ARIKA RESOURCES LIMITED — Interim / Quarterly Report 2007

Aug 23, 2007

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Portland Orthopaedics Limited Appendix 4E

The Board of Portland Orthopaedics Limited (ASX: PLD) presents its Appendix 4E for the year to 30 June 2007.

2007 highlights

• ‥ Record sales of $5.4 million, an increase of 234% compared to the previous year.

• ‥ US sales of $4.1 million, an increase of 491%. Portland’s products continue to receive very strong loyalty from US surgeons with an expanding list of surgeons using Portland’s joint replacement products leading to a 100% retention rate amongst surgeons adopting Portland products.

• ‥ Successful transition to outsource product manufacturing. Gross margin post outsourcing improved to 38%. The outsourcing has also improved capacity levels across Portland’s product range and flexibility in responding to market demand.

• ‥ New product development continues at rapid rates. R&D spending was $1.85 million, an increase of 49% on 2006. This led to very successful M-Cor hip replacement and Equator Plus Cup launches in the US with further product releases expected in 2008 as a result of this expenditure. These launches provide Portland with a platform to compete in the largest segment (65%) of the US hip replacement market-primary implants.

• ‥ Achieved seamless transition from US distributor, Plus Inc, to Portland with resulting continuing sales growth. Portland took the initiative after Smith & Nephew announced a takeover of Plus in March and combined with surgeon product satisfaction saw surgical cases using Portland implants increase by 20% during and post the transition.

• ‥ The Company has reported a loss of $5,726,095 for the year to June 2007 compared to $2,911,182 in the previous corresponding period. The 2007 loss includes a $1.1m exceptional write-down on stock as a result of the write down of earlier generation inventory.

• ‥ An oversubscribed placement of $6m in December 2006.

Consolidated net assets as at 30 June 2007 were $10,096,252 compared to $9,537,254 as at 30 June 2006. Net assets included $3,911,046 in cash assets, $3,040,268 in inventories and $3,982,964 of intangible assets that primarily comprise intellectual property and capitalised development costs.

Appendix 4E

Appendix 4E Period ending 30 June 2007

Name of entity	Portland Orthopaedics Limited
ABN	92 086 839 992
Current period	Year ending 30 June 2007
Previous corresponding period	Year ending 30 June 2006

Results for announcement to the market

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----- Start of picture text ----- Revenues from ordinary activities (item 2.1) Up 135% to 5,738,980Loss from ordinary activities after tax attributable to members (item 2.2) Up 97% to (5,726,095)Loss for the period attributable to members (item 2.3) Up 97% to (5,726,095)----- End of picture text -----

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----- Start of picture text ----- Dividends (Item 2.4) Amount per Franked amountsecurity per securityInterim dividend Nil NilFinal dividend Nil NilRecord date for determining entitlements to the dividend (Item 2.5) Not applicable30 June 2007 30 June 2006Net tangible asset backing per ordinary share (Shares at 30 June) $0.053 $0.082----- End of picture text -----

Commentary on the Results

Financial Performance

Sales increased significantly in 2007 as market penetration in the US led to increasing surgeon acceptance of the M-Cor and subsequent Equator Plus cup launched in January 2007. This 491% improvement in US segment sales further supports management’s decision to continue investment in R&D in developing the M-Cor family of products. Expenditure on development and testing was $0.72m with research expenditure of $1.13m in 2007 totaling an R&D spend of $1.85m or 32% or revenue.

Management took a view that early generation products were unlikely to be implanted and that the stocks of these products be assessed. Only stocks that would be used over the next few years have been maintained. As a result, a write-off of stock of $1.1m was taken in the 2007 accounts, increasing the operating loss.

Technological and process challenges were experienced as the manufacturing subsidiary Vimek extended from R&D production techniques to full scale production techniques to service US driven demand. Capacity constraint and legacy manufacturing techniques impacted on gross

Appendix 4E

margin in the first half of the year. As announced, outsourcing of certain manufacture was undertaken in the second half of the year to expand production quantities to meet demand and reduce costs. These cost reductions saw gross margin for the full year climb to 38% and further improvements are expected.

In 2007, a deferred tax asset, being a current year income tax credit of $1.4m was not recognised. The Board took a conservative approach to the interpretation of the relevant accounting standards which otherwise would have reduced operating losses attributable to members to $4.3m from the reported $5.7m.

Financial Position

Consolidated net assets as at 30 June 2007 were $10,096,252 compared to $9,537,254 as at 30 June 2006. Net assets included $3,911,046 in cash assets, $3,040,268 in inventories and $3,982,964 of intangible assets that primarily comprise intellectual property and capitalised development costs.

Cash Flows

The Company’s cash reserves decreased by $664,121 in the period to retained cash of $3,911,046 at the period end.

Earnings per security and the Nature of any Dilution Aspects

	30 June 2007	30 June 2006
Basic loss per shareWeighted average number of ordinary shares outstanding during theyear used in the calculation of basic earnings per shareDiluted loss per shareWeighted average number of ordinary shares outstanding during theyear used in the calculation of diluted earnings per share	($0.05)114,974,449($0.05)116,458,068	($0.04) 76,620,984 ($0.04) 78,452,249

Status of Audit

The financial statements on which this report is based are in the process of being audited and the audit report will be included in the annual report.

David Edwards Company Secretary 24 August 2007