ARCHER MATERIALS LIMITED - Annual Report 2010

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

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ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Corporate Directory

Share Registry

Archer Exploration Limited ABN 64 123 993 233

Computershare Investor Services Pty Ltd Level 5, 115 Grenfell Street Adelaide SA 5000 GPO Box 1903 Adelaide SA 5001 Investor Enquiries (within Australia): 1300 556 161 Facsimile +61 8 8236 2305

Directors

Greg English Chairman

Tom Phillips AM Director (Non-Executive)

Auditors

Alice McCleary Director (Non-Executive)

Grant Thornton South Australian Partnership Level 1, 67 Greenhill Road Wayville SA 5034

Gerard Anderson Director (Non-Executive)

John Dawkins AO Director (Non-Executive)

Solicitors

Norman Waterhouse Lawyers Level 15, 45 Pirie Street Adelaide SA 5000

Company Secretary

Craig Gooden

Registered Office

Bankers

Level 1, 28 Greenhill Road Bank of Queensland Wayville SA 5034 151 Pirie Street Telephone +61 8 8272 3288 Adelaide SA 5000 Facsimile +61 8 8272 3888 www.archerexploration.com.au

Australian Securities Exchange: ASX code : AXE

	Chairman’s and CEO’s Letter	2
	Review of Operations Director’s Report	5 15
	Auditor’s Independence Declaration	22
	Corporate Goverance Statement	23
	Financial Information	26
	Directors’ Declaration	51
	Independent Audit Report	52
	Additional Information	56

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Leigh Creek South Australia
Olympic Dam Mine Project Leigh Creek Port Augusta
Carrapateena Prospect
West Roxby
Project
Kanyaka
Port Augusta Wilmington
tenements Project areas and tenements
Whyalla
Napoleon’s Hat
Wildhorse Plain Exploration Licence (EL)
Carappee Hill Port Pirie
North Burra
Exploration Licence Application (ELA)
North Cowell Riverton
Elbow Hill Worlds End UraniumSA JV (EL)
Australia Plains Highways & Major Roads
Railways
0 50 100km Port Lincoln
Adelaide
SPENCER
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ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Highlights and achievements

Archer’s main focus in 2010 was to build a high quality, South Australian tenement portfolio while aggressively exploring key exploration targets. The company has grown its ground position with the following tenement transactions.

Manganese and Iron

Farm out agreement with OMM Holdings Limited (ASX:OMH) on Jamieson Tank.
Farmin with UraniumSA (ASX: USA) on the Wild Horse Plains and Elbow Hill Licenses.
Acquisition of the Australia Plains License and advanced applications at Kanyaka and Stone Hut.

Magnesite

Advanced applications on the Leigh Creek magnesite licenses, which host historic resources totaling 480m tonnes @ 42% MgO.

Gold

Following rock chip assays to 6.42 g/t Au at the Watervale Prospect, Archer made applications for the nearby Riverton and Napoleon’s Hat licenses.

During 2009/10 drilling programs were undertaken or are planned for:

Jamieson Tank – An 18 hole drilling program to evaluate strike extension of the Manganese/Iron Project as part of the Farmin Agreement with OMM was completed in June. The strike length of the mineralization was extended from 200 to 750 metres by this program.
Wild Horse Plains – Field evaluation of manganese and iron targets on the Eyre Peninsula licenses has identified four target areas. High Bluff and Campoona are high grade iron targets and Mintalie and Salt Creek manganese/iron targets. These areas will be drill tested in the fourth quarter 2010.
Pindari (Carappee Hill) – Air core drilling outlined a 1kms x 300m >1,000 ppm Ni soil anomaly (peak value 3,700ppm) associated with the 3kms diameter Pindari magnetic anomaly. The maiden RC drilling program by Archer Exploration Ltd to test the Pindari nickel /chrome anomaly has been approved and will commence in July.
Ketchowla (North Burra) The maiden drill program intersected shallow manganese mineralization including 8m @ 15.6% Mn from 6m ; 4m @ 29.3% Mn from 5m and 4m @ 17.5% Mn from 11m. Manganese mineralization at the K1 deposit included up to 0.34% Cu, 0.14% Co; 0.24% Ni and 0.15% Zn.

The company now has a solid base of advanced, drill ready targets and a pipeline of promising exploration areas with demonstrable mineralization to be explored. The grant of the Leigh Creek magnesite project will give the company an asset on which to base a business plan that could see the company move from mineral explorer to developer over the next few years.

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Letter from Chairman

Dear Fellow Shareholder,

During the past year, strong progress continued on many fronts towards delivering Archer’s strategy of developing a pipeline of greeenfields and advanced projects. Particularly pleasing were the advances made at Ketchowla and Jamieson Tank and the acquisition of several new projects including Wild Horse Plains iron ore and the Leigh Creek magnesite project.

We remain committed to prudently managing the Company’s funds to maximise value for shareholders whilst also effectively exploring our projects. This approach is reflected in the joint venture agreement we signed with OM Holdings in January 2010, whereby OMH has been exploring for manganese and iron on our Carappee Hill Project. This joint venture represents a strategic partnership with an international company experienced in the exploration, mining and processing of manganese.

Near Burra, we successfully tested our theories about the manganese mineralisation situated at Ketchowla, with some exciting results returned from drilling. Buoyed by the success at Jamieson Tank and Ketchowla, we successfully applied for and were granted tenements in South Australia which contain known manganese mineralisation. These tenements will be systematically evaluated and tested during the coming year.

However, our growth strategy is not just limited to the manganese projects. In March 2010 we signed a farmin agreement with UraniumSA Limited for the exploration for all minerals (except uranium) on the Wildhorse Plains group of tenements on the Eyre Peninsula. The Eyre Peninsula contains many known iron ore deposits and existing (OneSteel) and proposed (Centrex Metals, Lincoln Minerals, IronClad) iron ore mining operations. Early exploration results and the success of other explorers in the region support our view that this joint venture has the potential to host iron ore mineralisation.

At Leigh Creek, we applied for tenements that cover an existing magnesite deposit previously drilled by SAMAG. The application for tenements with a known large resource of good quality magnesite mineralisation is consistent with our strategy of cost effective exploration and project development.

The focus for the next year will be on developing our iron ore, manganese and magnesite projects and we will seek to either divest or enter into a strategic partnership in respect of the West Roxby and Wilmington projects.

Our ability to explore our tenements and fund opportunities like the Wild Horse Plains JV and Leigh Creek Magnesite Project is a result of our prudent funds management during the past three years. In time, these projects are expected to provide an even more extensive platform for future growth.

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

In April the Board announced the appointment of former Federal Treasurer, Mr John Dawkins AO as a non-executive director. John brings substantial business and political acumen to the Company and his appointment further strengthens the Board’s level of expertise.

The achievements of the last year have only been possible through the dedication and hard work of all of our staff and the board. Archer has a small and highly skilled management team that has achieved a great deal throughout the year. Our staff are the key to our future success.

Finally, I would like to express my appreciation to the shareholders who have supported the Company, my fellow directors and the team at Archer Exploration. It has been a year of growth in which we have cemented the foundations for the Company’s future.

With the right people, the right assets and a clear strategy and focus, we are confident that the Company is solidly based and well positions to provide returns for shareholders into the future.

Yours sincerely,

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Greg English Chairman

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ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Review of Operations

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Review of Operations

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Archer Exploration’s tenement portfolio has changed significantly during 2009/10 resulting from acquisitions and farmin agreements.

On the Eyre Peninsula Archer has consolidated its ground position with a farmin agreement with Uranium SA (ASX:USA) on the Wild Horse Plains and Elbow Hill exploration licences as well as entering into a farmin agreement with manganese miner OM Holdings Ltd (ASX:OMH) to explore Archer’s Jamieson Tank manganese prospect. Further east Archer made application for exploration licences covering the historic Kanyaka (ELA 30 /10), Stone Hut Well (ELA 31/10) and Neales Flat (EL4482) manganese deposits. Leigh Creek Magnesite license applications (ELA’s 31/10 173/10) cover four world class magnesite deposits, with extensive outcropping, high grade, historic magnesite resources. During 2011 Archer will evaluate the feasibility of building calcined magnesia business around these assets. At North Burra after initial promising gold results from the Watervale prospect Archer built its ground position with application for Napoleon’s Hat and Riverton licences.

Archer has a strong focus on safety environmental management and community engagement in all of its activities. The Company had no reported accidents or incidents during the year.

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Wildhorse Plain
Carappee Hill
North Cowell
Elbow Hill
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Iron and manganese

Carappee Hill (EL 3711)

In February 2010 Archer entered into a 4 year farmin agreement with ASX listed OM Holdings Limited’s wholly owned subsidiary, OM (Manganese) Ltd (OMM). The agreement entitled OMM to earn a 60% interest in manganese and iron resources of Carappee Hill (EL3711) by spending $600,000.

In June OMM completed an 18 hole, 738.5m reverse circulation drilling program at the Jamieson Tank Manganese Project. The OMM drilling program was aimed at testing the extensions to the manganese and iron mineralization intersected in drilling programs previously conducted by Archer in 2008 and Western Mining Corporation in 1993.

Subsequent results from this program reported in July included:

Manganese (Mn)

	TJTRC130 JTRC133 JTRC141	28 29 33	to to to	33m 35m 43m	5m @ 14.6% Mn & 8.0% Fe 6m @ 15.0% Mn & 10.7% Fe 10m @ 12.6% Mn & 20% Fe

*Iron*
JTRC144	5 to 21m	16m @ 35.3% Fe & 4.3% Mn
including	16 to 21m	5m @ 55.8% Fe & 2.7% Mn (EOH)
JTRC145	4 to 6m	2m @ 50.5% Fe & 2.6% Mn
JTRC144	bottomed	on high grade iron

The results extend the Jamieson Tank mineralised zone from 200m to 750m

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ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Wild Horse Plains (EL 3377) North Cowell (EL 4277) Elbow Hill (EL 3653)

Archer Exploration reached agreement in February 2010 with UraniumSA Ltd (ASX: USA) to Farm into the Eyre Peninsula Wild Horse Plains (EL3377) and Elbow Hill (EL3653) licenses, where it is earning an interest in all minerals except uranium.

In June, Archer commenced field evaluation of manganese and iron prospects identified on the Wild Horse Plains (EL3377) and North Cowell (EL4277) Licenses (Figure 1). These prospects were identified following a review of historical exploration and mining data and regional aeromagnetic interpretation.

mineralization within the extensive limbs and fold closures of synclines in the west of the licence area. Hematite mineralisation is associated with the Middleback Jaspilites within a geological setting with a number of vectors, particularly the long strike lengths (+40km) of the subcropping jaspilites and proximity of outcropping felsic rocks that are considered important in the development of economically significant iron deposits.

A total of 43 samples were taken during initial reconnaissance of the project area. The iron rich rocks contain magnetite and hematite and the best results came from Campoona and High Bluff in the west (Figure 2).

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Archer believes the Wild Horse Plains Area has
the potential to host economic, hematite iron
Fe 40 - 50%
Sample
15150 Fe 50 - 60%
EL 3377
Fe +60%
Sample
15373
Lower Middleback Jaspilite
Upper Middleback Jaspilite
Syncline Fold Hinge
EL 4277 0 5 10 Km
EL 4277
Cowell
Cleve
EL 3653
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Figure 2. Initial and historical significant rock chip iron results on USA Farmin and AXE Wild Horse Plains tenements. Iron : Campoona 8 samples - Average 43.2% Fe, High Bluff 4 samples - Average 62.4% Fe

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ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Manganese

Historic sampling results by CRA in 1978 and Shell in 1986 reported surface grades of approximately 20% Mn over a 4km strike length in the Salt Creek area. The manganese material is exposed in grain cropping paddocks and is covered by transported soils for most of the strike length. A total of 18 rock chip samples were collected from dolomites, meta sediments and jaspilites and analyses results range from <1% through to 26.8% Mn. The locations of the samples that reported above 10% Mn are shown in figure 3. Archer’s sampling at Salt Creek confirmed reported manganese and iron assays.

Salt Creek 3 samples Average 24% Mn and 23.8% Fe

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Archer plans to drill test the four main iron and Salt
Creek
manganese targets, Salt Creek (Fe/Mn) Mintalie (Fe/Mn)
Campoona (Fe) and High Bluff (Fe) in the fourth quarter
of 2010.
Lower Middleback Jaspilite
EL 3377
Upper Middleback Jaspilite
Syncline Fold Hinge
Miltalie 0 5 10 Km
EL 4277
EL 4277
Cowell
Cleve
EL 3653
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Figure 3. Rock Chip samples reporting over 10% manganese (black dots).

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ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

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Whyalla
Port Pirie North Burra
Burra
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Ketchowla (EL 4266)

Archer 100%

Regional reconnaissance mapping and rock chip sampling at Ketchowla identified six important manganese occurrences and many smaller manganese outcrops and old workings within an area of 135 kms[2] . Many surface rock chip samples returned Mn grades > 30% Mn. Manganese deposits in the north had associated cobalt, nickel, copper and zinc mineralization.

In February a shallow RC program of 42 holes and 643m of drilling intersected manganese (Mn) mineralization including -

8m @ 15.6%Mn from 6m (K1), 4m @ 29.3% Mn from 5m (K9) and 4m @ 17.5% Mn from 11m (K1).
and at the K1 prospect the manganese mineralization contained up to 0.34% Cu,

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Olympic Dam Mine
Leigh Creek
Leigh Creek
Project Stone Hut
Carrapateena Prospect
Kanyaka
Port Augusta
Whyalla
Port Pirie North Burra
Riverton Burra
Worlds End
Australia Plains
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Australia Plains (EL 4482 ) Kanyaka (ELA 030/10) Stone Hut (ELA 031/10)

Archer 100%

Archer have expanded its land holding with the acquisition of the Australia Plains licence (Neales Flat manganese mine) and the advanced applications on the old Kanyanka and Stone Hut manganese mines. All licences are expected to be granted in 3rd quarter of 2010.

0.14% Co, 0.24% Ni and 0.15% Zn

The tenement applications cover small historic high grade, manganese mines, like Ketchowla, that were worked during the second world war for direct use in the steel industry. Following the grant of the exploration licences initial evaluation of the properties will involve geological sampling and rock chip sampling. The objective of this work will be to define manganese drilling targets that have the potential to be direct shipping ore.

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Figure 4. Ketchowla

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ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

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Olympic Dam Mine
Leigh Creek
Project Leigh Creek
Carrapateena Prospect
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Magnesite

Magnesite (ELA 031/10: 173/10)

Archer 100%

In February 2010 Archer made application for ELA 031/10 covering the 1990’s SAMAG magnesite project in the Leigh Creek region of South Australia. The license application is at an advanced stage of processing and is expected to be granted in September 2010. During June this application area was expanded with ELA 173/10 covering 420 sqr kms and the Witchilina Magnesite deposit.

The licence applications cover historic magnesite resources reported by SAMAG in 1999 totalling 480 m.tonnes @ 42% MgO in five separate deposits. SAMAG’s objective in the late 1990’s was to develop a magnesium metal project based on the Dow Process. Archer will undertake a scoping study to determine the feasibility of building a calcining plant at one of the Spencer Gulf ports to produce calcined magnesite, magnesia (MgO) for use in the refractory and a range of chemical industry applications.

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EL 3711 0 250 500 m
Ni > 0.1%
Ni > 500ppm
Ni > 100ppm
Drill hole
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Carappee Hill
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Nickel

Carappee Hill (EL 3711)

Archer 100%

The 3 kms diameter Pindari bullseye magnetic anomaly (figure 5) was tested for diamonds by Stockdale Prospecting in 1987 with two shallow core holes. Stockdale’s petrology investigation of Pindari 1 reported minor sulphide mineralization including; pyrrhotite (iron sulphide), chalcopyrite (CuFeS2 – main primary ore of copper), sphalerite (ZnS – main primary ore of zinc) and pentlandite (FeNi)8S8 – nickel sulphide). Archer recovered the core and analysis results showed hole Pindari 1 was anomalous for nickel and chrome from 9m (22m @ 0.19% Ni 0.24% Cr)

At the surface the magnetic anomaly was covered with up to 10m of transported aeolian sand. An aircore drilling program (207 holes and 1,711m) was implemented in February 2010 to identify soil geochemical anomalies through the transported sand cover.

The soil geochemistry outlined a strong soil geochemical anomaly, which was:

1km x 300m in area and greater than 1,000pm nickel (Ni) and 1,000ppm chrome (Cr);
had peak soil sample values of 0.37% Ni and 0.34% Cr;
was closely associated with the core of the 3km diameter, bullseye magnetic anomaly.

Six 100m reverse circulation holes are planned to further test the Ni/Cr mineral system associated with the Pindari magnetic anomaly during July.

Figure 5. Pindari Magnetic anomaly with soil geochemical contours

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

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Carrapateena Prospect
Apollo
West Roxby
Project
Port Augusta
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At Apollo the unconformity between the Pandurra Formation and basement is estimated to be approximately 250-350m from surface. The target is ready for drill testing and the planar nature of the target and the extensive alteration and pathfinder element halo around unconformity style mineralized systems means a limited amount of drilling will be required to evaluate the Apollo target concept.

During the quarter Archer made application for an exploration work approval to drill test Apollo with at least one 400m drill hole. PIRSA (Primary Industry and Resources SA) approved the program subject to approval by the Aboriginal Heritage Branch of the Aboriginal Affairs and Reconciliation Division of the Department of Premier and Cabinet.

Uranium

Uranium (EL 3851)

Archer 100%

Apollo is a greenfields project located in a remote part of South Australia approximately 100 km NW of Port Augusta in the under explored Cariewerloo Basin. The Apollo Project is centred on an untested, precisely coincident gravity low, topographic depression and magnetic low anomalies (figures 6 a, b, c) .

Figure 6a. Gravity

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0 1 2 km
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One of the geological models proposed to explain the coincident anomalies (figure 7) is an Athabasca style unconformity related uranium mineralized system. PIRSA have identified the potential for unconformity related uranium mineralization in the Cariewerloo Basin, where Mesoproterozoic red bed lithologies (Pandurra Formation) unconformably overlie faulted, reduced, crystalline basement, which has been intruded by uranium rich A type granites.

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by uranium rich A type granites.
0 100 m
0 m
Quaternary
Bleached limit
100
Pandurra 0 1 2 km
Perched
Formation ore
Gray
strata
200
Quartz
crystal
zone
Highly clay
altered
Clay
300 Unconformity ore cap
Altered Basement ore
Gawler Range Volcanics Basement
0 1 2 km
400
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Figure 6b. Total Magnetic Intensity

Figure 6c. Topography

Figure 7: Geological Model for Apollo

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

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Napoleon’s Hat
Watervale
Port Pirie North Burra
Burra
Riverton
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Gold

Watervale discovery lead to an regional evaluation of the mineralized unit and the application for the Riverton licence where the Watervale sandstone hosts an extensive area of historic gold workings.

Napoleon’s Hat (ELA 113/10)

Archer 100%

This licence application is immediately north of the Watervale Prospect and covers areas of structural complexity considered prospective for Watervale style gold mineralization.

Watervale Prospect (EL 4266)

Archer 100%

At the Watervale Gold Prospect, quartz veined sandstone sampled over approximately 200m returned gold assays over 1 g/t Au with the best result of 6.42g/t Au (figure 8).

The proximity of the Watervale gold mineralized zone to the northern tenement boundary lead to the application for ELA 113/10 immediately north of the Watervale Prospect. Exploration in the area will resume in Q4 when the ELA is expected to be granted. The

Riverton (ELA 030/10)

Archer 100%

Riverton is an advanced licence application covering a similar geological setting as Watervale and with scattered historic gold workings. Mine records from 1896 include reports of 14 g/t gold from a 20m shaft and surface samples from 3 to 22g/t gold.

Archer will map and sample the new licenses in quarter four 2010 and be ready to drill the any gold anomalies in early 2010.

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EL 4266
Recent sample
Previous sample
Sample reporting below 0.1g/t Au
0.29 g/t Au
0 200 400 m
0.55 g/t Au
1.42 g/t Au
6.42 g/t Au
4.63 g/t Au
3.84 g/t Au
1.61 g/t Au
0.41 g/t Au
0.13 g/t Au
Strike extension to be investigated 0.8 g/t Au
for additional gold mineralisation
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Figure 8: Rock Chip sample results Watervale - North Burra

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Corporate development

Last year was one of expansion and consolidation of the companies ground positions in strategic areas like Central Eyre Peninsula and Burra, with particular focus on two commodities closely associated with the steel industry manganese and magnesite.

Archer will continue a corporate strategy that preserves cash, while exploring mineral opportunities that can relatively quickly grow the company’s market capitalization. The exploration objective is to develop drill targets at minimum cost and if drill targets cannot be defined at an early stage and at a relatively low cost, the tenement will be farmed out, sold or relinquished.

The grant, expected in Q3 2010 of tenements covering the world class Leigh Creek Magnesite deposit will create an opportunity for the company to move from an exploration to producing company in the next few years.

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Next 12 months focus

During the next 12 months the company will advance its exploration pipeline prospects to the stage where drill targets are defined -

Manganese/Iron – Neales Flat, Kanyaka, and Stone Hut

Gold – Napoleon’s Hat and Riverton

The more advanced exploration properties will have their maiden drill test -

Pindari Nickel Project
Apollo Uranium Project
Wild Horse Plains (Salt Creek, Mintalie, High Bluff, Campoona targets)

Watervale Gold Project.

With the acquisition of the Leigh Creek Magnesite Project, Archer will have a development project that is ready for a scoping study and if that is successful a feasibility study in 2011.

These programs will be carried out while ensuring the company financial situation is strong.

Caption to come

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The exploration results reported herein, insofar as they relate to mineralisation, are based on information compiled by Mr Wade Bollenhagen, Exploration Manager of Archer Exploration Limited. Mr Bollenhagen is a Member of the Australasian Institute of Mining and Metallurgy who has more than fourteen years experience in the field of activity being reported. Mr Bollenhagen consents to the inclusion in the report of matters based on his information in the form and context in which it appears.

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Summary of tenements

Tenement	Tenement Name	Project Name	Area	Commodity	Registered holder	Archer
		(km²)				Interest
EL 3851	Lake Gairdner North	West Roxby	926	Base Metals	Kensington Exploration P/L*	100%
EL 3869	Lake Gairdner South	West Roxby	678	Base Metals	Kensington Exploration P/L	100%
EL 3724	Woomera	West Roxby	884	Base Metals	Pirie Resources Pty Ltd*	100%
EL 3722	Andamooka	West Roxby	971	Base Metals	Pirie Resources Pty Ltd	100%
EL 3721	Yalymboo	West Roxby	962	Base Metals	Pirie Resources Pty Ltd	100%
EL 3711	Carrappee Hill	Eyre Peninsula	54	Base Metals	Pirie Resources Pty Ltd	100%
EL 4201	Baroota	Wilmington	335	Base Metals	Pirie Resources Pty Ltd	100%
EL 4202	Pinda	Wilmington	367	Base Metals	Pirie Resources Pty Ltd	100%
EL 4249	Spring Creek	Wilmington	357	Base Metals	Pirie Resources Pty Ltd	100%
EL 4230	World’s End	Burra	592	Base Metals	Pirie Resources Pty Ltd	100%
EL 4266	Burra North	Burra	814	Base Metals	Pirie Resources Pty Ltd	100%
EL 4277	North Cowell	Eyre Peninsula	93	Base Metals	Pirie Resources Pty Ltd	100%
EL 4482	Australia Plains	Burra	880	Base Metals	Pirie Resources Pty Ltd	100%
ELA 15/10	Riverton	Burra	308	Base Metals	Pirie Resources Pty Ltd	100%
ELA 31/10	Termination Hill	Leigh Creek	542	Magnesium	Leigh Creek Magnesite Pty Ltd*	100%
ELA 173/10	Witchelina	Leigh Creek	452	Magnesium	Leigh Creek Magnesite Pty Ltd	100%
ELA 30/10	Kanayka	Burra	230	Manganese	Pirie Resources Pty Ltd	100%
ELA 113/10	Napoleons Hat	Burra	46	Gold	Pirie Resources Pty Ltd	100%
EL 3377	Wildhorse Plains	Cleve	816	Base Metals	Gingertom Resources Pty Ltd	JV**
EL 3653	Elbow Hill	Cleve	79	IOCGU	Gingertom Resources Pty Ltd	JV**
*Total*			*10,386*

* Pirie Resources Pty Ltd, Kensington Exploration Pty Ltd and Leigh Creek Magnesite Pty Ltd are wholly owned subsidiaries of Archer Exploration Limited.

** To earn 100% of base metals, excluding uranium, when expenditures in accordannce with Joint Venture are met.

ARCHER EXPLORATION LIMITED ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010ANNUAL REPORT 2010

Directors’ Report

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Directors’ Report

Your Directors present this report on Archer Exploration Limited and its consolidated entities (‘Group’), for the year ended 30 June 2010.

Directors

The names of Directors in office at the date of this Report:

Greg English
Tom Phillips AM
Alice McCleary Gerard Anderson
John Dawkins AO

The above named Directors held office during and since the end of the financial year, except for Mr John Dawkins AO who was appointed a Director of the Company on 30 April 2010.

No Directors resigned during or subsequent to the end of the financial year. A biography and statutory disclosures regarding each director and the Company Secretary are provided elsewhere in this Directors’ Report.

Principal Activities

The principal activity of the Group during the course of the financial year was the exploration for minerals on the Group’s exploration licenses in South Australia. There has been no change to these activities during the financial year.

Operating Results

The loss of the Group was $475,463 after receiving a research and development concessional grant of $95,149.

Dividends

No dividends were declared or paid during the financial year. No recommendation for payment of dividends has been made.

Review of Operations

During the year the employees have visited all the Group’s owned Exploration Licences and technical evaluations were conducted including geophysics, mapping, soil sampling and drilling.

Significant Changes in State of Affairs

The Directors are not aware of any significant changes in the state of affairs of the Group occurring during the financial year, other than as disclosed in this Annual Report.

Matters Subsequent to the End of the Financial Year

No other matters or circumstances haven arisen since the end of financial year which have significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

Future Developments, Prospects and Business Strategies

The Company will continue an exploration strategy that preserves cash, while exploring mineral opportunities that can relatively quickly grow the company’s market capitalisation. The Company has developed a pipeline of projects ranging from greenfields manganese and gold prospects, through advanced drill ready manganese, iron, nickel and uranium targets. When the Leigh Creek Magnesite license is granted, the Company will have a world class magnesite resource with real development potential. The exploration objective is to develop drill targets at minimum cost and if drill targets cannot be defined at an early stage and at a relatively low cost, the tenement will be farmed out, sold or relinquished.

Further information on likely development in the operations of the Group and the expected results of operations have not been included because the directors’ believe it would result in unreasonable prejudice to the Group.

Environmental Issues

The Group’s operations are subject to significant environmental regulations under the laws of the Commonwealth and/or State. No notice of any breach has been received and to the best of the Directors’ knowledge no breach of any environmental regulations has occurred during the financial year or up to the date of this Annual Report.

A detailed description of the Group’s operations and financial position is set out elsewhere in this Annual Report.

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Information on Directors and Management

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Greg English

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Tom Phillips AM

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Alice McCleary

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Gerard Anderson

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John Dawkins AO

Greg English LLB, BE (Mining) Chairman

Greg English is a qualified mining engineer and lawyer. He is a partner of Norman Waterhouse Lawyers and specialises in mining, commercial and securities law. He is also a qualified mining engineer, with experience on a wide variety of mining projects. Greg was a previous director of ASX listed Gawler Resources Ltd.

Greg’s experience in the mining industry, particularly in capital raising, tenement acquisition, project management and business development, and his industry knowledge and business relationships, enables Archer Exploration to manage and develop its existing tenement portfolio and to identify and secure other high quality exploration assets.

Special Responsibilities - Chairman

Tom Phillips AM MBA FAICD Director (Non-Executive)

He holds board positions with several not-for-profit organisations and Safework Australia. Tom is the Presiding Member of Safework SA and also Chairs the Southern Adelaide Development Board. He is NonExecutive Chairman for UraniumSA Limited (ASX listed) and a former director of Australia Post.

Tom’s extensive experience in Australian industry and his knowledge of international business is a significant asset to the Company.

Special Responsibilities - Nil

Alice McCleary BEc FCA FTIA FAICD Director (Non-Executive)

Alice McCleary is a Chartered Accountant and company director. She is Deputy Chancellor of the University of South Australia, a director of Great Southern Ltd and UraniumSA Limited (ASX listed). She was a former director of TWT Group Ltd and Dragon Energy Ltd.

She is also a director of Adelaide Community Healthcare Alliance Inc (ACHA) and a member of the Takeovers Panel and the Corporations and Markets Advisory Committee.

Previous appointments include board memberships of National ICT Australia Ltd, South Australian Government Financing Authority (SAFA) and National President of the Taxation Institute of Australia. She

has been a tax partner in Coopers & Lybrand and was intimately involved with the Ralph Review of Business Taxation. Alice’s professional interests include financial management and corporate governance.

Special Responsibilities - Nil.

Gerard Anderson Assoc. Applied Geology, Grad Dip Bus.MSc Director (Non-Executive)

Gerard Anderson is a geologist with 35 years of experience including 17 years in senior exploration and mine management roles including Exploration Superintendent at the Boddington Gold Mine for Worsley Alumina, Chief Geologist at the Bronzewing Gold Mine and at KCGM, mine General Manager of Golden Grove operations for Normandy and Newmont, General Manager Joint Ventures for Newmont, Managing Director of Croesus Mining NL and Managing Director of Centrex Metals Ltd (both ASX listed).

Special Responsibilities - Nil

John Dawkins AO BEc RDA Director (Non-Executive)

John Dawkins is a former Federal Government Treasurer and he brings substantial business and political acumen to the Company. Since leaving politics in 1993 he has had an active business career including as Chair of Elders Rural Bank (now Rural bank), Integrated Legal Holdings and the Retail Energy Market Company.

He continues as Chair of Integrated Legal Holdings Limited (ASX listed), and is a director of MGM Wireless Ltd (ASX listed) and Government Relations Australia. He is Chair of the Australian Qualifications Framework Council and the National Quality Council.

Craig Gooden

Company Secretary

Mr Gooden was appointed Company Secretary on 16 February 2007 and performs the financial/accounting role in the Company as well as the secretarial duties. He has been a member of the Institute of Chartered Accountants in Australia since 1967 and has over 35 years experience in the resources industry. Mr Gooden is also the Company Secretary of Sundance Energy Australia Limited and UraniumSA Limited (both ASX listed).

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Remuneration Report (Audited)

This report details the nature and amount of remuneration for each director of Archer Exploration Limited and for the Key Management Personnel receiving the highest remuneration.

Remuneration Policy

The Board acts as the remuneration committee as a consequence of the size of the Board and the Company. The Board believes that individual salary negotiation is more appropriate than formal remuneration policies and external advice and market comparisons are sought where necessary. The Company discloses the fees and remuneration paid to all Directors as required by the Corporations Act 2001. The Board recognises that the attraction of high calibre executives is critical to generating shareholder value.

The directors and executives receive a superannuation guarantee contribution required by the government which is currently 9%, and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation and/or elected to increase superannuation contributions a part of their salary package.

All remuneration paid to Directors and executives is valued at the cost to the Company and expensed. The Company has established a Share Option Plan for the benefit of Directors, officers, senior executives and consultants. Shares issued to Directors and executives are valued at the difference between the market price of those shares and the amount paid by the director or executive. Options are valued using the Black-Scholes valuation methodology and recognised as remuneration in accordance with the attached vesting conditions.

The Board policy is to remunerate non-executive directors at the market rates for time, commitment and responsibilities. The Board determines payments to non-directors and reviews their remuneration annually, based on market price, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is not linked to the financial performance of the consolidated Group. However, to align director’s interests with shareholder interests, the directors are encouraged to hold shares in the Company.

Performance-based Remuneration

The elements of the Directors and Company executives’ remuneration which are dependent on performance conditions are:

Michael Hatcher, CEO,
Archer Exploration Limited

Mike Hatcher was engaged by the Company in the role of Chief Executive Officer commencing 25 August 2009, on the following terms:

Role; CEO.
Contract term; Two years but may be terminated early by either party giving minimum 2 months notice.
Remuneration; $138,000 per annum including statutory superannuation plus issue of 1,000,000 unlisted options (refer elsewhere in this Directors’ Report)
Bonus; Discretionary up to $45,540 each year and is determined with reference to share price performance against a comparator gap.
Termination payments; None.
Greg English, Chairman, Non-Executive DIrector Archer Exploration Limited
Base remuneration.
Tom Phillips AM, Non-Executive Director, Archer Exploration Limited

Base remuneration.

Alice McCleary, Non-Executive Director, Archer Exploration Limited

Base remuneration.

Gerard Anderson, Non-Executive Director, Archer Exploration Limited
Base remuneration.
John Dawkins AO, Non-Executive Director, Archer Exploration Limited
Base remuneration.

Each member of the executive team has signed a formal contract at the time of their appointment covering a range of matters including their duties, rights, responsibilities and any entitlements on terminations. The standard contract sets out the specific formal job description.

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Details of Key Management Personnel Remuneration for year ended 30 June 2010

The following table outlines persons who are key management personnel of the Company and the nature and amount of the elements of the remuneration of those persons.

*2010*				Share based
Directors	Salary and commissions		Superannuation	payments - Options	Total
		$	$	$	$
Mr Greg English*		67,278	6,055	-	73,333
Mr Tom PhillipsAM		44,343	3,991	-	48,334
Ms Alice McCleary		44,343	3,991	-	48,334
Mr Gerard Anderson		44,343	3,991	-	48,334
Mr John DawkinsAO		6,218	1,837	-	8,055
Subtotal		206,525	19,865	-	226,390
Key Management Personnel
Mr Craig Gooden		55,722	-	-	55,722
Mr Mike Hatcher		109,177	9,825	68,900	187,902
Mr Wade Bollenhagen		145,000	13,050	-	158,050
Total		516,424	42,740	68,900	628,064

In addition, Norman Waterhouse Lawyers were paid $24,318 (2009: $1,155) during the year for services rendered to the Company. Mr English was employed by Norman Waterhouse Lawyers during the year.

The fair value of the options issued to key management personnel has been determined using an approved valuation methodology. Refer Note 21.

The percentage of remuneration received as share based payments were:

[Mr Mike Hatcher ] 36.7%

Details of Key Management Personnel Remuneration for year ended 30 June 2009

The following table outlines persons who are key management personnel of the Company and the nature and amount of the elements of the remuneration of those persons.

*2009*				Share based
Directors	Salary and commissions		Superannuation	payments - Options	Total
		$	$	$	$
Mr Greg English*		125,000	11,250	-	136,250
Mr Tom PhillipsAM		47,783	4,300	-	52,083
Ms Alice McCleary		45,872	4,128	-	50,000
Mr Gerard Anderson		43,960	3,957	3,250	51,167
Subtotal		262,615	23,635	3,250	289,500
Key Management Personnel
Mr Craig Gooden		44,379	-	-	44,379
Mr Wade Bollenhagen		140,000	12,600	7,560	160,160
Total		446,994	36,235	10,810	494,039

In addition, Norman Waterhouse Lawyers were paid $1,155 and Watsons Lawyers were paid $966 during the year for services rendered to the Company. Mr. English was employed by both Watsons Lawyers and Norman Waterhouse Lawyers during the year.
The fair value of the options issued to key management personnel has been determined using an approved valuation methodology. Refer Note 21 .

The percentage of remuneration received as share based payments were:

[Mr Gerard Anderson ] 6.37%

[Mr Wade Bollenhagen ] 4.71%

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Key Management Personnel Compensation

Options Granted as Compensation

Options were granted during the year as compensation; 1,000,000 (2009: 390,000) No options were exercised during the year which were granted as compensation in prior periods.

Options issued as part of Remuneration for the year ended 30 June 2010

No options were issued to Directors during the year. (2009: 250,000 fair value $3,250). The CEO was issued a total of 1,000,000 options on 4 September 2009 under the Company’s Employee Share Option Plan (2009: 140,000). The options have an exercise price of 20 cents and expiry date of 31 December 2012. The fair value of these options was $68,900. (2009: $7,560)

The inputs utilised in determining the fair value of options is outlined in Note 21 to the Financial Statements.

At balance date, all the options issued to CEO Mike Hatcher have vested.

No options previously granted as compensation in prior periods have been exercised.

Number of Unlisted Options held by Directors and Key Management Personnel

Key Management	Balance	Granted as	Options	Net other	Balance	Total	Total	Total
Personnel	1/07/09	Compensation	Exercised	Changes	30/06/10	vested	exercisable	unexercisable
Mr Gerard Anderson	250,000	-	-	-	250,000	250,000	250,000	-
Mr Wade Bollenhagen	140,000	-	-	-	140,000	94,000	94,000	46,000
Mr Mike Hatcher	-	1,000,000	-	-	1,000,000	1,000,000	1,000,000	-
Total	390,000	1,000,000	-	-	1,390,000	1,344,000	1,344,000	46,000

Listed options - Number of listed options held by Key Management Personnel

Key Management		Balance	Granted as	Options	Net other	Balance	Total	Total	Total
Personnel		1/07/09	Compensation	Lapsed*	Changes	30/06/10	vested	exercisable	unexercisable
Mr Greg English		5,802,399	-	(5,802,399)	-	-	-	-	-
Mr Tom PhillipsAM		537,500	-	(537,500)	-	-	-	-	-
Ms Alice McCleary		750,000	-	(750,000)	-	-	-	-	-
Mr Gerard Anderson		25,000	-	(25,000)	-	-	-	-	-
MR John DawkinsAO		-	-	-	-	-	-	-	-
Mr Craig Gooden		425,000	-	(425,000)	-	-	-	-	-
Mr Wade Bollenhagen		-	-	-	-	-	-	-	-
Mr Mike Hatcher		-	-	-	-	-	-	-	-
Total	7,539,899		-	(7,539,899)	-	-	-	-	-

During the year the listed share options expired.

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Shareholdings - Number of shares held by Directors and Key Management Personnel

Key Management	Balance on	Received as	Options	Net Other	Balance
Person	1/7/09	Compensation	Exercised	Change	30/06/10
Mr Greg English	11,604,798	-	-	-	11,604,798
Mr Tom PhillipsAM	1,075,000	-	-	-	1,075,000
Ms Alice McCleary	1,500,000	-	-	240,000	1,740,000
Mr Gerard Anderson	50,000	-	-	-	50,000
Mr John DawkinsAO	-	-	-	-	-
Mr Craig Gooden	850,000	-	-	-	850,000
Mr Wade Bollenhagen	175,000	-	-	-	175,000
Mr Mike Hatcher	-	-	-	-	-
Total	15,254,798	-	-	240,000	15,494,798

Employment contract of the CEO and Exploration Manager

Name	Position	Duration of	Period of	Termination Payment
		Contract	Termination	provided for under
			Notice (3)	the contract
Michael Hatcher	CEO	24 Months (1)	Immediate	2 Months
Wade Bollenhagen	Exploration Manager	33 Months (2)	Immediate	4 weeks

Note 1) Contract commenced 25 August 2009

2) Contract renewed until 31 March 2012.
3) For termination with good cause.

Meetings of Directors

During the financial year, 12 meetings of the Board of Directors were held. Attendances by each Director were as follows:

Name	Number of Directors	Number of Directors
	meetings whilst a Director
	Held	Attended
Mr Greg English	12	12
Mr Tom PhillipsAM	11	12
Ms Alice McCleary	11	12
Mr Gerard Anderson	11	12
Mr John DawkinsAO*	2	2

2 meetings were held after Mr. Dawkins AO was appointed and he attended both meetings.

Since balance date the Company has formed a separate Audit and Risk Committee. The Company has not formed a Remuneration Committee, or a Corporate Governance Committee. The Board as a whole considers these matters. The Board considers this appropriate given the size and nature of the Company at this time.

Indemnifying Officers or Auditor

The Company’s Constitution provides that the Company indemnifies, on a full indemnity basis and to the full extent permitted by law, officers of the Company for all losses or liabilities incurred by the person as an officer of the Company or a related body corporate. In conformity with the Constitution, the Company is party to Deeds of Indemnity in favour of each of the Directors referred to in this report who held office during the year.

The Company has paid premiums to insure each of the directors, officers and consultants against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director or executive of the company, other than conduct involving wilful breach of duty or a lack of good faith in relation

to the company. The policy does not specify the individual premium for each officer covered. Since the end of the year the Company has paid, or agreed to pay, premiums in respect of such contracts for the year ending 30 June 2011.

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Options

The following options are unexercised at the date of this Annual Report:

this Annual Report:
Grant Date	Option Type	Number of shares	Exercise Price	Expiry Date
		subject to Options
21 November 2008	Unlisted	250,000	$0.25	14 July 2011
29 June 2009	Unlisted	270,000	$0.09	29 June 2012
4 September 2009	Unlisted	1,000,000	$0.20	31 December 2012

During the year ended 30 June 2010 10,000 Listed Bonus Options were exercised prior to expiring in February 2010.

No options issued to employees were exercised.

No person entitled to exercise employee option had or has any right by virtue of the option to participate in any share issue of any other body corporate.

Proceedings on Behalf of Company

As far as the Directors’ are aware, no person has applied to the Court for leave to bring proceedings on behalf of the Company or to 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.

Auditor’s Independence Declaration

The lead auditor’s independence for the year ended 30 June 2010 has been received and can be found on page 22 of the Financial Report.

Signed in accordance with a resolution of the Board of Directors

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Greg English Chairman

Adelaide

Dated this 23[rd] day of September 2010

Non-Audit Services

The Board of Directors is satisfied that the provision of the 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 services disclosed below did not compromise the external auditor’s independence for the following reasons:

all non-audit services are reviewed and approved by the board prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and
the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

The following fees for non-audit services were paid to the external auditors during the year ended 30 June 2010:

Taxation services $5,175 $5,175

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Auditor’s Independence Declaration

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 



ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Corporate Goverance Statement

A copy of the Company’s Corporate Governance Manual and its Code of Conduct and Ethics may be found on the company’s website, at:

www.archerexploration.com.au

These documents set out the principles of corporate governance which the Board, and all employees, are obliged to comply with:

Principle 1: Laying Solid Foundations for management and oversight

The Company’s Corporate Governance Manual sets out the matters reserved for the Board’s decision.

The board has established delegations to senior executives so that their authority and duties are clear. These relate to expenditure approvals, day-to-day decision-making, routine ASX disclosures, review of potential projects, OH&S, staffing, promotion of the Company and Board reporting. Details are set out in the Company’s Corporate Governance Manual.

We also advise that a formal performance appraisal of the Executive Chairman was carried out during the year by the Board in accordance with our published policy. In addition, the Executive Chairman reviewed the performance of other key executives in accordance with the policy.

Principle 2: Structuring the board to add value

The skills, experience and expertise relevant to the position of each director who is in office at the date of the annual report, and their term of office, are detailed in the directors’ report.

A majority of the non-executive directors of the company are independent:

Tom Phillips AM Alice McCleary Gerard Anderson

John Dawkins AO

Each holds less than 5% of the issued capital of the Company, and has no current or recent material business relationship with the Company other than as a director. The Non Executive Chairman of the Company, Mr. Greg English, is a substantial shareholder and holds more than 5% of the issued capital of the Company.

The Company does not have a separate Nomination Committee. However, the Board considers the composition, size and skills of the Board as part of its Board evaluation process, when selecting and appointing new directors, and at other relevant times,

and considers that it does not presently require a Nomination Committee given the present size of both the Company and the Board.

The Corporate Governance Manual sets out the process for evaluating the effectiveness of the Board. The Board has followed this process in the 2010 year.

Board members are permitted to obtain independent professional advice at the expense of the Company, as set out in the Corporate Governance Manual.

Principle 3: Promote ethical and responsible decision-making

The company’s Code of Conduct and Ethics establishes the practices directors and staff must follow to comply with the law, meet stakeholder expectations, maintain confidence in the Company’s integrity and report unethical practices.

The Corporate Governance Manual outlines a clear policy applicable to all staff and directors in relation to trading in the Company’s shares. The policy restricts directors and employees from acting on material information until it has been released to the market and adequate time has been given for this to be reflected in the securities’ prices.

Principle 4: Safeguarding integrity in financial reporting

During the financial year, the Company did not have a separate audit committee due to the current size of the Company and its operations. The Board as a whole had responsibility for the functions of an audit committee and carries out these functions in its monthly board meetings. Since balance date, the decision not to have a separate audit committee was reviewed and an Audit and Risk Committee has been established. The Chair of the committee is director Alice McCleary with directors Tom Phillips AM and Gerard Anderson as members. All directors are given notice of meetings and are free to attend.

The Company selects its external auditor on a merit basis and is currently satisfied with the audit services being provided. Given the short period of the Company’s existence, it has not yet had cause to consider auditor rotation or re-selection processes, but will base any such decisions on competency, independence and value for money.

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Corporate Goverance Statement

Principle 5: Making timely and balanced disclosure

The Company’s procedures for ensuring timely ASX disclosure are set out in the Corporate Governance Manual. The CEO and Company Secretary have dayto-day responsibility for compliance with ASX Listing Rules. All strategic disclosures to the ASX are approved by the Board. The functions of Competent Person for the purposes of the JORC code are performed by the Exploration Manager, Mr. Wade Bollenhagen.

Principle 6: Respecting the rights of shareholders

The Company’s shareholder communication policy is set out in the Corporate Governance Manual. The Company relies principally on ASX disclosure and AGM meeting notices to communicate with shareholders which is considered adequate at this early stage of the Company’s development.

The amount of remuneration for all directors and executives, including all monetary and non-monetary components, is detailed in the directors’ report. All remuneration is valued at the cost to the Company and expensed. There are no schemes for retirement benefits for non-executive directors other than statutory superannuation.

The Company seeks to remunerate employees fairly in accordance with industry benchmarks and individual performance. Contracts of employment with senior executives may include base salary, superannuation and provision of a motor vehicle. The contracts allow for annual performance and remuneration reviews. All employees are also entitled to participate in the Company’s employee share option plan, and modest grants of options were made during the year, as set out in this report. Employees are not permitted to use margin lending or similar facilities in relation to their shares in the Company.

Principle 7: Recognising and managing risk

The Company’s risk management polices are outlined in the Corporate Governance Manual. The Company has comprehensive policies in place to manage financial and operational risk, and these are being further developed and expanded as the Company’s operations expand. The effectiveness of management of these risks is reported upon to the Board each month. Broader corporate risks are reviewed by the Board as a whole on an ongoing basis, and risk minimization strategies such as insurance are in place. The Board has conducted a formal risk assessment of its activities.

In relation to financial risks, the Company has internal controls in place and these are audited as part of the external audit function. The Company also received formal assurances from the Chairman and Company Secretary as to the effectiveness of the Company’s risk management and internal control environment, as required by s295A of the Corporations Act.

Principle 8: Remunerate fairly and responsibly

The Company does not have a separate remuneration committee due to the current size of the company and its operations. The Board as a whole has responsibility for the functions of a remuneration committee, including the performance evaluation and remuneration of the Executive Chairman and Chief Executive Officer.

ARCHER EXPLORATION LIMITED ER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

Financial Information

ARCHER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES

ABN 64 123 993 233

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2010

The accompanying notes form part of the fnancial statements. *FOR THE YEAR ENDED 30 JUNE 2010* Notes Revenues from ordinary activities 2 Depreciation and amortisation expenses Impairment - exploration assets Employee benefits expense Finance costs Occupancy expense Consultants expense ASX listing and registry expense Other corporate expenses from ordinary activities Loss before income tax Income tax benefit 3 Loss for year Loss attributable to members of the parent entity Other comprehensive income Total comprehensive income for the year Total comprehensive income for the year attributable to members of the parent entity Earnings per Share Basic loss per share 6	Consolidated Group 2010 2009 $ $	Consolidated Group 2010 2009 $ $
	2010 $
	252,150 (17,922) - (454,200) (3,187) (39,656) (62,362) (51,502) (193,933)	374,191 (24,527) (865,203) (379,661) (4,459) (37,696) (56,610) (45,874) (250,119) (1,289,958) 178,855 (1,111,103) (1,111,103) - (1,111,103) (1,111,103) Cents (1.8)
	(570,612) 95,149
	(475,463)
	(475,463)
	-
	(475,463)

	(475,463)
	Cents
	(0.7)

ARCHER EXPLORATION LIMITED ER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

STATEMENT of FINANCIAL POSITION

AS AT 30 JUNE 2010

The accompanying notes form part of the fnancial statements. Notes ASSETS CURRENT ASSETS Cash and cash equivalents 7 Trade and other receivables 8 Total Current Assets NON-CURRENT ASSETS Plant and equipment 10 Exploration and evaluation expenditure 11 Total Non-current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 12 Financial liabilities 13 Short-term provisions 14 TOTAL CURRENT LIABILITIES NON CURRENT LIABILITIES Financial liabilities 14 Long-term provisions TOTAL NON CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 15 Reserves Retained earnings TOTAL EQUITY	Consolidated Group Parent Entity 2010 2009 2009 2008 $ $ $ $	Consolidated Group Parent Entity 2010 2009 2009 2008 $ $ $ $
	2010 $
	3,929,824 118,689	4,973,186 206,862 5,180,048 92,730 4,162,123 4,254,853 9,434,901 144,185 17,453 19,070 180,708 21,030 1,587 22,617 203,325 9,231,576 10,697,198 8,164 (1,473,786) 9,231,576
	4,048,513
	97,884 4,833,783
	4,931,667
	8,980,180
	102,185 21,016 19,736
	142,937
	- 4,816
	4,816
	147,753
	8,832,427
	10,699,698 81,978 (1,949,249)
	8,832,427

ARARCHER EXPLORATION LIMITED LORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2010

Consolidated Group Balance at 1 July 2008 Fair value of options issued Total comprehensive income for year Balance at 30 June 2009 Fair value of options issued Listed share options exercised Total comprehensive income for year Balance at 30 June 2010	Issued Retained Share Option Capital Earnings Reserve $ $ $ 10,697,198 (362,683) - - - 8,164 - (1,111,103) -	Issued Retained Share Option Capital Earnings Reserve $ $ $	Total $
			10,334,515 8,164 (1,111,103) 9,231,576 73,814 2,500 (475,463) 8,832,427
	10,697,198 (1,473,786) 8,164
	- - 73,814 2,500 - - - (475,463) -
	10,699,698 (1,949,249) 81,978

The accompanying notes form part of the financial statements.

ARCHER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES

ABN 64 123 993 233

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2010

mpanying notes form part of the fnancial statements. Notes CASH FLOWS FROM OPERATING ACTIVITIES Receipts from consulting services Payments to suppliers and employees Interest received Research & Development concessional tax refund Finance costs NET CASH (USED IN) OPERATING ACTIVITIES 20 CASH FLOWS FROM INVESTING ACTIVITIES Payments for exploration expenditure Receipts from sale of plant & Equipment Payments for plant and equipment NET CASH (USED IN) INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issues of ordinary shares Proceeds from borrowings Repayment of borrowings NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES Net (decrease) in cash held Cash at the beginning of the financial year Cash at the end of the financial year 7	Consolidated Group 2010 2009 2009 2008 $ $ $ $	Consolidated Group 2010 2009 2009 2008 $ $ $ $
	2010 $
	22,223 (769,026) 227,842 178,855 (3,187)	13,781 (700,249) 360,410 - (4,459) (330,517) (1,069,607) - (48,290) (1,117,897) - 52,975 (14,492) 38,483 (1,409,931) 6,383,117 4,973,186
	(343,293)
	(654,381) 15,454 (46,175)
	(685,102)
	2,500 - (17,467)
	(14,967)
	(1,043,362)
	4,973,186
	3,929,824

The accompanying notes form part of the financial statements.

ARARCHER EXPLORATION LIMITED LORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010

ABN 64 123 993 233

NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The financial report includes the consolidated financial statements and notes of Archer Exploration Limited and controlled entities (‘Consolidated Group’ or ‘Group’).

Basis of Preparation

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated.

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.

a) Principles of Consolidation

A controlled entity is any entity over which Archer Exploration Limited has the power to govern the financial and operating policies so as to obtain benefits from its activities. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are considered.

A list of controlled entities is contained in Note 9 to the financial statements.

As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial statements as well as their results for the year then ended. Where controlled entities have entered (left) the consolidated group during the year, their operating results have been included/(excluded) from the date control was obtained/(ceased).

All inter-group balances and transactions between entities in the consolidated group, including any recognised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed, where necessary, to ensure consistency with those adopted by the parent entity.

Business Combinations

Business combinations occur where control over another business is obtained and results in the consolidation of its assets and liabilities. All business combinations, including those involving entities under common control, are accounted for by applying the purchase method.

The acquisition method requires an acquirer of the business to be identified and for the cost of the acquisition and fair values of identifiable assets, liabilities and contingent liabilities to be determined at acquisition date, being the date that control is obtained. Cost is determined as the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for control together with costs directly attributable to the business combination. Any deferred consideration payable is discounted to present value using the equity’s incremental borrowing rate.

Goodwill is recognised initially at the excess of cost over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If the fair value of the acquirer’s interest is greater than cost, the surplus is immediately recognised in profit or loss.

b) Income Tax

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 the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities/(assets) aretherefore 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 as unused tax losses. Current and deferred income tax expense/(income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

ARCHER EXPLORATION LIMITED ER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010

ABN 64 123 993 233

NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset recognised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. 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 unused tax losses are recognised 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 legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

Tax Consolidation

Archer Exploration Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under tax consolidation legislation. The Group notified the Australian Tax Office that it had formed an income tax consolidated group to apply from 1 July 2007. The tax consolidated group has entered a tax funding arrangement whereby each company in the group contributed to the income tax payable by the group in proportion to their contribution to the Group’s taxable income. Differences between the amounts of net tax assets and liabilities recognised and the net amounts recognised pursuant to the funding arrangement are recognised as either a contribution by, or distribution to the head entity.

c) Plant and Equipment

Plant and equipment is carried at cost less where applicable, any accumulated depreciation and impairment losses.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Statement of Comprehensive Income during the financial period in which are they are incurred.

Depreciation

The depreciable amount of all fixed assets are depreciated on a straight-line basis over their useful lives to the consolidated entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are:

Class of Non Current Asset	Depreciation Rate	Basis of Depreciation
Plant and Equipment	10 – 33%	Straight Line

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the Statement of Comprehensive Income.

d) Exploration and Evaluation Expenditure

Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.

ARCHER EXPLORATION LIMITED ER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010

ABN 64 123 993 233

NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued

Where a decision is made to proceed with development the accumulated costs for the relevant area of interest will be amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

e) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to entities in the consolidated Group, are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.

f) Financial Instruments

Recognition and Initial Measurement

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention.

Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transactions costs related instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below.

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

Classification and Subsequent Measurement

i) Financial assets at fair value through profit or loss

Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of short term profit taking, where they are derivatives not held for hedging purposes, or designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Realised and unrealised gains and losses arising from changes in fair value are included in profit or loss in the period in which they arise.

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

ARCHER EXPLORATION LIMITED ER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010

ABN 64 123 993 233

NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued

ii) 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 subsequently measured at amortised cost using the effective interest rate method.

iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost using the effective interest rate method.

iv) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated as such or that are not classified in any of the other categories. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed determinable payments.

v) Financial liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method.

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 Statement of Comprehensive Income

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

l) Employee Benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for these benefits. Those cashflows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cashflows.

Equity - Settled Compensation

The Group has an employee share option plan. The bonus element over the exercise price of the employees services rendered in exchange for the grant of shares and options is recognised as an expense in the Statement of Comprehensive Income. The total amount to be expensed over the vesting period is determined by reference to the fair value of the shares or the option granted.

j) Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

k) Cash and Cash Equivalent

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the Statement of Financial Position.

l) Revenue

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

Revenue from the rendering of a service is recognised upon the delivery of the service to the customers. All revenue is stated net of the amount of goods and services tax (GST).

h) Interests in Joint Venture

The Consolidated Group’s share of assets, liabilities, revenue and expenses of the joint venture operations are included in the appropriate items of the Consolidated Financial Statements. Details of the Consloidated Group’s interest is shown in Note 17.

ARARCHER EXPLORATION LIMITED LORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010

ABN 64 123 993 233

NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued

m) Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in income in the period in which they are incurred.

n) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. 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 in the Statement of Financial Position are shown inclusive of GST.

Cash flows are presented in the Statement of Cash Flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

o) Comparative Figures

When required by accounting standards, comparative figures have been adjusted to conform to changes in presentation of the current financial year.

p) Critical Accounting Estimates and Judgments

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.

Key estimates

Impairment

The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value–in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

No impairment has been recognised in respect of non current assets for the year ended 30 June 2010.

Exploration and evaluation

The consolidated entity’s policy for exploration and evaluation is discussed at note 1(d). The application of this policy requires the directors to make certain estimates and assumptions as to future events and circumstances. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised exploration and evaluation expenditure, the directors conclude that the capitalised expenditure is unlikely to be recovered by future sale or exploitation, then the relevant capitalised amount will be written off though the income statement.

q) Adoption of New and Revised Accounting Standards

During the current year the Group adopted all of the new and revised Australia Accounting Standards and Interpretations applicable to its operations which became mandatory.

The adoption of these standards has impacted the recognition, measurement and discloser of certain transactions. The following is an explanation of the impact the adoption of these standards and interpretations has had on the financial statement of Archer Exploration Limited.

AASA 8: Operating Segments

In February 2007 the Australian Standards Boards issued AASB 8 which replaced AASB 114: Segment Reporting. As a result, some of the required operating segment disclosure have changed with the addition of a possible impact of the impairment testing of goodwill allocated to the cash generating unit (CGUs) of the entity. Below is an overview of the key changes and the impact on the Group’s financial statements.

Measurement Impacted

Identification and measurement of segments – AASB 8 requires the ‘management approach’ to the identification measurement and disclosure of operating segments. The ‘management approach’ requires that operating segments be identified on the basis of internal reports that are regularly reviewed by the entity’s chief operating decision maker, for the purpose of allocating resources and assessing performance. This could also include the identification of operating segments which sell primarily or exclusively to other internal operating segments. Under the AASB 114, segments were identified by business and geographical area, and only segments deriving revenue from external sources were considered.

ARCHER EXPLORATION LIMITED ER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued

Under AASB 8, operating segments are determined based on management reports using the ‘management approach’, whereas under AASB 114 financial results of such segments were recognised and measured in accordance with Australian Accounting Standards. This has resulted in changes to the presentation of segment results, with inter-segment sales and expenses such as depreciation and impairment now being reported for each segment rather that in aggregate for total group operations, as this is how they are reviewed by the chief operating decision maker.

AASB 101: Presentation of Financial Statements

In September 2007 the Australian Accounting Standards Board revised AASB 101 and as a result, there have been changes to the presentation and disclosure of certain information within the financial statements. Below is an overview of the key changes and the impact on the Group’s financial statements.

Disclosure Impact

Terminology changes – The revised version of the AASB 101 contains a number of terminology changes, including the amendment of the names of the primary financial statements.

Reporting changes in equity – The revised AASB 101 requires all changes in equity arising from transactions with owners, in their capacity as owners, to be presented separately from non-owner changes in equity. Owner changes in equity are to be presented in the statement of changes in equity, with non-owner changes in equity presented in the statement of comprehensive income. The previous version of AASB 101 required that owner changes in equity and other comprehensive income be presented in the statement of changes in equity.

Statement of comprehensive income – The revised AASB 101 requires all income and expenses to be presented in either one statement, the statement of the comprehensive income, or two statements, a separate income statement and a statement of comprehensive income. The previous version of AASB 101 required only the presentation of a single income statement.

The Group’s financial statements now contain a statement of comprehensive income.

Other comprehensive income – The revised version of AASB 101 introduces the concept of ‘other comprehensive income’ which comprises of income and expenses that are not recognised in profit or loss as required

by other Australian Accounting Standards. Items of other comprehensive income are to be disclosed in the statement of comprehensive income. Entities are required to disclose in income tax relating to each component of other comprehensive income. The previous version of AASB 101 did not contain an equivalent concept.

New Accounting Standards for Application in Future Periods

The AASB has issued new and amended accounting standards and interpretation that have mandatory application dates for future reporting periods. The Group has decided against early adoption of these standards. A discussion of those future requirements and their impact on the Group follows:

AASB 9 : Financial Instruments and AASB 2009-11: Amendments to Australian Accounting Standards arising from AASB9 [AASB 1,3,4,5,7,101,102,108,1 12,118,121,127,128,131,132,136,139,1023 & 1038 and Interpretations 10 & 12] (applicable for annual reporting periods commencing on or after 1 January 2013).
These standards are applicable retrospectively and amend the classification and measurement of financial assets. The Group has not yet determined the potential impact on the financial statements.
The changes made to accounting requirements include:
Simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value;
Simplifying the requirements of embedded derivatives;
Removing the tainting rules associated with heldto-maturity assets;
Removing the requirements to separate and fair value embedded derivatives for financial assets carried at amortised cost;
Allowing an irrevocable election on initial recognition to present gains and losses on investment in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument; and

ARARCHER EXPLORATION LIMITED LORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES continued

Reclassifying financial assets where there is a change in an entity’s business model as they are initially classified based on:
- a) the objective of the entity’s business model for managing the financial assets; and
- b) the characteristics of the contractual cash flows.
AASB 2009-8: Amendments to Australian Accounting Standards – Group Cash-settled Share-based Payment Transactions [AASB 2] (applicable for annual reporting periods commencing on or after 1 January 2010).

These amendments clarify the accounting for group cash-settled share-based payment transactions in the separate or individual financial statements of the entity receiving goods or services when the entity has no obligation to settle the share-based payment transaction. The amendments incorporate the requirements previously included in Interpretation 8 and Interpretation 11 and as a consequence, these two Interpretations are superseded by the amendments. These amendments are not expected to impact the Group.

AASB 2009-10: Amendments to Australian Accounting Standards – Classification of Rights Issues [AASB 132] (applicable for annual reporting periods commencing on or after 1 February 2010).
These amendments clarify that rights, options or warrants to acquire a fixed number of an entity’s own equity instruments for a fixed amount in any currency are equity instruments if the entity offers the rights, options or warrants pro-rata to all existing owners of the same class of its own non-derivative equity instruments. These amendments are not expected to impact the Group.

This standard makes a number of editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of International Financial Reporting Standards by the IASB. The standard also mends AASB 8 to require entities to exercise judgment in assessing whether a government and entities know to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. These amendments are not expected to impact the Group.

AASB 2009-13: Amendments to Australia Accounting Standards arising from Interpretation 19 [AASB1] (applicable for annual reporting periods commencing on or after 1 July 2010).

This standard makes amendments to AASB 1 arising from the issue of Interpretation 19. The amendments allow a first-time adopter to apply the transitional provision in Interpretation 19. This standard is not expected to impact the Group.

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.

The financial report was authorised for issue on 23[rd] September 2010 by the Board of Directors.

AASB 2009-12: Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretation 2, 4, 16, 1039 & 1052] applicable for annual reporting periods commencing on or after 1 January 2001).

ARCHER EXPLORATION LIMITED ER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

	Consolidated Group	Consolidated Group	Parent Entity	Parent Entity
	2010	2009	2009	_2008 _
	$	$	$	$
NOTE 2 – REVENUE
Operating activities
- Consulting fees	18,858	13,781
- Gain of sale of asset	514	-
- Interest received	232,778	360,410
Total Revenue	252,150	374,191
NOTE 3 – INCOME TAX BENEFIT
a) The components of income tax benefit comprise:
Current tax	95,149	178,855
Deferred tax	-	-
	95,149	178,855
b) The prima facie tax on loss from ordinary
activities before income tax is reconciled to
the income tax as follows 30% (2009 : 30%):
Net Loss	(570,612)	(1,289,958)
Prima facie tax benefit on loss
from ordinary activities before income tax at 30%	(171,184)	(386,987)
Add/(less):
Tax effect of:
- capital raising costs deductible	(59,185)	(59,185)
- other non allowable	(235,648)	266,198
	(466,017)	(179,974)
Research and development tax concession	95,149	178,855
Tax effect of temporary differences not brought to
account as they do not meet the recognition criteria	466,017	179,974
Income Tax attributable to operating loss	95,149	178,855
c) Unused tax losses for which no deferred tax asset
has been recognised at 30%	1,757,261	1,291,244

ARARCHER EXPLORATION LIMITED LORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

NOTE 4 – KEY MANAGEMENT PERSONNEL COMPENSATION

a) Names and positions held of consolidated entity key management personnel in office

at any time during the financial year are:

Mr Greg English	Chairman – Non-executive	appointed 9 May 2007
Mr Tom PhillipsAM	Director – Non-executive	appointed 16 February 2007
Ms Alice McCleary	Director – Non-executive	appointed 16 February 2007
Mr Craig Gooden	Company Secretary	appointed 16 February 2007
Mr Gerard Anderson	Director – Non-executive	appointed 14 July 2008
Mr John DawkinsAO	Director – Non-excecutive	appointed 30 April 2010
Mr Wade Bollenhagen	Exploration Manager	appointed 26 March 2008
Mr Mike Hatcher	Chief Executive Officer	appointed 12 August 2009

Other than those employees of the company listed above there are no additional management personnel.

b) Key Management Personnel Compensation

Refer to the Remuneration Report contained in the Report of Director’s for details of the remuneration paid or payable to each member of the Group’s key management personnel (KMP) for the year ended 30 June 2010.

The total of remuneration paid to KMP of the Group during the year are as follows:

Short term benefits Post employment benefit Share - based payments	2010 2009 516,424 446,994 42,740 36,235 68,900 10,810
	628,064 494,039

c) Options Granted as Compensation

1,000,000 (2009: 390,000) Options were granted during the year to key management as compensation with a fair value of $68,900 (2009:$10,810).

No options were exercised during the year which were granted as compensation in prior periods.

ARCHER EXPLORATION LIMITED ER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

NOTE 4 – KEY MANAGEMENT PERSONNEL COMPENSATION continued

d) Option Holdings

Number of options held by Key Management Personnel

2010
Key Management	Balance	Granted as	Options	Options	Balance	Total	Total	Total
Personnel	1.07.09	compensation	exercised	expired	30.06.10	Vested	Exercisable	Unexercisable
Mr Greg English	5,802,399	-	-	(5,802,399)	-	-	-	-
Mr Tom PhillipsAM	537,500	-	-	(537,500)	-	-	-
Ms Alice McCleary	750,000	-	-	(750,000)	-	-	-	-
Mr Gerard Anderson	275,000	-	-	(25,000)	250,000	250,000	250,000	-
Mr John DawkinsAO	-	-	-	-	-	-	-	-
Mr Craig Gooden	425,000	-	-	(425,000)	-	-	-	-
Mr W Bollenhagen	140,000	-	-	-	140,000	94,000	94,000	46,000
Mr Mike Hatcher*	-	1,000,000	-	-	1,000,000	1,000,000	1,000,000	-
Total	7,929,899	1,000,000	-	(7,539,899)	1,390,000	1,344,000	1,344,000	46,000

* Unlisted options issued to an employee.	* Unlisted options issued to an employee.	* Unlisted options issued to an employee.
2009
Key Management	Balance	Granted as	Options	Net other	Balance	Total	Total	Total
Personnel	1.07.08	compensation exercised		Changes	30.06.09	Vested	Exercisable	Unexercisable
Mr Greg English*	5,802,399	-	-	-	5,802,399	5,802,399	5,802,399	-
Mr Tom PhillipsAM*	537,500	-	-	-	537,500	537,500	537,500	-
Ms Alice McCleary*	750,000	-	-	-	750,000	750,000	750,000	-
Mr Gerard Anderson	-	250,000**	-	25,000	275,000	275,000	275,000	-
Mr Craig Gooden*	425,000	-	-	-	425,000	425,000	425,000	-
Mr W Bollenhagen	-	140,000**	-	-	140,000	47,000	47,000	93,000
Total	7,514,899	390,000	-	25,000	7,929,899	7,836,899	7,836,899	93,000

All of the listed options were escrowed until 14 August 2009.

** Unlisted options issued to a Director and employee.

e) Shareholdings

Number of shares held by Key Management Personnel

2010

*2010*
Key Management	Balance	Received as	Options	Net Other	Balance
Personnel	1.7.09	Compensation	Exercised	Change	30.6.2010
Mr Greg English	11,604,798*	-	-	-	11,604,798
Mr Tom PhillipsAM	1,075,000**	-	-	-	1,075,000
Ms Alice McCleary	1,500,000*	-		- 240,000	1,740,000
Mr John DawkinsAO	-	-	-	-	-
Mr Craig Gooden	850,000**	-	-	-	850,000
Mr Gerard Anderson	50,000	-	-	-	50,000
Mr W Bollenhagen	175,000	-	-	-	175,000
Mr M Hatcher	-	-	-	-	-
Total	15,254,798	-	-	240,000	15,494,798

Greg English’s and Alice McCleary’s shares were escrowed and could not be sold before 14 August 2009.
** 500,000 of Tom Phillips’ shares and 750,000 of Craig Gooden’s were escrowed and could not be sold before 14 August 2009.

ARARCHER EXPLORATION LIMITED LORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

NOTE 4 – KEY MANAGEMENT PERSONNEL COMPENSATION continued

e) Shareholdings continued

Number of shares held by Key Management Personnel

*2009*
Key Management	Balance on	Received as	Options	Net Other	Balance
Personnel	1.7.2008	Compensation	Exercised	Change	30.6.2009
Mr Greg English	11,604,798*	-	-	-	11,604,798*
Mr Tom PhillipsAM	1,075,000**	-	-	-	1,075,000**
Ms Alice McCleary	1,500,000*	-	-	-	1,500,000
Mr Gerard Anderson	-	-	-	50,000	50,000
Mr Craig Gooden	850,000**	-	-	-	850,000
Mr W Bollenhagen	80,000	-	-	95,000	175,000
Total	15,109,798	-	-	145,000	15,254,798

Greg English’s and Alice McCleary’s shares were escrowed and could not be sold before 14 August 2009.
** 500,000 of Tom Phillips’ shares and 750,000 of Craig Gooden’s were escrowed and could not be sold before 14 August 2009.

NOTE 5 – AUDITORS’ REMUNERATION Remuneration of the auditor for: - auditing or review of the financial report - other services provided by the practice of the auditor NOTE 6 – EARNINGS PER SHARE Reconciliation of earnings to Profit or Loss Loss for year used to calculate basic EPS a) Weighted average number of ordinary shares outstanding during the year used in calculation of basic EPS. b) In accordance with AASB 133 ‘Earnings per Share’ as potential ordinary shares may only result in a situation where their conversion results in increase on profit per share or decrease in loss per share, no		Consolidated Group Parent Entity 2010 2009 2009 2008 $ $ $ $ 24,000 20,000 5,175 15,415 29,175 35,415 (475,463) (1,111,103) Number Number 64,422,847 64,418,477

b) In accordance with AASB 133 ‘Earnings per Share’ as potential ordinary shares may only result in a situation where their conversion results in increase on profit per share or decrease in loss per share, no dilutive effect has been taken into account.

ARCHER EXPLORATION LIMITED ER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010

ABN 64 123 993 233

2008 $ NOTE 7 – CASH AND CASH EQUIVALENTS Short term deposits Cash at bank and on hand Total Cash at bank and on hand The effective interest rate on short term bank deposits was 6.2%. These deposits have an average maturity of 247 days. The Group’s exposure to interest rate risk is summarised at Note 24. NOTE 8 – TRADE AND OTHER RECEIVABLES CURRENT Other receivables At 30 June 2010 the consolidated entity did not have any receivables which were outside normal trading terms (past due but not impaired).		Consolidated Group Parent Entity 2010 2009 2009 2008 $ $ $ $ 3,831,191 4,757,558 98,633 215,628 3,929,824 4,973,186 118,689 206,862 118,689 206,862

NOTE 9 – INVESTMENTS IN CONTROLLED ENTITIES

ENTITIES
		Percentage Owned
	Country of	2010	2009
	Incorporation	%	%
Parent Entity
- Archer Exploration Limited	Australia	-	-
Subsidiaries of Archer Exploration Limited:
- Pirie Resources Pty Ltd	Australia	100	100
- Kensington Exploration Pty Ltd	Australia	100	100
- Leigh Creek Magnesite Pty Ltd (a)	Australia	100	-

a) Leigh Creek Magnesite Pty Ltd was incorporated on 17 May 2010

ARARCHER EXPLORATION LIMITED LORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

2008 $ NOTE 10 – PLANT AND EQUIPMENT Plant and Equipment at cost Accumulated depreciation a) Movements in carrying amounts: Balance at the beginning of the year Additions Depreciation Disposals Balance at 30 June NOTE 11 – EXPLORATION AND EVALUATION EXPENDITURE Costs carried forward in respect of areas of interest in: Exploration and evaluation phase at cost a) Movements in carrying amounts: Exploration and evaluation Balance at the beginning of the year Amounts capitalised during the year Impairment expense during the year Balance at 30 June During the year $8,159 (2009: Nil) of equipment depreciation was included in the amount capitalised as exploration and evaluation. A summary by tenement is included at_Note 17_ NOTE 12 – TRADE AND OTHER PAYABLES CURRENT Unsecured liabilities: Trade payables Other creditors and accruals Nil (2009: $1,155) is owed to Norman Waterhouse Lawyers for legal services. Mr G English is a partner of Norman Waterhouse Lawers		Consolidated Group Parent Entity 2010 2009 2009 2008 $ $ $ $ 139,070 119,259 (41,186) (26,529) 97,884 92,730 92,730 98,474 46,690 18,783 (26,081 (24,527) (15,455) - 97,884 92,730 4,833,783 4,162,123 4,833,783 4,162,123 4,162,123 4,198,503 671,660 828,823 - (865,203) 4,833,783 4,162,123 55,657 86,169 46,528 58,016 102,185 144,185

Nil (2009: $1,155) is owed to Norman Waterhouse Lawyers for legal services. Mr G English is a partner of Norman Waterhouse Lawyers.

ARCHER EXPLORATION LIMITED ER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010

ABN 64 123 993 233

2008 $ NOTE 13 – FINANCIAL LIABILITIES CURRENT Hire purchase liabilities NON-CURRENT Hire purchase liabilities The hire purchase liabilities are secured by a charge over a term deposit. NOTE 14 – SHORT-TERM PROVISIONS CURRENT Employee entitlements NON-CURRENT Employee entitlements NOTE 15 - ISSUED CAPITAL 64,428,477 (2009: 64,418,477) fully paid ordinary shares a) Ordinary Shares At 1 July 200 Shares issued during the year Total shares issued at 30 June 2009 Shares issued during the year Total shares issued at 30 June 2010 18,604,798 ordinary shares were held by vendor shareholders, directors or director related entities and were unlisted until 14 August 2009 as a result of being escrowed.		Consolidated Group Parent Entity 2010 2009 2009 2008 $ $ $ $
		21,016 17,453 - 21,030 19,736 19,070 4,816 1,587 $ $ $ $ 10,699,698 10,697,198 Number Number Number 64,418,477 - 64,418,477 10,000 64,428,477

ARCHER EXPLORATION LIMITED ER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010

ABN 64 123 993 233

2008 $ NOTE 15 - ISSUED CAPITALcontinued b) Issued Capital At 1 July 2008 Shares issued Total shares issued at 30 June 2009 Shares issued during the year Total shares issued at 30 June 2010 Ordinary shares participate in dividends and the proceeds on winding of the parent entity in proportion to the number of shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. c) Options on issue Details of the share options outstanding as at the end of the year are set out below: Grant date Expiry date Exercise price 13 February 2008 Bonus options 13 Feb 2010 0.25 14 July 2008 Unlisted employee options 14 Jul 2011 0.25 29 June 2009 Unlisted employee options 29 Jun 2012 0.09 3 September 2009 Unlisted employee options 31 Dec 2012 0.20		Consolidated Group Parent Entity 2010 2009 2009 2008 $ $ $ $
		10,697,198 10,697,198 - - 10,697,198 10,697,198 2,500 - - - 10,699,698 10,697,198 2010 2009 Number Number - 32,195,201 250,000 250,000 270,000 270,000 1,000,000 - 1,520,000 32,715,201

d) Capital management

Management controls the capital of the Group in order to maintain a good debt equity ratio, provide the shareholders with adequate returns and ensure that the Group can fund its operations and continue as a going concern.

The Group’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets. There are no externally imposed capital requirtements.

Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.

There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year. The strategy is to ensure that the Group’s gearing ratio remains minimal. At 30 June 2010 the Company had debt of $21,016 (2009: $38,483) resulting from a hire purchase liability. See Note 13 .

NOTE 16 - RESERVES

a) Share option reserve

The share option reserve records items recognised as an expense on valuation of employee share options.

ARCHER EXPLORATION LIMITED CHER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

==> picture [479 x 741] intentionally omitted <==

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

||||||||
|---|---|---|---|---|---|---|
|Consolidated Group|Parent Entity|
|2010|2009|2009|2008|
|$|$|$|$|
|NOTE 17 – TENEMENTS|
|The Company’s interest in tenements are as follows:|
|All tenements are within South Australia|
|Project|Tenement|Commodity|Carrying value|Carrying value|
|$|$|
|Yalamboo|EL3721|Base Metals|780,052|760,385|-|-|
|Andamooka|EL 3722|Base Metals|765,975|748,781|-|-|
|Woomera|EL 3724|Base Metals|519,097|503,591|-|-|
|Baroota|EL 4202|Base Metals|81,215|63,096|-|-|
|Wilmington|EL 4249|Base Metals|26,370|12,185|-|-|
|Pinda|EL 4202|Base Metals|46,776|29,144|-|-|
|Worlds End|EL 4230|Base Metals|214,195|179,216|-|-|
|Carappee Hill|EL 3711|Base Metals|581,773|492,958|-|-|
|Lake Gairdner North|EL 3851|Base Metals|897,401|871,836|-|-|
|Lake Gairdner South|EL 3869|Base Metals|510,595|491,960|-|-|
|North Burra|EL 4266|Base Metals|290,050|7,726|-|-|
|North Cowell|EL 4277|Base Metals|53,455|1,245|-|
|Australia Plains|EL 4482|Base Metals|11,882|-|
|Elbow Hill|EL 3653|Base Metals|17,987|-|
|Wildhorse Plains|EL 3377|Base Metals|36,960|-|
|-|
|Carrying value of exploration costs|4,833,783|4,162,123|
|All tenements are owned 100% other than those|
|marked * which are joint ventures to earn 100% of|
|any minerals excluding Uranium.|
|NOTE 18 - CAPITAL AND OTHER|
|EXPENDITURE COMMITMENTS|
|Capital commitments relating to tenements|
|The Consolidated Group is required to meet minimum|
|expenditure requirements of various Australian|
|Government bodies. These obligations are subject to|
|re-negotiation, may be farmed out or may be|
|relinquished and have not been provided for in the|
|financial statements.|
|Exploration expenditure commitments|
|- due within one year|1,270,000|1,075,000|
|- due within 1-5 years|-|-|-|-|
|- due over 5 years|-|-|-|-|
|1,270,000|1,075,000|-|-|
|Operating Lease commitments|
|Commitments for minimum lease payments in relation|
|to non-cancellable operating leases not provided for in|
|the financial statements.|
|Lease expenditure commitments|
|- due within one year|26,400|14,088|
|- due within 1-5 years|-|-|
|- due over 5 years|-|-|
|26,400|14,088|

----- End of picture text -----

ARARCHER EXPLORATION LIMITED LORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010

ABN 64 123 993 233

	Consolidated	Group	Parent Entity
	2010	2009	2009	2008
	$	$	$	$
NOTE 18 - CAPITAL AND OTHER
EXPENDITURE COMMITMENTScontinued
Employment and consultant commitments
Commitments for the payment of salaries and other
remuneration pursuant to an employment contracts not
provided for in the financial statements
Expenditure commitments
- due within one year	293,000	293,914
- due within 1-5 years	255,500	-
- due within 6-10 years	-	-	-	-
	548,500	293,914
Details relating to the employment contracts are set
out in the Remuneration Report.
NOTE 19 - SEGMENT REPORTING
The directors have considered the requirements of
AASB 8 – Operating Segments and the internal reports
that are reviewed by the chief operating decision maker
(the Board) in allocating resources and have concluded
that at this time there are no separately identifiable
segments.
The Group remains focused on mineral exploration
over areas of interest solely in South Australia.
NOTE 20 - CASH FLOW INFORMATION
a) Reconciliation of cash flows from operations with
(Loss) from ordinary activities after income tax
(Loss) from ordinary activities after income tax	(475,463)	(1,111,103)
Non cash flows in operating (loss)
- Depreciation (net of capitalisation)	17,408	24,527
- Share-based payments	73,814	8,164
- Exploration impairment	-	865,203
Changes in assets and liabilities, net of the
effects of purchase of subsidiaries
- (Increase)/Decrease in trade and other receivables	88,174	(170,776)
- Increase/(Decrease) in trade and other payables	(51,121)	41,710
- Increase in provisions	3,895	11,758
Net cash provided by operating activities	(343,293)	(330,517)

ARCHER EXPLORATION LIMITED ER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

NOTE 20 - CASH FLOW INFORMATION continued

b) Non Cash Financing and Investing Activities

There were no non cash financing and investing activities in 2010 or 2009.

c) Business Combinations

There were no non cash business combinations in 2010 or 2009

NOTE 21 - SHARE BASED PAYMENTS

The company established the Archer Exploration Limited Employee Share Option Plan in order to reward employees for services rendered. All employees are entitled to participate in the plan if in the employment of the consolidated Group. Employees are entitled to acquire vested ordinary shares at an agreed price. When issued, the shares carry full dividend and voting rights.

The following share-based payment arrangements existed at 30 June 2010.

1,000,000 options were issued on 4 September 2009 at a 20 cent exercise price expiring on 31 December 2012. These options were issued from the Archer Exploration Share Option Plan. The options have no voting rights and are not transferable. At balance date, 30 June 2010, none of the options have been exercised. The fair value of the options issued during the year was $68,900.

All options granted to employees are over ordinary shares in Archer Exploration Limited, which confer a right of one ordinary share.

The following share-based payment arrangements existed at 30 June 2009.

250,000 options were issued on 14 July 2008 at a 25 cent exercise price expiring in 3 years. These options were not issued from the Archer Exploration Share Option Plan. 270,000 options were issued on 29 June 2009 with an exercise price of 9 cents expiring in 3 years from the Archer Exploration Limited Employee Share Option Plan. The options have no voting rights and are not transferable. At balance date, 30 June 2009, none of the options have been exercised. The fair value of the options issued during the year was $17,830.

All options granted to employees are over ordinary shares in Archer Exploration Limited, which confer a right of one ordinary share.

		Parent Entity 2009 2008 Number of Weighted Number of Weighted Options Average Options Average Exercise Exercise Price $ Price $ - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Outstanding at the beginning of the year Granted Forfeited Exercised Expired Outstanding at year-end Unexercisable at year-end	Consolidated Group 2010 2009	Parent Entity 2009 2008
	Number of Weighted Number of Weighted Options Average Options Average Exercise Exercise Price $ Price $ 520,000 0.17 - - 1,000,000 0.20 520,000 0.17 - - - - - - - - - - - -	Number of Weighted Number of Weighted Options Average Options Average Exercise Exercise Price $ Price $ - - - - - - - - - - - - - - - - - - - -
	1,520,000 0.189 520,000 0.17	- - - -
	87,000 0.184 520,000 0.17	- - - -

The options outstanding at 30 June 2010 had a weighted average exercise price of $0.19 and a weighted average remaining contractual life of 1.9 years.

The weighted average fair value of the options granted during the year was $0.07.

The fair value of options issued during the year as remuneration, were calculated by using a Black-Scholes option pricing model applying the following inputs:

ARARCHER EXPLORATION LIMITED LORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

NOTE 21 - SHARE BASED PAYMENTS continued

TE 21 - SHARE BASED PAYMENTS	continued
Weighted average exercise price Weighted average life of the option Underlying share price Expected share price volatility Risk free interest rate	Employees 4 Sep 2009 14 July 2008 29 June 2009
	$0.20 $0.25 $0.09 3.3 years 3 years 3 years $0.115 $0.05 $0.07 107% 96% 142% 4.15% 6.00% 4.15%

Historical volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future tender, which may not eventuate.

The life of the options is based on the historical exercise patterns, which may not eventuate in the future.

Included under employee benefits expense in the income statement is $68,900 (2009: $8,164), which relates in full, to equity settled share-based payment transactions.

NOTE 22 - EVENTS AFTER THE BALANCE SHEET DATE

Other than as disclosed, there have been no material events after balance date.

NOTE 23 - RELATED PARTY TRANSACTIONS

a) Subsidiaries

Interests in subsidiaries are disclosed in Note 9.

b) Key Management Personnel

Disclosures relating to Key Management personnel are set out in Note 4.

c) Other translations with related parties

Norman Waterhouse Lawyers were paid a total of $24,318 (2009: $1,155) for legal services.

NOTE 24 - FINANCIAL INSTRUMENTS

a) Financial Risk Management Policies

The Group’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payables.

i) Treasury Risk Management

The Board meets on a regular basis to analyse financial risk exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts.

The Board’s overall risk management strategy seeks to assist the consolidated Group in meeting its financial targets, whilst minimising potential adverse effects on financial performance.

ii) Financial Risk Exposure and Management

The main risk the Group is exposed to through its financial instruments is interest rate risk.

Interest Rate Risk

Interest rate risk is managed with a mixture of fixed and floating rate cash deposits. At 30 June 2010

approximately 97% of Group deposits are fixed. It is the policy of the Group to keep between 90% and 100% of surplus cash in high yielding deposits.

ARCHER EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

ABN 64 123 993 233

NOTE 24 - FINANCIAL INSTRUMENTS continued

	Weighted	Average
	Effective Interest Rate		Effective	Interest Rate	Non Interest Bearing			Total
	2010	2009	20010	2009	2010	2009	2010	2009
	%	%	$	$	$	$	$	$
Financial Assets
Cash at bank	0.30%	0.30%	98,633	215,628	-	-	98,633	215,628
Deposits	6.29%	4.30%	3,831,191	4,757,558	-	-	3,831,191	4,757,558
Receivables	-	-	-	-	118,689	206,862	118,689	206,863
Total Financial Assets	-	-	3,929,824	4,973,186	118,689	206,862	4,048,513	5,180,049
Financial liabilities
Payables	-	-	-	-	(102,185)	(144,185)	(102,185)	(144,185)
Financial liabilities	10.40%	10.40%	(21,016)	(38,483)	-	-	(21,016)	(38,483)
Total Financial Liabilities	-	-	-	-	(102,185)	(144,185)	(123,201)	(182,668)
Total Net Financial Assets/
(Liabilities)	-	-	3,908,808	4,934,703	16,504	(62,677)	3,925,312	4,997,381

NOTE 24 - FINANCIAL INSTRUMENTS continued

b) Sensitivity Analysis

Interest Rate and Price Risk

The Group has performed a sensitivity analysis relating to its exposure to interest rate risk at balance date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks.

Interest Rate Sensitivity Analysis

At 30 June 2010, the effect on loss and equity as a result of changes in the interest rate, with all other variables remaining constant would be as follows:

Change in loss - Increase in interest rates by 2% - Decrease in interest rates by 2% Change in equity - Increase in interest rates by 2% - Decrease in interest rates by 2%	Consolidated Group Parent Entity 2010 2009 2009 2008 $ $ $ $ 72,000 95,000 (72,000) (95,000) 72,000 95,000 (72,000) (95,000)

c) Net Fair Value of Financial Assets and Liabilities

The net fair value of cash and cash equivalent and non interest bearing monetary financial assets and financial liabilities of the consolidated entity approximate their carrying value.

The net fair value of other monetary financial assets and financial liabilities is based on discounting future cash flows by the current interest rates for assets and liabilities with similar risk profiles. The balances are not materially different from those disclosed in the Statement of Financial Position of the consolidated entity.

d) Credit Risk

The maximum exposure to credit risk, excluding the value of ant collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for doubtful debts of those assets, as disclosed in the Statement of Financial Position and notes to the financial statements.

The consolidated entity does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the consolidated entity.

ARARCHER EXPLORATION LIMITED LORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

	Parent Entity	Parent Entity	Parent Entity
	2010	2009	2009	2008
	$	$	$	$
NOTE 25 - ARCHER EXPLORATION LIMITED
PARENT COMPANY INFORMATION
Parent Entity
Assets
Current Assets	2,039,512	3,163,148
Non-current assets
- Loans to subsidiaries	4,266,546	3,664,390
- Investments in subsidiaries	2,479,738	2,471,255
Other non-current assets	97,882	92,730
Total assets	8,883,678	9,391,523
Liabilities
Current Liabilities	127,117	138,917
Non current Liabilities	-	21,030
Total Liabilities	127,117	159,947
Equity
Issued Capital	10,699,698	10,697,198
Retained earnings	(2,025,115)	(1,473,786)
Reserves
Share options reserve	81,978	8,164
Total reserves	81,978	8,164
Financial Performance
Loss for the year	(551,328)	(1,111,103)
Other comprehensive income	-	-
Total comprehensive income	(551,328)	(1,111,103)
Guarantees in relation to relation to the debts
of subsidiaries
Archer Exploration Limited has not entered into a deed
of cross guarantee with its wholly-owned subsidiaries
Pirie Resources Pty Ltd, Kensington Exploration Pty Ltd
and Leigh Creek Magnesite Pty Ltd
Contingent Liabilities
Lease expenditure commitments	26,400	14,088
Employment and consultant commitments	548,500	233,914
Contractual Commitments
There are no contractual capital commitments for the
acquisition of property, plant or equipment

ARCHER EXPLORATION LIMITED EXPLORATION LIMITED AND CONSOLIDATED ENTITIES ANNUAL REPORT 2010 ABN 64 123 993 233

Directors’ Declaration

The Directors of the Company declare that:

1 the Financial Statements and Notes as set out on pages 26 to 50 are in accordance with the Corporations Act 2001 and:
a) comply with Australian Accounting Standards and International Financial Reporting Standards as disclosed in Note 1; and
b) give a true and fair view of the financial position as at 30 June 2010 and of the performance for the year ended on that date of the Company and Consolidated Group;
2 the Chief Executive Officer and the Chief Financial officer have each declared that:
a) the financial records of the Company for the year ended have been properly maintained in accordance with section 286 of the Corporations Act 2001;
b) the financial statements and notes for the financial year comply with the Accounting Standards; and
c) the financial statements and notes give a true and fair view;
3 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.

==> picture [103 x 52] intentionally omitted <==

Greg English Chairman

Adelaide

Dated this 23[rd] September 2010

ARCHER EXPLORATION LIMITED ARCHER EXPLORAT ON LIMITED ANNUAL REPORT 2010ANNUAL REPORT 2010

Independent Audit Report

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          



    

   

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

 



   

      

 



 





 
 
  
 



     

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

 



 

    



ARCHER EXPLORATION LIMITED ARCHER EXPLORATION LIMITED ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010ANNUAL REPORT 2010ANNUAL REPORT 2010

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ARCHER EXPLORATION LIMITED ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010ANNUAL REPORT 2010

Additional Information

Compiled as at 17 September 2010

Audit committee

Details of the Company’s Audit Committee are contained within the Director’s Report.

Corporate Governance Practices

A statement disclosing the extent to which the Company has followed the best practice recommendations set by the Australian Securities Exchange Corporate Governance Council during the reporting period immediately follows the Director’s Report.

Shareholding

Details of the Company’s Audit Committee are contained within the Director’s Report.

Substantial Shareholders

The names of the substantial shareholders in the Company, the number of equity securities to which each substantial shareholder and substantial holder’s associates have a relevant interest, as disclosed in substantial holding notices given to the Company:

Name	No. of Ordinary Share	%
Raffes Equities Limited	11,721,249	18.19
GDE Exploration (SA) Pty Ltd (Dragon Mining Investments A/C)	7,534,798	11.69
GDE Exploration (SA) Pty Ltd (A1 English Family A/C)	3,570,000	5.54

Distribution of Ordinary Shares

Ordinary Shares
Range	Total Holders	Units	% Issued Capital
1 – 1,000	17	2,101	0.00
1,001 - 5,000	62	235,764	0.37
5,001 – 10,000	173	1,656,910	2.57
10,001 – 100,000	409	15,078,165	23.66
100,001 – 9,999,999,999	61	47,455,537	73.66
Total	722	64,428,477	100.00
Unmarketable Parcels	Minimum parcel size	Holders	Units
Minimum $500.00 parcel at	4,762	60	142,965
$0.105 per unit

ARCHER EXPLORATION LIMITED ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010ANNUAL REPORT 2010

Distribution of 14 July 2011 Unlisted Options (Exercise price is 25 cents)

Range	Total Holders	Units	% Issued Capital
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000	1	250,000	100.00
100,001 - 9,999,999,999
Total	1	250,000	100.00

Distribution of 29 June 2012 Unlisted Options (Exercise price is 9 cents)

Range	Total Holders	Units	% Issued Capital
1 – 1,000	-	-	-
1,001 – 5,000	-	-	-
5,001 – 10,000	-	-	-
10,001 – 100,000	2	130,000	48.15
100,001 – 9,999,999,999	1	140,000	51.85
Total	3	270,000	100.00

Distribution of 31 December 2012 Unlisted Optiopns (Exercise price is 20 cents)

Range	Total Holders	Units	% Issued Capital
1 – 1,000	-	-	-
1,001 – 5,000	-	-	-
5,001 – 10,000	-	-	-
10,001 – 100,000	-	-	-
100,001 – 9,999,999,999	1	1,000,000	100.00
Total	1	1,000,000	100.00

Voting Rights

At meeting of members or classes of members:

a) each member entitled to vote may vote in person or by proxy, attorney or representative;
b) on a show of hands, every person present who is a member or proxy, attorney or representative of a member has one vote; and
c) on a poll, every person present who is a member or a proxy, attorney or representative of a member has:
i) for each fully paid share held by him, or in respect of which he [is] appointed a proxy, attorney or representative, one vote for the share;
ii) for each partly paid share, only the fraction of one vote which the amount paid (not credited) on the share bears to the total amounts paid and payable on the share (excluding amounts credited), subject to any rights or restrictions attached to any shares or class or classes of shares.

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Twenty largest holders of each class of quoted equity security

Ordinary Shares

Ordinary Shares	Ordinary Shares
Rank Name		Units	% Issued capital
1	Raffes Equities Limited	11,721,249	18.19
2	GDE Exploration (SA) Pty Ltd	7,534,798	11.69
3	GDE Exploration (SA) Pty Ltd	3,570,000	5.54
4	Valentina Nowak	2,609,750	4.05
5	UraniumSA Limited	2,000,000	3.10
6	Deborah Annette Rossiter	1,883,679	2.92
7	Ms Alice McCleary & Mr Brian John McCleary	1,720,000	2.67
8	EAP Nominees Pty Ltd	1,075,000	1.67
9	Mr Heung Ming Lam	1,050,000	1.63
10	Mr Craig Gooden & Mrs Virginia Gooden	850,000	1.32
11	Bluck Holdings Pty Ltd	750,000	1.16
12	Mr Roger Edward Koch	675,000	1.05
13	Mr Sivanandam Narayanasamy	600,000	0.93
14	GDE Exploration (SA) Pty Ltd	500,000	0.78
15	Mr Jacob Mathew	500,000	0.78
16	Mr Ganesan Sivanandam	500,000	0.78
17	Mr Ming Teck Yau	500,000	0.78
18	Pacway Investments Pty Ltd	495,630	0.77
19	Wynnwood Pty Ltd	473,204	0.73
20	Citicorp Nominees Pty Limited	417,193	0.65
Total		39,425,503	61.19

Holders of 14 July 2011 Unlisted Options (Exercise price 25 cents)

Rank	Name	Units	% Issued capital
1	Gerard Anderson	250,000	100.00
	Total	250,000	100.00

Holders of 29 June 2012 Unlisted Options (Exercise price 9 cents)

Rank	Name	Units	% Issued capital
1	Wade Bolenhagen	140,000	51.85
2	Claude Walter	80,000	29.63
3	Louise Howie	50,000	18.52
	Total	270,000	100.00

Holders of 31 December 2012 Unlisted Options (Exercise price 20 cents)

Rank	Name	Units	% Issued capital
1	Mike Hatcher	1,000,000	100.00
	Total	1,000,000	100.00

Use of Cash

During the financial year, the Company used the cash and assets in a form readily convertible to cash in a manner that was consistent with its business objectives.

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Other Details

Address and Telephone Details of the Company’s Registered and Administrative office

The address and telephone details of the registered office and administrative office in Australia is:

Archer Exploration Limited Level 1, 28 Greenhill Road Wayville SA 5034 Tel: +61 8 8272 3288 Fax: +61 8 8272 3888

Address and Telephone details of the office at which a Registrar of Securities is kept:

Computer Investor Services Pty Limited Level 5, 115 Grenfell Street Adelaide SA 5000 Tel: +61 8 8236 2300 Investor Enquiries 1300 556 161 Fax: +61 8 8236 2305

Stock Exchange on which the Company’s Securities are quoted

The Company’s listed equity securities are quoted on the Australian Securities Exchange.

Mineral Exploration Licences

As the Company is a mining exploration company, below is a list of its interests in mineral exploration tenements licences granted, where the licences are situated and the percentage interest held.

Tenement	Tenement Name	Commodity	Archer Interest
EL 3851	Lake Gairdner North	Base Metals	100%
EL 3869	Lake Gairdner South	Base Metals	100%
EL 3724	Woomera	Base Metals	100%
EL 3722	Andamooka	Base Metals	100%
EL 3721	Yalymboo	Base Metals	100%
EL 3711	Carrappee Hill	Base Metals	100%
EL 4201	Baroota	Base Metals	100%
EL 4202	Pinda	Base Metals	100%
EL 4249	Spring Creek	Base Metals	100%
EL 4230	World’s End	Base Metals	100%
EL 4266	Burra North	Base Metals	100%
EL 4277	North Cowell	Base Metals	100%
EL 4482	Australia Plains	Base Metals	100%
EL 4563	Riverton	Base Metals	100%
ELA 31/10	Termination Hill	Magnesium	100%
ELA 173/10	Witchelina	Magnesium	100%
ELA 4564	Kanayka	Manganese	100%
ELA 113/10	Napoleons Hat	Gold	100%
EL 3377	Wildhorse Plains	Base Metals	JV*
EL 3653	Elbow Hill	Base Metals	JV*

* To earn 100% of base metals, excluding uranium, when expenditures in accordannce with Joint Venture are met.

On Market Buy-back

There is currently no on-market buy-back.

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

Notes

ARCHER EXPLORATION LIMITED ANNUAL REPORT 2010

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AI assistant

ARCHER MATERIALS LIMITED — Annual Report 2010

64478_rns_2010-09-22_f58fbd12-4fc6-4725-8e70-09ad5e05a72c.pdf

Corporate Directory

Contents

Share Registry

Directors

Auditors

Solicitors

Company Secretary

Registered Office

Bankers

Highlights and achievements

Manganese and Iron

Magnesite

Gold

Letter from Chairman

Dear Fellow Shareholder,

Review of Operations

Review of Operations

Iron and manganese

Carappee Hill (EL 3711)

Manganese (Mn)

Wild Horse Plains (EL 3377) North Cowell (EL 4277) Elbow Hill (EL 3653)

Manganese

Ketchowla (EL 4266)

Archer 100%

Archer 100%

Magnesite

Magnesite (ELA 031/10: 173/10)

Archer 100%

Nickel

Carappee Hill (EL 3711)

Uranium

Uranium (EL 3851)

Gold

Napoleon’s Hat (ELA 113/10)

Archer 100%

Watervale Prospect (EL 4266)

Archer 100%

Riverton (ELA 030/10)

Archer 100%

Corporate development

Next 12 months focus

Summary of tenements

Directors’ Report

Directors’ Report

Directors

Principal Activities

Operating Results

Dividends

Review of Operations

Significant Changes in State of Affairs

Matters Subsequent to the End of the Financial Year

Future Developments, Prospects and Business Strategies

Environmental Issues

Information on Directors and Management

Greg English LLB, BE (Mining) Chairman

Special Responsibilities - Chairman

Tom Phillips AM MBA FAICD Director (Non-Executive)

Special Responsibilities - Nil

Alice McCleary BEc FCA FTIA FAICD Director (Non-Executive)

Special Responsibilities - Nil.

Gerard Anderson Assoc. Applied Geology, Grad Dip Bus.MSc Director (Non-Executive)

Special Responsibilities - Nil

John Dawkins AO BEc RDA Director (Non-Executive)

Craig Gooden

Company Secretary

Remuneration Report (Audited)

Remuneration Policy

Performance-based Remuneration

Details of Key Management Personnel Remuneration for year ended 30 June 2010

Details of Key Management Personnel Remuneration for year ended 30 June 2009

Key Management Personnel Compensation

Options Granted as Compensation

Options issued as part of Remuneration for the year ended 30 June 2010

Number of Unlisted Options held by Directors and Key Management Personnel

Listed options - Number of listed options held by Key Management Personnel

Shareholdings - Number of shares held by Directors and Key Management Personnel

Employment contract of the CEO and Exploration Manager

ARCHER MATERIALS LIMITED Annual Report 2010