ARCHER MATERIALS LIMITED — Interim / Quarterly Report 2012

Feb 7, 2012

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FINANCIAL REPORT

HALF-YEAR ENDED 31 DECEMBER 2011 ABN 64 123 993 233

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

ABN: 64 123 993 233
CONTENTS	Page
DIRECTORS’ REPORT	3
AUDITOR’S INDEPENDENCE DECLARATION	7
STATEMENT OF COMPREHENSIVE INCOME	8
STATEMENT OF FINANCIAL POSITION	9
STATEMENT OF CHANGES IN EQUITY	10
STATEMENT OF CASH FLOWS	11
NOTES TO THE FINANCIAL STATEMENTS	12
DIRECTORS’ DECLARATION	15
INDEPENDENT AUDITOR’S REVIEW REPORT	16
CORPORATE DIRECTORY	18

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

DIRECTORS’ REPORT

Your Directors present the financial report for Archer Exploration Limited and its consolidated entities (“Group”) for the half-year ended 31 December 2011.

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

Company Secretary

• Craig Gooden

Review of Operations

During the half-year ended 31 December 2011 the Group incurred a loss of $588,992 after income tax expense of $8,764 (2010: loss $528,869).

Exploration activities during the six months ended 31 December 2011 focused on exploration of the Group’s Wildhorse Plain Graphite and Sugarloaf Graphite projects and exploration of the Leigh Creek Magnesite deposits, all located in South Australia.

The following summary lists the operational activities for the half-year ended 31 December 2011:

Graphite

• Large crystalline graphite was recorded in petrological samples in all of the first three areas tested on Wildhorse Plain.

• At Campoona Graphite Shaft samples recorded 30% crystalline graphite ranging to 250µm (US 60 mesh and classified as Large flake graphite) with an average length of 100µm (US 140 mesh).

• Campoona South recorded 15 to 20% crystalline graphite ranging to 300µm (US 50 mesh and classified as Extra Large flake graphite) with an average length of 250µm (US60 mesh) within graphite clots up to 4mm in length.

• Council Pit recorded 15 to 20% crystalline graphite with an average length of 300µm (US50 mesh) and maximum flake size of 1,000µm (US 18 mesh classified as Super Large graphite flake graphite).

• A detailed close-spaced airborne Electro-magnetic geophysical survey was flown over the Campoona South area in July 2011. The survey followed-up a historic wide-spaced EM survey that indicated up to 8km of strike of highly graphitic schists. Interpretation of the airborne EM was used to target a series of drill holes at the Campoona South and Grid 2 graphite prospects. The EM survey constituted part of an ongoing R&D project that aims to

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ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES

ABN: 64 123 993 233

use modeled EM data as a predictive tool in categorizing the graphite present based on EM response.

• A total of 9 holes for 492 metres were drilled at the Campoona South and Grid 2 graphite prospects. Drilling confirmed down dip extensions to the Campoona South outcrop with intercepts to 20% C. Drilling at Grid 2 whilst recording low graphite content revealed the presence of flake graphite.

• At Sugarloaf re-assaying of historic drill samples previously not assayed for carbon returned wide high grade graphite intercepts including 20m @ 13% C in drill hole CHRC011 and 31m @ 14.37% C in drill hole CHRC012. Within the high grade intervals there were very high grade intercepts including 5m @ 22.56% C in CHRC012.

• Continuity of the Sugarloaf graphite deposit was confirmed at over a strike length of 2.2km. The deposit remains open along strike to the north.

• Samples of graphite were submitted for liberation and flotation tests. Testing of RC hammer samples from Sugarloaf in Adelaide returned positive results using an initial 53 micron grind followed by the 25 micron re-grind. Sample 6 (10.2% C head grade) achieved the best grade recovery combination and also the highest concentrate grade of 82%C. At a 60% recovery the combined concentrate grade was 72% C. Test work is continuing in order to help define the preferred processing route.

• Further graphite samples were sent to the US, Germany and China for evaluation.

Magnesite

• Leigh Creek Magnesite – Following the granting of EL 4567 Termination Hill on 20th September 2010 and the granting of EL 4729 Witchelina on 2nd May 2011 exploration activities have focused on metallurgical testing of Mt Hutton ore to determine the quality of magnesia products that can be produced.

• Test work continued on samples of Leigh Creek magnesite as part of an ongoing R&D project to identify the optimum process flow sheet to produce saleable magnesia products. Calcining of flotation concentrate has produced magnesia grading 95.4% MgO and 2.98% SiO2. This result is very promising. Testing will continue to determine if further reductions in SiO2 can be achieved through cyclosizing of the calcined products.

• In ongoing test work, the primary magnesite feed will undergoing staged rolls crushing at decreasing gap size from 10mm to 4mm, 2mm, 1mm and near closed to determine whether removal of talc can be achieved effectively without flotation.

Business Development

• A Heads of Agreement between Archer Exploration Limited (“Archer”) and BHPBilliton Olympic Dam Corporation Pty Ltd (“ODC”) covering the sale of an 80% legal and beneficial interest in Archer’s five West Roxby tenements was signed on 23rd December 2011.

• The Tenements host a number of undrilled exploration targets including potential IOCG targets at Island Lagoon and Evelyn Dam, a potential Athabasca unconformity uranium target at Apollo and several skarn targets (Figure 1).

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ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES

ABN: 64 123 993 233

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Figure 1. Magnetic image showing Archer’s West Roxby Tenements in relation to major IOCG deposits.

The main terms of the Heads of Agreement signed between Archer Exploration Limited and BHP Billiton Olympic Dam Corporation Pty Ltd (“ODC”) covering Archer’s five West Roxby tenements are:

• ODC to acquire an 80% legal and beneficial interest in the five Tenements for a cash consideration of $3 million.

• ODC to spend $3 million on Exploration over a period of 3 years.

• ODC will sole fund the Project up to a maximum of $50 million to a Decision to Mine is made, whichever is the first to occur.

• Archer and ODC agree to establish a Joint Venture to carry on exploration of the Project with ODC as Manager.

• Archer has the right to sell its participating interest at any stage before and on the Decision to Mine.

• Pre-emptive rights apply.

• Exclusivity has been agreed until 30th April 2012.

• These Heads of Agreement contemplates the finalisation of a Sale and Purchase Agreement and a Joint Venture Agreement prior to 30th April 2012. The Sale and Purchase Agreement will be subject to Ministerial consent and final approval by the board of ODC. The Sale and Purchase and Joint Venture Agreements are conditional on ODC conducting further nongeological Due Diligence and the results of that work being to the satisfaction of the ODC board.

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

Auditor’s Declaration

The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 7 for the half-year ended 31 December 2011.

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 8[h] day of February 2012.

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.

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

AUDITOR’S INDEPENDENCE DECLARATION

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STATEMENT OF COMPREHENSIVE INCOME – FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

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

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 2011 2010 $ $ 67,508 111,406 - 2,386 (16,401) (16,029) (178,288) (73,495) (45) (961) (249,221) (346,389) (41,810) (35,632) - (6,997) (161,971) (163,158)
	(580,228) (528,869) (8,764) -
	(588,992) (528,869)
	(588,992) (528,869)
	- -
	(588,992) (528,869)
	(588,992) (528,869)
	Cents Cents (0.9) (0.8)

The accompanying notes form part of the financial statements.

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

STATEMENT OF FINANCIAL POSITION – AS AT 31 DECEMBER 2011

NOTES ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Non-currents assets held for sale 2 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 3 Reserves Retained earnings TOTAL EQUITY	CONSOLIDATED GROUP 31 Dec 30 June 2011 2011 $ $ 1,738,816 2,674,176 50,246 37,857 2,853,995 -
	4,643,057 2,712,033
	89,486 105,525 3,273,068 5,688,265
	3,362,554 5,793,790
	8,005,611 8,505,823
	110,822 421,084 - 1,690 25,738 102,823
	136,560 525,597
	12,492 10,592
	12,492 10,592
	149,052 536,189
	7,856,559 7,969,634
	11,154,250 10,699,698 217,427 196,062 (3,515,118) (2,926,126)
	7,856,559 7,969,634

The accompanying notes form part of the financial statements.

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ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES

ABN: 64 123 993 233

STATEMENT OF CHANGES IN EQUITY – FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

BALANCE AT 1 JULY 2010 Fair value of options issued Total comprehensive income for the period BALANCE AT 31 DECEMBER 2010 BALANCE AT 1 JULY 2011 Fair value of options issued Shares issued during the period Transaction costs (net of tax) Total comprehensive income for the period BALANCE AT 31 DECEMBER 2011	Issued Capital $ Retained Earnings $ Share Option Reserve $ Total $
	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
	10,699,698 (2,926,126) 196,062 7,969,634 - 475,000 (20,448) - - - 21,365 - - 21,365 475,000 (20,448) - (588,992) - (588,992) 11,154,250 (3,515,118) 217,427 7,856,559

The accompanying notes form part of the financial statements.

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

STATEMENT OF CASH FLOWS – FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

CASH FLOW FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Finance cost Research and Development concessional tax refund 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 Proceeds from issue of shares Payments for the costs of capital raising Repayment of borrowings NET CASH FROM/ (USED IN) FINANCING ACTIVITIES Net (decrease) in cash held Cash at beginning of period CASH AT 31 DECEMBER 2011	CONSOLIDATEDGROUP 31 Dec 31 Dec 2011 2010 $ $ - 3,071 (523,846) (527,619) 67,508 111,406 (45) (961) - 95,149
	(456,383) (318,954)
	(622,713) (298,115) (362) (42,477)
	(623,075) (340,592)
	175,000 - (29,212) - (1,690) (9,383)
	144,098 (9,383)
	(935,360) (668,929) 2,674,176 3,929,824
	1,738,816 3,260,895

The accompanying notes form part of the financial statements.

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

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

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 2011 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 2011, 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 – NON CURRENT ASSETS HELD FOR SALE

On the 23rd of December 2011 a Heads of Agreement between Archer Exploration Limited (“Archer”) and BHPBilliton Olympic Dam Corporation Pty Ltd (“ODC”) was signed covering the sale of an 80% legal and beneficial interest in Archer’s five West Roxby tenements.

In accordance with AASB 5 – Non current assets held for sale and discontinued operations, 80% of the carrying value of the exploration and evaluation assets subject to the Heads of Agreement have been reclassified to Non current assets held for sale.

NOTE 3 – ISSUED CAPITAL

BALANCE 1 JULY 2010 BALANCE 31 DECEMBER 2010 BALANCE 1 JULY 2011 Shares issued as a placement during the period net of issue costs and tax BALANCE AT 31 DECEMBER 2011	Consolidated Group Ordinary Shares $ 64,428,477 10,699,698 64,428,477 10,699,698
	64,428,477 10,699,698 2,714,286 454,552
	67,142,763 11,154,250

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

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

NOTE 4 – SHARE BASED PAYMENTS

2011

No share based payments were made during the period.

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%

NOTE 5 – SEGMENT INFORMATION

Segment Performance TENEMENTS Leigh Creek Magnesite Graphite/ Manganese Other 31-Dec 31-Dec 31-Dec 31-Dec 31-Dec 31-Dec 2011 2010 2011 2010 2011 2010 $ $ $ $ $ $ Segment results before income tax - - - - (178,288) (73,4950 - - - - (178,288) (73,495) Reconciliation of segment results to Group net loss before tax Unallocated income and expenses Interest and other income Depreciation Corporate overheads (Loss) before tax	TENEMENTS Leigh Creek Magnesite Graphite/ Manganese Other 31-Dec 31-Dec 31-Dec 31-Dec 31-Dec 31-Dec 2011 2010 2011 2010 2011 2010 $ $ $ $ $ $ - - - - (178,288) (73,4950	Total 31-Dec 31-Dec 2011 2010 $ $ (178,288) (73,495)
	- - - - (178,288) (73,495)	(178,288 (73,495)
		67,508 113,792 (16,401) (16,029) (453,047) (553,137)
		(580,228) (528,869)

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ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES

ABN: 64 123 993 233

NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2011

NOTE 5 – SEGMENT INFORMATION - cont

Leigh Creek Magnesite Graphite/ Manganese Other 31-Dec 31-Dec 31-Dec 31-Dec 31-Dec 31-Dec 2011 2010 2011 2010 2011 2010 $ $ $ $ $ $ Segment assets as at 31 December 2011 213,157 123,561 1,885,035 1,533,754 4,028,871 4,030,951 Segment asset increase for the year - exploration expenditure capitalised 89,596 123,561 335,280 538,579 179,242 192,342 - expensed during the year - - - - (181,322) (76,530) Total corporate and unallocated assets Total Group assets

Total 31-Dec 31-Dec 2011 2010 $ $ 6,127,063 5,688,266 1,878,548 2,817,558

8,005,611 8,505,823

NOTE 6 – 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 7 – EVENTS SUBSEQUENT TO REPORTING DATE

There has been no material event subsequent to the half-year ended 31 December 2011.

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ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES 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 8 to 14 are in accordance with the Corporations Act 2001 , including:

2. a) complying with Accounting Standard AASB 134 Interim Financial Reporting, and

3. b) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and of its performance for the half-year ended on that date.

4. 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 8[h] day of February 2012.

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ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES

ABN: 64 123 993 233

INDEPENDENT AUDITORS’S REVIEW REPORT

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ARCHER EXPLORATION LIMITED & CONTROLLED ENTITIES

ABN: 64 123 993 233

INDEPENDENT auditor’s REVIEW REPORT CONT

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

CORPORATE DIRECTORY

DIRECTORS

Greg English – Chairman Tom Phillips AM – Non-executive Director Alice McCleary – Non-executive Director Gerard Anderson – Managing Director John Dawkins AO – Non-executive Director Peter Meers – Non-executive Director

COMPANY SECRETARY

Craig Gooden

REGISTERED OFFICE

Level 1 28 Greenhill Road Wayville SA 5034 Telephone: 08 8272 3288 Fax: 08 8272 3888 Email: info@archerexploration.com.au

SHARE REGISTRY

Computershare Investor Services Pty Ltd Level 5 115 Grenfell Street ADELAIDE SA 5000

AUDITORS

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

SOLICITOR

Norman Waterhouse Lawyers Level 15 45 Pirie Street ADELAIDE SA 5000

BANKERS

Bank of Queensland 151 Pirie Street ADELAIDE SA 5000

AUSTRALIAN SECURITIES EXCHANGE

The Company is listed on the Australian Securities Exchange ASX CODE: AXE

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