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ACN 1 4 6 0 3 5 6 9 0

2 0 1 2 A N N U A L R E P O R T

For the year ended 30 June 2012

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C O R P O R AT E D I R E C T O R Y

DIRECTORS

Executive Chairman Executive Director Non-Executive Director Non-Executive Director

Dato Soo Kok Lim Datuk Siew Swan Ong Mr Brent Butler Mr Andrew Kwa

PRINCIPAL PLACE OF BUSINESS

Unit 4/70 Wittenoom Street EAST PERTH WA 6004 Telephone: (61 8) 9325 9885 Email: [email protected] Website: www.audalia.com.au

SHARE REGISTRY

Computershare Investor Services Pty Ltd Level 2, 45 St George’s Terrace PERTH WA 6000 Telephone: (61 8) 9323 2000 Facsimile: (61 8) 9323 2033

AUDITOR

BDO Audit (WA) Pty Ltd 38 Station Street SUBIACO WA 6008

COMPANY SECRETARY

Ms Karen Logan

REGISTERED OFFICE

79 Broadway NEDLANDS WA 6009 Telephone: (61 8) 6389 2688 Facsimile: (61 8) 6389 2588

SOLICITORS

Steinepreis Paganin Level 4, The Read Buildings 16 Milligan Street PERTH WA 6000

BANKER

National Australia Bank 48 Howe Street OSBORNE PARK WA 6017

STOCK EXCHANGE

ASX Limited Exchange Plaza 2 The Esplanade Perth WA 6000

ASX Code: ACP, ACPO

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C O N T E N T S

	PAGE
Corporate Directory	1
Review of Activities	3
Directors' Report	9
Remuneration Report	14
Corporate Governance Statement	18
Financial Statements	25
Directors' Declaration	47
Independent Audit Report	48
Auditor’s Independence Declaration	50
Shareholder Information	51
Summary of Tenements	54

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R E V I E W O F A C T I V I T I E S

Audalia Resources Limited is pleased to present its second Annual Report to shareholders and provide some insight into the initial advancement the Company has made in its exploration activities to date and progress it expects to make going forward.

GASCOYNE PROJECT

The Gascoyne Project is located approximately 100 kilometres north of Gascoyne Junction east of the Lyons River and tributaries. The tenements consist of five granted Exploration Licences, E09/1568-70 and E09/1824-25. The Gascoyne Project covers an area of 32,400 Ha (324 km[2] ).

The regional setting of the Gascoyne Project is near the western edge of the Neo-Proterozoic Morrisse Metamorphic Suite rocks with overlying Permo-Carboniferous sediments of the Carnarvon Basin. The metamorphic belt acts as a buffer zone between the Archaean Yilgarn shield and the overlying cratonic Proterozoic Basins and is orientated WNWESE with well-developed schists, shears and intrusives parallel to this dominant strike. Therefore the area is a complex juxtaposition of sediments, granitoids and mafics with accompanying structures such as shears and faults.

The region was explored for gold, base metals and diamonds by large companies such as BHP, MIM, Western Mining and Rio Tinto using regional stream sediment, soil and rock chip sampling. These explorers considered the Gascoyne Province to be prospective for Broken Hill Type (BHT) Ag-Pb-Zn mineralisation based on a study of Zn-bearing spinels (gahnites) in the late 1990s.

Exploration work completed during 2011-12

Rock Chip Sampling

A total of 31 rock chip samples were collected from the Gascoyne Project in July 2011. Samples were assayed for a suite of elements which included Gold (Au), Silver (Ag), Barium (Ba), Copper (Cu), Manganese (Mn), Molybdenum (Mo), Nickel (Ni), Lead (Pb) and Zinc (Zn). Samples were analysed with a minimum detection limit of 1 ppm.

Table 1: Tenement rock chip samples register

Tenement ID	Status	Samples
E09/1568	Granted	5
E09/1569	Granted	7
E09/1570	Granted	2
E09/1824	Granted	14
E09/1825	Granted	3

Analysis of the rock chip samples returned anomalous values of up to 240 ppm Cu, up to 202 ppm Zn and 138 ppm Pb. In addition, pathfinder elements such Mo (24.3 ppm) and Ba (2550, 2880 ppm) have also returned anomalous values. Table 2 below lists peak anomalous results from the rock chip sampling programme.

Table 2: Summary of anomalous assay results

Table of anomalous base metal andpathfinder results	Table of anomalous base metal andpathfinder results
*Sample ID*	*Values*
11AUD00005	2030ppm Ba
11AUD00014	2550ppm Ba
11AUD00022	24.3ppm Mo
11AUD00027	240ppm Cu, 85ppm Pb, 242ppm Zn
11AUD00032	150ppm Cu, 125ppm Pb, 202ppm Zn
11AUD00036	102ppm Pb
11AUD00037	138ppm Pb

Interpretation of the assays has highlighted areas of interest, for example, where associations of anomalous metals exist, which warrant further investigation.

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R E V I E W O F A C T I V I T I E S

Figure 1: Location of areas of elevated base metal values within E09/1824 & E09/1569

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Area 1 - E09/1824

Geological and regolith interpretation of 1:25,000 aerial photography was conducted by B. Rees in 2008 for Altera Resources, when iron/manganese-stained gossanous outcrops within E09/1824 were identified. Gossanous outcrop is defined as decomposed rock, derived from the oxidation of sulphides.

These gossan outcrops were located during the July 2011 field trip. At one of the sampled gossan outcrops goethite boxworks derived from pyrite and other sulphides has since returned anomalous Pb, Zn, Cu and Ba assays. Within ELA29/1824 the current rock chip sampling has also returned anomalous Ba values. Barium is closely associated with the Broken Hill style of Pb-Zn mineralisation and therefore its presence in this area is noted as quite favourable. The Ba values returned from the sampling are not of ore grade magnitude.

The anomalous rock chip sample results were plotted over the aeromagnetic data images. There appears to be a correlation between anomalous base metal assays and the conformable chloritic bands in the rock strata, which are believed to have been derived from mafic/basic flows, but may also represent hydrothermal alteration. These mafic iron rich units may be the host rocks base metal mineralisation within the area.

Area 2 - E09/1569

Area 2 zone of anomalism is located in the south east of the tenement E09/1569. Three rock chip samples were collected from the south-eastern part of E09/1569 and provide the first exploration to be completed within this part of the tenement.

Anomalous Zn value of 242 ppm and a Cu value of 240ppm. Highly anomalous pathfinder elements values of Mo (24.3 ppm) and Ba (2550, 2880 ppm) have also been noted. The Mo value is up to 24 times the maximum background threshold of 1 ppm.

The anomalous Zn and Cu in association with the pathfinder elements highlight a geochemical target that needs to be followed up with a systematic auger soil sampling program.

R E V I E W O F A C T I V I T I E S

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Future Exploration

The rock chip sampling programme of 31 samples and reconnaissance mapping completed during July 2011 have returned encouraging anomalous base metal and pathfinder values that are worthy of follow up exploration work. Some of the anomalous base metal results are associated with gossanous outcrops identified by previously completed geology/regolith interpretation of aerial photography in conjunction with magnetometry.

The Gascoyne Project area remains prospective to host a stratabound lead-zinc (copper) mineralisation of the Broken Hill type. Systematic auger geochemical drilling/sampling, follow-up geophysics programmes and detailed geological mapping is proposed to continue exploration.

A programme of systematic auger geochemical sampling is proposed on a nominal 400m x 50m pattern over anomalism at Area 1. Anomalous samples collected in July 2011 correlate with interpreted chloritic bands in the rock strata which may reflect hydrothermal alteration of the country rock. In addition, these bands correlate with anomalous gossanous outcrop identified in the aerial photography. These factors make Area 1 highly prospective and a priority target for further work to be completed.

Table 3: Rock chip results

Sample_ID	E_gda	N_gda	Au(AR) (ppm)	Ag (ppm)	Ba (ppm)	Cu (ppm)	Mn (ppm)	Mo (ppm)	Ni (ppm)	Pb (ppm)	Zn (ppm)
11AUD00002	368798	7284918	-0.001	0.5	369	40	351	0.4	44	39	20
11AUD00003	368800	7284900	-0.001	-0.5	365	35	4200	0.5	74	18	128
11AUD00004	368790	7284853	-0.001	-0.5	866	10	333	0.7	10	62	56
11AUD00005	370678	7276958	-0.001	-0.5	2030	20	847	1.7	14	49	82
11AUD00006	377890	7282078	-0.001	-0.5	995	60	1890	0.4	150	11	146
11AUD00007	377931	7282088	-0.001	-0.5	430	-5	2900	0.6	36	7	118
11AUD00008	378609	7281919	-0.001	-0.5	346	40	1550	0.7	32	37	52
11AUD00009	378920	7281685	0.001	-0.5	51	10	229	3.1	14	4	22
11AUD00010	379446	7281194	-0.001	-0.5	269	-5	107	0.6	4	41	8
11AUD00011	378893	7281625	-0.001	-0.5	135	-5	100	0.7	6	6	14
11AUD00012	378001	7282067	-0.001	-0.5	2410	5	830	0.6	18	40	32
11AUD00014	376592	7286791	-0.001	-0.5	2550	10	1130	0.8	18	64	90
11AUD00015	376992	7286627	-0.001	-0.5	960	45	786	1.3	40	70	54
11AUD00020	377331	7283038	-0.001	-0.5	829	5	462	0.8	24	19	44
11AUD00021	371258	7280598	-0.001	-0.5	1260	-5	1020	0.7	14	39	36
11AUD00022	383552	7273819	-0.001	-0.5	358	90	1690	24.3	46	45	84
11AUD00023	370396	7282027	-0.001	-0.5	1340	-5	123	0.6	8	63	18
11AUD00024	370408	7282068	-0.001	-0.5	678	-5	45	0.3	6	126	12
11AUD00025	371164	7281357	-0.001	-0.5	48	35	1320	0.2	68	4	92
11AUD00026	384288	7274495	-0.001	-0.5	253	10	143	0.7	12	62	26
11AUD00027	384031	7274984	-0.001	-0.5	143	240	384	3.1	86	85	242
11AUD00028	379195	7280547	0.001	-0.5	308	60	139	0.5	28	21	16
11AUD00029	379188	7279307	-0.001	-0.5	353	20	376	1.9	14	29	32
11AUD00030	379186	7279262	-0.001	-0.5	423	15	301	0.4	56	25	40
11AUD00031	379389	7279154	-0.001	-0.5	356	55	142	3.7	30	107	40
11AUD00032	379604	7278746	0.019	-0.5	211	150	292	1	68	125	202
11AUD00033	379986	7278534	-0.001	-0.5	96	10	65	0.8	14	28	18
11AUD00034	379984	7278536	-0.001	-0.5	222	55	69	1.3	16	37	54
11AUD00035	379940	7278519	-0.001	-0.5	31	15	105	1	8	13	14
11AUD00036	378350	7279454	-0.001	-0.5	2880	-5	75	0.5	6	102	12
11AUD00037	378350	7279454	-0.001	-0.5	541	5	67	1	14	138	18

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R E V I E W O F A C T I V I T I E S

MEDCALF PROJECT

The Medcalf Project is located some 470 kilometres south east of Perth near Lake Johnson, Western Australia. The Project comprises three granted Exploration Licences E63/1068, E63/1405 and E63/1406 and covers an area of 1,740 Ha (17.4 km[2] ).

The Medcalf Project lies in the southern end of the Archaean Lake Johnston greenstone belt. This greenstone belt is a narrow, north-northwest trending belt approximately 110 km in length. It is located near the south margin of the Yilgarn Craton, midway between the southern ends of the Norseman-Wiluna and the Forrestania-Southern Cross greenstone belts.

Previous work carried out by numerous holders of the tenements over the last 40 years includes exploration for nickel, titanium/vanadium, platinum group metals (PGM) and gold. The primary vandiferous titanomagnetite mineralisation occurs within the pyroxenite zone between the basal peridotite and upper gabbro zones of the sill. The lateritic weathering of this sill has removed much of the silica, calcium and magnesium in solution thus resulting in residual concentrations of iron, titanium and vanadium oxides. This secondary enrichment potential hosts economic ore.

Exploration work completed during 2011-12

Review of historic exploration activities

A summary of the historic exploration was also completed and collated below:

Unimin/Laporte 1972:

Seven rotary percussion holes – RPH15 to RPH 21 - and two diamond holes – DDHLJ1 and DDHLJ2 – were drilled to test the nickel and vanadium potential at Medcalf.

Amoco 1982:

Twenty eight vertical RAB holes were drilled for a total of 1523m. Selected 1.5m intervals were analysed for V2O5 and TiO2. A number of these were also analysed for nickel, copper, zinc, cobalt and chromium. No sample heaps remains on site.

Arimco 1996:

Three HQ diamond holes – MEDD-1, 2 and 3 - were drilled to a maximum depth of 43m to obtain material for metallurgy. Half core was used for metallurgy. Location of the remaining half core is unknown.

Lionore 2006:

Diamond hole LJPD0091 was designed to test a TEM anomaly.

Norilsk 2010:

Drilled LJPD0091 and 0092.

Mapping/soil sampling

A mapping and soil sampling programme was carried for gold was completed over 9 days, from 13 to 21 January 2012. Geology was mapped by GPS (+/-3m accuracy) at 1:5000 scale onto A3 sheets of 2mm grid graph paper. Old drill collars and grid pegs were picked up where encountered. This mapping is currently being electronically imported into a GIS format. Soil sampling results returned low values for gold. Best result was 16ppb gold. Results received are set out in Table 4 below.

R E V I E W O F A C T I V I T I E S

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Table 4: Soil sampling results

Medcalf stream sediment sampling	Medcalf stream sediment sampling	Medcalf stream sediment sampling	Medcalf stream sediment sampling	Medcalf stream sediment sampling
Sampno	East	North	Au (ppb)	Description
MD001	291,520	6,397,680	6	minus 80 mesh soil
MD002	291,600	6,397,680	3	minus 80 mesh soil
MD003	291,680	6,397,680	4	minus 80 mesh soil
MD004	291,520	6,397,600	1	minus 80 mesh soil
MD005	291,600	6,397,600	5	minus 80 mesh soil
MD006	291,680	6,397,600	3	minus 80 mesh soil
MD007	291,520	6,397,520	<1	minus 80 mesh soil
MD008	291,600	6,397,520	2	minus 80 mesh soil
MD009	291,680	6,397,520	1	minus 80 mesh soil
MD010	292,283	6,397,812	2	minus 80 mesh trap site stream sediment
MD011	292,924	6,398,967	3	minus 80 mesh trap site stream sediment
MD012	293,840	6,398,840	6	minus 80 mesh soil
MD013	293,920	6,398,840	6	minus 80 mesh soil
MD014	294,000	6,398,840	4	minus 80 mesh soil
MD015	293,920	6,398,760	5	minus 80 mesh soil
MD016	294,000	6,398,760	1	minus 80 mesh soil
MD017	294,080	6,398,760	6	minus 80 mesh soil
MD018	293,920	6,398,680	5	minus 80 mesh soil
MD019	294,000	6,398,680	10	minus 80 mesh soil
MD020	294,080	6,398,680	4	minus 80 mesh soil
MD021	294,000	6,398,680	9	Duplicate of MD019
MD022	294,000	6,398,600	10	minus 80 mesh soil
MD023	294,080	6,398,600	6	minus 80 mesh soil
MD024	294,000	6,398,520	10	minus 80 mesh soil
MD025	294,080	6,398,520	2	minus 80 mesh soil
MD026	294,160	6,398,520	5	minus 80 mesh soil
MD027	294,080	6,398,440	1	minus 80 mesh soil
MD028	294,160	6,398,440	3	minus 80 mesh soil
MD029	293,599	6,397,340	<1	minus 80 mesh trap site stream sediment
MD030	293,409	6,397,238	<1	minus 80 mesh trap site stream sediment
MD031	294,240	6,398,520	1	minus 80 mesh soil
MD032	294,320	6,398,520	3	minus 80 mesh soil
MD033	294,400	6,398,520	4	minus 80 mesh soil
MD034	292,480	6,398,520	4	minus 80 mesh soil
MD035	294,560	6,398,520	2	minus 80 mesh soil
MD036	294,560	6,398,600	8	minus 80 mesh soil
MD037	294,480	6,398,600	6	Duplicate of MD037
MD038	294,480	6,398,600	5	minus 80 mesh soil
MD039	294,400	6,398,440	9	minus 80 mesh soil
MD040	294,480	6,398,440	16	minus 80 mesh soil
MD041	294,560	6,398,440	2	minus 80 mesh soil
MD042	294,560	6,398,360	2	minus 80 mesh soil
MD043	294,480	6,398,360	1	minus 80 mesh soil
MD044	294,400	6,398,360	1	minus 80 mesh soil
MD045	295,120	6,397,840	1	minus 80 mesh soil
MD046	295,200	6,397,840	<1	minus 80 mesh soil
MD047	295,280	6,397,840	2	minus 80 mesh soil
MD048	295,360	6,397,840	2	minus 80 mesh soil
MD049	295,360	6,397,760	4	minus 80 mesh soil
MD050	295,280	6,397,760	1	minus 80 mesh soil
MD051	295,200	6,397,760	4	minus 80 mesh soil
MD052	295,120	6,397,760	<1	minus 80 mesh soil
MD053	295,200	6,397,680	1	minus 80 mesh soil
MD054	295,280	6,397,680	2	minus 80 mesh soil
MD055	295,360	6,397,680	2	minus 80 mesh soil
MD056	295,600	6,396,960	2	minus 80 mesh soil
MD057	295,680	6,396,960	2	minus 80 mesh soil
MD058	295,680	6,396,880	2	minus 80 mesh soil
MD059	295,680	6,396,880	2	Duplicate of MD058
MD060	295,680	6,397,840	2	minus 80 mesh soil
MD061	295,760	6,397,840	3	minus 80 mesh soil
MD062	295,840	6,397,840	2	minus 80 mesh soil
MD063	295,840	6,397,920	2	minus 80 mesh soil
MD064	295,760	6,397,920	2	minus 80 mesh soil
MD065	295,680	6,397,920	1	minus 80 mesh soil

R E V I E W O F A C T I V I T I E S

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Future Exploration

A 46 drillhole programme has been planned over a 2km by 2km mineralised area on a 160m by 160m drill spacing to confirm a historic estimate calculated by Amoco during 1982. The programme is designed to drill to an average depth of 50m, totalling 2,300m.

A flora environmental survey is underway which, once completed, will be submitted to the Department of Mines and Petroleum together with the Programme of Works for approval.

Competent Person’s Statement

The information in this report that relates to Exploration Results is based on information compiled by Mr Brent Butler, who is a member of the Australasian Institute of Mining and Metallurgy. Mr Butler is a consultant geologist with 27 years’ experience as a geologist. Mr Butler has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 edition of the ‘Australasian Code for Reporting of Exploration results, Mineral Resources and Ore Reserves’ (JORC Code). Mr Butler consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

D I R E C T OR S ’ R E P OR T

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The Directors present their report together with the financial report of Audalia Resources Limited (the Company ) for the year ended 30 June 2012 and the auditor’s report thereon.

DIRECTORS

The Directors of the Company at any time during or since the end of the financial year are:

Dato Soo Kok Lim

Executive Chairman – Age 43, appointed: 9 October 2010

Dato Lim is a graduate in Law with Honours from The University of Kent in Canterbury, England in 1989. In 1990, he obtained the degree of Utter Barrister Gray’s Inn, England. He was called to the Bar in Malaysia in 1991. After a brief career in a local law firm in Kuala Lumpur, he established his own practice in 1993 and operated it until 1999. He was appointed a Commissioner for Oaths by the Chief Justice of Malaysia in 1999. Dato Lim is also a Notary Public appointed by the Attorney General of Malaysia.

He is also currently a director of a number of companies listed on Bursa Malaysia (formerly known as the Kuala Lumpur Stock Exchange). Dato Lim is actively involved with the management of significant family investments in property development, hotel management and other commercial interests. He has substantial business and legal experience in investments in Malaysia, Australia, China and other South East Asian countries.

Dato Lim will be seeking re-election by shareholders at the 2012 Annual General Meeting.

Datuk Siew Swan Ong

Executive Director – Age 40, appointed: 9 October 2010

Datuk Ong is an advocate & solicitor with over more than 15 years of experience including managing his legal practice in Malaysia. He is a graduate in law from Bond University, Australia. He provides legal advice to a wide range of clients including clients in the mining industry in Malaysia and Indonesia.

He has extensive knowledge of the mining industry in Malaysia having been involved as legal counsel in joint ventures and acquisition of mining transactions and dispute resolution between clients and State Governments.

He has served as a director and company secretary on several companies in Malaysia and Hong Kong.

Mr Brent Butler

Non-Executive Director – Age 52, appointed: 16 February 2011

Mr Butler is a geologist with over 25 years’ experience in the resource industry. He has a geology degree from Otago University and is a member of the Australasian Institute of Mining and Metallurgy. Mr Butler is also a Fellow of the Society of Geology (USA) and a member of Prospectors Development of Canada. He is currently the President and CEO of Superior Mining International Corporation, Director of Redhill Resources Corp and Managing Director of its Australian subsidiary. He has significant international exploration and mining experience in the gold industry, having worked in the United States, Brazil, Chile, Argentina, Africa and Australia.

Mr Andrew Kwa

Non-Executive Director – Age 61, appointed: 11 October 2011

Mr Kwa has a bachelor of Computer Science degree from Teesside University in the UK. He worked as a Systems Analyst and IT Consultant for several years both in Malaysia and in Australia. Mr Kwa has extensive financial and project management experience. He is currently a consultant in a substantial property development in Western Australia and is a non-executive director of an ASX-listed company.

Mr Anthony Ho

Non-Executive Director – Age 53, appointed: 27 August 2010, resigned 17 August 2011

D I R E C T OR S ’ R E P OR T

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COMPANY SECRETARY

Ms Karen Logan

Appointed: 27 August 2010

Ms Logan graduated with a Bachelor of Commerce majoring in Accounting and Business Law from Curtin University in Western Australia. After completing a Graduate Diploma in Applied Corporate Governance, she qualified as a Chartered Secretary in 2009. Ms Logan is an Associate of the Institute of Chartered Secretaries and Administrators and a Fellow of the Financial Services Institute of Australasia.

She has been a partner of a public practice since 2006 and has significant experience in capital raising projects and ASX listings. She is currently the secretary of a number of ASX-listed companies and provides corporate and accounting advice and services to those clients.

DIRECTORSHIPS IN OTHER LISTED ENTITIES

Directorships of other listed entities held by directors of the Company during the last 3 years immediately before the end of the financial year are as follows:

			Period of directorship	Period of directorship
Director	Company		From	To
Dato Soo Kok Lim	Not Applicable		-	-
Datuk Siew Swan Ong	Not Applicable		-	-
Mr Brent Butler	Redhill Resources Corp.		2006	Present
	Superior Mining International	Corporation	22 March 2011	Present
	Siburan Resources Limited		12 November 2009	21 August 2012
Mr Andrew Kwa	Global Gold Holdings Limited		2008	Present

DIRECTORS’ INTERESTS

The relevant interests of each director in the securities of the Company at the date of this report are as follows:

Director	Shares	Options
Dato Soo Kok Lim	15,000,000	-
Datuk Siew Swan Ong	15,750,000	-
Mr Brent Butler	530,000	15,000
Mr Andrew Kwa	250,000	-

DIRECTORS’ MEETINGS

The number of directors’ meetings and the number of meetings attended by each of the directors of the Company during the financial year are:

			Audit and Risk	Audit and Risk	Nomination and Remuneration	Nomination and Remuneration
	Board Meetings		Committee Meetings		Committee Meetings
Director	Held	Attended	Held	Attended	Held	Attended
Dato Soo Kok Lim	4	4	1	1	N/A	N/A
Datuk Siew Swan Ong	4	4	N/A	N/A	-	-
Mr Brent Butler	4	4	1	1	-	-
Mr Andrew Kwa	3	3	N/A	N/A	N/A	N/A
Mr Anthony Ho	-	-	-	-	-	-

Committee membership

As at the date of the report, the Company had a Nomination and Remuneration Committee and an Audit and Risk Committee of the Board of Directors.

D I R E C T OR S ’ R E P OR T

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DIRECTORS’ MEETINGS (continued)

Committee membership (continued)

Members acting on the committees of the Board during the financial year were:

Nomination and Remuneration Committee	Audit and Risk Committee
Mr Brent Butler (Chairman)	Mr Brent Butler (Chairman)
Mr Andrew Kwa	Mr Andrew Kwa
Datuk Siew Swan Ong	Dato Soo Kok Lim

PRINCIPAL ACTIVITY

The principal activity of the Company during the financial year was mineral exploration.

OPERATING AND FINANCIAL REVIEW

Operating review

The Company was successfully admitted to the Official List of ASX on 4 July 2011.

During the year, two applications for exploration licences in the area adjacent to the Company’s Gascoyne Project were granted. The Company also acquired three mining tenements in the southern end of the Archaean Lake Johnston greenstone belt during the year.

Further information regarding activities undertaken by the Company during the year is contained in the section entitled Review of Activities in this Financial Report.

Financial review

The Company incurred a loss of $393,303 after income tax for the financial year (2011: loss of $97,706).

Significant Changes in the State of Affairs

The Company’s net assets decreased by $410,589 to $2,120,293 during the financial year. The decrease in net assets principally comprises the net loss of $393,303 being incurred for the year.

Total shares on issue at 30 June 2012 are 80,160,001.

RESULTS

The Company incurred a loss of $393,303 (2011: loss of $97,706) after income tax for the financial year.

LIKELY DEVELOPMENTS

The Company will continue to pursue its principal activity of mineral exploration and continue to review and assess other acquisition and joint venture opportunities in the resource sector.

Planned exploration

The Company intends to focus exploration programmes primarily (initially) on its headline project, the Medcalf Project as well as at its Gascoyne Project. Further information regarding the exploration programmes at the Company’s projects is contained in the section entitled Review of Activities in this Financial Report.

DIVIDENDS

No dividend has been declared or paid by the Company to the date of this report.

D I R E C T OR S ’ R E P OR T

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ENVIRONMENTAL REGULATION

The Company’s exploration and mining activities are governed by a range of environmental legislation and regulations including the National Greenhouse and Energy Report Act 2007 and Mining Act 1978. As the Company is still in the development phase of its interests in exploration projects, Audalia Resources is not yet subject to the public reporting requirements of environmental legislation and regulations. To the best of the directors’ knowledge, the Company has adequate systems in place to ensure compliance with the requirements of the applicable environmental legislation and is not aware of any breach of those requirements during the financial year and up to the date of the Director’s Report.

EVENTS SUBSEQUENT TO REPORTING DATE

Other than the matters described in Note 22 to these financial statements, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect significantly the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years.

OPTIONS

Unissued shares under option

At the date of this report, unissued ordinary shares of the Company under option are:

Class	Expiry date	Exercise Price	Number of Options
Listed Options (ACPO)	28 April 2014	$0.20	6,830,004

None of these options were exercised during the financial year and all remained outstanding at 30 June 2012. These options do not entitle the holder to participate in any share issue of the Company or any other entity.

INDEMNIFICATION AND INSURANCE OF OFFICERS

Indemnification

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

Insurance

As at the date of this report no insurance policies in respect of indemnification of officers have been entered into.

INDEMNIFICATION AND INSURANCE OF AUDITORS

The Company has not, during or since the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against liability incurred by the auditor.

During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied to the Court under section 237 of the Corporations Act 2001 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 purposes of taking responsibility on behalf of the Company for all or part of those proceedings.

NON-AUDIT SERVICES

The following non-audit services were provided by BDO Corporate Tax (WA) Pty Ltd and BDO Corporate Finance (WA) Pty Ltd, companies associated with the Company's auditor, BDO Audit (WA) Pty Ltd. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

D I R E C T OR S ’ R E P OR T

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NON-AUDIT SERVICES (continued)

BDO Corporate Tax (WA) Pty Ltd and BDO Corporate Finance (WA) Pty Ltd received or are due to receive the following amounts for the provision of non-audit services:

BDO Corporate Tax (WA) Pty Ltd Tax compliance services BDO Corporate Finance (WA) Pty Ltd Investigating accountant’s report for inclusion in a prospectus	2012 $ 2011 $ 5,100 - - 6,939
	5,100 6,939

OFFICERS OF THE COMPANY WHO ARE FORMER AUDIT PARTNERS OF BDO AUDIT (WA) PTY LTD

There are no officers of the Company who are former audit partners of BDO Audit (WA) Pty Ltd.

REMUNERATION REPORT

The Remuneration Report is set out on pages 14 to 17 and forms part of the Directors’ Report.

AUDITOR’S INDEPENDENCE DECLARATION

The auditor’s independence declaration is set out on page 50 and forms part of the Director’s Report.

AUDITOR

BDO Audit (WA) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001 .

Dated at Perth, Western Australia this 28[th] day of September 2012.

Signed in accordance with a resolution of the directors:

Dato Soo Kok Lim Executive Chairman

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R E M U N E R AT I O N R E P O R T (A U D I T E D )

This Remuneration Report outlines the remuneration arrangements of the Company in accordance with the requirements of the Corporations Act 2001 (the Act ) and its regulations. This information has been audited as required by section 308(3C) of the Act.

For the purposes of this report, key management personnel of the Company are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly, including any director (whether executive or otherwise) of the Company.

KEY MANAGEMENT PERSONNEL

The following were key management personnel of the Company at any time during the year and unless otherwise indicated were key management personnel for the entire year:

Directors

Name	Position held
Dato Soo Kok Lim	Executive Chairman
Datuk Siew Swan Ong	Executive Director
Mr Brent Butler	Non-Executive Director
Mr Andrew Kwa	Non-Executive Director (appointed 11 October 2011)
Mr Anthony Ho	Non-Executive Director (resigned 17 August 2011)

REMUNERATION COMMITTEE

The Nomination and Remuneration Committee of the Board of Directors of the Company is responsible for determining and reviewing remuneration policies for the directors and executives. If necessary, the Nomination and Remuneration Committee obtains independent advice on the appropriateness of remuneration packages given trends in comparable companies and in accordance with the objectives of the Company.

Further information on the Nomination and Remuneration Committee’s role, responsibilities and membership is set out in the section entitled Corporate Governance Statement in this Financial Report.

PRINCIPLES OF REMUNERATION

The remuneration structures explained below are competitively set to attract, motivate and retain suitably qualified and experienced candidates, reward the achievement of strategic objectives and achieve the broader outcome of creation of value for shareholders. The remuneration structures take into account:

the capability and experience of the key management personnel;
the key management personnel’s ability to control the achievement of strategic objectives;
the Company’s performance including:
the growth in share price; and
the amount of incentives within each key management person’s compensation.

Given the evaluation and developmental nature of the Company’s principal activity, the overall level of compensation does not have regard to the earnings of the Company.

REMUNERATION STRUCTURE

In accordance with best practice corporate governance, the structure of non-executive directors’ remuneration is clearly distinguished from that of executives.

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R E M U N E R AT I O N R E P O R T (A U D I T E D )

REMUNERATION STRUCTURE (continued)

Non-executive director remuneration

The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. Total remuneration for all non-executive directors, last voted upon by shareholders at the 2011 General Meeting, is not to exceed $300,000 per annum. Directors’ fees cover all main board activities and membership of committees.

Non-executive directors do not receive any retirement benefits, other than statutory superannuation, nor do they receive any performance related compensation. Level of non-executive directors’ fees as at the reporting date is as follows:

Name	Non-executive directors’ fees
Mr Andrew Kwa	$20,000 per annum
Mr Brent Butler	$20,000 per annum

Executive remuneration

Remuneration for executives is set out in employment agreements. Details of the employment agreements with the Executive Chairman and Executive Director are provided below.

Executive directors may receive performance related compensation but do not receive any retirement benefits, other than statutory superannuation.

Fixed remuneration

Fixed remuneration consists of base compensation (which is calculated on a total cost basis and includes any FBT charges related to employee benefits including motor vehicles) as well as employer contributions to superannuation funds.

Fixed remuneration is reviewed annually by the Nomination and Remuneration Committee through a process that considers individual and overall performance of the Company. As noted above, the Nomination and Remuneration Committee has access to external advice independent of management.

Short-term incentive

The Company has not set any short-term incentives ( STI ) for key management personnel.

Long-term incentive

Long-term incentives ( LTI ) may be provided to key management personnel in the form of options over ordinary shares of the Company. LTI are considered to promote continuity of employment and provide additional incentive to recipients to increase shareholder wealth. Options may only be issued to directors subject to approval by shareholders in general meeting.

There were no options issued as LTI during the year.

The Company has introduced a policy that prohibits employees and directors of the Company from entering into transactions that operate or are intended to operate to limit the economic risk or are designed or intended to hedge exposure to unvested Company securities. This includes entering into arrangements to hedge their exposure to LTI granted as part of their remuneration package. This policy may be enforced by requesting employees and directors to confirm compliance.

Use of remuneration consultants

The Nomination and Remuneration Committee did not engage the services of a remuneration consultant during the year.

Voting and comments made at the Company’s 2011 Annual General Meeting

The Company received 100% of “yes” votes on its remuneration report for the 2011 financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.

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R E M U N E R AT I O N R E P O R T (A U D I T E D )

Consequences of performance on shareholder wealth

In considering the Company’s performance and benefits for shareholder wealth, the Directors have regard to the following indices in respect of the current financial period:

following indices in respect of the current financial period:
	2012	20111
Net loss for the year	$393,303	$97,706
Dividends paid	Nil	Nil
Change in share price Share price at beginning of the period	$0.01 $0.20	Nil $0.202
Share price at end of the period	$0.21	$0.20
Loss per share	0.49 cents	0.16 cents

These figures cover the period from incorporation on 27 August 2010 to 30 June 2011.
The Company was incorporated on 27 August 2010 with an issued capital of 1 share of $0.20.

Due to the Company currently being in an exploration and evaluation phase, the Company’s earnings are not considered to be a principal performance indicator. However, the overall level of key management personnel remuneration takes into account the achievement of strategic objectives, service criteria and growth in share price.

The overall level of key management personnel remuneration takes into account the performance of the Company since the Company’s incorporation on 27 August 2010. As a result, remuneration was not paid to directors or executives until the Company was admitted to the Official List of ASX in July 2011. Since then, the level of remuneration has remained unchanged, other than the increase or decrease in remuneration levels due to the appointment or resignation of key management personnel. Furthermore, total remuneration for all non-executive directors has remained unchanged since voted upon by shareholders in January 2011.

There were no performance related remuneration transactions during the year.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with its Executive Chairman and Executive Director. The employment agreements outline the components of remuneration paid to the executives and are reviewed on an annual basis.

Dato Soo Kok Lim, Executive Chairman, has an employment agreement effective from 4 July 2011 with the Company ( EC Employment Agreement ). The EC Employment Agreement specifies the duties and obligations to be fulfilled by the Executive Chairman. The term of the EC Employment Agreement is 2 years. The Company must pay to Dato Lim $20,000 per annum (exclusive of statutory superannuation) for Dato Lim’s services.

Either Dato Lim or Audalia may terminate the agreement at any time by giving three month’s written notice to the other. Dato Lim has no entitlement to termination payment should he terminate the agreement by written notice. Audalia may, by giving written notice to Dato Lim, immediately terminate the agreement should a number of specified occurrences happen, including a serious breach of the agreement or serious misconduct. Dato Lim has no entitlement to termination payment in the event of removal for misconduct.

Datuk Siew Swan Ong, Executive Director, has an employment agreement effective from 4 July 2011 with the Company ( ED Employment Agreement ). The ED Employment Agreement specifies the duties and obligations to be fulfilled by the Executive Director. The term of the ED Employment Agreement is 2 years. The Company must pay to Datuk Ong $20,000 per annum (exclusive of statutory superannuation) for Datuk Ong’s services.

Either Datuk Ong or Audalia may terminate the agreement at any time by giving three month’s written notice to the other. Datuk Ong has no entitlement to termination payment should he terminate the agreement by written notice. Audalia may, by giving written notice to Datuk Ong, immediately terminate the agreement should a number of specified occurrences happen, including a serious breach of the agreement or serious misconduct. Datuk Ong has no entitlement to termination payment in the event of removal for misconduct.

Refer to Note 16 for details on the financial impact in future periods resulting from firm commitments arising from noncancellable contracts for services with directors.

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R E M U N E R AT I O N R E P O R T (A U D I T E D )

REMUNERATION OF KEY MANAGEMENT PERSONNEL

Details of the nature and amount of each major element of the remuneration of each key management person of the Company are:

SHORT-TERM POST- EMPLOYMENT SHARE-BASED PAYMENTS	SHORT-TERM POST- EMPLOYMENT SHARE-BASED PAYMENTS


Superannuation Performance
Salary & fees $ benefits $ Options $ Total $ related %
Directors Non-executive Mr B Butler 2012 19,839 - - 19,839 - 2011 - - - - - Mr A Kwa1 2012 13,268 1,194 - 14,462 - 2011 Mr A Ho2 2012 2,419 - - 2,419 - 2011 - - - - - Executive Dato S K Lim 2012 19,839 1,785 - 21,624 - 2011 - - - - - Datuk S S Ong 2012 19,839 1,785 - 21,624 - 2011 - - - - - Mr G C Ooi3 2011 - - - - -
*Total, all directors* 2012 75,204 4,765 - 79,969 - 2011 - - - - -
Other KMP Ms K Logan4 2012 - - - - - 2011 - - - - -
Total, all executives 2012 - - - - - 2011 - - - - -

*Total, all directors* *and executives*	2012 75,204 4,765 - 79,969 -
	2011 - - - - -

Notes in relation to the table of remuneration:

Appointed 11 October 2011.
Resigned 17 August 2011.
Resigned 5 April 2011.
In addition to the remuneration as disclosed above, a total of $88,995 was paid to Townshend York Pty Ltd for secretarial, accounting and consultancy services provided by Ms Karen Logan to the Company.

Non-executive directors’ fees commenced from the date of the Company’s admission to the Official List of ASX on 4 July 2011. Dato Lim and Datuk Ong’s employment agreements were also effective from that date.

SHARE-BASED REMUNERATION

There were no share-based remuneration transactions during the year.

End of Remuneration Report (Audited).

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C O R P O R AT E G O V E R N AN C E S T AT E M E N T

The Board of Directors is responsible for the operational and financial performance of the Company, including its corporate governance. The Company believes that the adoption of good corporate governance adds value to stakeholders and enhances investor confidence.

The Company acknowledges the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations with 2010 Amendments (2[nd] Edition) (the Recommendations ). This Corporate Governance Statement provides details of the Company’s compliance with those Recommendations, or where appropriate, indicates a departure from the Recommendations with an explanation. A checklist summarising the Company’s compliance with the Recommendations is also set out at the end of this statement.

Audalia’s corporate governance policies are available on the Company’s website: www.audalia.com.au.

PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT

Board Charter

The Board is accountable to shareholders for the performance of the Company. The Board operates under the Board Charter that details its functions, responsibilities and powers and those delegated to management.

On appointment, non-executive directors receive formal letters of appointment setting out the terms and conditions of appointment. The formal letter of appointment covers the matters referred to in the guidance and commentary for Recommendation 1.1. Executive directors are employed pursuant to employment agreements.

Evaluation of the performance of senior executives

The performance of senior executives will be evaluated in accordance with the Performance Evaluation Process. Subsequent to the end of the reporting period, the nomination committee will conduct performance evaluations for senior executives in accordance with the process disclosed.

The Board Charter and Performance Evaluation Process are available on the Company’s website.

PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE

Composition of the Board

The Board consists of the Executive Chairman, Executive Director and two non-executive directors. Details of their skills, experience and expertise and the period of office held by each director have been included in the Directors’ Report. The number of board meetings and the attendance of the directors are set out in the Directors’ Report.

The roles of Chairman and the Executive Director are not exercised by the same individual. The Board Charter summarises the roles and responsibilities of the Chairman, Dato Lim, and the Executive Director, Datuk Ong.

Independence of non-executive directors

The Board has assessed the independence of the non-executive directors using defined criteria of independence and materiality consistent with the guidance and commentary for Recommendation 2.1.

Although Mr Butler and Mr Kwa hold 530,000 and 250,000 fully paid ordinary shares respectively and Mr Butler holds 15,000 options in the Company, the Board considers this immaterial. Messrs Butler and Kwa are regarded as independent as they are not substantial shareholders as defined by the Corporations Act .

The Company is at variance with Recommendations 2.1 and 2.2 in that the majority of directors are not independent and the Chairman is not independent. The Board has determined that the composition of the current Board represents the best mix of directors that have an appropriate range of qualifications and expertise, can understand and competently deal with current and emerging business issues and can effectively review and challenge the performance of management. Furthermore, each individual member of the Board is satisfied that whilst the Company may not comply with Recommendations 2.1 and 2.2, all directors bring an independent judgement to bear on Board decisions.

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C O R P O R AT E G O V E R N AN C E S T AT E M E N T

Nomination and Remuneration Committee

The Nomination and Remuneration Committee consists of three members and is chaired by Mr Butler, who is an independent non-executive director.

The Nomination and Remuneration Committee Charter sets out its role, responsibilities and membership requirements. The Charter reflects the matters set out in the commentary and guidance for Recommendation 2.4.

For information on the skills, experience and expertise of the Nomination and Remuneration Committee member, refer to the Directors’ Report.

Details of the members and their attendance at meetings of the Nomination and Remuneration Committee are included in the Directors’ Report.

Board renewal and succession planning

The appointment of directors is governed by the Company’s Constitution and the Appointment and Selection of New Directors policy. In accordance with the Constitution of the Company, no director except a Managing Director shall hold office for a continuous period in excess of three years or past the third annual general meeting following the director's appointment, whichever is the longer, without submitting for re-election.

The Company has not adopted a policy in relation to the retirement or tenure of directors.

The appointment of the Company Secretary is a matter for the Board. Information on the skills, experience and qualifications of the Company Secretary can be found in the Directors’ Report.

Evaluation of the performance of the Board, its committees and individual directors

The performance of the Board, its committees and individual directors will be evaluated in accordance with the Performance Evaluation Process. Subsequent to the end of the reporting period, the Board will conduct performance evaluations of the Board, the Nomination and Remuneration Committee, the Audit and Risk Committee and individual directors in accordance with the process disclosed.

Induction and education

When appointed to the Board, a new director will receive an induction appropriate to their experience. Directors may participate in continuing education to update and enhance their skills and knowledge from time to time, as considered appropriate.

Access to information and advice

Directors are entitled to request and receive such additional information as they consider necessary to support informed decision-making. The Board also has a policy under which individual directors and Board committees may obtain independent professional advice at the Company’s expense in relation to the execution of their duties, after consultation with the Chairman.

The Company’s Constitution, Nomination and Remuneration Committee Charter and the policy for Appointment and Selection of New Directors are available on the Company’s website.

PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION MAKING

Code of Conduct

The Board has adopted a Code of Conduct which applies to all directors and officers of the Company. It sets out Audalia’s commitment to successfully conducting the business in accordance with all applicable laws and regulations while demonstrating and promoting the highest ethical standards. The Code of Conduct reflects the matters set out in the commentary and guidance for Recommendation 3.1.

Diversity Policy

The Board has adopted a Diversity Policy which sets out the Company’s aims and practices in relation to recognising and respecting diversity in employment. The Policy reinforces the Company’s commitment to actively managing diversity as a means of enhancing the Company’s performance by recognising and utilising the contributions of diverse skills and talent from its employees.

The Diversity Policy reflects the matters set out in the commentary and guidance for Recommendation 3.2.

C O R P O R AT E G O V E R N AN C E S T AT E M E N T

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Gender Diversity

The Board is responsible for establishing and monitoring on an annual basis the achievement against gender diversity objectives and strategies, including the representation of women at all levels of the organisation.

The proportion of women within the whole organisation as at the date of this report are as follows:

Women employees in the whole organisation 20% Women in senior executive positions 20% Women on the Board of Directors 0%

The Board acknowledges the absence of female participation on the Board of Directors. However, as noted above, the Board has determined that the composition of the current Board represents the best mix of directors that have an appropriate range of qualifications and expertise, can understand and competently deal with current and emerging business issues and can effectively review and challenge the performance of management.

The Company is at variance with Recommendation 3.3 in that it has not set or disclosed measurable objectives for achieving gender diversity in accordance with its Diversity Policy. Due to the size of the Company, the Board does not deem it practical to limit the Company to specific targets for gender diversity as it operates in a very competitive labour market where positions are sometimes difficult to fill. However, every candidate suitably qualified for a position has an equal opportunity of appointment regardless of gender, age, ethnicity or cultural background.

The Code of Conduct and Diversity Policy are available on the Company’s website.

PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING

Audit and Risk Committee

The Audit and Risk Committee consists of three members and is chaired by an independent non-executive director, Mr Butler.

The Audit and Risk Committee Charter sets out its role, responsibilities and membership requirements. The Charter reflects the matters set out in the commentary and guidance for Recommendation 4.3.

For information on the skills, experience and expertise of the Audit and Risk Committee members, refer to the Directors’ Report.

Details of the members and their attendance at meetings of the Audit and Risk Committee are included in the Directors’ Report.

External auditor

Consistent with its Charter, the Audit and Risk Committee reviews the external auditor’s terms of engagement and audit plan, and assesses the independence of the external auditor. The current practice, subject to amendment in the event of legislative change, is for the rotation of the engagement partner to occur every five years.

The Company’s independent external auditor is BDO Audit (WA) Pty Ltd. The appointment of BDO Audit (WA) Pty Ltd was ratified by members at the inaugural Annual General Meeting held on 25 November 2011.

The Audit and Risk Committee Charter is available on the Company’s website.

PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE

The Continuous Disclosure Policy sets out the key obligations of the directors and employees in relation to continuous disclosure as well as the Company’s obligations under the Listing Rules and the Corporations Act. The Policy also provides procedures for internal notification and external disclosure, as well as procedures for promoting understanding of compliance with the disclosure requirements for monitoring compliance.

The Policy reflects the matters set out in the commentary and guidance for Recommendation 5.1.

The Continuous Disclosure Policy is available on the Company’s website.

C O R P O R AT E G O V E R N AN C E S T AT E M E N T

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PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS

The Shareholder Communications Policy sets out the Company’s aims and practices in respect of communicating with both current and prospective shareholders. The Policy reinforces the Company’s commitment to promoting investor confidence by requiring:

compliance with the continuous disclosure obligations;
compliance with insider trading laws;
compliance with financial reporting obligations;
compliance with shareholder meeting requirements, including the provision of an opportunity for shareholders and other stakeholders to hear from and put questions to the Board, management and auditor of the Company;
communication with shareholders in a clear, regular, timely and transparent manner; and
response to shareholder queries in a prompt and courteous manner.

The Policy reflects the matters set out in the commentary and guidance for Recommendation 6.1.

The Shareholder Communications Policy is available on the Company’s website.

PRINCIPLE 7: RECOGNISE AND MANAGE RISK

Risk Management Policy

Audalia recognises that risk is inherent to any business activity and that managing risk effectively is critical to the immediate and future success of the Company. As a result, the Board has adopted a Risk Management Policy which sets out the Company’s system of risk oversight, management of material business risks and internal control.

Risk oversight

Audalia’s risk management framework is supported by the Board of Directors, management and the Audit and Risk Committee. The Board is responsible for approving and reviewing the Company’s risk management strategy and policy. Management are responsible for monitoring that appropriate processes and controls are in place to effectively and efficiently manage risk. The Audit and Risk Committee also has delegated responsibilities in relation to risk management and the financial reporting process as set out in the Audit and Risk Committee Charter. Further detail regarding the Audit and Risk Committee can be found above at Principle 4: Safeguarding integrity in financial reporting.

Reporting and assurance

When considering the Audit and Risk Committee’s review of financial reports, the Board receives a written statement declaration in accordance with section 295A of the Corporations Act , signed by the Executive Chairman and Executive Director, that the Company’s financial reports give a true and fair view, in all material respects with, of the Company’s financial position and comply in all material respects with relevant accounting standards. This statement also confirms that the Company’s financial reports are founded on a sound system of risk management and internal control and that the system is operating effectively in relation to financial reporting risks.

Similarly, in a separate written statement the executive Chairman and the Chairman of the Audit and Risk Committee also confirm to the Board that the Company’s risk management and internal control systems are operating effectively in relation to material business risks for the period, and that nothing has occurred since period-end that would materially change the position.

The Risk Management Policy is available on the Company’s website.

PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY

Nomination and Remuneration Committee

The Nomination and Remuneration Committee has delegated responsibilities in relation to the Company’s remuneration policies as set out in the Nomination and Remuneration Committee Charter. The Charter reflects the matters set out in the commentary and guidance for Recommendation 8.1. Further detail regarding the Nomination and Remuneration Committee can be found above at Principle 2: Structure the board to add value.

C O R P O R AT E G O V E R N AN C E S T AT E M E N T

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Non-executive directors’ remuneration policy

The structure of non-executive directors’ remuneration is clearly distinguished from that of executives. Remuneration for non-executive directors is fixed. Total remuneration for all non-executive directors, last voted upon by shareholders at the 2011 General Meeting, is not to exceed $300,000 per annum. Non-executive directors do not receive performance related compensation. Neither the non-executive directors nor the executives of the Company receive any retirement benefits, other than superannuation.

Executive directors’ remuneration policy

As noted previously, the Executive Chairman and Executive Director are employed pursuant to employment agreements. Summaries of these employment agreements are set out in the Remuneration Report.

Further details regarding the remuneration arrangements of the Company are set out in the Remuneration Report.

The checklist below summarises the Company’s compliance with the Recommendations.

					Comply	Reference/
	Requirement				Yes/ No	Explanation
Pr 1	Lay solid foundations for management and oversight
Rec 1.1	Companies should establish the functions reserved to	the board		and	Yes	Website &
	those delegated to senior executives and disclose the functions.					Page 18
Rec 1.2	Companies should disclose the process for evaluating the performance				Yes	Website &
	of senior executives.					Page 18
Rec 1.3	Companies should provide the information indicated in the Guide to				Yes	Website &
	reporting to Principle 1.					Page 18
Pr 2	Structure the board to add value
Rec 2.1	A majority of the board should be independent directors.				No	Website &
						Page 18
Rec 2.2	The chair should be an independent director.				No	Website &
						Page 18
Rec 2.3	The roles of chair and chief executive officer should not be exercised by				Yes	Website &
	the same individual.					Page 18
Rec 2.4	The board should establish a nomination committee.				Yes	Website &
						Page 19
Rec 2.5	Companies should disclose the process for evaluating the performance				Yes	Website &
	of the board, its committees and individual directors.					Page 19
Rec 2.6	Companies should provide the information indicated in the Guide to				Yes	Website &
	reporting to Principle 2.					Page 18 & 19
Pr 3	Promote ethical and responsible decision making
Rec 3.1	Companies should establish a code of conduct and disclose the code or				Yes	Website &
	a summary of the code as to:					Page 19
	 the practices necessary to maintain confidence		in	the
	company’s integrity;
	 the practices necessary to take account	of their		legal
	obligations and reasonable expectations of their stakeholders;
	and
	 the responsibility and accountability of individuals for reporting
	and investigating reports of unethical practices.
Rec 3.2	Companies should establish a policy concerning diversity and		disclose		Yes	Website &
	the policy or a summary of that policy. The policy	should include				Page 19
	requirements for the board to establish measurable	objectives for
	achieving gender diversity for the board to assess annually both the
	objectives and progress in achieving them.

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C O R P O R AT E G O V E R N AN C E S T AT E M E N T

		Comply	Reference/
	Requirement	Yes/ No	Explanation
Rec 3.3	Companies should disclose in each annual report the measurable	No	Website &
	objectives for achieving gender diversity set by the board in accordance		Page 20
	with the diversity policy and progress towards achieving them.
Rec 3.4	Companies should disclose in each annual report the proportion of	Yes	Website &
	women employees in the whole organisation, women in senior executive		Page 20
	positions and women on the board.
Rec 3.5	Companies should provide the information indicated in the Guide to	Yes	Website &
	reporting on Principle 3.		Page 20
Pr 4	Safeguard integrity in financial reporting
Rec 4.1	The board should establish an audit committee.	Yes	Website &
			Page 20
Rec 4.2	The audit committee should be structured so that it:	No	Website &
	 consists only of non-executive directors;		Page 20
	 consists of a majority of independent directors;
	 is chaired by an independent chair, who is not the chair of the
	board; and
	 has at least three members.
Rec 4.3	The audit committee should have a formal charter.	Yes	Website &
			Page 20
Rec 4.4	Companies should provide the information indicated in the Guide to	Yes	Website &
	reporting on Principle 4.		Page 20
Pr 5	Make timely and balanced disclosure
Rec 5.1	Companies should establish written policies designed to ensure	Yes	Website &
	compliance with ASX Listing Rule disclosure requirements and to		Page 20
	ensure accountability at a senior level for that compliance and disclose
	those policies or a summary of those policies.
Rec 5.2	Companies should provide the information indicated in the Guide to	Yes	Website &
	reporting on Principle 5.		Page 20
Pr 6	Respect the rights of shareholders
Rec 6.1	Companies should design a communications policy for promoting	Yes	Website &
	effective communication with shareholders and encouraging their		Page 21
	participation at general meetings and disclose their policy or a summary
	of that policy.
Rec 6.2	Company should provide the information indicated in the Guide to	Yes	Website &
	reporting on Principle 6.		Page 21
Pr 7	Recognise and manage risk
Rec 7.1	Companies should establish policies for the oversight and management	Yes	Website &
	of material business risks and disclose a summary of those policies.		Page 21
Rec 7.2	The board should require management to design and implement the risk	Yes	Website &
	management and internal control system to manage the company’s		Page 21
	material business risks and report to it on whether those risks are being
	managed effectively. The board should disclose that management has
	reported to it as to the effectiveness of the company’s management of
	its material business risks.
Rec 7.3	The board should disclose whether it has received assurance from the	Yes	Website &
	chief executive officer (or equivalent) and the chief financial officer (or		Page 21
	equivalent) that the declaration provided in accordance with section
	295A of the Corporations Act is founded on a sound system of risk
	management and internal control and that the system is operating
	effectively in all material respects in relation to financial reporting risks.

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C O R P O R AT E G O V E R N AN C E S T AT E M E N T

		Comply	Reference/
	Requirement	Yes/ No	Explanation
Rec 7.4	Companies should provide the information indicated in the Guide to	Yes	Website &
	reporting on Principle 7.		Page 21
Pr 8	Remunerate fairly and responsibly
Rec 8.1	The board should establish a remuneration committee.	Yes	Website &
			Page 21
Rec 8.2	The remuneration committee should be structured so that it:	No	Website &
	 consists of a majority of independent directors;		Page 19 & 21
	 is chaired by an independent chair; and
	 has at least three members.
Rec 8.2	Companies should clearly distinguish the structure of non-executive	Yes	Website &
	directors’ remuneration from that of executive directors and senior		Page 22
	executives.
Rec 8.3	Companies should provide the information indicated in the Guide to	Yes	Website &
	reporting on Principle 8.		Page 19, 21 &
			22

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S T AT E M E N T O F C OM P R E H E N S I V E I N C OM E

for the year ended 30 June 2012

Note Revenue from Continuing Operations Other income Operational expenses Corporate and administrative expenses Loss before income tax Income tax expense/(benefit) 5 Loss for the period Other comprehensive income Other comprehensive income/(loss) Total comprehensive loss for the period attributable to the owners of the Company Loss per share for loss attributable to the ordinary equity holders of the Company Basic loss per share (cents) 17	2012 $ Period from incorporation on 27 August 2010 to 30 June 2011 $ 98,347 5,716 (200,000) (7,026) (291,650) (96,396)
	(393,303) (97,706) - -
	(393,303) (97,706) - -
	(393,303) (97,706)
	(0.49) (0.16)

Diluted loss per share is not shown as all potential ordinary shares on issue would decrease the loss per share and are thus not considered dilutive.

The Statement of Comprehensive Income is to be read in conjunction with the accompanying notes.

S T AT E M E N T O F F I N AN C I AL P O S I T I O N as at 30 June 2012

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Note CURRENT ASSETS Cash and cash equivalents 6 Trade and other receivables 7 Held-to-maturity investment 8 Other current assets 9 Total Current Assets NON-CURRENT ASSETS Trade and other receivables 7 Other assets 9 Exploration and evaluation assets 10 Total Non-Current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 11 Provisions 12 Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 13 Reserves 14 Accumulated losses 15 TOTAL EQUITY	2012 $ 2011 $ 894,938 2,361,588 21,514 29,471 750,000 - 2,715 -
	1,669,167 2,391,059
	6,312 - - 1,979 521,858 251,511
	528,170 253,490
	2,197,337 2,644,549
	73,565 113,667 3,479 -
	77,044 113,667
	77,044 113,667
	2,120,293 2,530,882
	2,601,302 2,618,588 10,000 10,000 (491,009) (97,706)
	2,120,293 2,530,882

The Statement of Financial Position is to be read in conjunction with the accompanying notes.

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S T AT E M E N T O F C H AN G E S I N E Q U I T Y for the year ended 30 June 2012

Balance as at 30 June 2011 Loss for the year Total comprehensive loss for the year Transactions with equity holders in their capacity as equity holders: Shares issued Transaction costs on share issues Share-based payment Balance as at 30 June 2012 Balance as at 27 August 2010 Loss for the Period Total comprehensive loss for the Period Transactions with equity holders in their capacity as equity holders: Shares issued Transaction costs on share issues Share-based payment Balance as at 30 June 2011	Contributed Equity $ 2,618,588 - - - (17,286) - 2,601,302 Contributed Equity $ - - 2,837,500 (218,912) - 2,618,588	Reserves $ 10,000 - - - - - 10,000 Reserves $ - - - - 10,000 10,000	Accumulated Losses $ (97,706) (393,303) (393,303) - - - (491,009) Accumulated Losses $ - (97,706) (97,706) - - - (97,706)	Total $ 2,530,882 (393,303)
				(393,303) - (17,286) -
				2,120,293
				Total $ - (97,706)
				(97,706) 2,837,500 (218,912) 10,000
				2,530,882

The Statement of Changes in Equity is to be read in conjunction with accompanying notes.

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S T AT E M E N T O F C A S H F L OW S

for the year ended 30 June 2012

Note Cash flows from operating activities Payments to suppliers and employees Payments for exploration and evaluation expenses Interest received *Net cash outflow from operating activities* 20 Cash flows from investing activities Payments for held-to-maturity investment Payments for exploration and evaluation assets – acquisition costs Payments for exploration and evaluation assets – capitalised costs *Net cash outflow from investing activities* Cash flows from financing activities Net (payments) / proceeds from the issues of shares, net of share issue costs 13 *Net cash inflow/(outflow) from financing activities* Net increase/(decrease) in cash held Cash and cash equivalents at 1 July 2011 Cash and cash equivalents at 30 June 2012 6	2012 $ Period from incorporation on 27 August 2010 to 30 June 2011 $ (276,199) (79,479) (200,000) (9,005) 80,397 5,612
	(395,802) (82,872)
	(750,000) - (163,192) (250,000) (72,987) (1,511)
	(986,179) (251,511)
	(84,669) 2,695,971
	(84,669) 2,695,971
	(1,466,650) 2,361,588 2,361,588 -
	894,938 2,361,588

The Statement of Cash Flows is to be read in conjunction with the accompanying notes.

N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

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1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Reporting entity

The financial report of Audalia Resources Limited for the financial year ended 30 June 2012 was authorised for issue in accordance with a resolution of the directors on 28 September 2012.

Audalia Resources Limited (the Company ) is a public company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange.

The nature of the operations and principal activities of the Company are described in the Directors’ Report.

Basis of preparation

Statement of compliance

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 , Australian Accounting Standards ( AASBs ) and other authoritative pronouncements of the Australian Accounting Standards Board ( AASB ). The financial report of the Company also complies with the International Financial Reporting Standards ( IFRSs ) issued by the International Accounting Standards Board.

Basis of measurement

The financial report is prepared on the accruals basis and the historical cost basis.

The financial report is presented in Australian dollars and all values are rounded to the nearest dollar unless otherwise stated.

Going concern

The financial report has been prepared on a going concern basis which assumes realising its assets and extinguishing its liabilities in the normal course of business. At 30 June 2012, the Company had net assets of $2,120,293 (30 June 2011: $2,530,882) and continues to incur expenditure on its exploration tenements drawing on its cash balances. As at 30 June 2012, Company had $894,938 (30 June 2011: $2,361,588) in cash and cash equivalents and $750,000 in held to maturity assets.

Based upon the Company’s existing cash resources, the ability to modify expenditure outlays if required, and the directors’ confidence of sourcing additional funds, the directors consider there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable, and therefore the going concern basis of preparation to be appropriate for the preparation of the Company’s 2012 Financial Report.

In the event that the Company is not able to continue as a going concern, it may be required to realise assets and extinguish liabilities other than in the normal course of business and at amounts different to those stated in its financial report.

Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by the Company.

Significant accounting judgements, estimates and assumptions

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

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N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

Significant accounting judgements, estimates and assumptions (continued)

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are outlined below:

Exploration and evaluation expenditure

The write-off and carrying forward of exploration acquisition costs is based on an assessment of an area of interest’s viability and/or the existence of economically recoverable reserves.

Deferred taxation

Deferred tax assets in respect of tax losses have not been brought to account as it is not considered probable that future taxable profits will be available against which they could be utilised.

Summary of Significant Accounting Policies

Segment reporting

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur, whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. This includes start-up operations which are yet to earn revenues. Management will also consider other factors in determining operating segments such as the level of segment information presented to the Board of Directors.

Operating segments have been identified based on the information provided to the chief operating decision makers – being the Board of Directors.

Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above.

Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently at amortised cost less any impairment losses recognised. Collectability of trade receivables is reviewed on an ongoing basis. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Company will not be able to collect all amounts due.

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company’s management has the positive intention and ability to hold to maturity. Held-tomaturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the end of the reporting period, which are classified as current assets.

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N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

Exploration and evaluation expenditure

Exploration, evaluation and development 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. Events may occur or information may come to hand after the issue of this report which may materially alter the carrying value of this asset. 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. When production commences, the accumulated costs for the relevant area of interest are 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 are 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 are determined on the basis that the restoration will be completed within one year of abandoning the site.

Trade and other payables

Liabilities are recognised for amounts to be paid in the future for goods or services received, whether or not billed to the Company. Trade accounts payable are normally settled within 60 days. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

Employee benefits

Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, and long service leave.

Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used.

Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

Revenue recognition

Revenue represents interest received and reimbursements of exploration expenditures and is recognised to the extent that it is probable that the economic benefits will flow to the Company and can be reliably measured. Interest income is recognised as it accrues.

Income tax

Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

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Income tax (continued)

Deferred income tax liabilities are recognised for all taxable temporary differences:

(a) except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
(b) in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised:

(a) except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
(b) in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.

The Company has unused tax losses. However, no deferred tax balances have been recognised, as it is considered that asset recognition criteria have not been met at this time.

Goods and services tax

Revenues, expenses and assets are recognised net of the amount of GST except:

When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable.
Receivables and payables, which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as part of operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

Leases

Operating lease payments are recognised as an expense in the statement of comprehensive income on a straightline basis over the lease term.

N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

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Loss per share

Basic loss per share is calculated by dividing the net loss attributable to members of the Company for the reporting period by the weighted average number of ordinary shares of the Company.

New accounting standards and interpretations

The following new standards and amendments to standards are mandatory for the financial year beginning 1 July 2011:

AASB 2009-12 Amendments to Australian Accounting Standards (AASB 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052)
AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (AASB 1, 3, 101 & 134 and Interpretation 13)
AASB 2010-5 Amendments to Australian Accounting Standards (AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042)
AASB 2010-6 Amendments to Australian Accounting Standards – Disclosure on Transfers of Financial Assets (AASB 1 and 7)
AASB 2010-9 Amendments to Australian Accounting Standards – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (AASB 1)
AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Covergence Project (AASB 1, 5, 101, 107, 108, 121, 128, 132 & 134 and Interpretation 2, 112 & 113)
AASB 2011-5 Amendments to Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and proportionate Consolidation (AASB 127, 128 and 131)

The adoption of these standards did not have any impact in the current period and is unlikely to affect future periods.

New accounting standards and interpretations that are not yet mandatory

The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They have not been applied in preparing this financial report:

(i) AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013)
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until 1 January 2013 but is available for early adoption. When adopted, the standard is not expected to impact on the Company’s accounting for financial assets as it does not have any available for sale assets. There will be no impact on the Company's accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Company does not have any such liabilities. The Company has decided not to early adopt AASB 9.
(ii) AASB 13 Fair Value Measurement, AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 (effective from 1 January 2013)
AASB 13 establishes a single framework for measuring fair value of financial and non-financial items recognised at fair value in the statement of financial position or disclosed in the notes in the financial statements. Additional disclosures are required under the standard for items measured at fair value in the statement of financial position, as well as items merely disclosed at fair value in the notes to the financial statements. This standard is not applicable until 1 January 2013 but is available for early adoption. When adopted, the standard is not expected to have a material impact on the Company’s financial statements. The Company has decided not to early adopt this amendment.
(iii) AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements (effective from 1 July 2013)
On 30 June 2010 the AASB officially introduced a revised differential reporting framework in Australia. Under this framework, a two-tier differential reporting regime applies to all entities that prepare general purpose financial statements. Audalia Resources Limited is listed on the ASX and is not eligible to adopt the new Australian Accounting Standards – Reduced Disclosure Requirements. The two standards will therefore have no impact on the financial statements of the entity.

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N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

(iv) Presentation of Items of Other Comprehensive Income, Amendments to IAS Presentation of Financial Statements (effective from 1 July 2012)

This standard is not applicable until 1 January 2012 but is available for early adoption. When adopted, the standard is not expected to impact on the Company’s financial statements as it does not have any Other Comprehensive Income. The Company has decided not to early adopt this amendment.

(v) IAS 19 Employee Benefits (effective from 1 January 2013)

This standard is not applicable until 1 January 2013 but is available for early adoption. When adopted, the standard is not expected to have a material impact on the Company’s financial statements as it only has a minimum level of employees. The Company has decided not to early adopt this amendment.

(vi) Amendments to Australian Accounting Standard to Remove Individual Key Management Personnel Disclosure Requirements (effective from 1 July 2013)

This standard makes amendments to AASB 124 Related Party Disclosures to remove the individual key management personnel disclosures requirements with an effective date of 1 July 2013. Early adoption of this standard is not permitted.

Comparatives

The Company was incorporated on 27 August 2010. Accordingly the comparative information is for the period from incorporation to 30 June 2011.

2. FINANCIAL RISK MANAGEMENT

Overview

The Company has exposure to the following risks from their use of financial instruments:

credit risk
liquidity risk
market risk

This note presents information about the Company’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included in Note 21.

Audalia’s risk management framework is supported by the Board, management and the Audit and Risk Committee. The Board is responsible for approving and reviewing the Company’s risk management strategy and policy. Management are responsible for monitoring that appropriate processes and controls are in place to effectively and efficiently manage risk. The Audit and Risk Committee is responsible for identifying, monitoring and managing significant business risks faced by the Company and considering the effectiveness of its internal control system. Management and the Audit and Risk Committee report to the Board.

The Board has established an overall Risk Management Policy which sets out the Company’s system of risk oversight, management of material business risks and internal control.

Financial risk management objectives

The overall financial risk management strategy focuses on the unpredictability of the finance markets and seeks to minimise the potential adverse effects on financial performance and protect future financial security.

Credit risk

Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s cash and cash equivalents. There were no changes in the Company’s credit risk management policies from previous years.

The Company does not hold any credit derivatives to offset its credit exposure.

N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

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2. FINANCIAL RISK MANAGEMENT (continued)

Fair value of financial instruments

The fair values of financial assets and liabilities are determined in accordance with generally accepted pricing models based on estimated future cash flows. The Directors consider that the carrying amounts of financial assets and financial liabilities recorded in the financial statements approximate their fair values.

Liquidity risk

Liquidity risk arises from the financial liabilities of the Company and the Company’s subsequent ability to meet their obligations to repay their financial liabilities as and when they fall due.

Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Board has determined an appropriate liquidity risk management framework for the management of the Company’s short, medium and longterm funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves and continuously monitoring budgeted and actual cash flows and matching the maturity profiles of financial assets, expenditure commitments and liabilities. There were no changes in the Company’s liquidity risk management policies from previous years.

Market risk

Market risk is the risk that changes in market prices, such as interest rates and commodity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising return. There were no changes in the Company’s market risk management policies from previous years.

Interest rate risk

The Company’s exposure to interest rates primarily relates to the Company’s cash and cash equivalents. The Company manages market risk by monitoring levels of exposure to interest rate risk and assessing market forecasts for interest rates.

Other market price risk

The Company is involved in the exploration and development of mining tenements for minerals. Should the Company successfully progress to a producer, revenues associated with mineral sales, and the ability to raise funds through equity and debt, will have some dependence upon commodity prices.

The Company operates within Australia and all transactions during the financial year are denominated in Australian dollars. The Company is not exposed to foreign currency risk at the end of the reporting period.

Capital management

When managing capital, the Board’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. The Board also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity.

The Board is constantly adjusting the capital structure to take advantage of favourable costs of capital or high return on assets. As the market is constantly changing, management may issue new shares, sell assets to reduce debt or consider payment of dividends to shareholders.

The Board has no current plans to issue further shares on the market.

The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position although there is no formal policy regarding gearing levels.

The Company has no formal financing and gearing policy or criteria during the year having regard to the early status of its development and low level of activity.

There were no changes in the Company’s approach to capital management during the year.

The Company is not subject to any externally imposed capital requirements.

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N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

3. AUDITOR’S REMUNERATION During the year the following fees were paid or payable for services provided by the auditor of the Company and its related practices: Audit Services BDO Audit (WA) Pty Ltd - audit of financial report Other Services BDO Corporate Finance (WA) Pty Ltd - investigating accountant’s report for inclusion in a prospectus BDO Corporate Tax (WA) Pty Ltd - preparation of income tax return for the period ended 30 June 2011 4. EXPENSES (a) Employee benefits expense Wages and salaries Superannuation expense (b) Lease payments included in statement of comprehensive income Minimum lease payments – operating lease (c) Consultancy fees included in statement of comprehensive income 5. INCOME TAX (a) Income tax expense (b) Numerical reconciliation between tax expense and pre-tax net loss Loss before income tax expense Income tax benefit calculated at rates noted in (d) below Effect of non-deductible item – entertainment/other Increase in deferred tax balances not brought to account Income tax expense (c) Deferred tax assets not brought to account - Carry forward tax losses - Capital raising costs - Provisions and accruals - Other Potential at 30%	2012 $ 2011 $ 23,981 22,720 - 6,939 5,100 -
	29,081 29,659
	75,204 - 4,765 -
	79,969 -
	26,554 -
	203,155 -
	- -
	(393,303) (97,706)
	(117,991) (29,312) 1,590 1,584 116,401 27,728
	- -
	325,263 34,522 44,101 52,539 6,979 6,794 - 438
	376,343 94,293

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N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

5. INCOME TAX (continued)

The tax benefits of the above deferred tax assets will only be obtained if:

(i) the Company derives future assessable income of a nature and of an amount sufficient to enable the benefits to be utilised;

(ii) the Company continues to comply with the conditions for deductibility imposed by law; and

(iii) no changes in income tax legislation adversely affects the Company in utilising the benefits.

Deferred tax liabilities at 30% - Prepayments - Interest receivable - Exploration and evaluation costs	2012 $ 2011 $ 120 - 5,385 - 156,557 1,511
	162,062 1,511

The above deferred tax liabilities have not been recognised as they have given rise to the carry forward revenue losses for which the deferred tax asset has not been recognised.

(d) Tax Rates

The potential tax benefit in respect of tax losses not brought into account has been calculated at 30%.

6. CASH AND CASH EQUIVALENTS

Cash at bank and in hand Term deposit	209,768 2,361,588 685,170 -
	894,938 2,361,588

The Company’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 21.

7. TRADE AND OTHER RECEIVABLES

Current

GST receivable Interest receivable Sundry debtors Non-Current Security deposit	3,459 15,901 17,951 - 104 13,570
	21,514 29,471
	6,312 -

There were no receivables past due but not impaired. The Company’s exposure to credit risk related to trade and other receivables is disclosed in Note 21.

8. HELD TO MATURITY INVESTMENTS

Current

Held-to-maturity investment

750,000

Held-to-maturity investment comprises the Company’s term deposit with an original maturity term of 6 months and issued by an entity rated AA-.

The held-to-maturity investment is not past due or impaired.

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N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

8. HELD TO MATURITY INVESTMENTS (continued)

The held-to-maturity investment is denominated in Australian currency. As a result, there is no exposure to foreign currency risk. There is also no exposure to price risk as the investment will be held to maturity. The Company’s exposure to credit risk related to held-to-maturity investments is disclosed in Note 21.

9. OTHER ASSETS Current Prepayments Non-current Prepaid exploration expenditure	2012 $ 2011 $ 2,715 -
	- 1,979

10. EXPLORATION AND EVALUATION ASSETS

Exploration, evaluation and development costs carried forward in respect of areas of interest Reconciliation Carrying amount at beginning of the year Exploration and evaluation Acquisition of Gascoyne Tenements Acquisition of Medcalf Tenements Carrying amount at end of the year	521,858 251,511
	251,511 - 107,155 1,511 9,202 250,000 153,990 -
	521,858 251,511

The value of the exploration, evaluation and development costs carried forward is dependent upon the continuance of the Company’s rights to tenure of the area of interest, the results of future exploration, and the recoupment of costs through successful development and exploitation of the areas of interest or alternatively by their sale.

11.TRADE AND OTHER PAYABLES

Trade creditors Other creditors and accruals	50,033 55,101 23,532 58,566
	73,565 113,667

The carrying amount of trade and other payables approximates their fair value. The Company’s exposure to credit and liquidity risks related to trade and other payables are disclosed in Note 21.

12. PROVISIONS

Provision for annual leave Balance brought forward Movement during the Period Balance carrying forward	3,479 -
	- - 3,479 -
	3,479 -

13. CONTRIBUTED EQUITY

80,160,001 fully paid ordinary shares

2,601,302 2,618,588

N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

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13. CONTRIBUTED EQUITY (continued)

(a) Ordinary shares

The following movements in ordinary share capital occurred during the year:

Balance at beginning of year Issue of shares at $0.20 each on incorporation Issue of shares at $0.0001 each Issue of shares at $0.04 each Issue of shares at $0.10 each Issue of shares at $0.20 each Share issue costs Balance at the end of the year	2012 Number 2011 Number 80,160,001 - - 1 - 55,000,000 - 7,500,000 - 10,000,000 - 7,660,000 - - 80,160,001 80,160,001	2012 $ 2011 $ 2,618,588 - - 0.20 - 5,500 - 300,000 - 1,000,000 - 1,532,000 (17,286) (218,912)
		2,601,302 2,618,588

Ordinary shares entitle the holder to participate in dividends and the proceeds from winding up of the Company in proportion to the number and amounts paid on the shares held.

On a show of hands every holder of ordinary securities present at a shareholder meeting in person or by proxy is, entitled to one vote, and upon a poll each share is entitled to one vote.

Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.

(b) Options

Movement in options

No options were granted during the year.

Unissued shares under option

Class	Expiry date	Exercise Price	Number of Options
Listed Options (ACPO)	28 April 2014	$0.20	6,830,004

None of these options were exercised or lapsed during the year and all remained outstanding at 30 June 2012.

These options do not entitle the holder to participate in any share issue of the Company or any other entity.

(c) Capital management

The Company’s objectives when managing capital are disclosed in Note 2.

14. RESERVES Option Reserve Balance at the beginning of the year Issue of Listed Options for services rendered Balance at the end of the year	2012 $ 2011 $ 10,000 - - 10,000
	10,000 10,000

This reserve was used to record the value of 3,000,000 Listed Options issued in satisfaction of management fees payable pursuant to an agreement with C K Locke & Partners Pty Ltd, lead manager to the IPO Offer. Refer Note 20 (b) for further details of this share-based payment.

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N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

ACCUMULATED LOSSES Accumulated losses at the beginning of the year Net loss for the year Accumulated losses at the end of the year	2012 $ 2011 $ (97,706) - (393,303) (97,706)
	(491,009) (97,706)

15. ACCUMULATED LOSSES

16. COMMITMENTS AND CONTINGENCIES

Operating lease commitments

The Company has entered into a commercial lease on its office in East Perth, Western Australia. The lease is for a 24-month period from 15 October 2011.

Future minimum rentals payable under the non-cancellable operating lease as at 30 June are as follows:

Within one year After one year but not more than five years	29,906 - 8,812 -
	38,718 0

Service commitments

The Company has entered into a service agreement with Townshend York Pty Ltd ( Townshend York ), a company associated with Mr Ho and Ms Logan, to provide company secretarial services in connection with the operations of the Company, under which Townshend York receives $48,000 per annum for the first year of the agreement, $54,000 for the second year and $60,000 for the third year. At 30 June 2012, the unexpired portion of the term of agreement amounts to $114,000.

The Company has also entered into a service agreement with Townshend York to provide accounting services in connection with the operations of the Company, under which Townshend York receives $24,000 per annum. At 30 June 2012, the unexpired portion of the term of agreement amounts to $48,000.

Refer to Note 18 for details of these key management personnel transactions during the year.

Remuneration commitments

Commitments for the payment of salaries and other remuneration under long-term employment contracts in existence at the reporting date but not recognised as liabilities, payable:

Within one year After one year but not more than five years	43,600 40,000 352 40,000
	43,952 80,000

Amounts disclosed as remuneration commitments include commitments arising from the employment agreements of directors and executives referred to in the Remuneration Report of the Directors’ Report that are not recognised as liabilities and are not included in the compensation of key management personnel.

Exploration commitments

The Company has certain obligations to perform minimum exploration work on mining tenements held. These obligations may vary over time, depending on the Company’s exploration program and priorities. These obligations are also subject to variations by negotiation, joint venturing or relinquishing some of the relevant tenements. As at reporting date, total exploration expenditure commitments of the Company which have not been provided for in the financial statements are as follow.

Within one year After one year but not more than five years	234,885 99,749 466,879 138,740
	701,764 238,489

Contingencies

The Company does not have any contingent liabilities at balance and reporting dates.

N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

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17. EARNINGS PER SHARE

Basic and diluted earnings per share

The calculation of basic loss per share at 30 June 2012 was based on the following:

Loss attributable to ordinary shareholders Net loss for the year Weighted average number of ordinary shares Balance at beginning of the year Effect of shares issued on 27 August 2010 Effect of shares issued on 10 September 2010 Effect of shares issued on 29 October 2010 Effect of shares issued on 20 April 2011 Effect of shares issued on 29 June 2011	2012 $ 2011 $ (393,303) (97,706)
	Number Number 80,160,001 - - 1 - 52,500,000 - 5,965,909 - 2,337,662 - 49,740
	80,160,001 60,853,312

Diluted earnings per share must be calculated where potential ordinary shares on issue are dilutive. As the potential ordinary shares on issue would decrease the loss per share in the current period, they are not considered dilutive, and not shown. The number of potential ordinary shares is set out in Note 13.

18. KEY MANAGEMENT PERSONNEL

Key management personnel compensation

Short-term employee benefits Post-employment benefits Other benefits Total compensation	2012 $ 2011 $ 75,204 - 4,765 - - -
	79,969 -

Detailed remuneration disclosures are provided in the Remuneration Report on pages 14 to 17.

Equity holdings of key management personnel

The movement during the year in the number of ordinary shares in Audalia Resources Limited held, directly, indirectly or beneficially by each key management person, is as follows:

		Held at				Held at	Held at
	Held at	date of		Granted as		date of	30 June
2012	1 July 2011	appointment	Purchases	remuneration	Disposals	resignation	2012
Directors
Dato S K Lim	15,750,000	N/A	-	-	(750,000)	N/A	15,000,000
Datuk S S Ong	15,750,000	N/A	-	-	-	N/A	15,750,000
Mr B Butler	530,000	N/A	-	-	-	N/A	530,000
Mr A Ho1	10,000	N/A	-	-	-	10,000	N/A
Mr A Kwa	N/A	250,000	-	-	-	N/A	250,000
Executive
Ms K Logan	500,000		-	-	-	N/A	500,000

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N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

18. KEY MANAGEMENT PERSONNEL (continued)

Equity holdings of key management personnel (continued)

					Held at	Held at
	Held at		Granted as	Other	date of	30 June
2011	27 August2010	Purchases	remuneration	changes	resignation	2011
Directors
Dato S K Lim	-	15,750,000	-	-	N/A	15,750,000
Datuk S S Ong	-	15,750,000	-	-	N/A	15,750,000
Mr B Butler	-	530,000	-	-	N/A	530,000
Mr A Ho	-	10,000	-	-	N/A	10,000
Mr G C Ooi2	-	10,500,001	-	(10,500,000)	1	N/A
Executive
Ms K Logan	-	500,000	-	-	N/A	500,000

Options and rights over equity instruments

The movement during the year in the number of options over ordinary shares in Audalia Resources Limited held, directly, indirectly or beneficially by each key management person, is as follows:

				Held at							Held at	Held	at	Vested
		Held at		date of		Granted as					date of	30 June		during
2012	1	July	2011	appointment		remuneration			Lapsed		resignation	2012		the year
Directors
Dato S K Lim			-	N/A			-			-	N/A		-	-
Datuk S S Ong			-	N/A			-			-	N/A		-	-
Mr B Butler		15,000		N/A			-			-	N/A	15,000		-
Mr A Ho1		5,000		N/A			-			-	5,000		N/A	-
Mr A Kwa			N/A		-		-			-	N/A		-	-
Executive
Ms K Logan			-	N/A			-			-	N/A		-	-
		Held at									Held at	Held at
	27 August				Granted as			Other			date of	30 June	Vested during
2011		2010		Purchases	remuneration		changes			resignation		2011		the year
Directors
Dato S K Lim			-	-		-			-		N/A		-	-
Datuk S S Ong			-	-		-			-		N/A		-	-
Mr B Butler			-	15,000		-			-		N/A	15,000		15,000
Mr A Ho			-	5,000		-			-		N/A	5,000		5,000
Mr G C Ooi2			-	-		-			-		-	N/A		N/A
Executive
Ms K Logan			-	-		-			-		N/A		-	-

No shares or options were granted to key management personnel during the year as compensation. No options held by key management personnel were vested but not exercisable as at 30 June 2012.

Notes in relation to the tables of shares and options and rights over equity instruments

Mr Ho resigned on 17 August 2011.
Mr Ooi resigned on 5 April 2011.

N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

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18. KEY MANAGEMENT PERSONNEL (continued)

Other transactions with key management personnel

A number of key management persons, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities.

A number of those entities transacted with the Company during the year. The terms and conditions of those transactions were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to unrelated entities on an arm’s length basis.

The aggregate amounts recognised during the year relating to key management personnel and their related parties were as follows:

		Transactions value year	Transactions value year	Balance outstanding	Balance outstanding
		ended 30 June		as at 30 June
Director/		2012	2011	2012	2011
Executive	Transaction	$	$	$	$
Mr A Ho and Ms K Logan	Secretarial & Accounting fees1 Consultancy fees2	88,995 -	31,994 67,550	11,595 -	11,481 32,492
Mr B Butler	Consultancy fees3	28,500	-	11,000	-
Mr A Kwa	Commission fees4	6,000	-	-	-

Notes in relation to the table of related party transactions

A company associated with Mr Ho and Ms Logan, Townshend York Pty Ltd, provides company secretarial and accounting services in connection with the operations of the Company. Terms for such services are based on market rates, and amounts are payable on a monthly basis.
A company associated with Mr Ho and Ms Logan, Townshend York Pty Ltd, provided consultancy services in respect of the Company’s IPO. Terms for such services were based on market rates, and amounts were payable on a monthly basis.
A company associated with Mr Butler, World Technical Services Group Pty Ltd, provided consulting services in connection with the Company’s exploration projects. Terms for such services were based on market rates, and amounts were payable on a monthly basis.
Mr A Kwa was paid a commission in connection with the Company’s IPO. Terms of the commission was based on market rates and was due and payable under normal payment terms.

19. SEGMENT REPORTING

The Board has determined that the Company has two reportable segments, being mineral exploration and corporate and administrative.

30 June 2012 Mineral Exploration $ Corporate and administrative $ Segment revenue - 98,347 Segment result (200,000) (193,303) Segment assets 521,858 1,675,479 Segment liabilities (32,189) (44,855)	Company $ 98,347
	(393,303) 2,197,337
	(77,044)

for the year ended 30 June 2012

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N O T E S T O T H E F I N AN C I AL S T AT E M E N T S

19. SEGMENT REPORTING (continued)

30 June 2011 Mineral Exploration $ Corporate and administrative $ Segment revenue - 5,716 Segment result (7,027) (90,679) Segment assets 253,490 2,391,059 Segment liabilities (381) (113,286) 20. RECONCILIATION OF CASH FLOWS USED IN OPERATING ACTIVITIES 2012 $ (a) Cash flows from operating activities Loss for the year (393,303) Adjustments for: Depreciation - Operating loss before changes in working capital and provisions (393,303) Change in trade and other receivables (14,136) Change in other assets (400) Change in trade and other payables 8,558 Change in provisions 3,479 Net cash used in operating activities (395,802)	30 June 2011 Mineral Exploration $ Corporate and administrative $ Segment revenue - 5,716 Segment result (7,027) (90,679) Segment assets 253,490 2,391,059 Segment liabilities (381) (113,286) 20. RECONCILIATION OF CASH FLOWS USED IN OPERATING ACTIVITIES 2012 $ (a) Cash flows from operating activities Loss for the year (393,303) Adjustments for: Depreciation - Operating loss before changes in working capital and provisions (393,303) Change in trade and other receivables (14,136) Change in other assets (400) Change in trade and other payables 8,558 Change in provisions 3,479 Net cash used in operating activities (395,802)	Company $ 5,716
		(97,706) 2,644,549
		(113,667)
		2011 $ (97,706) -
	(393,303) (14,136) (400) 8,558 3,479	(97,706) (16,005) (1,979) 32,818 -
	(395,802)	(82,872)

(b) Non-cash investing and financing activities

On 25 January 2011, the Company entered into an agreement under which Audalia appointed C K Locke & Partners Pty Ltd as lead manager to the IPO Offer. On 29 June 2011, as part consideration for the services, the Company issued 3,000,000 listed options exercisable at $0.20 each on or before 28 April 2014 in satisfaction of $10,000 of management fees.

This transaction is not reflected in the Statement of Cash Flows.

21. FINANCIAL INSTRUMENTS DISCLOSURE

Credit risk

Exposure to credit risk

The carrying amount of the Company’s financial assets represents the maximum credit exposure. The Company’s maximum exposure to credit risk at the reporting date was:

Cash and cash equivalents Trade and other receivables Held-to-maturity investments	Carrying Amount 894,938 2,361,588 24,263 29,471 750,000 -
	1,669,201 2,391,059

N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

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21. FINANCIAL INSTRUMENTS DISCLOSURE (continued)

Credit risk (continued)

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit rating (Standard & Poor’s) if available or to historical information about counterparty default rates:

Cash at bank and short-term bank deposits A-1+1 Held to maturity investments AA-1 Trade and other receivables No default2	2012 $ 2011 $ 894,938 2,361,588
	750,000 -
	27,826 29,471

The equivalent S&P rating of the financial assets represents that rating of the counterparty with whom the financial asset is held rather than the rating of the financial asset itself.
Trade and other receivables consist of interest receivable, initial listing fee refundable from ASX and security bonds and deposits.

Allowance for impairment loss

A provision for impairment loss is recognised when there is objective evidence that an individual receivable is impaired.

Balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due.

Liquidity risk

The following are the contractual maturities of financial liabilities on an undiscounted basis, including estimated interest payments: Cash flows for liabilities without fixed amount or timing are based on conditions existing at year end.

30 June 2012 Trade and other payables 30 June 2011 Trade and other payables	Carrying amount Contractual cash flows 1 year 2-5 years >5 years 73,565 (73,565) (73,565) - -
	Carrying amount Contractual cash flows 1 year 2-5 years >5 years 113,667 (113,667) (113,667) - -

Interest rate risk

Profile

At the reporting date the interest rate profile of the Company’s interest bearing financial instruments was:

Variable rate instruments Cash at bank Fixed rate instruments Held-to-maturity investments	Carrying Amount 2012 $ 2011 $ 209,768 2,361,588 1,435,170 -
	1,644,938 2,361,588

N O T E S T O T H E F I N AN C I AL S T AT E M E N T S for the year ended 30 June 2012

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21. FINANCIAL INSTRUMENTS DISCLOSURE (continued)

Cash flow sensitivity analysis for variable rate instruments

A change of 75 basis points in interest rates would have increased or decreased the Company’s loss by $1,573 (2011: $17,712). The Board assessed a 75 basis point movement as being reasonably possible based on short term historical movements. This analysis assumes that all other variables remain constant.

Fair value of financial instruments

AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2), and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).

All of the Company’s assets and liabilities measured and recognised at fair value at 30 June 2012 and 30 June 2011 are classified as level 3.

22. EVENTS SUBSEQUENT TO REPORTING DATE

Subsequent to balance date, the Company acquired the Lake Johnston Project (the Lake Johnston Project ) located in the Yilgam region of Western Australia for a cash consideration of $55,000 (exclusive of GST). The Lake Johnston Project is located adjacent to Audalia’s existing Medcalf Project and comprises eight prospecting licences P63/1528, P63/1529, P63/1533, P63/1532, P63/1531, P63/1530, P63/1560 and P63/1561, and two granted exploration licences E63/1133 and E63/1134.

The financial effect of the above transaction has not been brought to account in the financial statements for the year.

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D I R E C T O R S ’ D E C L A R AT I O N

In the opinion of the directors of Audalia Resources Limited:

(a) the financial statements and notes and the remuneration disclosures that are contained in the Remuneration Report in the Directors’ Report, set out on pages 14 to 17, are in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the Company’s financial position as at 30 June 2012 and of its performance, for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations), the Corporations Regulations 2001 and other professional reporting requirements; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1;
(c) 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 has been made after receiving the declarations from the Executive Chairman and Executive Director required by section 295A of the Corporations Act 2001 for the year ended 30 June 2012. In accordance with section 295A, the Executive Chairman and Executive Director declared that:

(i) the financial records of the Company have been properly maintained in accordance with section 286 of the Corporations Act 2001 ;
(ii) the financial statements and notes comply with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 in all material respects;
(iii) the financial statements and notes give a true and fair view, in all material respects, of the financial position and performance of the Company.

Dated at Perth, Western Australia this 28[th] day of September 2012.

Signed in accordance with a resolution of the directors.

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Soo Kok Lim Executive Chairman

38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia

Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AUDALIA RESOURCES LIMITED

Report on the Financial Report

We have audited the accompanying financial report of Audalia Resources Limited, which comprises the statement of financial position as at 30 June 2012, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration.

Directors’ Responsibility for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that the financial statements comply with International Financial Reporting Standards .

Auditor’s Responsibility

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

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

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

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of Audalia Resources Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

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Opinion

In our opinion:

(a) the financial report of Audalia Resources Limited is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the Company’s financial position as at 30 June 2012 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001 and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2012. The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion, the Remuneration Report of Audalia Resources Limited for the year ended 30 June 2012 complies with section 300A of the Corporations Act 2001 .

BDO Audit (WA) Pty Ltd

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Chris Burton Director

Perth, Western Australia Dated this 28[th] day of September 2012

38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia

Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au

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28 September 2012

The Board of Directors Audalia Resources Limited 79 Broadway NEDLANDS WA 6009

Dear Sirs,

DECLARATION OF INDEPENDENCE BY CHRIS BURTON TO THE DIRECTORS OF AUDALIA RESOURCES LIMITED

As lead auditor of Audalia Resources Limited for the year ended 30 June 2012, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.

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Chris Burton Director

BDO Audit (WA) Pty Ltd Perth, Western Australia

S H A R E H O L D E R I N F O R M A T I O N

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Details of shares and options as at 24 September 2012:

Top holders

The 20 largest registered holders of each class of equity security as 24 September 2012 were:

Fully paid ordinary shares

Fully paid ordinary shares
Name	No. of Shares %
1. Siew Swan Ong 2. Soo Kok Lim 3. Yek Yek Ong 4. Siew Hoong Low 5. Ms Anna Moi Chin Chong 6. Serng Yee Liew 7. Chai Keong Loh 8. Wai Heng Ho 9. CME Group Berhad 10. Seow Pang Ng 11. Ring Diong Ding 12. Ms Emily Kok 13. Silver Capital Pty Ltd 14. Mr Kah Hui Tan + Mrs Irene Soi Khim 15. Chee Thin Toh 16. Mr Chao Yong Lee 17. Cheng Seng Lim 18. Ms Karen Poh Lin Chin 19. Mr Min Tuck Goh Fawcett + Mrs Lili Fawcett 20. Ms Cecilia Hua Khing Chiu	15,750,000 19.65 15,000,000 18.71 8,300,000 10.35 6,700,000 8.36 4,000,000 4.99 4,000,000 4.99 2,350,000 2.93 1,710,000 2.13 1,400,000 1.75 1,333,332 1.66 1,250,000 1.56 1,250,000 1.56 1,250,000 1.56 1,250,000 1.56 1,250,000 1.56 1,070,000 1.33 833,335 1.04 666,668 0.83 666,668 0.83 533,330 0.68
	70,563,333 88.03

Options exercisable at $0.20 on or before 28 April 2014

Options exercisable at $0.20 on or before 28 April 2014
Name	No. of Options %
1. C K Locke and Partners Pty Ltd 2. Ring Diong Ding 3. Kim Geok Cesarine Lim 4. Ewe Sean Teoh 5. Ms Emily Kok 6. Kon Neng Chin 7. Cheng Seng Lim 8. Mr Min Tuck Goh + Ms Lili Fawcett 9. Ms Cecilia Hua Khing Chiu 10. Jagdish Murli Chanrai 11. Mr Kok Chee Chua 12. Soo Ka Lim 13. Goffacan Pty Ltd 14. Gregory J Wood & Associates Pty Ltd 15. Mr Hanbin Ye 16. Lai Wah Sim 17. Mah (Australia) Pty Ltd 18. Mrs Helen Terzopoulos 19. Mr Arran McDiven 20. Mr Ian John Moody	3,000,000 43.93 250,000 3.66 250,000 3.66 166,667 2.44 125,000 1.83 83,334 1.22 83,334 1.22 83,334 1.22 66,667 0.98 41,667 0.61 41,667 0.61 41,667 0.61 20,000 0.29 20,000 0.29 20,000 0.29 16,667 0.24 12,500 0.18 10,000 0.15 7,500 0.11 7,500 0.11
	4,347,504 63.65

S H A R E H O L D E R I N F O R M A T I O N

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Distribution schedules

A distribution schedule of each class of equity security as at 24 September 2012:

		Fully paid ordinary	Fully paid ordinary	shares
Range			Holders	Units	%
1	-	1,000	2	2	0.00
1,001	-	5,000	7	30,769	0.04
5,001	-	10,000	437	4,363,969	5.44
10,001	-	100,000	6	188,833	0.24
100,001	-	Over	36	75,576,428	94.28
Total			506	80,160,001	100.00

Options	exercisable at	exercisable at	$0.20 on or before 28 April	$0.20 on or before 28 April	2014
Range			Holders	Units	%
1	-	1,000	0	0	0.00
1,001	-	5,000	495	2,475,000	36.24
5,001	-	10,000	4	32,500	0.48
10,001	-	100,000	12	530,837	7.77
100,001	-	Over	5	3,791,667	55.51
Total			518	6,830,004	100.00

Substantial shareholders

The names of substantial shareholders and the number of shares to which each substantial shareholder and their associates have a relevant interest, as disclosed in substantial shareholding notices given to the Company, are set out below:

Substantial shareholder	Number of Shares
Siew Swan Ong	15,750,000
Soo Kok Lim	15,000,000
Yek Yek Ong	8,300,000
Siew Hoong Low	6,700,000

Restricted Securities

Fully paid ordinary shares

Number of Shares Escrow Period 61,000,000 24 months commencing on the date of Official Quotation

Options exercisable at $0.20 on or before 28 April 2014

Number of Options Escrow Period 3,000,000 24 months commencing on the date of Official Quotation

S H A R E H O L D E R I N F O R M A T I O N

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Unmarketable parcels

Holdings less than a marketable parcel of ordinary shares (being 2,778 as at 24 September 2012):

Holders	Units
3	2,501

Voting Rights

The voting rights attaching to ordinary shares are:

On a show of hands, every member present in person or by proxy shall have one vote, and upon a poll, each share shall have one vote.

Options do not carry any voting rights.

On-Market Buy Back

There is no current on-market buy-back.

ASX Admission Statement

During the year, the Company has applied its cash in a way consistent with its business objectives.

S U M M A R Y O F T E N E M E N T S

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Summary of tenements as 28 September 2012

Projects	Licence Number	Area (km²)	Registered Holder / Applicant	Status	Audalia Interest

Western Australia

Gascoyne	E09/1568	18.00	Audalia Resources Limited	Granted	100%
	E09/1569	45.00	Audalia Resources Limited	Granted	100%
	E09/1570	27.00	Audalia Resources Limited	Granted	100%
	E09/1824	33.00	Audalia Resources Limited	Granted	100%
	E09/1825	201.00	Audalia Resources Limited	Granted	100%

Medcalf	E63/1068	9.00	Audalia Resources Limited	Granted	100%
	E63/1405	3.00	Audalia Resources Limited	Granted	100%
	E63/1406	3.00	Audalia Resources Limited	Granted	100%

Lake Johnston	P63/1528	1.09	Lake Johnston Pty Ltd	Granted	100%
	P63/1529	1.95	Lake Johnston Pty Ltd	Granted	100%
	P63/1530	1.94	Lake Johnston Pty Ltd	Granted	100%
	P63/1531	1.27	Lake Johnston Pty Ltd	Granted	100%
	P63/1532	1.77	Lake Johnston Pty Ltd	Granted	100%
	P63/1533	0.82	Lake Johnston Pty Ltd	Granted	100%
	P63/1560	0.96	Lake Johnston Pty Ltd	Granted	100%
	P63/1561	0.19	Lake Johnston Pty Ltd	Granted	100%
	E63/1133	3.00	Lake Johnston Pty Ltd	Granted	100%
	E63/1134	3.00	Lake Johnston Pty Ltd	Granted	100%

AI assistant

AUDALIA RESOURCES LIMITED — Annual Report 2012

64291_rns_2012-09-27_bb6bacaa-8a83-41f3-9621-b61f69989625.pdf

ACN 1 4 6 0 3 5 6 9 0

2 0 1 2 A N N U A L R E P O R T

C O R P O R AT E D I R E C T O R Y

DIRECTORS

PRINCIPAL PLACE OF BUSINESS

SHARE REGISTRY

AUDITOR

COMPANY SECRETARY

REGISTERED OFFICE

SOLICITORS

BANKER

STOCK EXCHANGE

C O N T E N T S

R E V I E W O F A C T I V I T I E S

GASCOYNE PROJECT

Exploration work completed during 2011-12

Rock Chip Sampling

R E V I E W O F A C T I V I T I E S

Area 1 - E09/1824

Area 2 - E09/1569

Future Exploration

R E V I E W O F A C T I V I T I E S

MEDCALF PROJECT

Exploration work completed during 2011-12

Review of historic exploration activities

Unimin/Laporte 1972:

Amoco 1982:

Arimco 1996:

Lionore 2006:

Norilsk 2010:

Mapping/soil sampling

Future Exploration

Competent Person’s Statement

DIRECTORS

Dato Soo Kok Lim

Executive Chairman – Age 43, appointed: 9 October 2010

Datuk Siew Swan Ong

Mr Brent Butler

Mr Andrew Kwa

Mr Anthony Ho

Non-Executive Director – Age 53, appointed: 27 August 2010, resigned 17 August 2011

COMPANY SECRETARY

Ms Karen Logan

DIRECTORSHIPS IN OTHER LISTED ENTITIES

DIRECTORS’ INTERESTS

DIRECTORS’ MEETINGS

Committee membership

DIRECTORS’ MEETINGS (continued)

Committee membership (continued)

PRINCIPAL ACTIVITY

OPERATING AND FINANCIAL REVIEW

Operating review

Financial review

Significant Changes in the State of Affairs

RESULTS

LIKELY DEVELOPMENTS

Planned exploration

DIVIDENDS

ENVIRONMENTAL REGULATION

EVENTS SUBSEQUENT TO REPORTING DATE

OPTIONS

Unissued shares under option

INDEMNIFICATION AND INSURANCE OF OFFICERS

Indemnification

Insurance

INDEMNIFICATION AND INSURANCE OF AUDITORS

PROCEEDINGS ON BEHALF OF THE COMPANY

NON-AUDIT SERVICES

NON-AUDIT SERVICES (continued)

OFFICERS OF THE COMPANY WHO ARE FORMER AUDIT PARTNERS OF BDO AUDIT (WA) PTY LTD

REMUNERATION REPORT

AUDITOR’S INDEPENDENCE DECLARATION

AUDITOR

R E M U N E R AT I O N R E P O R T (A U D I T E D )

KEY MANAGEMENT PERSONNEL

Directors

REMUNERATION COMMITTEE

AUDALIA RESOURCES LIMITED Annual Report 2012