Interpretations.

This Standard is not expected to impact the Group.

AASB 2010–5: Amendments to Australian Accounting Standards [AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042] (applicable for annual reporting periods beginning on or after 1 January 2011).

This Standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRSs by the IASB. However, these editorial amendments have no major impact on the requirements of the respective amended pronouncements.

AASB 2010–6: Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets [AASB 1 & AASB 7] (applicable for annual reporting periods beginning on or after 1 July 2011).

This Standard adds and amends disclosure requirements about transfers of financial assets, especially those in respect of the nature of the financial assets involved and the risks associated with them. Accordingly, this Standard makes amendments to AASB 1: First-time Adoption of Australian Accounting Standards, and AASB 7: Financial Instruments: Disclosures, establishing additional disclosure requirements in relation to transfers of financial assets.

This Standard is not expected to impact the Group.

AASB 2010–7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 127] (applies to periods beginning on or after 1 January 2013).

37

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

3. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONT).

This Standard makes amendments to a range of Australian Accounting Standards and Interpretations as a consequence of the issuance of AASB 9: Financial Instruments in December 2010. Accordingly, these amendments will only apply when the entity adopts AASB 9.

As noted above, the Group has not yet determined any potential impact on the financial statements from adopting AASB 9.

AASB 2010–8: Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets [AASB 112] (applies to periods beginning on or after 1 January 2012).

This Standard makes amendments to AASB 112: Income Taxes.

The amendments brought in by this Standard introduce a more practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model under AASB 140: Investment Property.

Under the current AASB 112, the measurement of deferred tax liabilities and deferred tax assets depends on whether an entity expects to recover an asset by using it or by selling it. The amendments introduce a presumption that an investment property is recovered entirely through sale. This presumption is rebutted if the investment property is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale.

The amendments brought in by this Standard also incorporate Interpretation 121 into AASB 112.

The amendments are not expected to impact the Group.

AASB 2010–9: Amendments to Australian Accounting Standards – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters [AASB 1] (applies to periods beginning on or after 1 July 2011).

This Standard makes amendments to AASB 1: First-time Adoption of Australian Accounting Standards.

The amendments brought in by this Standard provide relief for first-time adopters of Australian Accounting Standards from having to reconstruct transactions that occurred before their date of transition to Australian Accounting Standards.

Furthermore, the amendments brought in by this Standard also provide guidance for entities emerging from severe hyperinflation either to resume presenting Australian-Accounting-Standards financial statements or to present Australian-Accounting-Standards financial statements for the first time.

This Standard is not expected to impact the Group.

AASB 2010–10: Further Amendments to Australian Accounting Standards – Removal of Fixed Dates for First-time Adopters [AASB 2009–11 & AASB 2010–7] (applies to periods beginning on or after 1 January 2013).

This Standard makes amendments to AASB 2009–11: Amendments to Australian Accounting Standards arising from AASB 9, and AASB 2010–7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010).

The amendments brought in by this Standard ultimately affect AASB 1: First-time Adoption of Australian Accounting Standards and provide relief for first-time adopters from having to reconstruct transactions that occurred before their transition date.

[The amendments to AASB 2009–11 will only affect early adopters of AASB 2009–11 (and AASB 9: Financial Instruments that was issued in December 2009) as it has been superseded by AASB 2010–7.]

This Standard is not expected to impact the Group.

38

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

4. REVENUE FROM ORDINARY ACTIVITIES

Revenue from outside the operating activities Interest Other Revenue	2011 2010 $ $ 111,059 146,991 15,207 14,542 Consolidated
	126,266 161,533

5. AUDITORS’ REMUNERATION

5. AUDITORS’ REMUNERATION
Remuneration of the auditor of the parent entity for: - auditing or reviewing the financial statements - valuation of options	2011 2010 $ $ 23,000 18,200 870 - Consolidated
	23,870 18,200

39

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

6. TAXATION

The prima facie tax on loss from ordinary activities before income tax is reconciled to income tax as follows: a. Prima facie tax receivable on loss from ordinary activities at 30% (2010: 30%) Tax effect of deferred tax assets not brought to account Income tax expense attributable to entity	2011 2010 $ $ (379,475) (620,922) 379,475 620,922 - - Consolidated

The directors have not recognised any tax assets in respect of losses, as they do not believe that the conditions for recognition set out in Note 1(e) have been met.

7. ASSET BACKING AND EARNINGS PER SHARE

Continuing Operations Net tangible asset backing – cents per share Earnings per share - Basic – cents - Diluted – cents Earnings/(loss) used in the calculation of basic and diluted EPS Weighted average number of ordinary shares used in the calculation of basic and diluted EPS - in the calculation of basic EPS - in the calculation of diluted EPS Number of options not considered dilutive	2011 2010 $ $ 1.08 2.03 (0.48) (1.13) (0.48) (1.13) (1,264,918) (2,069,739) Consolidated
	263,615,155 183,593,979 263,615,155 183,593,979 118,674,069 2,976,190

As the company reported a loss for the year ended 30 June 2011, options on issue were not included in the calculation of diluted earnings per share.

40

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

8. CASH ASSETS

8. CASH ASSETS
	Consolidated
	2011	2010
	$	$
Cash at bank	2,908,011	2,556,280

9. RECEIVABLES

Current Other receivables Non-current Other receivables 10. PROPERTY, PLANT AND EQUIPMENT Field equipment At cost Accumulated depreciation Office equipment At cost Accumulated depreciation Total property, plant and equipment – Net book value Movement in Carrying Values Carrying value as at 1 July 2010 Additions Disposals Depreciation Carrying value as at 30 June 2011	2011 2010 $ $ 105,136 29,894 105,136 29,894 16,360 15,000 16,360 15,000 2011 2010 $ $ 8,322 8,322 (5,949) (5,194) 2,373 3,128 10,165 5,887 (5,279) (4,529) 4,886 1,358 7,259 4,486 Field Office Total Equipment Equipment $ $ $ 3,128 1,358 4,486 - 4,278 4,278 - - - (755) (750) (1,505) Consolidated Consolidated
	2,373 4,886 7,259

41

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

11. OTHER NON-CURRENT ASSETS

11. OTHER NON-CURRENT ASSETS
Exploration Licences Exploration expenditure capitalised - Development phase - Exploration and evaluation phase	2011 2010 $ $ 1,050,160 1,049,960 2,013,797 1,391,531 1,304,240 1,134,617 Consolidated
	4,368,197 3,576,108

Exploration Licences are carried at cost of acquisition less impairment losses.

Recoverability of the carrying amount of exploration assets is dependent on the successful production and sale of uranium ore and coal.

Capitalised costs amounting to $824,348 (2010:$1,532,944) have been included in cash flows from investing activities in the cash flow statement. In the 2011 year, 4 Indonesian projects were relinquished, which included Lumpo, Lampung, Dimori and Rizki. The total costs written off for the 4 Indonesian projects totalled $32,259 in the 2011 year.

Adavale Resources Limited relinquished all its holdings in Springvale, Queensland and had written off $622,125,exploration costs in the 2010 year. Mt Flint in South Australia had also been relinquished and $117,449 of costs were written off in the 2010 year.

12. PAYABLES

12. PAYABLES
Trade creditors Trade creditors to related parties Other creditors and accruals	2011 2010 $ $ 36,894 89,656 26,694 142,924 110,563 34,398 Consolidated
	174,151 266,978

Further information relating to trade creditors to related parties is set out in note 24.

The terms and conditions of the transactions with directors and related parties are no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-Director related entities on an arm's length basis.

42

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

13. PROVISIONS Current Employee benefits (a) Movement in provisions Consolidated Opening balance as at 1 July 2010 Additional provision Amount used Balance as at 30 June 2011	2011 2010 $ $ 15,754 6,193 Consolidated
	15,754 6,193
	Employee benefits $ 6,193 9,561 - 15,754

14. LOAN AND BORROWINGS

A converting loan agreement with Arthur Phillip Pty Ltd (a related party of Mr Richard Poole), was approved at the Annual General Meeting on 26 November 2010.

The terms of the loan are as follows:

• (a) Loan has a Face Value of $1,000,000;

(b) The Company may make multiple draw downs under the Loan;

(c ) Interest shall accrue on the Loan at 8%;

(d) If the Loan has not been repaid or converted, the Company will repay any or all of the Loan 24 months after the execution date:

(e ) Where an event of default occurs, Arthur Phillip may require the Company to repay any or all of the Loan plus any interest.

(f) The Loan is convertible into Shares at a conversion price of 5 cents per Share;

(g) The conversion of the Loan into Shares is subject to and conditional upon the company obtaining Shareholder approval

(h) The Loan is an unsecured debt instrument ranking alongside general secured creditors.

In consideration for Arthur Phillip Pty Ltd to provide the Loan to the Company, the Company has agreed to issue to Arthur Phillip Pty Ltd 10,000,000 Options. The terms and conditions are as follows:

Exercise Price	$0.04
Expiry Date	31-Jul-14

As at the date of this report the Converting loan agreement has not been executed nor the associated options granted.

43

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

15. CONTRIBUTED EQUITY

15. CONTRIBUTED EQUITY
Issued and Paid-up Share Capital (a) Ordinary shares, fully paid Number Ordinary Shares Balance as at 1 July Non-recounceable Entitlement issue as at 22 Nov 2010 (i) Performance shares issued on 26 Nov 2010 (iii) Shortfall placement on 3 Dec 2010 (i) Additional shares issued on 3 Dec 2010 (ii) Options exercised in 2010 (iv) Less: transactions costs of issue Closing balance at 30 June	2011 2011 2010 2010 No $ No $ 316,990,019 34,771,995 183,593,979 34,771,995 Consolidated Consolidated
	316,990,019 34,771,995 183,593,979 34,771,995
	No $ No $ 183,593,979 34,771,995 183,593,979 34,771,995 18,337,116 366,742 - - 2,000,000 40,000 - - 104,058,870 2,081,176 - - 9,000,000 180,000 - - 54 2 - - - (113,643) - -
	316,990,019 37,326,273 183,593,979 34,771,995

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share when a poll is called else one vote each on a show of hands.

In the event of a winding up of the Company, ordinary shareholders rank after all creditors and are fully entitled to any proceeds of liquidation.

• (i) On 19 October 2010, the company announced a pro-rata non-renounceable entitlement issue offer of 2 cents per share. A total of 18,337,116 new ordinary shares were applied from a total offer of 122,395,986 shares on 22 Nov 2010. A shortfall of 104,058,870 ordinary shares resulted and the shortfall shares were allocated pursuant to the underwriting agreement. On 3 Dec 2010 it was announced the shortfall were placed.

• (ii) An additional 9,000,000 shares were placed to raise a further $180,000, on the same terms as the entitlement issue. The additional placements were made to sophiscated investors pursuant to ASX Listing rule 7.1.

• (iii) On 26 October 2010, 2,000,000 performance shares were approved at the AGM for 2 director of Adavale Resources Ltd. These being 1,000,000 ordinary shares to John Risinger and 1,000,000 ordinary shares to Philip Suriano.

• (v) On 26 November 2010, the performance securities were approved at the AGM for 2 directors of Adavale Resources Ltd.

• The primary purpose of granting the performance options to Messrs John Risinger and Philip Suriano is to provide cost

• effective consideration for their ongoing commitment and contribution to the Company in their roles as Directors and to provide an incentive to them to deliver a mining project in Indonesia.

• (iv) 54 options were exercised from shareholders during 2011, resulting in 54 ordinary shares issued at 4 cents.

44

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

15. CONTRIBUTED EQUITY (continued)

(b) Options

Options - exercisable at 0.21, expiring date 30 Nov 2011 Opening balance Issued Closing balance Options - exercisable at 0.21, expiring date 01 Dec 2011 Opening balance Issued Closing balance Options - exercisable at 0.04, expiring date 31 Jul 2014 Opening balance Issued Closing balance Class A Options - exercisable at 0.04, expiring date 31 Jul 2014 Opening balance Issued Closing balance Class B Options - exercisable at 0.04, expiring date 31 Jul 2014 Opening balance Issued Closing balance Class C Options - exercisable at 0.045, expiring date 31 Jul 2015 Opening balance Issued Closing balance Class D Options - exercisable at 0.05, expiring date 31 Jul 2016 Opening balance Issued Closing balance Options - exercisable at 0.04, expiring date 31 Jul 2014 Opening balance Issued Closing balance

2011 2010 No No 1,428,571 1,428,571 - - 1,428,571 1,428,571 1,547,619 1,547,619 - - 1,547,619 1,547,619 - - 65,697,879 - 65,697,879 - - - 10,000,000 - 10,000,000 - - - 10,000,000 - 10,000,000 - - - 10,000,000 - 10,000,000 - - - 10,000,000 - 10,000,000 - - - 10,000,000 - 10,000,000 - Consolidated

45

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

(c) Capital Risk Management

The company’s objective when managing capital is to safeguard its ability to continue as a going concern. In order to maintain or adjust the capital structure, the company may issue new shares or return capital to shareholders.

The company’s strategy, which is unchanged from the prior year, was to maintain a sufficient level of cash to meet its obligations, when the debt is due and its investment commitment.

There is no externally imposed capital requirements for the Company.

16. RESERVES

The option reserve records items recognised as expenses on valuation of Directors share options

17. DIVIDENDS

The Directors do not recommend a dividend for the year ended 30 June 2011. No dividend was paid for the year ended 30 June 2011

18. FINANCIAL INSTRUMENTS

Financial Risk Management

The Company's activities expose it to a variety of financial risks; market risk (including fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company.

Risk management is carried out by the board of directors under policies approved by the Board. The board identifies and evaluates financial risks and provides principles for overall risk management.

46

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

(a) Interest Rate Risk

The consolidated entity is exposed to interest rate fluctuations.

Interest Rate Risk Exposures

The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities is set out below:

Weighted Average Note Interest rate 2011 Financial assets Cash assets 8 4.66% Receivables 9 Other current assets Financial liabilities Payables 13 2010 Financial assets Cash assets 8 2.55% Receivables 9 Other current assets Financial liabilities Payables 13	Floating Non- Interest 1 year or 1 to 5 years more than 5 Interest Total rate less years Bearing $ $ $ $ $ $ 1,872,774 1,035,238 - - - 2,908,012 - - - - 105,136 105,136 - - - - 3,731 3,731 Fixed interest maturing in:
	1,872,774 1,035,238 - - 108,867 3,016,879
	- - - - 174,151 174,151
	- - - - 174,151 174,151
	563,719 1,992,561 - - - 2,556,280 - - - - 29,894 29,894 - - - - 8,832 8,832
	563,719 1,992,561 - - 38,726 2,595,006
	- - - - 266,977 266,977
	- - - - 266,977 266,977

47

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

18. FINANCIAL INSTRUMENTS DISCLOSURE (CONTINUED)

Financial Risk Management (continued)

Interest Rate Sensitivity Analysis

A sensitivity analysis was performed relating to the exposure to interest rate risk at balance date. This sensitivity analysis demonstrates the effect on the current year results and equity which should result from a change in these risks.

At 30 June 2011, the effect on profit and equity as a result of changes in the interest rate, with all other variables remaining constant would be as follows:

		Economic	Economic	Economic	Economic
		Entity		Entity
		30 June	**2011 **	30 June	2010
		$		$
	Change in profit
	- Increase in interest rate by 2%		2,462		3,279
	- Decrease in interest rate by 2%	(2,462)		(3,279)
	Change in equity
	- Increase in interest rate by 2%		2,462		3,279
	- Decrease in interest rate by 2%	(2,462)		(3,279)
(b)	Net Fair Values of Financial Assets and Liabilities

Valuation Approach

Net fair values of financial assets and liabilities are determined by the consolidated entity on the following basis:

Monetary financial assets and financial liabilities not readily traded in an organised financial market are determined by valuing them at the present value of contractual future cash flows on amounts due from customers (reduced for expected credit losses) or due to suppliers. Cash flows are discounted using standard valuation techniques at the applicable market yield having regard to the timing of the cash flows. The carrying amounts of bank term deposits, trade debtors, other debtors, accounts payable, bank loans and lease liabilities approximate net fair value.

The net fair value of investments in unlisted shares in other corporations is determined by reference to the underlying net assets and an assessment of future maintainable earnings and cash flows of the respective corporations.

The balances of financial assets and liabilities approximate their net fair value.

48

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

18. FINANCIAL INSTRUMENTS DISCLOSURE (CONTINUED)

(c) Unrecognised Financial Instruments

The Company and controlled entities do not have any unrecognised financial instruments.

(d) Foreign Currency Risk

The Group's exposure to foreign currency risk was as follows based on notional amounts:

2011 2010 AUD USD AUD USD Other Debtors 38,277 71,800 29,894 - Other Creditors (172,352) (1,932) (266,978) -

The following significant exchange rates applied during the year:

	Average	Rate	Reporting date-Spot Rate	Reporting date-Spot Rate
	2011	2010	2011	2010
AUD
USD	1.0333	0.0894	1.0739	0.8523

Sensitivity analysis

A strengthening of the AUD, as indicated below, against the AUD at 30 June would have increase/(decreased) equity and profit or loss by the amounts shown below. The analysis is based on foreign currency exchange rate variances that the Group considered reasonably possible at the end of the rpeorting period. The analysis assumes that all other variables, in particular interest rates remain constant.

	Strengthening	Strengthening	Weakening	Weakening
	Equity	Profit or loss	Equity	Profit or loss
30-Jun-11
AUD (10% strenthening)	(48,250)	48,638	58,972	(20,832)
30-Jun-10
AUD (10% strenthening)	-	-	-	-

49

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

18. FINANCIAL INSTRUMENTS DISCLOSURE (CONTINUED)

(e) Credit Risk Exposures

Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. The Company measures credit risk on a fair value basis. The credit risk on financial assets, excluding investments, of the consolidated entity, which have been recognised on the statement of financial position, is the carrying amount, net of any provision for doubtful debts.

The Company has no significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics.

(f) Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through credit facilities or other fund raising initiatives, to meet commitments as and when they fall due

Management monitors rolling forecasts of the Group’s liquidity on the basis of expected cash flow. Consolidated Economic Entity cash reserves of $2,908,011 (2010: $2,556,280) as at 30 June 2011 will ensure liquidity risk is minimised for future financial periods.

(g) Capital Management Risk

The Company’s objective when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets.

The Company monitors capital on the basis of the gearing ratio. The ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowing less cash and cash equivalents. Total capital is calculated as equity shown in the balance sheet plus net debt. As the company is in a transitionary stage the gearing ratio has been maintained throughout the year at 0%.

50

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

19. COMMITMENTS

Exploration lease commitments Minimum expenditure commitments on exploration licences Committed but not provided for and payable: Within one year One year or later and no later than for five years Operating lease commitment Minimum expenditure commitments on rental lease Committed but not provided for and payable: Within one year One year or later and no later than for five years	2011 2010 $ $ 235,000 245,269 - - 235,000 245,269 2011 2010 $ $ 33,488 - 33,488 - 66,976 - Consolidated Consolidated

Estimated amount payable for the share of property lease of office premises in Indonesia.

51

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

20. SEGMENT INFORMATION

The Company has identified its operating segments based on internal reports that are reviewed by the Board and management. The Company operated in one business segment during the year, being mining and in two geographical areas, being Australia and Indonesia.

The segment reporting is detailed below:

(a) Primary Reporting – Business Segments Year ended 30 June 2011 Revenue Sales Interest Other Total Segment Revenue Segment Result - Others - Loans - Others Total segment assets - Exploration expenditure Profit/(loss) from ordinary activities before income tax Income tax expense Net Profit/(loss) - Receivables Total segment liabilities	Mining and Mining and Other Total exploration exploration $ $ $ $ Australia Indonesia - - - - 572 - 110,487 111,059 - - 15,207 15,207
	572 - 125,694 126,266
	(127,695) (333,454) (803,769) (1,264,918) - - - -
	(127,695) (333,454) (803,769) (1,264,918)
	2,354,400 2,013,797 - 4,368,197 4,075 68,219 4,829,164 4,901,458 24,264 133,327 2,757,680 2,915,271
	2,382,739 2,215,343 7,586,844 12,184,926
	2,759,986 2,016,246 - 4,776,232 21,345 1,800 166,759 189,904
	2,781,331 2,018,046 166,759 4,966,136

52

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

20. SEGMENT INFORMATION (CONT)

(b) Primary Reporting – Business Segments Year ended 30 June 2010 Revenue Sales Interest Other Total Segment Revenue Segment Result - Others - Loans - Others Profit/(loss) from ordinary activities before income tax Income tax expense Net Profit/(loss) Total segment assets - Exploration expenditure - Receivables Total segment liabilities	Mining and Mining and Other Total exploration exploration $ $ $ $ Australia Indonesia - - - - 145 - 146,846 146,991 - - 14,542 14,542
	145 - 161,388 161,533
	(938,374) - (1,131,363) (2,069,737) - - - -
	(938,374) - (1,131,363) (2,069,737)
	2,202,098 1,391,631 - 3,593,729 33,665 - 2,423,769 2,457,434 4,486 - 2,543,620 2,548,106
	2,240,249 1,391,631 4,967,389 8,599,269
	2,408,669 - - 2,408,669 98,288 - 174,881 273,169
	2,506,957 - 174,881 2,681,838

All segment assets are located in Australia and Indonesia.

c) Segment assets:

Reportable segments’ assets reconciled to total assets as follow:

Segment Assets Intersegment Eliminations Total assets as per balance sheet	Consolidated 30 June 2011 12,184,926 (4,776,231) 7,408,695	Consolidated 30 June 2010 8,599,269 (2,408,669)
		6,190,600

53

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

20. SEGMENT INFORMATION (CONT)

d) Segment liabilities:

Reportable segments’ liabilities reconciled to total liabilities as follow:

gments’ liabilities reconciled to total liabilities as follow:
Segment Liabilities Intersegment Eliminations Total liabilities as per balance sheet	Consolidated 30 June 2011 4,966,136 (4,776,231) 189,905	Consolidated 30 June 2010 2,681,838 (2,408,668)
		273,170

21. CONTROLLED ENTITIES

Particulars in relation to controlled entities

Particulars in relation to controlled entities
		Ordinary Shares
		Consolidated Entity Interest
	2011		2010
	%		%
Company:
Adavale Resources Limited
Controlled entities:
Adavale Minerals Pty Ltd	100		100
Adavale Queensland Pty Ltd	100		100
Adavale Indonesia Pty Ltd	100		100
The above entities were incorporated in Australia.
PT Adavale Nusantara	100		-
Adavale Harner Resources	60		-
Incorporated in Indonesia

54

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

22. NOTES TO THE STATEMENTS OF CASH FLOWS

Notes Cash at bank 8 - Depreciation of non-current assets - Accrued interest (b) Reconciliation of the operating loss after tax to the net cash flow from operations Profit/(loss) from ordinary activities after income tax Add/(less) non cash items: term deposits at call, net of outstanding bank overdrafts. Cash as at the end of the financial year as shown in the statements of cash flows is reconciled to the related items in the statement of financial position as follows: cash includes cash on hand and at bank and short (a) Reconciliation of Cash For the purposes of the statements of cash flows, - Impairment losses - Write-off of exploration costs - Other Changes in assets and liabilities: - (Increase)/decrease in receivables - Increase/(decrease) in trade creditors and accruals - Increase/(decrease) in provisions Net cash provided by/(used in) operating activities

2011 2010 $ $ 2,908,011 2,556,280 (1,264,918) (2,069,737) 1,509 1,855 4,537 10,460 - 1,189,514 32,259 - 52,000 (100) (1,174,613) (868,008) (76,038) (11,017) (92,827) 140,965 9,561 6,193 (1,333,917) (731,867) Consolidated

23. SHARE BASED PAYMENTS

Shares granted to key management personnel as share-based payments are as follows:

	Grant Date	No.
John Risinger	26-Nov-10	1,000,000
Philip Suriano	26-Nov-10	1,000,000

On 26 November 2010, the performance securities were approved at the AGM for 2 directors of Adavale Resources Ltd. The primary purpose of granting the performance options to Messrs John Risinger and Philip Suriano is to provide cost effective consideration for their ongoing commitment and contribution to the Company in their roles as Directors and to provide an incentive to them to deliver a mining project in Indonesia.

55

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

23. SHARE BASED PAYMENTS (CONTINUED)

Options granted to key management personnel as share-based payments are as follows:

					Exercise
Directors	Date of Grant	Type	Date of Expiry	Number	Price
John Risinger	8 December 2010	Class A	31 July 2014	5,000,000	$0.04
	8 December 2010	Class B	31 July 2014	5,000,000	$0.04
	8 December 2010	Class C	31 July 2015	5,000,000	$0.045
	8 December 2010	Class D	31 July 2016	5,000,000	$0.05
Philip Suriano	8 December 2010	Class A	31 July 2014	5,000,000	$0.04
	8 December 2010	Class B	31 July 2014	5,000,000	$0.04
	8 December 2010	Class C	31 July 2015	5,000,000	$0.045
	8 December 2010	Class D	31 July 2016	5,000,000	$0.05
The grant date fair value of the share based payments were measured using the Black-Scholes formula.				Expected volatility is
estimated using the Black-Scholes option pricing model applying the following inputs:
At the weighted average exercise	price:		$0.045
Weighted average life of the options:			3.75 years
Expected share price violatility:			15%
Risk-free interest rate:			4.96%

The terms and conditions of the grants of the options are as follows:

(a) Class A - give the optionholder the right to subscribe to one share;

(b) Class B - shall only vest and be exercisable upon the Company selling and shipping its first load of coal;

(c ) Class C - shall on vest and be exercisable upon the Company selling and shipping 500,000th tonne of coal; and

(d) Class D - shall on best and be exerciable upon the Company selling and shipping its 1,000,000th tonne of coal.

56

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

24. RELATED PARTIES

Directors’ and Key Management Personnel

The directors of Adavale Resources Limited are considered the key management personnel of the consolidated economic entity. The directors’ remuneration and equity holdings have been disclosed in the directors report attached to the financial statements.

(a) The key management personnel compensation comprised:

Short-term employee benefits Directors fees Share based payments Total	2011 2010 $ $ 300,000 120,000 120,125 144,000 52,000 - 472,125 264,000 Consolidated

Apart from the details disclosed in this note and elsewhere in the financial report, no director or other related party has entered into a material contract with the Company or the consolidated entity since the end of the previous financial year and there were no material contracts involving directors’ interests existing at year-end.

Directors’ transactions with the Company or its controlled entities

	Consolidated	Consolidated
	2011	2010
	$	$
Fees paid to Arthur Phillip Pty Limited, a company
controlled by Mr Richard Poole for provision of
company secretarial, administration, management and
advisory services during the year	137,266	252,000
Fees paid to Steinepreis Paganin, a firm of which Mr
Roger Steinepreis is a partner, for the provision of legal
services during the year	65,956	14,888
Fees paid to Entertainment Marketing Enterprise Pty
Ltd, a company controlled by Mr Philip Suriano for
the provision of management and advisory services
during the year	26,982	120,000
Fees paid to Larca Pty Ltd, a company controlled
by Mr John Risinger for provision of management
and advisory services during the year	91,196	40,000
Fees paid to Drill Logic Pty Limited, a company controlled
by Mr Mark Stevenson and Mr John Risinger for the
provision of exploration services during the year	-	17,380

The terms and conditions of the transactions with directors and their director-related entities were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-Director-related entities on an arm’s length basis.

57

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

24. RELATED PARTIES (CONTINUED)

Directors’ balances with the Company or its controlled entities

Steinepreis Paganin Larca Consulting Pty Limited Entertainment Marketing Enterprise Pty Ltd Seiki Takahashi Payables (see note 12) Arthur Phillip Pty Limited	2011 2010 $ $ 15,950 2,000 6,695 4,000 4,049 2,049 - 55,000 - 79,875 Consolidated
	26,694 142,924

Other related parties transactions

A converting loan agreement with Arthur Phillip Pty Ltd (a related party of Mr Richard Poole), was approved at the Annual General Meeting on 26 November 2010. The loan is for $1,000,000 and the financial benefit to be granted to Arthur Phillip is the entry into the loan and the payment of interest under the loan. The funds of the Loan is to be used primarily to assist in the construction and establishment of mining operations and available working capital. (see note 14)

As at the date of this report the converting loan agreement has not been executed or the associated option granted.

Transactions with associated company

For the purpose of administering a number of associated companies, an administration company Norfolk Management Pty Ltd was formed, with Adavale Resources Limited holding one share being 50% of the issued capital. The company operates solely as an administrative function and recharges as an administrative fee for the share of administrative expenses incurred on behalf of Adavale Resources Limited. During the year $144,960 (2010 - $99,468) was paid to Norfolk Management Pty Ltd as administrative fees. The company made neither profits nor losses for the year ended 30 June 2011, hence there is no proportional share of results bought to account to the company or Group financial statements.

25. EVENTS SUBSEQUENT TO REPORTING DATE

During the 2011 year, Adavale Resources Ltd entered into a Joint Venture in Indonesia to explore and mine coal in Indonesia. The effective start date of the Joint Venture will commence on 1 August 2011.

On 20 September 2011, options were issued to Marshall Cooper (CEO of PT Adavale Nusantara Resources, subsidiary of Adavale Resources Limited) as part of his remuneration package.

On 28 September 2011, the board announced the appointment of Mr Haryono Eddyarto as a Non-Executive Director.

With the exception of the above, no matters or circumstances have arisen since the end of the year which significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years.

58

ADAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

26. PARENT ENTITY FINANCIAL INFORMATION

(a) Summary financial information

The individual financial statements for the parent entity show the following aggregate amounts:

Balance Sheet Current Assets Total Assets Current Liabilities Total Liabilities Shareholders' contributed equity Reserves Accumulated Losses Statement of Comprehensive Income Total profit/(loss) Total comprehensive income/(loss)	2011 2010 $ $ 2,795,612 2,548,206 9,167,956 7,413,566 166,762 174,882 166,762 174,882 37,326,274 34,771,995 43,433 31,433 (28,368,513) (27,564,744)
	9,001,194 7,238,684
	2011 2010 $ $ (803,768) (1,131,363)
	(803,768) (1,131,363)

(b) Contingent Liabilities of the Parent

The parent entity did not have any contingent liabilities as at 30 June 2011.

(c ) Commitments

The parent entity did not have any contractual commitment as at 30 June 2011.

59

ADAVALE RESOURCES LIMITED DIRECTORS' DECLARATION

The directors of the Company declare that:

1. the financial statements and notes, as set out on pages 23 to 59 are in accordance with the Corporations Act 2001 and:

2. (a) comply with Accounting Standards and the Corporations Regulations 2001; and

3. (b) give a true and fair view of the financial position as at 30 June 2011 and of the performance for the year ended on that date of the company;

4. the Chief Executive Officer has declared that:

5. (a) The financial records of the Company for the financial year have been properly maintained in accordance with Section 286 of the Corporations Act 2001;

6. (b) The financial statements and notes for the financial year comply with the Accounting Standards, and;

7. (c ) The financial statements and notes for the financial year give a true and fair view;

8. in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

On behalf of the Directors

==> picture [105 x 44] intentionally omitted <==

Mr R Poole Chairman

Sydney, 29 September 2011

60

robertnielsonpartners

ABN 65 141 087 768 chartered accountant business advisors

r n p

Level 7 280 George Street Sydney NSW 2000 Australia Box R176 Royal Exchange NSW 1225 Australia T 61 2 9235 0299 F 61 2 9222 1065 E enq@robertnielsonpartners.com.au

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF ADAVALE RESOURCES LIMITED

Scope

Report on the Financial Report

We have audited the accompanying financial report of Adavale Resources Limited ("the company") and Adavale Resources Limited and Controlled Entities ("the consolidated entity") comprising the statement of financial position as at 30 June 2011, the statement of comprehensive income, statement of changes in equity, statement of cash flows for the year ended at that date, a summary of significant accounting policies and other explanatory notes and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year.

The financial report and the directors’ responsibility

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud and error; selecting and applying appropriate accounting polices; and making accounting estimates that are reasonable in the circumstances In Note 1 the directors also state, in accordance with Accounting Standard AASB 101; Presentation of Financial Statements, that compliance with the Australian equivalent to International Financial Reporting Standards(IFRS) ensures that the financial report, comprising the financial statements and notes, complies with IFRS.

Audit Approach

Our responsibility is to express an opinion on the financial report based on our audit. We have conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluation the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Liability limited by a scheme approved under Professional Standards Legislation

61

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 .

Audit Opinion

In our opinion,

• (a) the financial report of Adavale Resources Limited and its controlled entities is in accordance with the Corporation Act 2001 including:

• (i) giving a true and fair view of the company’s and the consolidated entity’s financial position as at 30 June 2011 and of its performance for the year ended on that date; and

• (ii) complying with Accounting Standards in Australia (including Australian Accounting interpretations) and with the Corporations Regulations 2001; and

• (b) the financial report also compiles with International Financial Reporting Standards as disclosed in Note 1.

Report on Remuneration Report

We have audited the Remuneration Report included in pages 18 to 19 of the report of the directors for the year ended 30 June 2011 The Directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with s300A of the Corporations Act 2001. Our responsibility is to express an opionion on the Remuneration Report, based on our audit conducted in accordance with the Australian Auditing Standards

In our opinion the Remuneration Report of Adavale Resources Limited for the year ended 30 June 2011, complies with s 300A of the Corporations Act.

Robert Nielson Partners

==> picture [115 x 48] intentionally omitted <==

Robert Nielson Date 29 September 2011

62

ADAVALE RESOURCES LIMITED

ADDITIONAL INFORMATION

Additional information included in accordance with the Listing Rules of the Australian Securities Exchange Limited.

1. SHAREHOLDER INFORMATION

• (a) Distribution of holders at 21 September 2011

==> picture [336 x 168] intentionally omitted <==

----- Start of picture text -----

Fully paid
ordinary shares
Number of Holders
Distribution is:
1 - 1,000 216
1,001 - 5,000 67
5,001 - 10,000 42
10,001 - 100,000 545
100,001 and Over 265
Holding less than a marketable
416
parcel
----- End of picture text -----

(b) Voting rights

There are no restrictions on voting rights attached to the ordinary shares. On a show of hands every member present in person shall have one vote and upon a poll, every member present or by proxy shall have one vote every share held.

(c ) Substantial shareholders (as at 21 September 2011)

The Company’s register of substantial shareholders shows the following:

Shareholder	Number of shares	%
Richard Poole	48,440,203	15.28%
Haryono Eddyarto	31,441,033	9.92%
Mark Stevenson	21,254,314	6.70%

(d) Shareholders

The twenty largest shareholders hold 62.53% of the total issued ordinary shares in the Company as at 21 September 2011.

63

ADAVALE RESOURCES LIMITED ADDITIONAL INFORMATION

(e) Restricted Securities

There are no securities subject to escrow restrictions.

(f) Unquoted Equity Securities (as at 21 September 2011)

Options	Number on issue	% held
Expiry 30 November 2011 and exercisable at $0.21
Crosby Special Situations Fund Ltd	1,428,571	100%
Expiry 1 December 2011 and exercisable at $0.21
Crosby Special Situations Fund Ltd	1,547,619	100%
Expiry 31 July 2014 and exercisable at $0.04	65,697,879	100%
Expiry 31 July 2014 and exercisable at $0.04	10,000,000	100%
Expiry 31 July 2014 and exercisable at $0.04	10,000,000	100%
Expiry 31 July 2015 and exercisable at $0.045	10,000,000	100%
Expiry 31 July 2016 and exercisable at $0.05	10,000,000	100%
Expiry 31 July 2014 and exercisable at $0.04	10,000,000	100%
Expiry 31 Mar 2014 and exercisable at $0.10	10,000,000	100%
Expiry 31 Mar 2014 and exercisable at $0.10	10,000,000	100%
Expiry 31 Mar 2014 and exercisable at $0.10	10,000,000	100%

2. QUOTATION

Listed securities in Adavale Resources Limited are quoted on the Australian Securities Exchanges

3. AUDIT COMMITTEE

As at the date of the Directors’ Report, the Company did not have an audit committee of the board of directors. The company is not of a size, nor are the affairs of a complexity, sufficient to warrant the existence of a separate audit committee. All matters which could be delegated to such a committee are dealt with by the full Board.

64

Top Twenty Shareholders at 20 September 2011

		Number	% of Issued
	Name
		of Shares	Shares
1.	FONTELINA PTY LTD	34,008,870	10.73
2.	ARTHUR PHILLIP NOMINEES PTY LTD	22,767,084	7.18
3.	ARTHUR PHILLIP NOMINEES PTY LTD	19,852,193	6.26
4.	HOLLOMAN VALUE HOLDINGS LLC	19,333,333	6.10
5.	EAGLE RESOURCES PTY LTD	16,500,000	5.21
6.	ARTHUR PHILLIP NOMINEES PTY LTD	11,051,073	3.49
7.	ARTHUR PHILLIP NOMINEES PTY LTD	10,157,094	3.20
8.	BLUEKNIGHT CORPORATION PTY LTD	9,943,733	3.14
9.	LARCA PTY LTD	7,706,000	2.43
10.	BYRON DEVESON SUPERANNUATION FUND PTY LTD <TH	7,628,333	2.41
11.	LIPPO SECURITIES NOMINEES (BVI) LTD	7,150,906	2.26
12.	HUDSON CORPORATE LTD	6,916,241	2.18
13.	MR DAVID ARTHUR PAGANIN <DA PAGANIN FAMILY NO	5,728,845	1.81
14.	RANCHLAND HOLDINGS PTYLTD	5,000,000	1.58
15.	ZERO NOMINEES PTY LTD	3,355,864	1.06
16.	PHEAKES PTY LTD	2,500,000	0.79
17.	MR ROGER STEINEPREIS	2,393,105	0.75
18.	GANRA PTY LTD	2,222,223	0.70
19.	MRS SONJA LOUISE NEWMAN HEATH + MR JAMES PETER	2,000,000	0.63
20.	MR ANDREW MUIRHEAD SKIDMORE	2,000,000	0.63
		198,214,897	62.54

65