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FINANCIAL REPORT

HALF-YEAR ENDED 31 DECEMBER 2010 ABN 64 123 993 233

ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES ABN: 64 123 993 233

CONTENTS	Page
DIRECTORS’ REPORT	3
AUDITOR’S INDEPENDENCE DECLARATION	5
STATEMENT OF COMPREHENSIVE INCOME	6
STATEMENT OF FINANCIAL POSITION	7
STATEMENT OF CHANGES IN EQUITY	8
STATEMENT OF CASH FLOWS	9
NOTES TO THE FINANCIAL STATEMENTS	10
DIRECTORS’ DECLARATION	13
INDEPENDENT AUDITOR’S REVIEW REPORT	14
CORPORATE DIRECTORY	16

ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES ABN: 64 123 993 233

ARCHER EXPLORATION LIMITED

DIRECTORS’ REPORT

Your Directors present the financial report for Archer Exploration Limited and its consolidated entities (“Group”) for the half-year ended 31 December 2010.

Directors

The names of each person who has been a Director during this period and to the date of this report are:

Gregory David English
Thomas Robin Phillips AM
Alice McCleary
Gerard Anderson
John Dawkins AO
Peter Meers appointed 12 November 2010

Company Secretary

Craig Gooden

Review of Operations

During the half-year ended 31 December 2010 the Group incurred a loss of $528,869 (2009: loss $305,243).

The following summary lists the operational activities for the half-year ended 31 December 2010:

The activities during the six months focused on exploration of the Group’s Leigh Creek Magnesite, Ketchowla Manganese and Rare Earth Elements, Salt Creek Manganese, Jamieson Tank Manganese, Wildhorse Plains Iron Ore and Sugarloaf Graphite all located in South Australia.
Leigh Creek Magnesite - EL 4567 Termination Hill was granted on 20[th] September 2010 giving Archer 100% ownership of the Pug Hill, Termination Hill, Mt Playfair and Mt Hutton magnesite resources.

ELA173/10 Witchelina is pending approval.

A 750kg composite sample of magnesite from Beds 5 and 9 at Mt Hutton was sent to Calix Limited in Victoria for flash calcining tests. The sample is the first of up to four (4) that will be undertaken to quantify the calcined products produced under differing calcining conditions. Results will be available Q1 2011.

Ketchowla Manganese – significant assays for the heavy Rare Earth Elements (REE) Yttrium, Neodymium and Cerium were recorded at K1, K2, K3 and K9 manganese deposits from both rock chip and reverse circulation drill samples.

Agitated acid leach tests highlighted excellent recoveries of 90% - 95% for Mn, Ni, Co, Cu and Zn.

ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES ABN: 64 123 993 233

A 10kg drill sample from K1 was collected for dense media separation tests. This process is used at Woodie Woodie and Bootu Creek to upgrade run-of-mine manganese material grading around 20% Mn into saleable >40% Mn ore.

Salt Creek Manganese – A 10kg sample of outcropping manganese was collected for dense media separation tests. All landowner approvals have been received for drilling the deposit. Drilling is expected to commence in February 2011.
Jamieson Tank Manganese – OMM sponsored drilling at Jamieson Tank returned encouraging assays including:
5m @ 14.6% Mn
6m @ 15% Mn, and
10m @ 12.6% Mn
Wildhorse Plains Iron Ore - Rock chip samples to 64.38% Fe were taken from outcropping iron formations, including hematite, at Mt Desperate and Campoona. Preparation was completed for a ground gravity survey as a precursor to drilling expected to be completed during Q1 2011.
Samples of graphite were collected from the collars of two historic shafts dug into the Sugarloaf graphite deposit. The samples have been submitted for flake size determination. The raw assay drill hole intercepts from Sugarloaf (up to 16% Total Carbon) are comparable to grades within the Uley deposit.
Tenements – Archer has accepted the conditions for ELA 113/10 Napoleon’s Hat covering the extensive Wonna gold workings.

ELAs 388/10 and 389/10 were applied for covering prospective ground for phosphate, barite and REE mineralization.

Auditor’s Declaration

The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 5 for the half-year ended 31 December 2010.

This report is signed in accordance with a resolution of the Board of Directors.

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Greg English Chairman

Archer Exploration Limited

Adelaide

Dated this 16[th] day of February 2011.

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 & CONTROLLED ENTITIES ABN: 64 123 993 233

AUDITOR’S INDEPENDENCE DECLARATION

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ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES ABN: 64 123 993 233

STATEMENT OF COMPREHENSIVE INCOME – FOR THE HALF YEAR ENDED 31 DECEMBER 2010

REVENUES FROM ORDINARY ACTIVITIES Interest income Serviced office revenues EXPENSES FROM ORDINARY ACTIVITIES Depreciation and amortisation expense Exploration expense written off Finance cost Employee benefits expense ASX listing and share registry expense Consulting expense Other expenses from ordinary activities LOSS BEFORE INCOME TAX EXPENSE Income tax expense LOSS FOR THE PERIOD LOSS ATTRIBUTED TO MEMBERS OF THE PARENT ENTITY Other comprehensive income TOTAL COMPREHENSIVE INCOME FOR THE PERIOD TOTAL COMPRHENSIVE INCOME ATTRIBUTABLE TO MEMBERS OF THE PARENT ENTITY Basic loss per share	CONSOLIDATEDGROUP 31 Dec 31 Dec 2010 2009 $ $ 111,406 100,155 2,386 10,155 (16,029) (13,040) (73,495) - (961) (1,819) (346,389) (228,006) (35,632) (39,820) (6,997) (6,167) (163,158) (126,701)
	(528,869) (305,243) - -
	(528,869) (305,243)
	(528,869) (305,243)
	- -
	(528,869) (305,243)
	(528,869) (305,243)
	Cents Cents (0.8) (0.5)

The accompanying notes form part of the financial statements.

ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES ABN: 64 123 993 233

STATEMENT OF FINANCIAL POSITION – AS AT 31 DECEMBER 2010

ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Total current assets NON-CURRENT ASSETS Plant and equipment Exploration and evaluation expenditure Total non-current assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Financial liabilities Short-term provisions Total current liabilities NON-CURRENT LIABILITIES Long-term provisions Total-non current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained earnings TOTAL EQUITY	CONSOLIDATED GROUP 31 Dec 30 June 2010 2010 $ $ 3,260,895 3,929,824 42,879 118,689
	3,303,774 4,048,513
	124,329 97,884 5,058,713 4,833,783
	5,183,042 4,931,667
	8,486,816 8,980,180
	81,423 102,185 11,633 21,016 7,738 19,736
	100,794 142,937
	5,238 4,816
	106,032 147,753
	8,380,784 8,832,427
	10,699,698 10,699,698 159,204 81,978 (2,478,118) (1,949,249)
	8,380,784 8,832,427

The accompanying notes form part of the financial statements.

ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES ABN: 64 123 993 233

STATEMENT OF CHANGES IN EQUITY – FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

BALANCE AT 1 JULY 2009 Fair value of options issued Total comprehensive income for the period BALANCE AT 31 DECEMBER 2009 BALANCE AT 1 JULY 2010 Fair value of options issued Total comprehensive income for the period BALANCE AT 31 DECEMBER 2010	Issued Capital $ Retained Earnings $ Share Option Reserve $ Total $
	10,697,198 (1,473,786) 8,164 9,231,576 - - 52,962 52,962 - (305,243) - (305,243)
	10,697,198 (1,779,029) 61,126 8,979,295
	10,699,698 (1,949,249) 81,978 8,832,427 - - 77,226 77,226 - (528,869) - (528,869) 10,699,698 (2,478,118) 159,204 8,380,784

The accompanying notes form part of the financial statements.

ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES ABN: 64 123 993 233

STAEMENT OF CASH FLOWS – FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

CASH FLOW FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Finance cost Research and Development tax concession recouped NET CASH (USED IN) OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Payments for exploration expenditure Payment for plant and equipment NET CASH (USED IN) INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings NET CASH (USED IN) FINANCING ACTIVITIES Net (decrease) in cash held Cash at beginning of period CASH AT 31 DECEMBER 2010		CONSOLIDATEDGROUP 31 Dec 31 Dec 2010 2009 $ $ 3,071 17,097 (527,619) (445,573) 111,406 100,155 (961) (1,819) 95,149 178,855
		(318,954) (151,285)
		(298,115) (291,487) (42,477) -
		(340,592) (291,487)
		(9,383) (8,516)
		(9,383) (8,516)
		(668,929) (451,288) 3,929,824 4,973,186
		3,260,895 4,521,898

The accompanying notes form part of the financial statements.

ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES ABN: 64 123 993 233

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

These general purpose financial statements for the interim half-year reporting period ended 31 December 2010 have been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards including AASB 134: Interim Financial Reporting. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards.

This interim financial report is intended to provide users with an update on the latest annual financial statements of Archer Exploration Limited and its controlled entities (the Group). As such, it does not contain information that represents relatively insignificant changes occurring during the half-year within the Group. It is therefore recommended that this financial report be read in conjunction with the annual financial statements of the Group for the year ended 30 June 2010, together with any public announcements made during the half-year.

The same accounting policies and methods of computation have been followed in this interim financial report as were applied in the most recent annual financial statements.

NOTE 2 - SHARE BASED PAYMENTS

On 3 December 2010 a grant of share options was made to the Managing Director of the Company following shareholder approval. The terms and conditions of the grant made during the six months ended 31 December 2010 are as follows:

2010

	Grant		Grant date	Vesting	Contractual life
	date		Number of	conditions	of options
			instruments
3	December	2010	5,000,000	2,000,000 on issue and a further	1,092 days
				1,000,000 each year for 3 years on
				31 Oct 11, 31 Oct 12 and 31 Oct 13

Fair value of share options and assumptions used in determining fair value for the six months ended 31 December 2010:

Fair value at grant date	$0.0348 per option
Share price	$0.145
Exercise price	$0.20
Expected volatility	44.7%
Option life	1,092 days
Risk-free interest rate	4.63%

ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES ABN: 64 123 993 233

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

NOTE 2 - SHARE BASED PAYMENTS cont

On 4 September 2009 a grant of share options was made to a Chief Executive Officer of the Company. The terms and conditions of the grant made during the six months ended 31 December 2009 were as follows:

2009
Grant	Grant date	Vesting	Contractual life
date	Number of	conditions	of options
	instruments
4 September 2009	1,000,000	50% on issue,50%	1,214 days
		on 30 June 2010

Fair value of share options and assumptions for the six months ended 31 December 2009:

Fair value at grant date $0.0689 per option Share price $0.115 Exercise price $0.20 Expected volatility 107% Option life 1,214 days Risk-free interest rate 4.15%

ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2010

ABN: 64 123 993 233

NOTE 3- SEGMENT INFORMATION

Segment Performance Segment results before income tax Reconciliation of segment results to Group net loss before tax Unallocated income and expenses Interest and other income Depreciation Corporate overheads (Loss) before tax Segment assets as at 31 December 2010 Segment asset increase for the year - exploration expenditure capitalised - expensed during the year Total corporate and unallocated assets Total Group assets	TENEMENTS Leigh Creek Magnesite Other 31-Dec 31-Dec 31-Dec 31-Dec 2010 2009 2010 2009 $ $ $ $ - - (73,495) -	TOTAL 31-Dec 31-Dec 2010 2009 $ $ (73,495) -
	- - (73,495) -	(73,495) -
	Leigh Creek Magnesite Other 31-Dec 30-Jun 31-Dec 30-Jun 2010 2010 2010 2010 $ $ $ 36,975 - 5,021,738 4,833,783 36,975 - 261,450 671,660 - - (73,495) -	113,792 110,310 (16,029) (13,040) (548,759) (402,513)
		(524,491) (305,243)
		TOTAL 31-Dec 30-Jun 2010 2010 $ $ 5,058,713 4,833,783 298,425 671,660 (73,495) - 3,428,103 4,146,397
		8,486,816 8,980,180

NOTE 4 - CONTINGENT LIABILITIES & COMMITMENTS

Since the last annual report there has been no material change to any contingent liabilities.

The consolidated entities have minimum expenditure commitments on exploration licenses as per the terms of the exploration licences. If the minimum expenditure on each licence is not met, part of the licence area may be relinquished.

NOTE 5 - EVENTS SUBSEQUENT TO REPORTING DATE

There has been no material event subsequent to the half-year ended 31 December 2010.

ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES ABN: 64 123 993 233

DIRECTORS’ DECLARATION

The Directors of the Company declare that:

The Financial Statements and Notes, as set out on pages 6 to 12 are in accordance with the Corporations Act 2001, including:
a) complying with Accounting Standard AASB 134 Interim Financial Reporting, and
b) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and of its performance for the half-year ended on that date.
In the Director’s 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.

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Greg English Chairman

Adelaide

Dated this 16[th] day of February 2011.

ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES ABN: 64 123 993 233