BLACK ROCK MINING LIMITED - Annual Report 2007

2 0 0 7 a N N U a L R E P O R T

Company Particulars

DIRECTORs

Adrian Larking (Managing Director) Alan Knights (Executive Director) Jörg Baumgärtner (Non-Executive Director) Scott Spencer (Non-Executive Director)

COMPaNY sECRETaRY

Nigel Hodder

PRINCIPaL PLaCE OF BUsINEss

Unit 6 38 Colin Street West Perth WA 6005 Phone: (08) 9482 0482 Facsimile: (08) 9482 0499

REGIsTERED OFFICE

Unit 6 38 Colin Street West Perth WA 6005

BaNKERs

Westpac Banking Corporation 109 St Georges Terrace Perth WA 6000

aUDITORs

Ord Partners Level 2, 47 Colin Street West Perth WA 6005

sHaRE REGIsTER

Computershare Investor Services Pty Ltd 45 St Georges Terrace Perth WA 6000 Phone: (08) 9323 2000 Facsimile: (08) 9323 2033

sTOCK ExCHaNGE

The Company’s securities are quoted on the official list of the Australian Stock Exchange

asx CODE

GRK (Shares) GRKOA (Options)

Green Rock Energy Limited is a public company limited by shares and is domiciled in Australia

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Contents
About Geothermal Energy	‡2
Managing Director’s Report	‡4
South Australian Projects Olympic Dam	‡6
South Australian Projects Patchawarra, Upper Spencer Gulf	‡8
European Operations Hungary	‡10
Board of Directors	‡11
Principal Consultants	‡12
Financial Statements	‡13
Additional Stock Exchange Information	‡55

Geothermal energy is the natural heat contained in the Earth and presents a commercially viable and sustainable solution to problems of greenhouse gas emissions and rising fuel prices.

1 1

About Geothermal Energy

Geothermal energy delivers environmentally friendly, renewable, base load power 24 hours per day, 7 days per week.

A 100 megawatt power station can power a community of 100,000 people.

Geothermal energy is the natural heat contained in the Earth and presents a commercially viable and sustainable solution to problems of greenhouse gas emissions and rising fuel prices. It is both clean and sustainable and the Earth houses vast supplies of this energy.

Geothermal energy can be recovered at the earth’s surface in the form of hot water or steam or mixtures of both. Geothermal springs occur where hot geothermal water escapes from underground to the surface, such as at Bath in England, Rotarua in New Zealand and the famous spa town of Heviz in Hungary.

The ancient Romans located many of their towns near geothermal springs, such as Aquincum founded around AD89 at Budapest, Hungary’s capital city.

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100 mega watts 100,000 people
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Geothermal energy was first used to produce electricity at Lardarello in Tuscany, Italy in 1904. Today there are in excess of 400 geothermal power plants operating world-wide with a combined electrical capacity in excess of 9,000 MW. Geothermal power plants, used to generate electricity, have historically been located in volcanic regions of the world where the water in the geothermal reservoirs is up to 350°C.

With the increase in the price of electricity (due to both the cost of fossil fuels and the addition of a carbon emission charge) and the improvements in drilling and geothermal power plant technology, electricity can be now produced economically using geothermal water at temperatures as low as 120°C. These changes have expanded the potential geothermal resources available for electricity production.

There is a spectrum of geological environments from which geothermal energy can be obtained. At one end of the spectrum are conventional hydrothermal systems , where hot water or steam flows naturally to the surface from underground aquifers or reservoirs; through to hot dry rocks at the other end of the spectrum, where there is no natural permeable water reservoir. Water is the common medium used to capture and transport that heat to the surface, for conversion to electricity.

Fracture stimulation is used to generate a permeable reservoir for hot dry rock systems, and may be used to improve the permeability of natural hydrothermal systems. These fracture stimulated systems are referred to as enhanced or engineered geothermal systems .

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‡ 2

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‡ Hydrothermal Systems

Most of the world’s operating geothermal energy plants occur in volcanic regions where natural hot permeable underground reservoirs have trapped water which has seeped from the surface through natural fractures and faults near molten magma or hot volcanic rocks.

Hydrothermal systems can also occur outside volcanic regions, where the water trapped in the permeable reservoir rocks, such as porous sandstones or fractured carbonates, is hotter than normal. This occurs because either the Earth’s crust is relatively thin, as in the case in Hungary, or the nearby rocks generate anomalous quantities of heat, such as below the Great Artesian Basin in South Australia.

Geothermal power plants, fed by hydrothermal systems, are therefore mostly located where there is volcanic activity or hot buried rocks. The geothermal energy is recovered by harvesting the hot water, or steam, already in the earth.

‡ Engineered Geothermal Systems (EGS)

In some hydrothermal systems, particularly at their extremities, the permeability of the hot rocks is too low to enable the water to flow at a rate sufficient for electricity generation. The flow rate, and thus productivity, of these hydrothermal systems can often be improved by pumping water, under pressure, down the wells to open existing or additional fractures and pathways in the hot underground reservoirs.

This technique, first developed by the petroleum industry, and now refined by the geothermal industry, is known as fracture stimulation, with the reservior referred to as an enhanced or engineered geothermal system.

‡ Hot Dry Rocks (HDR)

Unlike hydrothermal systems, HDR systems do not have a natural reservoir of permeable water filled fractures or faults. Heat is recovered from hot dry rocks by pumping water into and through fractures engineered in the hot rocks by hydraulic fracture stimulation.

A well is firstly drilled deep into the hot dry rocks. Water is then pumped, under pressure, down the well into the hot crystalline rocks to create a permeable reservoir in the rocks. The water pressure opens a network of pre-existing fractures or zones of weakness in the hot rocks - “fracture stimulation”. Pumping of water is continued to extend the fractures to develop a permeable reservoir.

A second well is then drilled with water also pumped, under pressure, down the well to fracture stimulate the rock and to connect to the previously created permeable reservoir.

Water is then pumped down one of the wells, the injection well, to gather heat as it flows through the permeable reservoir and back to the surface via the other, production, well. Multiple production and injection wells are drilled to extract heat from large volumes of rock mass to meet power generation requirements.

‡ Binary Power Plant

At the surface the super-heated water from underground passes through a heat exchanger which transfers the heat energy to a second liquid in the power plant. This liquid vaporises and drives an electricity generation turbine. The vapour is condensed and is recirculated in the plant. The water, which is now partially cooled, is pumped directly back down the injection well and recirculated. Recirculation of both fluids means the binary power plant does not release any green house gases such as CO2, into the atmosphere.

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Managing Director’s Report

Green Rock Energy’s business mission is to identify and develop geothermal energy resources to supply clean, carbon-free, renewable base load electricity and direct heat to the community and industry.

Dear Shareholder,

The Company will achieve its business mission by building a portfolio of geothermal energy projects where there is good demand and energy prices which make the investment attractive and where the location means the project can be developed in stages as the resources are developed. Our two major projects, Olympic Dam and our Hungarian venture, meet these criteria. The Olympic Dam Geothermal Energy Project remains Green Rock Energy’s main focus in Australia; however the Company is looking at adding new projects to its portfolio where they show the required potential for a commercial geothermal energy project.

During the year the Company added leading geothermal industry expertise to its Board and extended its geothermal activities beyond its

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Mr Adrian Larking, Managing Director

major hot dry rock project at Olympic Dam in Australia by entering into a geothermal joint venture in Hungary.

With MOL and Enex, two international energy producers, the joint venture is working towards the development of hydrothermal energy projects in Hungary, a country which has some of the hottest geothermal waters in Europe and a fiscal regime that supports the development of geothermal energy projects.

In January, two wells were re-entered at the Ortaháza project in the west of Hungary. Production testing of the geothermal waters yielded insufficient flows for commercial electricity production without further expenditure. The wells have been suspended for possible future geothermal energy use. However, the production testing, and the knowledge the joint venture has of the geology of this region, and Hungary generally, has encouraged the joint venturers to move on to the selection of the next project site.

A technical team has been evaluating the large amount of data from the many petroleum wells that have encountered water flows at elevated temperatures. Geological and seismic information is being combined with this to build tectonic models to determine the optimum combination of temperature and geothermal water recovery potential. We are very encouraged with progress and aim to have the next site selected

in the current quarter with a view to carrying out production testing early next year.

The mini hydro-fracture testing at our Olympic Dam Geothermal Energy Project has been delayed a few months due to detailed evaluation and selection of the most effective testing methodology and the subsequent lack of available drill rigs. The testing is planned to be completed within the next few months.

Three Geothermal Exploration Licences were recently granted to the Company over the Patchawarra Trough in the Cooper Basin, South Australia. The Company considers the licence areas to have potential for large scale geothermal energy production in conjunction with future construction of a high voltage electrical transmission line linking the Cooper Basin to the national power grid.

At our Upper Spencer Gulf Project, work to refine our target selection will begin on our six Geothermal Exploration Licence areas as soon as they are granted.

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‡ 4

“During the year the Company

added leading geothermal

industry expertise to its Board and extended its geothermal activities beyond its major hot dry rock project…”

‡ Health, Safety and Environment

Once again the Company is pleased to report that there were no lost time injuries for employees or contractors and there were no breaches of health and safety and environmental compliance requirements for the year.

‡ Corporate Matters

We are pleased to welcome Dr Jörg Baumgärtner who joined the Board in April this year. His background and extensive experience in both conventional and engineered geothermal, or hot dry rock, systems will be invaluable to the Company. Dr Baumgärtner operates his own geothermal consulting and drilling company and is currently completing the development of the Landau geothermal power plant in the Rhine Graben, Germany. He is also a member of both the Management and Supervisory boards of the Soultz Geothermal Project in Soultz-sous-Forêts in France. This project is the foremost engineered geothermal system project in Europe. He is closely involved in the management of all aspects of the project including drilling, fracture stimulation and chemical stimulation of the hot granites at depths down to 5km.

In August Green Rock Energy also enriched its team by appointing three leading renewable energy consultants who bring a wealth of renewable energy experience and are assisting the Company in identifying and evaluating geothermal projects in Australia and overseas. They are:

Roy Baria, a geophysicist and engineer, worked alongside Dr Baumgärtner at the Soultz Geothermal Project, where he was Scientist in Charge. Mr. Baria was formerly Deputy Director of the U.K. Geothermal Project at Rosemanowes, England. He specializes in seismic profiling and geothermal reservoir engineering.
Ian Campbell, until May a Senator in the Australian Federal Government, served in various executive positions including Parliamentary Secretary to the Treasurer, Minister for Local Government, Territories and Roads and most recently Minister for Environment and Heritage.
Jeff Harding, the former Chief Executive Officer of Pacific Hydro, one of Australia’s leading renewable energy companies, oversaw the dynamic growth of Pacific Hydro, which included the successful completion of the Ord River Hydro Electric project in Western Australia and various wind and hydro projects in Australia and overseas.

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European Geothermal Plant

‡ Funding

Green Rock Energy raised approximately $4 million dollars in early 2007 via a renounceable rights issue and private placement. The main purpose of this raising was to fund the Hungarian project.

Since the end of the financial year a further $1.3 million has been raised by a placement to ensure activities do not slow pending a refund of around $1.3 million due to the Company in relation to the Hungarian project, from the World Bank and IFC implemented, Global Environmental Facility Trust Fund.

‡ Australian Geothermal Industry

In May this year I attended a Roundtable and Workshop on geothermal energy convened by two Federal Government Ministers at Parliament House, Canberra. The meetings were convened to explore ways to assist and remove obstacles that may hinder the development of the Australian geothermal energy industry. I was encouraged by the enthusiasm shown by the Ministers and the Government Departments towards the industry.

Following this forum the major participants in the Australian geothermal industry agreed to form an industry association to assist the progress of the geothermal industry in Australia. The Company is actively participating in the processes to establish this association which are well underway.

In June this year Green Rock Energy provided input to the House of Representatives’ Standing Committee on Industry and Resources study into the Renewable Energy Sectors in Australia. A copy of the Company’s submission can be seen on our website www.greenrock.com.au

Green Rock Energy attended meetings in the USA and Europe as a sponsor member of the Geothermal Implementing Agreement established by the International Energy Agency.

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Adrian Larking, Managing Director

South Australian Projects

The Olympic Dam Geothermal Energy Project, wholly owned by Green Rock Energy, is located within a few kilometres of a major electricity user and national power grid.

‡ Olympic Dam (100% owned)

The Olympic Dam Geothermal Energy Project, wholly owned by Green Rock Energy Limited, is located in central South Australia within a few kms of BHP Billiton Ltd’s Olympic Dam copper operation and the Roxby Downs township.

The Company has 7 Geothermal Exploration Licenses covering nearly 3,000 sq kms at Olympic Dam. The area was selected because of the extensive heat source identified by comprehensive geological work carried out in the process of developing the Olympic Dam mine together with the huge market potential provided by the mine and the high voltage power lines connecting Olympic Dam to the national electricity grid.

The objective is to develop a base load 400MW geothermal power plant with the heat energy provided by a series of engineered geothermal reservoirs. This would be a very large operation on the world scale.

Green Rock Energy drilled its first exploratory diamond geothermal well, to a depth of 1,935m at Olympic Dam in the second half of 2005. This confirmed the project area has hot homogeneous granite host rock with appropriate fracturing qualities for generation of a fractured reservoir to establish a water circulation through the hot granites and temperatures estimated to be around 170 to 200°C at 5,000m to 5,500m depth.

During the year the Company commissioned the CSIRO to study the in-situ rock stresses using drill core and drill log data from the exploratory well. The study indicates that the hydraulic fracture orientation and fluid flow in a stimulated zone in the hot granites are most likely to be in a sub-horizontal direction which in CSIRO’s words “is ideal for generating an optimal heat exchange reservoir and will allow a maximum distance between injection and production wells.”

The next step is to measure the actual size and orientation of these principal stress directions in mini hydro-fracture tests, and associated micro-seismic monitoring, to be carried out in Blanche No. 1 well. The tests, planned to be undertaken by the CSIRO

during the 4th quarter of 2007, will provide necessary data to assist in the planning and design of the two deep production wells and the fracture stimulation program to generate the sub-surface reservoir connecting the wells.

Towards the end of the year, GeothermEx, Inc., a leading international geothermal consulting group, specialising in resource estimation, undertook a study to estimate the productivity of a well at various depths. They also used the geological and drill log data and temperature measurements from the Blanche No. 1 well. The results of the analysis provided an estimate of the potential net power output, which essentially is the amount of saleable power, from each production well. They estimated the net power output potential could be as high as 7.6 MWe. That is to say, a 30MWe power plant could require the drilling of only 4 production wells.

The actual power capacity of a typical production well in the Olympic Dam location however, will only be known when the fracture stimulation and water flow circulation testing has been carried out at production depth after drilling of the two deep production wells.

The Olympic Dam Geothermal Energy Project is located within 10 kms of a 275kV and a 132 kV power transmission line connected to the national power grid. It is also close to major infrastructure, engineering services, township transport and hospital facilities with Roxby Downs only 20Km away.

This access to the national power grid is a major comparative advantage the project has over many other geothermal projects. Because of the large capital costs associated with both the power plant and drilling, it would be uneconomic to have large sums of capital tied up in non-producing wells awaiting the construction of the power plant and similarly, to have constructed a power plant without having completed the drilling to provide the energy source. It is therefore necessary to develop a geothermal power plant incrementally - in say 20MWe to 40MWe stages. This incremental development cannot occur economically if the project is not within a short distance from the energy user or a high voltage power grid.

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‡ 6

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Roxby Downs township

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South Australian Tenements - Olympic Dam Project

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Olympic Dam Copper Operation

South Australian (wholly owned) Projects Green Rock Energy is adding new geothermal projects to its portfolio where they show the required commercial potential.

‡ Patchawarra Project (100% owned)

The Patchawarra Geothermal Exploration Licenses cover 1,483 sq kms of land over the Patchawarra Trough in the Cooper Basin, South Australia.

The area contains geological formations which we believe are prospective for high flows of hot geothermal water and potentially suitable for generation of geothermal electrical energy. The Geothermal Exploration Licenses are located in the Patchawarra Trough, a structure within the Cooper Basin containing thick aquifers. The prospective aquifers are in excess of 1,200m thick at depths in excess of 3,000m. These thick, deep aquifers have the potential to contain high temperature water flows suitable for conventional geothermal energy production.

Work is underway to refine our geothermal target selection in the Patchawarra tenements. Given success with subsequent target evaluation and testing the development of the Patchawarra Project will be in conjunction with future construction of a high voltage electrical transmission line linking the Cooper Basin to the national power grid.

Our aim is to produce pure desalinated water for the Upper Spencer Gulf and surrounding regions with the minimum contribution to green house gases.

‡ Upper Spencer Gulf Project (100% owned)

The Upper Spencer Gulf Geothermal Exploration License Applications, cover an area from south of Whyalla on the Eyre Peninsula north to Port Augusta and then south along the east cost of the Spencer Gulf to below Port Pirie.

The Company will evaluate the suitability of the geology for an engineered geothermal system to provide the heat source for a desalination plant using the distillation process. The aim is to produce pure desalinated water for the Upper Spencer Gulf and surrounding regions with the minimum contribution to green house gases.

Reverse Osmosis desalination plants, which have been commissioned in Perth and are being considered in other parts of Australia, use high-pressure pumps to pass sea water through semi-permeable membranes to filter out the salt and fine solids. These plants require large amounts of energy; and as energy costs rise, so will the cost of water produced by reverse osmosis.

By using geothermal water to commence the evaporation process (the principle energy requirement) for a distillation desalination plant, the electricity requirements are much less than for a reverse osmosis plant and substantially lower geothermal water temperatures are needed than if used to generate electricity. This means drilling costs will be cheaper and the generation of green house gases will be significantly reduced when compared to reverse osmosis desalination plants.

In addition to using less electrical power, and thus generating less green houses gases, the distillation process has other benefits over reverse osmosis:

Distillation produces water at high purity (having a residual salinity in the order of 1-2 ppm), and is not dependent on the salinity of the feed seawater.
Seawater distillation plants are much less sensitive to seawater quality than reverse osmosis plants for which seawater pretreatment is a critical issue.
Operation and maintenance costs are generally lower.

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‡ 8

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South Australia Tenements - Patchawarra Project
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South Australian Tenements - Upper Spencer Project and Patchawarra Project

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European Operations

Green Rock Energy is working towards the development of hydrothermal energy projects throughout Hungary.

‡ Hungary (33% owned)

Green Rock Energy has a one third interest in a joint venture with two very experienced international energy companies, MOL, Hungary’s largest oil and gas company and Enex hf, a leading international geothermal development and consulting company, to develop geothermal power plants throughout Hungary.

The joint venture is focused on the Pannonian Basin, an area known from extensive petroleum drilling carried out by MOL to have favourable geology with abundant natural geothermal water in known locations ranging from 130°C to 200°C. Hungary also requires and supports the generation of renewable energy. It provides attractive pricing substantially greater for electricity generated from geothermal energy than fossil fuel generated electricity. Substantial infrastructure exists to fast-track production to deliver early cash flow. Locations being evaluated are close to the existing power grid. The joint venture is aiming for a suite of geothermal power plants through Hungary. The size of each power project will depend on the temperature and sustainable flow rate of the water needed to generate electricity.

During the year short term production testing was carried out at the Ortaháza Project, located in Zala County, in western Hungary. Two abandoned hydrocarbon exploration wells, Ortaháza 3 and Ortaháza 5, were re-entered for testing. The temperature, at 146°C, and chemical properties of the geothermal water produced were as expected, however the flow rate from the production testing, at approximately 1,100 to 1,200 cubic metres per day, was below the joint venture’s requirements and considered only suitable for direct heat sales. Because the flow rate was insufficient for electricity production under current conditions, the joint venture decided to move onto the next project. The wells have been suspended for possible future use. The majority of the expenditure on the project is being refunded from technical risk insurance provided by the Geofund, an organization implemented jointly by the World Bank and International Finance Corporation to promote geothermal development on Eastern Europe.

The location of the second and subsequent projects is currently being determined. A combined team of geologists and hydro-geologists, from Green Rock Energy, MOL and Enex, are undertaking the detailed geological evaluation of both the extensive well bore and seismic data, to identify the fractured reservoirs, for the optimum combination of temperature and geothermal water recovery potential. The aim is to have selected the second and possibly third project site in the fourth quarter of 2007 with production testing early in 2008.

Zala County, Hungary

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Heviz hot springs (Hungary)

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Ortaháza 5

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‡ 10

Board of Directors

(for detailed information on Directors, please see page 15 )

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Adrian Larking (Managing Director) BSc (Hons), MSc, Dipl. Imperial College, LLB and Grad Dipl. Legal Practice. FAIMM.

Mr Larking is a geologist and resources lawyer with around 30 years experience in the minerals and petroleum industries in Australia and internationally. Much of his experience was gained while working for Western Mining Corporation Limited (now owned by BHP Billiton).

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Dr Jörg Baumgärtner (Independent Non - Executive Director) Dipl. Geophysics, PhD, post doctorate studies Stanford University

Dr Baumgärtner is a leading practitioner of the development and production of geothermal energy from Enhanced Geothermal Systems (EGS) or Hot Dry Rocks.

He is the Chief Executive Officer of BESTEC Gmbh and BESTEC Drilling Gmbh companies actively involved in European deep geothermal projects. He is a member of both the Management and Supervisory boards of the Soultz Geothermal project in Soultz-sous-Florets, the foremost EGS project in Europe.

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Alan Knights (Executive Director) B Econ, MBA and CPA.

Mr Knights has held the position of Group Treasurer, Company Secretary and General Manager Finance at Western Mining Corporation Limited and Chief Financial Officer of Perilya Limited.

Mr Knights’ focus is on financial management and commercial development.

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Scott Spencer

(Independent Non - Executive Director) BA (Hons), B Phil, M Litt, Dipl. AICD

Mr Spencer served in the Department of Foreign Affairs and had several senior foreign postings before appointment as Regional Director in Western Australia.

He was a Non-Executive Director of ASX /AIM listed Hardman Resources Limited and is currently Non-Executive Chairman of Monitor Energy Limited , an ASX listed oil and gas company.

Principal Consultants

Green Rock Energy has the team to take the Company to its next stage.

Green Rock Energy utilises the services of leading renewable energy consultants to identify and evaluate geothermal projects in Australia and overseas.

Roy Baria

HNC (Mech Eng), BSc (Eng) and MPhil (Geophysics) Mr Baria is a geophysicist with specialities in seismic profiling and geothermal reservoir engineering. He is a director of MIL-TECH UK and Hot Dry Rocks Pty Ltd and was formerly Deputy Director of the UK Geothermal Project at Rosemanowes, England and Scientist in Charge of the Soultz Geothermal Project in Soultz-sous- Florets, France.

Mr Baria has worked alongside Green Rock Energy’s Non - Executive director Dr Jorg Baumgartner at the Soultz Geothermal Project which is considered the foremost Enhanced Geothermal System project in Europe

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Gary Meyer

BSc (Geology and Chemistry), Grad. Course Hydrology, Grad. Cert. Management

Mr Meyer has over 30 years professional experience focussed on hydrology and environment management. He has worked in

Canada, USA, Philippines, Cuba, Uzbekistan, Finland and Brazil on diverse water and environmental projects.

Mr Meyer has been involved in environmental baseline studies at several mining projects and the development of environmental data management systems. He has developed numerical groundwater flow models for water supply and mine dewatering projects.

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Jeff Harding

BE(Hons) BA (Econ), FAICD

Mr Harding is the former Chief Executive Officer of Pacific Hydro Limited, one of Australia’s leading renewable companies. He oversaw the successful completion of the Ord River Hydro Electric Project in Western

Australia , the Bakun Hydro Electric development in the Philippines and hydro electric projects in Chile.

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Ian Campbell

Mr Campbell was a Senator in the Australian Federal Government and most recently Federal Minister for the Environment. In this capacity he administered a range of government programs providing support to renewable energy industries.

Mr Campbell has served in various executive positions in the Senate from 1996, including Parliamentary Secretary to the Treasurer, Minister for Local Government, Territories and Roads, Minister for the Environment and Heritage and Minister for Human Services.

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‡ 12

for the year ended 30 June 2007 Annual Financial Report

Corporate governance statement	‡ 14
Directors’ report	‡ 15
Auditors’ independence declaration	‡ 24
Independent audit report	‡ 25
Directors’ declaration	‡ 27
Income statement	‡ 28
Balance sheet	‡ 29
Statement of changes in equity	‡ 30
Cash fow statement	‡ 32
Notes to the fnancial statements	‡ 33

INtroDuCtIoN

The Board of Directors of Green Rock Energy Limited is responsible for the corporate governance of the consolidated entity. The Board guides and monitors the business and affairs of the consolidated entity on behalf of its shareholders by whom they are elected and to whom they are accountable.

In line with the above the Board has put in place a Board Charter. This charter sets out the way forward for the Company in its implementation of the ASX eight essential Corporate Governance Principles and Recommendations.

As in the prior year, the approach taken by the Board was to set the blue print for the consolidated entity to follow as it introduces elements of the governance process.

Due to the size of the consolidated entity and the scale of its operations, it has been neither practical nor economic for the full implementation of all the best practice recommendations.

SKILLS, EXPErIENCE, EXPErtISE AND tErM oF oFFICE oF EACH DIrECtor

A profile of each director, containing applicable information, is set out in the Directors’ Report on page 15.

IDENtIFICAtIoN oF INDEPENDENt DIrECtorS

Mr. Scott Spencer and Dr Jörg Baumgärtner are independent directors.

In determining whether a non-executive director is independent the individual must satisfy the following criteria:

Less than 10% of the shares of the Company are held by the director and any entity or individual directly or indirectly associated with the director.
No sales are made to or purchases from any entity or individual associated with the director.
None of the directors income or the income of an individual or entity directly or indirectly associated with the director is derived from a contract with any member of the entity other than income derived as a director of the entity.

StAtEMENt CoNCErNING AVAILABILItY oF INDEPENDENt ProFESSIoNAL ADVICE

If a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of his /her office as a director, then, provided the director first obtains approval for incurring such expense, the Company will pay the reasonable expenses associated with obtaining such advice.

NoMINAtIoN CoMMIttEE

The Company has adopted a Nomination Committee Charter which sets out the responsibilities of the Committee which, amongst other things, include recommending to the Board the criteria for Board membership, screening candidates for membership, member succession, Board performance review, ongoing development and reviewing policy in respect of tenure, remuneration and retirement.

The full Board carried out the functions of the Nomination Committee during the year but did not meet formally as a Nomination Committee. Relevant matters were discussed on an as and when basis during regular meetings of the Board.

AuDIt CoMMIttEE

The full Board carries out the functions of the Audit Committee. The Board did not meet formally as the Audit Committee during the financial year. All matters were discussed on an as required basis during regular Board meetings.

It is envisaged that the same approach will be adopted during the forthcoming year with the full Board being charged with performing the role of Audit Committee as and when required.

‡ 14

Directors’ Report

Your directors submit their Annual Financial Report on the consolidated entity consisting of Green Rock Energy Limited and the entities that it controlled during the financial year ended 30 June 2007.

In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

The names and particulars of the directors of the Company during or since the end of the financial year are:

DIrECtorS

DIrECtorS
Name	Particulars
Adrian Larking	Mr Larking holds a BSc Hons, MSc, Dip. Imperial College (Royal School of Mines, London), LLB, degrees and
(Managing Director)	a Graduate Diploma in Legal Practice. Additionally, he is a Fellow of the Australian Institute of Mining and Metallurgy. He is a geologist and resources lawyer with around 30 years experience in the minerals and
	petroleum industries in Australia and internationally. Much of his experience was gained while working for
	Western Mining Corporation Limited (now owned by BHP Billiton).
	In the three years prior to the date of this report Mr Larking held no directorship in any other public listed company.
	Date of appointment as Managing Director - 25 February 2005.
Alan Knights	Mr Knights holds Bachelor of Economics and Master of Business Administration degrees. He is a Certifed
(Executive Director)	Practicing Accountant with 30 years experience in the fnance and mining industries. He has held the position of Group Treasurer, Company Secretary and General Manager Finance at Western Mining Corporation Limited and
	Chief Financial Offcer of Perilya Limited.
	Mr Knights’ focus is on fnancial management and commercial development.
	In the three years prior to the date of this report, Mr Knights held no directorship in any other public listed company.
	Date of appointment as Non-Executive Director - 10 May 2005.
	Date of appointment as Executive Director - 21 November 2005.
Hugh Warner	Mr Warner holds a Bachelor of Economics degree. He has been involved with a number of private and publicly
(Non-Executive Director)	listed companies in Australia, United Kingdom, and Canada operating in the oil and gas, gold, diamonds and technology sectors.
	He contributes general corporate and company secretarial management skills and has a sound understanding of
	the requirements of both the Australian and United Kingdom stock exchanges.

Mr Warner held directorships with the following public listed companies in the three years prior to the date of this report:

Company Name Date Appointed Date Resigned Mobi Limited 15 December 2004 24 December 2006 Black Range Minerals Limited 8 January 2004 27 June 2005 Monitor Energy Limited 16 April 2004 22 December 2005 OBJ Limited 13 February 2004 4 November 2005 Deep Yellow Limited 20 August 2004 18 July 2005 Service Stream Limited 20 November 2003 27 July 2004 I M Medical Limited 28 November 2003 16 September 2004 RMG Limited 31 January 2006 4 April 2006 Toodyay Resources Limited 22 December 2005 4 April 2006

Date of appointment as a Non-Executive Director 21 September 2000.

Mr Warner resigned from the Board on 16 February 2007.

Directors’ Report

DIrECtorS (continued)

Name

Scott Spencer

(Non-Executive Director)

Particulars

Mr Spencer holds a BA Hons, BPhil and MLitt degrees.

He served in the Department of Foreign Affairs and had several senior foreign postings before appointment as Regional Director in Western Australia.

He was a Non-Executive Director of ASX /AIM listed Hardman Resources Limited where, as an Executive Director, he had been active in the establishment and funding of a portfolio of petroleum exploration assets. He is currently Non-Executive Chairman of Monitor Energy Limited , an ASX listed oil and gas company.

Date of appointment as a Non-Executive Director - 29 November 2005.

Mr Spencer held directorships with the following listed companies in the 3 years immediately prior to the date of this report.

Name Date Appointed Date Resigned Monitor Energy Ltd 22 December 2005 current Hardman Resources Ltd 19 July 1994 12 April 2006

Jörg Baumgärtner Dr Baumgartner is a leading practitioner of the development and production of geothermal energy from Enhanced Geothermal Systems (EGS) or Hot Dry Rocks.

(Non- Executive Director)

He is based in Germany and is the Chief Executive Officer of BESTEC Gmbh and BESTEC Drilling Gmbh companies actively involved in European deep geothermal projects.

He is a member of both the Management and Supervisory boards of the Soultz Geothermal project in Soultz-sous-Florets, the foremost EGS project in Europe. His experience extends to the use of micro-seismic technologies and use of chemical tracers to monitor the development of the fracture network in granites.

Dr Baumgärtner was a researcher at the German Continental Deep Drilling Program at the Institute of Geophysics at the Ruhr University in Bochum, Germany and carried out post doctorate research at Stanford University in Palo Alto, California and at Dowell Schlumberger Inc. at Tulsa , Oklahoma, USA.

Date of appointment as Non-Executive Director - 25 April 2007.

In the three years prior to this report Dr Baumgärtner held no directorship in any other public listed company.

CoMPANY SECrEtArY

Nigel Hodder

Mr Hodder holds a Bachelor of Commerce degree from Rhodes University (South Africa) and held the position of Corporate Secretary for the First Mutual group of companies in addition to performing executive management roles in the marketing, administration and property development divisions of the business.

He was appointed Company Secretary on 4 April 2005.

CorPorAtE StruCturE

Green Rock Energy Limited is a company limited by shares, incorporated and domiciled in Australia. It listed on the Australian Securities Exchange on 10 December 2003 and is assigned the code GRK.

Its principal place of business and registered office is:

Unit 6, 38 Colin Street, West Perth, WA 6005, Australia.

‡ 16

Directors’ Report

PrINCIPAL ACtIVItIES

The principal continuing activity of the consolidated entity during the financial year was the pursuit of geothermal energy resources and the development of low emission, base load, renewable energy.

South Australia

The Company has 7 Geothermal Exploration Licences (GELs) totalling 2,897 square kilometres and 2 Geothermal Exploration Licence Applications surrounding Olympic Dam Mine and the Roxby Downs township, where an underground heat anomaly is known to exist.

During the year the Company lodged applications for six new GELs in the Upper Spencer Gulf of South Australia. The licences cover the area from south of Whyalla on the Eyre Peninsula north of Port Augusta and then south along the east coast of the Spencer Gulf to below Port Pirie.

Green Rock Energy also applied for and was granted 3 GELs in the Cooper Basin area of South Australia. These licences cover a combined area of 1,483 sq kms and are positioned over the Patchawarra Trough in South Australia. This area contains geological formations which are prospective for high heat flows of hot geothermal water. The Patchawarra Trough is a structure containing thick aquifers in excess of 1,200 m at depths in excess of 3,000m.

Hungary

In the year under review the Company acquired all of the issued share capital of Vulcan Geothermal Pty Ltd which is the parent company of a Hungarian entity Green Rock (Vulcan) Energy Kft. (previously Vulcan Energy Kft ). The Hungarian entity is party to an unincorporated joint operating agreement with MOL, a Hungarian oil and gas company, and ENEX hf an Icelandic geothermal consulting and geothermal energy developer. The joint operating agreement is for a project to develop geothermal energy, for the production of renewable electricity and /or the direct sale of heat .

Other

The Company plans to continue to meet its obligations under the terms of its farm-in arrangement with Siberia Mining Corporation Limited in the Waukarlycarly Telfer joint venture project where a reappraisal of the two tenements held resulted in some encouragement for uranium and gold prospectivity within these areas. Applications for exploration licences have not yet been granted.

rEVIEW oF oPErAtIoNS

During the year under review, the consolidated entity achieved the following:

Results and Position

The loss after accounting for tax for the year ended 30 June 2007 is $1,452,727 (2006: $502,932). Revenue from continuing activities was $87,222 (2006: $33,076). Total expenses increased from $1,049,129 in 2006 to $1,620,016. This increase reflects the expanded interests of the Company and its exploration activity in Hungary. Net assets at year end were $11,382,179 against $8,223,888 at the close of the prior year. Total cash held at year end was $981,818 (2006: $220,449).

EXPLorAtIoN ACtIVItIES

Hungary

In October, Green Rock Energy Limited completed negotiations and entered into an agreement to acquire Vulcan Geothermal Pty Ltd , which holds a 32% interest in an unincorporated joint venture (“ Joint Venture”) to establish the first geothermal power plant in Central-Eastern Europe.

The partners in the Joint Venture, in addition to Green Rock Energy Limited, are one of Hungary’s largest companies, the Hungarian oil and gas company, MOL (“MOL”), which is also the operator of the Joint Venture, and Enex hf (“Enex”), a leading Icelandic geothermal consulting and development company.

During the year existing , but shut-in , or out-of-use, petroleum wells were selected for flow testing following an evaluation of around 70 shut in wells owned by MOL out of thousands of petroleum wells drilled in Hungary.

The first two wells (Ortaháza -3 & Ortaháza -5), located near Iklódbördöce (Zala County), in south-west Hungary, were tested for hot water production rates.

Ortaháza 5 well produced good temperatures and chemistry of the geothermal water and yielded water flow rates useable for direct heat sales but below what is needed for commercial production of electricity. Further testing of the wells has been put on hold. Work has commenced on the selection of the next project site.

Directors’ Report

EXPLorAtIoN ACtIVItIES (continued)

Hungary (continued)

Green Rock is claiming a refund of approximately $1.4 million , a major proportion of the funds expended by it on this project in preparing and carrying out the production testing. This refund is expected to be paid by the end of 2007 from the Geofund geological risk insurance which was provided to the project by the World Bank Group.

Olympic Dam

During the year Green Rock Energy Limited measured the temperature in several deep mineral holes, drilled during the quarter by BHP Billiton to around 2,300 metres depth at the Olympic Dam mine, only a few kilometres away from Green Rock’s Blanche No 1 well. Temperatures and the geothermal gradient were marginally higher than Blanche No 1 well confirming the heat anomaly of the Olympic Dam area.

Studies of the stresses in Blanche No 1 were carried out by CSIRO with favourable results.

BoArD CHANGES

On the 16 February 2007 Mr Hugh Warner tendered his resignation as a director of the Company.

On 25 April 2007 Dr Jörg Baumgärtner was appointed a non-executive director. Dr Baumgärtner will hold office until the next general meeting of the Company and will make himself available for re-election at that meeting.

CorPorAtE MAttErS

During December 2006 the Company received the sum $359,706 from the Australian Taxation Office under the Commonwealth Government’s Research and Development Tax Concession Scheme in respect of eligible research undertaken in the 2005/6 tax year.

CHANGES IN StAtE oF AFFAIrS

Changes in the state of affairs of the consolidated entity during the financial year were:

a) An increase in contributed equity of $4,403,667 (from $9,776,727 to $14,180,394) as a result of:

Issue of 4,432,142 ordinary shares to institutional and sophisticated investors at a price of 7 cents each during August 2006.
Issue of 3,500,000 ordinary fully paid shares and granted 3,500,000 options (unlisted) expiring on 28 November 2008 and exercisable at 15 cents each to the vendors, or their respective nominees, of Vulcan Geothermal Pty Ltd. The deemed value of the shares was 10.5 cents per share. Both the shares and the options were subject to an escrow period ending on 1 September 2007.
A private placement of 6,700,000 shares at a price of 5 cents per share and grant of 3,350,000 free options exercisable at 10 cents per option and expiring on 18 April 2008 during December 2006.
During December 2006 issued 65,000 fully paid shares at 20 cents each on exercise of 65,000 options expiring on 31 December 2007.
During January 2007 a renounceable rights issue of 73,787,607 fully paid ordinary shares to eligible shareholders at 5 cents each plus 36,893,810 free options expiring on 18 April 2008 exercisable at 10 cents each.
b) The total number of ordinary shares on issue and the number of 18 April 2008 options at 30 June 2007 were 147,640,214 (2006: 59,155,465) and 40,243,810 respectively. Unlisted options issued totaled 6,500,000.

SuBSEquENt EVENtS

On 4 September 2007 the Company issued 12,000,000 shares to sophisticated investors at an issue price of 11 cents per share. The capital raised amounted to $1,320,000 (before costs) and will be used to supplement working capital.

On 9 August 2007 the Company issued 300,000 incentive options exercisable at 15 cents and expiring on 9 August 2011.

On 9 August 2007 the Company issued 1,000,000 incentive options exercisable at 15 cents and expiring on 9 August 2010 .

Except for the above, no other matters or circumstances, other than that referred to in the financial statements or notes thereto, have arisen since the end of the financial year, that have significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

‡ 18

Directors’ Report

FuturE DEVELoPMENtS

Disclosure of information concerning likely developments in the operations of the consolidated entity in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the consolidated entity. Accordingly, information of this nature has not been disclosed in this report.

ENVIroNMENtAL rEGuLAtIoNS

The exploration activities of entities in the consolidated entity are subject to environmental regulations imposed by various regulatory authorities, particularly those relating to ground disturbance and the protection of rare and endangered flora and fauna.

Entities in the consolidated entity have complied with all environmental requirements up to the date of this report.

DIVIDENDS

No dividends were paid or declared by the Company since the end of the previous financial year.

SHArE oPtIoNS

Share options granted to directors and executives

During and since the end of the financial year the following share options were granted to directors or executives of the Company.

Mr Alan Knights (Executive Director) - 2,000,000 options granted on 21 November 2006 which are exercisable at 25 cents each and expire on 21 November 2009. The options vest 50% on 21 November 2006 with the balance vesting on 21 November 2007. The grant of these options was approved by shareholders at the 2006 Annual General Meeting held on 28 November 2006.

Mr Scott Spencer (Non-Executive Director) - 500,000 options granted on 21 November 2006 which are exercisable at 25 cents each and expire on 21 November 2009. 50% of the options granted vest on 21 November 2006 with the balance vesting on 21 November 2007. The grant of these options was approved by shareholders at the 2006 Annual General Meeting held on 28 November 2006.

Mr Nigel Hodder (Company Secretary) - 500,000 options on 20 March 2007 with an exercise price of 7 cents each and expiring on 9 March 2011. The options vest 50% on 9 March 2008 with the remainder vesting on 9 March 2009. A further 300,000 options were granted to Mr Hodder on 9 August 2007, are exercisable at 15 cents and expire on 9 August 2011.

The total number of options granted to directors and executives during the year under review were 3,000,000.

Share options on issue

As at the end of the year, total un-issued ordinary shares under option were as follows:

Grant date	Expiry date	Exerciseprice	Number under option
28 November 2007 (unlisted)	28 November 2008	15 cents	3,500,000
21 November 2006 (unlisted)	21 November 2009	25 cents	2,500,000
6 February 2007 (listed)	18 April 2008	10 cents	40,243,810
6 February 2007 (unlisted)	9 March 2011	7 cents	500,000
Total			46,743,810

Option holders do not have any right by virtue of the option to participate in any share issue of the Company or any related body corporate.

Share options that expired or lapsed during the year.

22,867,464 options exercisable at 20 cents each and expiring on 31 December 2006 lapsed on that date. No options were cancelled during the course of the financial year ended 30 June 2007.

No shares were issued during the year as a result of exercise of options.

Directors’ Report

INDEMNIFICAtIoN oF oFFICErS

The Company gave indemnity and held the following liability cover in place during the course of the financial year:

Agreements to indemnify Mr. A Larking (Managing Director), Mr A Knights (Executive Director), Mr S Spencer and Dr J Baumgärtner (Non –Executive Directors) in respect of any liabilities incurred by them while acting in the normal course of business as a director of the entity and to insure them against certain risks they are exposed to as directors of the Company.
Pursuant to the above the Company has paid premiums to insure the directors and executive management against liabilities incurred in the conduct of the business of the Company and has provided right of access to the Company records. In accordance with common commercial practice, the insurance policy prohibits disclosure of the premium and the nature of the liability insured against.

Mr Adrian Larking (Managing Director) Dr Jörg Baumgärtner (Non- Executive Director) Mr Alan Knights (Executive Director) Mr Hugh Warner (Non-Executive Director) Mr Scott Spencer (Non-Executive Director) Mr Nigel Hodder (Company Secretary)

DIrECtorS’ MEEtINGS

The following table sets out the number of directors’ meetings held during the financial year and the number of meetings attended by each director.

During the financial year 13 Board meetings were held.

Board of Directors

	Board of	Directors
Directors	Number eligible to attend	Number Attended
Adrian Larking	13	13
Jörg Baumgärtner	2	2
Alan Knights	13	11
Scott Spencer	13	13
Hugh Warner	8	7

DIrECtorS’ SHArEHoLDINGS

The following table sets out each director’s relevant interest in shares or options over shares of the Company as at the date of this report:

Directors	ordinary shares	options over shares
Adrian Larking	9,500,000	984,375
Jörg Baumgärtner	-	-
Alan Knights	2,318,232	2,771,993
Scott Spencer	-	500,000

‡ 20

Directors’ Report

rEMuNErAtIoN rEPort

Remuneration policy for directors and executives

The Board of Directors is responsible for determining and reviewing compensation arrangements for directors and the executive team.

The Board assesses the appropriateness of the nature of the amount of remuneration of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and Executive team and that each staff member’s remuneration package properly reflects that person’s duties and responsibilities.

At present, the Board does not consider it appropriate to link directors’ and executive’s remuneration to the performance of the Company.

Director and executive details

The directors of Green Rock Energy Limited during the year were:

Adrian Larking (Managing Director) Appointed 25 Feburary 2005 Jörg Baumgärtner (Non-Executive Director) Appointed 25 April 2007 Alan Knights (Executive Director) Appointed 10 May 2005 Scott Spencer (Non-Executive Director) Appointed 29 November 2005 Hugh Warner (Non-Executive Director) Appointed 21 September 2000 Resigned 16 February 2007

The only group executive of Green Rock Energy Limited during the year was:

Nigel Hodder (Company Secretary)

Appointed 4 April 2005

Elements of director and executive remuneration

Remuneration packages contain the following key elements:

Primary benefits - salaries / fees
Post employment benefits - superannuation
Share based payments

The following table discloses the remuneration of the directors of the Company:

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Primary Post-employment Equity
Salary & Non- Super- Prescribed Other
fees Bonus monetary annuation benefits Other Options benefits Total
2007 $ $ $ $ $ $ $ $ $
- - - - - -
Adrian Larking 180,000 16,200 196,200
Dr Jörg Baumgärtner 7,645 688 - - - - 8,333
Alan Knights (i) 160,000 - - 14,400 - - 52,884 - 227,284
- - - - -
Scott Spencer (ii) 55,046 4,954 13,221 73,221
- - - - - -
Hugh Warner 34,731 3,126 37,857
Total 437,422 - - 39,368 - - 66,105 - 542,895
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(i) 2,000,000 options were granted as part of his appointment as a Director. 1,000,000 vested on 21 November 2006 and the balance will vest on 21 November 2007. Options expire on 21 November 2009.

(ii) 500,000 options were granted as part of his appointment as a Director. 250,000 vested on 21 November 2006 and the balance will vest on 21 November 2007. Options expire on 21 November 2009.

Directors’ Report

rEMuNErAtIoN rEPort (continued)

The following table discloses the remuneration of the other key management personnel of the Company :

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Primary Post-employment Equity
Salary & Bonus Non- Super- Prescribed Other Options Other Total
fees monetary annuation benefits benefits
2007 $ $ $ $ $ $ $ $ $
- - - - -
Nigel Hodder (i) 100,000 9,000 2,917 111,917
Total 100,000 - - 9,000 - - 2,917 - 111,917
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(i) 500,000 options were granted as part of remuneration for the year. Of this number 250,000 vest on 9 March 2008 with the balance vesting on 9 March 2009. These options expire on 9 March 2011.

Value of options issued to directors and executives

						Percentage
						of total
		Options		Total Value of	Value of options	remuneration for
	Options granted	exercised	Options lapsed	options granted	included in	the year that
	Value at grant	Value at exercise	Value at time of	Exercised or	Remuneration	consists of
	date	date	lapse	lapsed	for the year	options
	$	$	$	$	$	%
Alan Knights	66,800	-	-	66,800	52,884	23.27
Scott Spencer	16,700	-	-	16,700	13,221	18.05
Nigel Hodder	17,500	-	-	17,500	2,917	2.60
Total	101,000	-	-	101,000	69,022

Value of Options - basis of calculation

The following factors and assumptions were used in determining the fair value of options at grant date:

		Option series
Inputs into the model	A Knight	S Spencer	N Hodder
Grant date share price (cents)	10.00	10.00	5.10
Exercise price (cents)	25.00	25.00	7.00
Expected volatility	80%	80%	70%
Option life	3 years	3 years	4 years
Dividend yield	-	-	-
Risk-free interest rate	5.75%	5.75%	5.75%

The total value of options granted , exercised and lapsed during the year is calculated based on the following:
Fair value of the option at grant date multiplied by the number of options granted during the year: plus
Fair value of the option at the time of exercise multiplied by the number of options exercised during the year: plus
Fair value of the option at the time of lapse multiplied by the number of options lapsed or cancelled during the year
The total value of options included in remuneration for the year is calculated in accordance with AASB 124 “ Related Party Disclosures” which requires the following:
The value of options is determined at grant date and is included in remuneration on a proportionate basis from grant date to vesting date. Where options immediately vest, the full value of the option is recognised in remuneration in the current year.

‡ 22

Directors’ Report

rEMuNErAtIoN rEPort (continued)

The options granted to Nigel Hodder vest in two equal tranches , on the first and second anniversary of the grant date. Half of the options granted to Alan Knights and Scott Spencer vest on 21 November 2006 and the balance one year after. As such only a portion of the fair value of the options at grant date have been included in remuneration for the year.

ProCEEDINGS oN BEHALF oF tHE CoMPANY

No person has applied for leave of Court to bring proceedings on behalf of the consolidated entity or intervene in any proceedings to which the consolidated entity is a party for the purpose of taking responsibility on behalf of the consolidated entity for all or any part of those proceedings.

NoN-AuDIt SErVICES

Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 23 to the financial statements.

The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

The directors are of the opinion that the services as disclosed in note 23 to the financial statements do not compromise the external auditor’s independence, based on advice received from the Audit Committee, for the following reasons:

all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor, and
none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.

AuDItor’S INDEPENDENCE DECLArAtIoN

The auditor’s independence declaration is included on page 24 of the financial report.

Signed in accordance with a resolution of the directors made pursuant to s.298(2) of the Corporations Act 2001.

On behalf of the directors

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Scott Spencer Non-Executive Director

Perth, Australia. 28 September 2007

to the directors of Green Rock Energy Limited

Independence Declaration

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‡ 24

Independent Audit Report

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Independent Audit Report

to the directors of Green Rock Energy Limited

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‡ 26

Directors’ declaration

The directors declare that:

(a) in the directors’ opinion, there are reasonable grounds to believe that the Company and its consolidated entities will be able to pay its debts as and when they become due and payable;
(b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with Accounting Standards and give a true and fair view of the financial position and performance of the consolidated entity and the Company; and
(c) the directors have been given the declarations required by s.295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the directors,

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Scott Spencer Non-Executive Director Perth, Australia 28 September 2007

INCOME STATEMENT fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

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	Consolidated Company
Note	2007 $ 2006 $ 2007 $ 2006 $
Revenue Interest income 6 Other income 6 Total revenue Expenses Staff costs Administrative expenditure Audit and legal fees Corporate advisory expenses Offce rent and outgoings Insurance Depreciation Exchange losses Impairment of loan to subsidiary Exploration expenditure written off as incurred Other expenses Total expenses Loss before income tax beneft 6 Income tax beneft Loss for year Loss per share: Basic (cents per share) 16	- - 49,222 33,076 49,135 33,076 38,000 - 15,000 -
	87,222 33,076 64,135 33,076 (682,300) (478,570) (682,300) (478,570) (93,165) (72,099) (93,165) (72,099) (79,000) (40,683) (79,000) (40,683) (64,407) (142,771) (64,407) (142,771) (49,716) (43,043) (49,716) (43,043) (16,523) (23,235) (16,523) (23,235) (26,553) (23,526) (26,553) (23,526) (121,744) - - - - - (195,930) - (32,781) (28,931) (32,781) (28,931) (453,827) (196,271) (343,847) (196,271)
	(1,620,016) (1,049,129) (1,584,222) (1,049,129) (1,532,794) (1,016,053) (1,520,087) (1,016,053)
	80,067 513,121 67,360 513,121 (1,452,727) (502,932) (1,452,727) (502,932)
	1.54 0.90

Notes to the financial statements are included on pages 33 to 54.

‡ 28

BALANCE SHEET AS AT 30 juNE 2007INCOME STATEMENT fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

	Consolidated Company
Note	2007 $ 2006 $ 2007 $ 2006 $
Current assets Cash and cash equivalents 8 Other receivables 9 Other current assets 9 Total current assets Non-current assets Exploration & evaluation expenditure 10 Property, plant and equipment 11 Other fnancial assets 12 Total non-current assets Total assets Current liabilities Trade and other payables 13 Provisions 14 Total current liabilities Total liabilities Net assets Equity Issued capital 15 Reserve 15 Accumulated losses Total equity	981,818 220,449 972,071 220,371 1,519,757 - 70,302 - 10,000 362,534 10,000 362,534
	2,511,575 582,983 1,052,373 582,905 8,953,576 7,545,644 1,670,591 1,545,722 80,722 99,020 78,772 99,020 105,300 105,300 8,698,035 6,105,300
	9,139,598 7,749,964 10,447,398 7,750,042 11,651,173 8,332,947 11,499,771 8,332,947
	250,152 87,705 98,750 87,705 18,842 21,354 18,842 21,354
	268,994 109,059 117,592 109,059 268,994 109,059 117,592 109,059
	11,382,179 8,223,888 11,382,179 8,223,888
	14,180,394 9,776,727 14,180,394 9,776,727 227,633 20,432 227,633 20,432 (3,025,848) (1,573,271) (3,025,848) (1,573,271)
	11,382,179 8,223,888 11,382,179 8,223,888

Notes to the financial statements are included on pages 33 to 54.

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INCOME STATEMENT fOR THE fINANCIAL yEAR ENDED 30 juNE 2007STATEMENT Of CHANGES IN EquITy fOR THE yEAR ENDED 30 juNE 2007

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CoMPANY

	Attributable to equity holders
for the year ended 30 june 2007 Total equity at beginning of year Loss for year Total recognised income and expenses Share based payments Shares issued net of costs Exchange differences arising on translation of foreign operations Equity at end of year	Ordinary Shares $ Reserves $ Accumulated Losses $ Total Equity $
	9,776,727 20,432 (1,573,271) 8,223,888
	- - (1,452,727) -
	- - (1,452,727) (1,452,727)
	- 206,922 - 206,922 4,403,667 - - 4,403,667 - 279 - 279
	14,180,394 227,633 (3,025,848) 11,382,179

CoMPANY

CoMPANY
	Attributable to equity holders
for the year ended 30 june 2006 Total equity at beginning of year Loss for year Total recognised income and expenses Shares issued net of costs Equity at end of year	Ordinary Shares $ Option Premium Reserve $ Accumulated Losses $ Total Equity $
	9,201,657 20,432 (1,070,339) 8,151,750
	- - (502,932) ~~-~~
	- - (502,932) (502,932)
	575,070 - - 575,070
	9,776,727 20,432 (1,573,271) 8,223,888

Notes to the financial statements are included on pages 33 to 54.

‡ 30

STATEMENT Of CHANGES IN EquITy fOR THE yEAR NDED 30 juNE 2007INCOME STATEMENT fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

CoNSoLIDAtED ENtItY

CoNSoLIDAtED ENtItY
	Attributable to equity holders
for the year ended 30 june 2007 Total equity at beginning of year Loss for year Total recognised income and expenses Share based payments Shares issued net of costs Exchange difference arising on translation of foreign operations Equity at end of year	Ordinary Shares $ Option Premium Reserve $ Accumulated Losses $ Total Equity $
	9,776,727 20,432 (1,573,271) 8,223,888
	- - (1,452,727) -
	(1,452,727) (1,452,727)
	- 206,922 - 206,922 4,403,667 - - 4,403,667 - 279 - 279
	14,180,394 227,633 (3,025,848) 11,382,179

CoNSoLIDAtED ENtItY

CoNSoLIDAtED ENtItY
	Attributable to equity holders
for the year ended 30 june 2006 Total equity at beginning of year Loss for the year Total recognised income and expenses Shares issued net of costs At end of year	Ordinary Shares $ Reserves $ Accumulated Losses $ Total Equity $
	9,201,657 20,432 (1,070,339) 8,151,750
	- - (502,932) -
	- - (502,932) (502,932)
	575,070 - - 575,070
	9,776,727 20,432 (1,573,121) 8,223,888

Notes to the financial statements are included on pages 33 to 54.

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INCOME STATEMENT fOR THE fINANCIAL yEAR ENDED 30 juNE 2007CASH fLOw STATEMENT fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

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	Consolidated Company
Note	2007 $ 2006 $ 2007 $ 2006 $
Cash fows from operating activities Interest received Payments to suppliers and employees Tax refund in respect of exploration expenditure Receipts from customers Net cash used in operating activities 26 Cash fows from investing activities Payments for exploration and evaluation Payment for plant and equipment Receivables – non current Payments for deposits lodged with bank to secure payment to third parties Net cash used in investing activities Cash fows from fnancing activities Proceeds from issues of shares and options Share issue costs Net cash provided by fnancing activities Net increase (decrease) in cash held Cash and cash equivalents at the beginning of the fnancial year Cash and cash equivalents at the end of the fnancial year 8	49,222 33,076 49,135 33,076 (1,261,229) (1,085,922) (1,299,046) (1,085,922) - 153,415 364,382 153,415 (29,360) - 15,000 -
	(1,241,367) (899,431) (870,529) (899,431)
	(2,025,176) (1,226,829) (124,797) (1,226,809) (8,255) (69,703) (6,305) (69,703) - - (2,282,836) - - (105,300) - (105,300)
	(2,033,431) (1,401,832) (2,413,938) (1,401,812)
	4,347,630 579,680 4,347,630 579,680 (311,463) (4,610) (311,463) (4,610)
	4,036,167 575,070 4,036,167 575,070
	761,369 (1,726,193) 751,700 (1,726,173) 220,449 1,946,642 220,371 1,946,544
	981,818 220,449 972,071 220,371

Notes to the financial statements are included on pages 33 to 54.

‡ 32

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

1. General information

Green Rock Energy Limited (the Company) is a listed public company, incorporated in Australia and operating in Australia and Hungary.

Green Rock Energy Limited’s registered office and its principal place of business are as follows:

Registered office Principal place of business Unit 6, 38 Colin Street Unit 6, 38 Colin Street WEST PERTH WA 6005 WEST PERTH WA 6005

2. Adoption of New and revised Accounting Standards

At the date of authorisation of the financial report, a number of Standards and Interpretations were in issue but not yet effective.

Initial application of the following Standards will not affect any of the amounts recognised in the financial report, but will change the disclosures presently made in relation to the consolidated entity’s and the Company’s financial report:

Standard	Standard	Effective for annual reporting periods beginning on or after	Expected to be initially applied in the fnancial year ending
•	AASB 7 ‘Financial Instruments: Disclosures’ and consequential amendments to other accounting standards resulting from its issue	1 January 2007	30 June 2008
•	AASB 101 ‘Presentation of Financial Statements’ – revised standard	1 January 2007	30 June 2008
•	AASB 2007-7 ‘Amendments to Australian Accounting Standards’	1 July 2007	30 June 2008
•	AASB 8 ‘Operating Segments’	1 January 2009	30 June 2010

Initial application of the following Standards and Interpretations is not expected to have any material impact to the financial report of the consolidated entity and the Company:

Standard	Standard	Effective for annual reporting periods beginning on or after	Expected to be initially applied in the fnancial year ending
•	AASB Interpretation 10 ‘Interim Financial Reporting and Impairment’	1 November 2006	30 June 2008
•	AASB Interpretation 11 ‘AASB 2 – Group and Treasury Share Transactions’	1 March 2007	30 June 2008
•	AASB 2007-1 ‘Amendments to Australian Accounting Standards arising from AASB Interpretation 11’	1 March 2007	30 June 2008
•	AASB Interpretation 12 ‘Service Concession Arrangements’	1 January 2008	30 June 2009
•	AASB 2007-2 ‘Amendments to Australian Accounting Standards arising from AASB Interpretation 12’	1 January 2008	30 June 2009
•	AASB 2007-4 ‘Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments’	1 July 2007	30 June 2008
•	AASB Interpretation 14 ‘AASB 119 – The Limit on a Defned Beneft Asset, Minimum Funding Requirements and their Interaction’	1 January 2008	30 June 2009
•	AASB 123 ‘Borrowing Costs’ – revised standard	1 January 2009	30 June 2010
•	AASB 2007-6 ‘Amendments to Australian Accounting Standards arising from AASB 123’	1 January 2009	30 June 2010

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

2. Adoption of New and revised Accounting Standards (continued)

AASB Interpretation 10

AASB 134 ‘Interim Financial Reporting’ requires an entity to apply the same accounting policies in its interim financial report as are applied in its annual financial report. It also states that measurements for interim reporting purposes are made on a year-to-date basis so that the frequency of reporting does not affect an entity’s annual reports. AASB Interpretation 10 clarifies that an entity cannot reverse an impairment loss recognised in a previous interim period in relation to goodwill or either an investment in an equity instrument or in a financial asset carried at cost

This approach is consistent with impairment reversal prohibitions in AASB 136 ‘Impairment of Assets’ and AASB 139 ‘Financial Instruments: Recognition and Measurement’.

AASB Interpretation 10 is required to be applied prospectively from the date at which the entity first applied AASB 36 (ie. 1 July 2004) and AASB 139 (ie. 1 July 2005), for goodwill and investments in either equity instruments or financial assets carried at cost, respectively.

AASB Interpretation 11 and AASB 2007-1

AASB Interpretation 11 clarifies the application of AASB 2 ‘Share-based Payment’ to certain share-based payment arrangements involving the entity’s own equity instruments and to arrangements involving equity instruments of the entity’s parent. AASB 2007-1 amends AASB 2 to insert transitional provisions of IFRS 2 ‘Share-based Payment’ that had previously been set out in AASB 1 ‘First-time Adoption of Australian Equivalents to International Financial Reporting Standards’.

AASB Interpretation 11 and AASB 2007-1 are required to be applied retrospectively.

AASB Interpretation 12 and AASB 2007-2

AASB Interpretation 12 provides guidance on the accounting by operators for public-to-private service concession arrangements. The Company nor the consolidated entity does not operate such services.

AASB 2007-4

AASB 2007-4 makes amendments to a number of Australian Accounting Standards to introduce various accounting policy options, delete various disclosures presently required and make a number of editorial amendments.

Whilst a large number of Accounting Standards are amended by AASB 2007-4, key accounting policy options introduced by AASB 2007-4 relate to:

the measurement and presentation of government grants;
the accounting for jointly controlled entities using the proportionate consolidation method; and the presentation of the cash flow statement.

The consolidated entity does not intend to change any of its current accounting policies on adoption of AASB 2007-4; accordingly, there will no financial impact to the financial report. However, in the [consolidated entity’s/company’s] financial report for the financial year ending 30 June 2008, certain information may no longer be disclosed, or may be disclosed in an alternative manner, due to amendments made by AASB 2007-4 to the disclosure requirements of various Accounting Standards.

AASB Interpretation 13

AASB Interpretation 13 addresses the accounting by entities that provide their customers with incentives to buy goods or services by providing awards (i.e. award credits) as part of a sales transaction. AASB Interpretation 13 requires the entity that grants the awards to account for the sales transaction that gives rise to the award credits as a ‘multiple element revenue transaction’ and allocate the fair value of the consideration received or receivable between the award credits granted and the other components of the revenue transaction. AASB Interpretation 13 is required to be applied retrospectively.

AASB Interpretation 14

AASB Interpretation 14 addresses three issues for entities that (a) have a defined benefit superannuation plan; and (b) have a defined benefit plan asset. Neither the consolidated entity nor the Company has such a plan or an asset.

‡ 34

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

2. Adoption of New and revised Accounting Standards (continued)

AASB 123 (revised) and AASB 2007-6

AASB 123 (July 2004) permits an entity to either expense or capitalise borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets. Under AASB 123 (revised), entities are no longer permitted to choose between alternate treatments and must capitalise borrowing costs relating to qualifying assets. AASB 2007-6 makes amendments to various Accounting Standards arising from the issue of AASB 123 (revised).

AASB 123 (revised) is generally to be applied prospectively to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009. Accordingly, no restatements will be required in respect of transactions prior to the date of adoption.

3. Significant accounting policies

Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Urgent Issues Group Interpretations, and complies with other requirements of the law. Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with the A-IFRS ensures that the consolidated financial statements and notes of the consolidated entity comply with International Financial Reporting Standards (‘IFRS’). The parent entity financial statements and notes also comply with IFRS except for the disclosure requirements in IAS 32 ‘Financial Instruments: Disclosure and Presentation’ as the Australian equivalent Accounting Standard , AASB 132 ‘Financial Instruments: Disclosure and Presentation’ does not require such disclosures to be presented by the parent entity where its separate financial statements are presented together with the consolidated financial statements of the consolidated entity.

The financial statements were authorised for issue by the directors on 28 September 2007.

Basis of preparation

The financial report has been prepared on an accruals basis and is based on historical costs and does not take into account changing money values or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets.

Going concern

The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business.

The ability of the Company and the consolidated entity to continue as going concerns and to pay their debts as and when they fall due is dependent on the ability of the Company and the consolidated entity to secure additional funding which would be sufficient to fund project development and to provide adequate working capital for a further 12 months.

The directors took steps during the year under report to ensure the Company and the consolidated entity continued as going concerns. These steps included:

In August 2006 raised $300,250 net via private placement to institutional and sophisticated investors.
A private placement to sophisticated investors in December 2006 raised $314,900 after costs.
In December 2006 raised $3,408,018 net via a pro-rata Renounceable Rights Issue.

Since the end of the last financial year the Company has, through the issue of 12,000,000 shares raised $1,251,525 (net of costs) from a private placement to professional investors. Additionally, arising from the flow test results achieved from its Hungarian Orthahaza project, it has lodged a claim in the amount of $1,406,986 under the Geological Risk Insurance provided by the Geothermal Energy Development Programme (GeoFund). This programme is funded by the Global Environment Facility Fund and implemented by the World Bank and International Finance Corporation. Following an independent assessment of the flow results of the project, and audit of the costs incurred, the directors have every reason to believe that the claim will succeed and that it will not be moderated.

Notwithstanding this, there is uncertainty whether the Company and the consolidated entity will be able to continue as going concerns.

Should the Company and the consolidated entity be unable to continue as going concerns, they may be required to realise their assets and extinguish their liabilities other than in the normal course of business and at amounts different from those stated in the financial report.

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

3. Significant accounting policies (continued)

Going concern (continued)

The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that may be necessary should the Company and the consolidated entity be unable to continue as going concerns.

The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2007, the comparative information presented in these financial statements for the year ended 30 June 2006, and in the preparation of the opening A-IFRS balance sheet at 1 January 2004, the consolidated entity’s date of transition.

The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

(a) Basis of consolidation

The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the consolidated entity, being the Company (the parent entity) and its subsidiaries as defined in Accounting Standard AASB 127 ‘Consolidated and Separate Financial Statements’. A list of subsidiaries appears in note 19 to the financial statements. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements.

On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. If, after reassessment, the fair values of the identifiable net assets acquired exceeds the cost of acquisition, the deficiency is credited to profit and loss in the period of acquisition.

The interest of minority shareholders is stated at the minority’s proportion of the fair values of the assets and liabilities recognised.

The consolidated financial statements include the information and results of each subsidiary from the date on which the Company obtains control and until such time as the Company ceases to control such entity.

In preparing the consolidated financial statements, all intercompany balances and transactions, and unrealised profits arising within the consolidated entity are eliminated in full.

(b) Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the consolidated entities in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 ‘Business Combinations’ are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 ‘Non-current Assets Held for Sale and Discontinued Operations’, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the consolidated entities interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the consolidated entities interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

(c) Cash and cash equivalents

Cash and cash equivalents includes cash on hand and deposits held with banks.

(d) Employee benefits

Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.

Provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

‡ 36

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

3. Significant accounting policies (continued)

(e) financial assets

Investments are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs.

Subsequent to initial recognition, investments in subsidiaries are measured at cost.

Other financial assets, including trade receivables, loans, and other receivables, are classified as loans and receivables, and are recorded at amortised cost less impairment. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

(f) Government grants

Government grants are assistance by the government in the form of transfers of resources to the consolidated entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. Government grants include government assistance where there are no conditions specifically relating to the operating activities of the consolidated entity other than the requirement to operate in certain regions or industry sectors.

Government grants relating to income are recognised as income over the periods necessary to match them with the related costs. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the consolidated entity with no future related costs are recognised as income of the period in which it becomes receivable.

Government grants relating to assets are treated as deferred income and recognised in profit and loss over the expected useful lives of the assets concerned.

(g) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

i. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

ii. for receivables and payables which are recognised inclusive of GST.

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

Cash flows are included in the Cash Flow Statement on a gross basis. 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 operating cash flows.

(h) Impairment of assets

At each reporting date, the consolidated entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Goodwill, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired. An impairment of goodwill is not subsequently reversed.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

3. Significant accounting policies (continued)

(h) Impairment of assets (continued)

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

(i) Income tax

Current tax

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Deferred tax

Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items.

In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and joint ventures except where the consolidated entity is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the consolidated entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company/consolidated entity intends to settle its current tax assets and liabilities on a net basis.

(j) 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.

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.

‡ 38

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

3. Significant accounting policies (continued)

(j) Exploration and Evaluation Expenditure (continued)

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

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

(k) Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(l) Payables

Trade payables and other accounts payable are recognised when the consolidated entity becomes obliged to make future payments resulting from the purchase of goods and services.

(m) Plant and equipment

Plant and equipment, are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.

Depreciation is provided on plant and equipment. Depreciation is calculated on a straight line basis so as to write off the net cost or other re-valued amount of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method is reviewed at the end of each annual reporting period.

The following estimated useful lives are used in the calculation of depreciation:

Office equipment 2.6 – 8.7 years
Technical equipment 4 - 5 years

(n) Provisions

Provisions are recognised when the consolidated entity has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.

(o) Revenue recognition

Interest revenue is recognised when receivable.

(p) Trade and other receivables

Trade receivables and other receivables are recorded at amounts due less any allowance for doubtful debts.

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

3. Significant accounting policies (continued)

(q) Comparative figures

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

(r) Share Based Payments

Equity-settled share-based payments granted after 7 November 2002 that were unvested as of 1 January 2005, are measured at fair value at the date of grant. Fair value is measured by use of a Black Scholes model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. Further details on how the fair value of equity-settled share-based transactions has been determined can be found in note 21.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the consolidated entity’s estimate of shares that will eventually vest.

For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date.

4. Critical Accounting Judgments

In the application of A-IFRS management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgments made by management in the application of A-IFRS that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial statements.

The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Key estimates - impairment

The consolidated entities assesses impairment at each reporting date by evaluating conditions specific to the consolidated entitles that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. The consolidated entities policy on the capitalisation of exploration and evaluation expenditure is detailed in note 3(j).

Key estimates - share based payments

The consolidated entities measures the cost of equity settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black Scholes model.

One of the inputs into the option valuation model is volatility of the underlying share price which is estimated on the one year history of the share price and has been estimated at approximately 100%.

Key judgments - doubtful debts/recovery of provision

The Directors believe that the recovery of the intercompany loan from Green Rock Energy Limited to the consolidated entities is dependent on the successful development and commercial exploitation or, alternatively, the sale of the exploration assets held by the controlled entity.

Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

‡ 40

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

5. Segment reporting

Segment information is presented in respect of the consolidated entity’s business and geographical segments. The primary format, geographical segments, is based on the consolidated entity’s management and internal reporting structure.

Inter-segment pricing is determined on an arm’s length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly income-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Geographical segments

The consolidated entity operates in two principal geographical areas:

Australia
Hungary

Business segments

The consolidated entity operates in predominantly one business segment, being geothermal energy and development activities.

Geographical segments

	Australia Hungary Eliminations Consolidated
Revenue Interest Other Total revenue Loss before tax Income tax beneft Loss for the period Total segment assets Total segment liabilities Cash fows from operating activities Cash fows from investing activities Cash fows from fnancing activities	2007 2006 2007 2006 2007 2006 2007 2006
	49,135 33,076 87 - - - 49,222 33,076 15,000 - 23,000 - - - 38,000 -
	64,135 33,076 23,087 - - - 87,222 33,076
	(1,452,727) (1,016,053) (213,504) - 200,797 - (1,465,434) (1,016,053) 67,360 513,121 12,707 - - - 80,067 513,121
	(1,385,367) (502,932) (200,797) - 200,797 - (1,385,367) (502,932)
	11,907,080 8,332,947 2,314,814 - (2,570,721) - 11,651,173 8,332,947 117,592 109,059 2,434,314 - (2,282,911) - 268,994 109,059 (870,529) (899,431) (370,838) - - - (1,241,367) (899,431) (2,413,938) (1,401,832) 380,507 - - - (2,033,431) (1,401,832) 4,036,167 575,070 - - - - 4,036,167 575,070

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

	Consolidated Company
	2007 $ 2006 $ 2007 $ 2006 $
6. Loss from operations (a) Revenue Revenue from continuing activities consisted of the following items: Interest Income Other (b) Loss before income tax expense Loss before income tax has been arrived at after charging the following specifc expenses: Operating lease rental expenses Employee benefts expense: Salaries and fees Post employment benefts Other employee benefts (accrued leave)	49,222 33,076 49,135 33,076 38,000 - 15,000 -
	87,222 33,076 64,135 33,076 49,716 43,043 49,716 43,043
	615,790 419,464 615,790 419,464 69,022 37,752 69,022 37,752 18,842 21,354 18,842 21,354
	703,654 478,570 703,654 478,570
7. Income taxes (a) Income tax recognised in proft or loss Tax income comprises: Current income tax beneft Adjustments in respect of current income tax of prior periods Total tax income The prima facie income tax expense on pre-tax accounting loss from operations reconciles to the income tax beneft in the fnancial statements as follows: Loss from operations Income tax expense calculated at 30% Research and development concession Non deductible expenses Effect of lower rate of tax on overseas income Unused tax losses and tax offsets not recognised as deferred tax assets Overprovision in prior year Income tax attributable to operating loss	80,067 359,706 67,360 359,706 - 156,415 , 153,415
	80,067 513,121 67,360 513,121

	1,532,794 1,016,053 1,520,087 1,016,053
	459,838 304,816 456,026 304,816 13,475 71,941 13,472 71,941 (61,202) - (61,204) - (49,820) - - - (282,221) (17,051) (340,934) (17,051)
	80,067 359,706 67,360 359,706 - 153,415 - 153,415
	80,067 513,121 67,360 513,121

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.

‡ 42

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

		Consolidated Company
		2007 $ 2006 $ 2007 $ 2006 $
	unrecognised deferred tax balances The following deferred tax assets have not been brought to account as assets: Temporary differences Exploration and evaluation Tax losses – revenue	14,199 34,249 14,199 34,249 2,686,073 2,263,693 501,177 463,717 1,754,286 814,481 1,759,371 814,481
		4,454,558 3,112,423 2,274,747 1,312,447
8. 9.	Cash and cash equivalents Cash at bank and in hand Deposits at call	28,027 220,449 18,280 220,371 953,791 - 953,791 -
		981,818 220,449 972,071 220,371
	other receivables Current Other receivables (i) Other current assets	1,519,757 70,302 10,000 362,534 10,000 362,534
		1,529,757 362,534 80,302 362,534

(i) Included in other receivables is an amount of $1,406,986 claimed under the Geological Risk Insurance provided by the Geothermal Energy Development Programme (GeoFund) which is funded by the Global Environment Facility Trust Fund and implemented jointly by the World Bank and International Finance Corporation.

As at the date of this report all documentation supporting the claim had been reviewed by World Bank officials in Europe and found to be correctly complied and adequately detailed. The costs under claim have been independently verified and audited. The claim has been lodged with the World Bank and acknowledged but is subject to fund approval by GeoFund.

	Consolidated Company
	2007 $ 2006 $ 2007 $ 2006 $
10. Exploration and evaluation expenditure Exploration expenditure capitalised - exploration and evaluation phases Total exploration expenditure Movement in the carrying amount for deferred exploration expenditure: Brought forward at the beginning of year Capitalised during year Exploration expenditure written off Carried forward exploration expenditure	8,953,576 7,545,644 1,670,591 1,545,742
	7,545,644 6,347,746 1,545,742 347,844 1,407,932 1,197,898 124,849 1,197,898 - - - -
	8,953,576 7,545,644 1,670,591 1,545,742

Recoverability of the carrying amount of exploration assets is dependent on the successful development and commercial exploitation or sale of the respective areas of interest.

Capitalised costs amounting to $2,025,176 (2006: $1,226,829) have been included in cash flows from investing activities in the cash flow statement.

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

	Consolidated Company
	2007 $ 2006 $ 2007 $ 2006 $
11. Plant and equipment Plant and equipment at cost Gross carrying amount Balance at 1st July 2006 Additions Disposals Balance at 30th June 2007 Accumulated depreciation Balance at 1st July 2006 Depreciation expense Depreciation on asset disposed Balance at 30th June 2007 Net book value at 30th june 2007 12. other non-current fnancial assets Investments in controlled entities at cost (ii) Loan to subsidiary Less: provision for impairment Other fnancial assets (i)	123,737 54,034 123,737 54,034 8,255 69,703 6,305 69,703 - - - -
	131,992 123,737 130,042 123,737
	24,717 1,191 24,717 1,191 26,553 23,526 26,553 23,526 - - - -
	51,270 24,717 51,270 24,717
	80,722 99,020 78,772 99,020
	- - 6,505,400 6,000,000 - - 2,282,836 - - - (195,501) - 105,300 105,300 105,300 105,300
	105,300 105,300 8,698,035 6,105,300

(i) In compliance with the requirements of the South Australian Petroleum Act of 2000, the Company is required to lodge and maintain with the Minister, for the satisfaction of obligations arising under the Act or the Geothermal Exploration Licences (GELs) granted, security of $100,000 (one hundred thousand dollars). The security is to be lodged in cash or an unconditional irrevocable bank guarantee or a letter of credit from a financial institution approved by the Minister.

If on expiry of the GELs they are not renewed and the Minister is satisfied that there are no further obligations under the licences or the Act, the Minister will return the security to the Company.

(ii) Detailed information on shares in controlled entities in which the Company had a direct or indirect interest at 30 June 2007 is disclosed in note 19.

		Consolidated Company
		2007 $ 2006 $ 2007 $ 2006 $
13.	Current trade and other payables
	Trade payables Other payables	233,402 73,705 82,000 73,705 16,750 14,000 16,750 14,000
		250,152 87,705 98,750 87,705

The average credit period on purchases of goods and services is 30 days. No interest is charged on the trade payables for the first 60 days from the date of the invoice.

The consolidated entity has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.

‡ 44

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

	Consolidated Company
	2007 $ 2006 $ 2007 $ 2006 $
14. Current provisions Employee benefts 15. Issued capital and reserves (a) Issued capital Fully paid ordinary shares Balance at beginning of fnancial year Share placement 10 August 2006 (at 7 cents each) Acquisition of geothermal project 30 November 2006 (at 10.5 cents each) Share placement 15 December 2006 Conversion of 31 December 2006 Options Renounceable Rights Issue Class A Performance shares converted 25 July 2005 (at 20 cents each) Share Purchase Plan 13 December 2005 (at 16 cents each) Share issue costs Balance at end of fnancial year	18,842 21,354 18,842 21,354
	18,842 21,354 18,842 21,354

	14,180,394 9,776,727 14,180,394 9,776,727
	14,180,394 9,776,727 14,180,394 9,776,727

	2007 No. 2006 $ 2007 No. 2006 $
	59,155,465 9,776,727 40,532,465 6,201,657 4,432,142 310,250 - - 3,500,000 367,500 - - 6,700,000 335,000 - - 65,000 13,000 - - 73,787,607 3,689,380 - - - - 15,000,000 3,000,000 - - 3,623,000 579,680 - (311,463) - (4,610)
	147,640,214 14,180,394 59,155,465 9,776,727

Ordinary shares carry one vote per share and the right to dividends.

Share options carry no rights to dividends and have no voting rights.

	Consolidated Company
	2007 $ 2006 $ 2007 $ 2006 $
(b) Reserves Option premium reserve Share based payments reserve (i) Foreign translation reserve	158,332 20,432 158,332 20,432 69,022 - 69,022 - 279 - 279 -
	227,633 20,432 227,633 20,432

(i) the full amount of the share based payment reserve was incurred during the year under review.

As at 30 June 2007, there were 40,241,810 listed and 6,500,00 unlisted un-issued ordinary shares in respect of which options were outstanding (2006 : 22,932,465). The listed options expire on 18 April 2008 and have an exercise price of 10 cents.

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

16. Loss per share

Basic loss per share: Basic loss per share	Consolidated
	2007 Cents per share 2006 Cents per share
	1.54 0.90

The loss and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows:

Loss for year Weighted average number of ordinary shares for the purposes of basic loss per share	2007 $ 2006 $
	1,452,727 502,932
	94,494,912 56,175,115

Diluted loss per share

Diluted loss per share has not been calculated as the Company’s potential ordinary shares are not considered dilutive and do not increase loss per share.

17. Commitments for expenditure

(a) Exploration expenditure commitments

In order to maintain current rights of tenure to exploration tenements, the consolidated entity is required to perform minimum exploration work to meet the minimum expenditure requirements specified by various State governments.

These obligations can be reduced by selective relinquishment of exploration tenure or renegotiation. Due to the nature of the consolidated entities operations in exploring and evaluating areas of interest, it is very difficult to forecast the nature and amount of future expenditure.

Exploration expenditure forecast

These obligations are not provided for in the financial report and are payable:

Within one year One year or later and no later than fve years	Consolidated Company
	2007 $ 2006 $ 2007 $ 2006 $
	400,000 250,000 400,000 250,000 5,000,000 1,250,000 5,000,000 1,250,000 5,400,000 1,500,000 5,400,000 1,500,000

(b) Operating lease commitments

The lease held in respect of Unit 6, 38 Colin Street is a three year lease which commenced on 16 May 2005 with an option to renew for a further three years (to 15 May 2011) and includes secure parking. The outgoing costs are based on actual expenditure.

The facility to sublet is contained within the lease and permission may not be unreasonably withheld. Based on its location, the standard of fit-out and usable area, this self-contained office unit could be easily sublet. The annual rent for this unit is $45,972 (2006: $40,465).

‡ 46

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

Not longer than 1 year Longer than 1 year and not longer than 5 years Later than fve years	Consolidated Company
	2007 $ 2006 $ 2007 $ 2006 $
	45,972 40,465 45,972 40,465 35,463 77,144 35,463 77,144 - - - -
	81,435 117,609 81,435 117,609

18. Contingent liabilities and contingent assets

There were no contingent liabilities nor contingent assets at year end.

19. Subsidiaries

Subsidiaries
Name of Entity	Country of Incorporation Ownership Interest 2007 % 2006 %
Parent Entity
Green Rock Energy Limited Australia Subsidiaries
Green Heat Resources Pty Ltd Australia 100% 100% Green Rock Geothermal Pty Ltd Australia 100% 100% Vulcan Geothermal Pty Ltd Australia 100% - Green Rock (Vulcan) Energy Kft (i) Hungary 100% -

(i) contolled by a 100% ownership interest in Vulcan Geothermal Pty Ltd.

20. Acquisitions of entities

Acquisition of new subsidiary

On 27 November 2006, the Company acquired 100% of the issued share capital of Vulcan Geothermal Pty Ltd an Australian company which fully owns a Hungarian geothermal company Vulcan Energy Kft (subsequently renamed Green Rock (Vulcan) Energy Kft) for a consideration of $505,400. The consideration comprised the issue of 3,500,000 ordinary shares at 10.5 cents per share and 3,500,000 unlisted options (exercisable at 15 cents , expiring on 28 November 2008) valued at 3.94 cents per option. Vulcan’s principal activity is the identification and development of geothermal energy resources for the production of electricity. This transaction has been accounted for using the acquisition method of accounting. The date of acquisition was deemed to be 28 November 2006, being the date the acquisition was approved by the Company’s shareholders.

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

20. Acquisitions of entities (continued)

Acquisition of new subsidiary

The net assets acquired in the business combination, and the goodwill arising, are as follows:

Net assets acquired: Cash and cash equivalents Property, plant and equipment Other receivables Exploration expenditure Trade and other payables Goodwill arising on acquisition Fair value of consideration	Acquiree’s carrying amount before business combination $ fair value adjustments $	fair value $
	15,118 - 3,183 - 15,650 - - 472,338 (889) -
		15,118
		3,183
		15,650
		472,338
		(889)
	33,062 472,338	505,400
		-
		505,400

Included in the net loss for the period is $2,934 attributable to the additional costs generated by Vulcan Geothermal Pty Ltd and Vulcan Energy Kft (the Hungarian operation).

Had the business combinations been effected at 1 July 2006, the revenue of the consolidated entities would be $391,298, and net loss $402,771. The directors of the consolidated entities consider these ‘pro-forma’ numbers to represent an approximate measure of the performance of the combined group on an annualised basis and to provide a reference point for comparison in future periods.

21. Share Based Payment Arrangements

The following share-based payment arrangements were in existence during the current period:

Options series	Number	Grant date	Expiry date	Exercise price (cents)	fair value at grant date (cents)
Directors Issued 21/11/06 (i) 2,000,000 21/11/06 21/11/09 25 3.34 Issued 21/11/06 (ii) 500,000 21/11/06 21/11/09 25 3.34
Employee Incentive Option Plan Issued 20/03/07 (iii) 500,000 20/03/07 9/03/11 7 5.10

(i) Mr Alan Knights (Executive Director) - 2,000,000 options granted on 21 November 2006 which are exercisable at 25 cents each and expire on 21 November 2009. The options vest 50% on 21 November 2006 with the balance vesting on 21 November 2007. The grant of these options was approved by shareholders at the 2006 Annual General Meeting held on 28 November 2006.
(ii) Mr Scott Spencer (Non-Executive Director) - 500,000 options granted on 21 November 2006 which are exercisable at 25 cents each and expire on 21 November 2009. 50% of the options granted vest on 21 November 2006 with the balance vesting on 21 November 2007. The grant of these options was approved by shareholders at the 2006 Annual General Meeting held on 28 November 2006.
(iii) Mr Nigel Hodder (Company Secretary) - 500,000 options on 20 March 2007 with an exercise price of 7 cents each and expiring on 9 March 2011. The options vest 50% on 9 March 2008 with the remainder vesting on 9 March 2009. 300,000 options were granted on 9 August 2007, are exercisable at 15 cents and expire on 9 August 2011.

The fair value of the share options granted during the financial year under share based payment arrangements is $69,022 (2006: Nil). Options were priced using a Black Scholes model. Expected volatility is based on the movement of the underlying share price around its average price over the expected term of the option. The directors have determined that the expected period of exercise to be similar to the option life based on historical experience.

‡ 48

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

21. Share Based Payment Arrangements (continued)

Inputs into the model	Option series
	A Knights S Spencer N Hodder
Grant date share price (cents) Exercise price (cents) Expected volatility Option life Dividend yield Risk-free interest rate	10.00 10.00 5.10 25.00 25.00 7.00 80% 80% 70% 3 years 3 years 4 years - - - 5.75% 5.75% 5.75%

The following reconciles the outstanding share options granted at the beginning and end of the financial year:

Balance at beginning of the fnancial year Granted during the fnancial year • Directors • Employees Balance at end of the fnancial year Exercisable at end of the fnancial year	2007 2006	2007 2006
	Number of options weighted Average Exercise price (Cents)	Number of options weighted Average Exercise price (cents)
	- - - - 2,500,000 25.00 - - 500,000 25.00 - -
	3,000,000 25.00 - -
	1,250,000 25.00 - -

Exercised during the financial year

No share options granted under the employee share option plan were exercised during the financial year.

Balance at end of the financial year

The share options outstanding and exercisable at the end of the financial year had a weighted average remaining contractual life of 1,700 days.

22. Key management personnel remuneration

The key management personnel of Green Rock Energy Limited during the year were:

• Adrian Larking Managing Director Appointed 25 February 2005 • Alan Knights Executive Director Appointed 10 May 2005 • Jörg Baumgärtner Non-Executive Director Appointed 25 April 2007 • Scott Spencer Non-Executive Director Appointed 29 November 2005 • Hugh Warner Non-Executive Director Appointed 21 September 2000 Resigned 16 February 2007 • Nigel Hodder Company Secretary Appointed 4 April 2005

(a) Key management personnel remuneration

The Board seeks to set remuneration at a level that provides the Company with the ability to attract and retain directors of high caliber , whilst incurring a cost which is acceptable to shareholders.

The level of fixed remuneration is set so as to provide a base level which is both appropriate to the position and is competitive in the market. Fixed remuneration is reviewed annually and this process consists of a review of Company and individual performance, comparative remuneration in the market and where appropriate external advice on policies and practices.

The directors do not consider performance based remuneration to be appropriate at present.

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

22. Key management personnel remuneration (continued)

Details of the nature and amount of each element of the remuneration of each director and executive officer of the Company for the year ended 30 June 2007 are as follows:

==> picture [488 x 163] intentionally omitted <==

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

Primary Post-employment Equity
Super- Pre
Non-Mon- annua- scribed Other
Salary & fees Bonus etary tion benefits Other Options benefits Total
2007 $ $ $ $ $ $ $ $ $
- - - - - -
Adrian Larking 180,000 16,200 196,200
Jörg Baumgärtner 7,645 688 - 8,333
- - - - -
Alan Knights 160,000 14,400 52,884 227,284
- - - - -
Scott Spencer 55,046 4,954 13,221 73,221
- - - - - -
Hugh Warner 34,731 3,126 37,857
- - - - -
Nigel Hodder 100,000 9,000 2,917 111,917
Total 537,422 - - 48,368 - - 69,022 - 654,812
----- End of picture text -----

	Primary	Primary	Primary	Post-employment	Post-employment	Post-employment	Equity
2006	Salary & fees $	Bonus $	Non- mone- tary $	Super- annua- tion $	Pre- scribed benefts $	Other $	Options $
Adrian Larking Alan Knights Scott Spencer Hugh Warner Nigel Hodder Total	180,000 - - 16,200 - - - - 196,200 98,180 - - 8,836 - - - - 107,016 32,110 - - 2,890 - - - - 35,000 59,174 - - 826 - - - - 60,000 100,000 - - 9,000 - - - - 109,000
	469,464 - - 37,752 - - - - 507,216

(b) Contracts for services with key management personnel

Contracts binding the Managing Director and the Executive Director have been formalised. These contracts may be terminated at any time by the individuals or the Board giving three months notice in writing to terminate the Employment Agreement .

The two Non-Executive Directors are both bound by contract. The initial term of Dr Jorg Baumgartner’s contract expires at the conclusion of the Annual General Meeting in November 2007 at which time he may offer himself for re-appointment. The contracts of the Non- Executive Directors may be terminated at any time by notice in writing or by shareholders acting by majority vote.

The contract of employment of the Company Secretary is such that he will continue in employment until either the Company or the individual give at least one months notice in writing of the desire to terminate his contract.

‡ 50

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

22. Key management personnel remuneration (continued)

Leave is accrued at the rate of 4 weeks per annum. Long service leave accrues in accordance with the statutory provisions applying from time to time in Western Australia.

The calculation of terminal benefits is made in accordance with statutory provisions and is payable by the Company at the time of vacating office.

	Consolidated Company
23. remuneration of auditors During the year the following fees were paid or were payable for services provided by the auditor of the Company, its related practices and non related audit frms Audit services Audit and review of the fnancial report Other non-audit services	2007 $ 2006 $ 2007 $ 2006 $
	30,750 23,550 30,750 23,550 4,500 1,750 4,500 1,750
	35,250 25,300 35,250 25,300

The auditor of Green Rock Energy Limited is Ord Partners, Chartered Accountants.

24. related party disclosures

(a) Equity interests in related parties

Equity interests in subsidiaries

Details of the percentage of ordinary shares held in subsidiaries and loans to subsidiaries are disclosed in note 19 and this note respectively.

(b) Key management personnel remuneration

Details of key management personnel remuneration are disclosed in note 22 to the financial statements.

(c) Key management personnel equity holdings

fully paid ordinary shares.
2007	Balance@ 1/7/06 No. Balance on appointment Net other change No.	Balance on resignation No.	Balance@ 30/6/07 No.
Adrian Larking (i) Jörg Baumgärtner Alan Knights (ii) Scott Spencer Hugh Warner (iii) Nigel Hodder (iv) Total	7,531,250 N/A 1,968,750 N/A 9,500,000 N/A - - N/A - 74,246 N/A 2,043,986 N/A 2,118,232 - N/A - N/A - 823,751 N/A 681,569 1,505,320 N/A - N/A 207,694 N/A 207,694
	8,429,247 - 4,901,999 1,505,320 11,825,926

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

24. related party disclosures (continued)

(i) acquired additional shares through Renounceable Rights Issue

(ii) acquired shares on market and through Renounceable Rights Issue

(iii) acquired on market

(iv) acquired shares on market, and through Renounceable Rights Issue

fully paid ordinary shares

==> picture [509 x 120] intentionally omitted <==

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

Balance@ Balance on Balance@
1/7/06 Net other change resignation 30/6/07
2006
No. No. No. No.
-
Adrian Larking (i) 7,500,000 31,250 7,531,250
- -
Alan Knights (ii) 74,246 74,246
- - - -
Scott Spencer
-
Hugh Warner (iii) 730,001 93,750 823,751
Nigel Hodder - - - -
Total 8,230,001 199,246 - 8,397,997
----- End of picture text -----

(i) acquired additional shares through the Share Purchase Plan

(ii) acquired additional shares on market and through the Share Purchase Plan

(iii) additional shares acquired through the Share Purchase Plan

Share option holdings

2007	Bal @ 1/7/06 No.	Granted as remu neration No.	Net other change No.	Balance on resignation No.	Bal @ 30/06/07 No.	Bal dvested vested @ 30/06/07 No.	Vested but not exerci- sable No.	Vested and exercisable 30 june 2007 No.	Options vested during year No.
Adrian Larking Jorg Baumgartner Alan Knights Hugh Warner Scott Spencer Nigel Hodder Total	-	- - 2,000,000 - 500,000 500,000	984,375	- - - 376,331 - -	984,375	984,375 - 1,771,993 - 250,000 101,924	-	984,375 - 1,771,993 - 250,000 101,924	-
	N/A		-		-		-		-
	-		771,993		2,771,993		-		1,000,000
	630,066		(253,735)		N/A		-		-
	-		-		500,000		-		250,000
	-		101,924		601,924		-		-
	630,066	3,000,000	1,604,557	376,331	4,858,292	3,108,292	-	3,108,292	1,250,000

Share option holdings

2006	Balance at 1/7/2005 No.	Granted as remuner- ation No.	Net other change No.	Balance on No. resignation	Bal @ 30/06/06 No.	Bal vested@ 30/06/06 No.	Vested but not No. exercisable	Vested and No. exercisable 30 june 2006	Options vested during year No.
Adrian Larking Alan Knights Hugh Warner Scott Spencer Nigel Hodder Total	-	- - - - -	-	- - - - -	-	- - - - -	-	- - 630,066 - -	- - - - -
	-		-		-		-
	630,066		-		630,066		-
	-		-		-		-
	-		-		-		-
	630,066	-	-	-	630,066	-	-	630,066	-

(d) Other transactions with Key Management Personnel:

There were no other transactions with Key Management Personnel.

‡ 52

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

25. Subsequent events

On 9 August 2007 the Company issued 300,000 incentive options exercisable at 15 cents and expiring on 9 August 2011.

On 9 August 2007 the Company issued 1,000,000 incentive options exercisable at 15 cents and expiring on 9 August 2010 .

26. (a)

(b)

	Consolidated Company
	2007 $ 2006 $ 2007 $ 2006 $
Notes to the cash fow statement Reconciliation of loss for the period to net cash fow used in operating activities Loss for the period Exploration expenditure written off Depreciation and amortisation of non-current assets Impairment of loan to subsidiary Changes in net assets and liabilities, net of effects from acquisition and disposal of businesses: (Increase)/decrease in assets: Current receivables Other Increase/(decrease) in liabilities: Current payables Current provisions Net cash used in operating activities	(1,452,727) (502,932) (1,452,727) (502,932) 32,781 28,932 32,781 28,932 26,553 23,526 26,553 23,526 - - 195,930 - (355,662) (70,302) (355,662) (8,060) 342,534 162,598 (105,149) 57,214 (105,149) (2,512) 11,854 (2,512) 11,854
	(1,241,367) (899,431) (870,529) (899,431)

Significant non-cash items:

On the 30th November 2006 the Company issued 3,500,000 shares at 10.5 cents each to acquire exploration assets.

27. Financial instruments

(a) financial risk management objectives

The consolidated entity’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates, interest rates and credit risk and the consolidated entity manages the financial risks relating to the operations of the consolidated entity.

(b) Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements.

NOTES TO THE fINANCIAL STATEMENTS fOR THE fINANCIAL yEAR ENDED 30 juNE 2007

27. Financial instruments (continued)

(c) Interest rate risk management

The consolidated entity is exposed to interest rate risk as it places funds at both fixed and floating interest rates. The risk is managed by maintaining an appropriate mix between fixed and floating rate products which also facilitate access to money.

Maturity profile of financial instruments

The following table details the consolidated entity’s exposure to interest rate risk as at 30 June 2007:

2007	weighted average effective interest rate %	Variable interest rate $	Variable interest rate $		fixed maturity dates	fixed maturity dates	fixed maturity dates	fixed maturity dates	fixed maturity dates	fixed maturity dates		Non interest bearing $
				Less than 1 year $	1-2 years $	2-3 years $		3-4 years $		4-5 years $	5+ years $
financial assets: Cash Other fnancial assets The following table details t	5.75 972,071 - - - 4.70 - 105,300 - - 972,071 105,300 - - he consolidated entity’s exposure to interest rate risk as			- 105,300		- -				- -	- - 972,071 - - 105,300
		972,071			-			-
		-			-			-
		972,071		105,300	-	-		-		-	- - 1,077,371
			entity’s exposure to interest rate risk as					at 30 June 2006
2006	weighted average effective interest rate %		Variable interest rate $		Maturity dates						Non interest bearing $	Tota l $
					Less than 1 year $		1-5 years $		More than 5 years $
financial assets: Cash Other Financial assets	4.5 5.0				- 105,300				- -		- 220,449 - 105,300
			220,449				-
			-				-
			220,449		105,300		-		-		4,677 330,426

financial liabilities:

(d) fair value of financial instruments

The directors consider that the carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their fair values (2006: net fair value).

The fair values and net fair values of financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

(e) Liquidity risk management

The consolidated entity manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

‡ 54

NOTES TO THE fINANCIAL STATEMENTS ADDITIONAL STOCK ExCHANGE INfORMATION fOR THE fINANCIAL yEAR ENDED 30 juNE 2007AS A 10 OCTOBER 2007

Number of holders of equity securities

Ordinary share capital

159,642,214 fully paid ordinary shares are held by 2,146 individual shareholders.

There are no partly paid ordinary shares held by any shareholder.

All issued ordinary shares carry one vote per share.

Options

40,241,810 options are held by 353 individual option holders. Options do not carry a right to vote.

Distribution of holders of ordinary shares

1- 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over Total Holding less than a marketable parcel ($500) at $0.125 per unit	Total holders units % Issued Capital
	30 9,404 0.01 237 966,395 0.60 459 3,968,774 2.48 1,192 47,059,451 29.48 228 107,638,190 67.43
	2,146 159,642,214 100.00
	129 325,538 Minimum parcel size 4,000

NOTES TO THE fINANCIAL STATEMENTS ADDITIONAL STOCK ExCHANGE INfORMATION fOR THE fINANCIAL yEAR ENDED 30 juNE 2007AS A 10 OCTOBER 2007

Substantial shareholders

Substantial shareholders
Ordinary shareholders Perilya Limited PKA Investments Pty Ltd Twenty largest holders of quoted equity securities Perilya Limited PKA Ivestments Pty Ltd Simon Ashton Calm Holdings Pty Ltd ANZ Nominees Calm Holdings Pty Ltd Bruno Nosek Alan Knights Kirk Securities Limited Peter Thomas Reilly Andrew Mayes, Caroline Law & Herbert Mayes David & Julie Waterhouse William Schroder Worldpower Pty Ltd Ken Done & Associates Pty Ltd Craig Burton < The C I Burton Family a/c> Stephen & Sheridan Keenihan Seaspin Pty Ltd David Brunt Lawrence Crowe Consulting Pty Ltd Total	fully paid Number Percentage	Partly paid Number Percentage
	16,428,571 10.29 - - 9,499,730 5.95 - -
	25,928,301 16.24 - -
	fully paid Number Percentage	Partly paid Number Percentage
	16,428,571 10.29 - - 9,499,730 5.95 - - 4,331,250 2.71 - - 3,390,000 2.12 - - 3,003,253 1.88 - - 3,000,000 1.88 - - 2,202,500 1.38 - - 2,118,232 1.33 - - 1,500,000 0.94 - - 1,363,636 0.85 - - 1,350,000 0.85 - - 1,080,000 0.68 - - 1,000,000 0.63 - - 1,000,000 0.63 - - 920,381 0.58 - - 875,000 0.55 - - 875,000 0.55 - - 875,000 0.55 - - 800,000 0.50 - - 800,000 0.50 - -
	56,412,553 35.35 - -

Company Secretary

Nigel Hodder

Registered Office

Unit 6 , 38 Colin Street West Perth, WA 6005, Australia

Share Registry

Computershare Investor Services Pty Ltd 45 St Georges Terrace , Perth WA 6000, Australia

Principal Administration Office Unit 6, 38 Colin Street West Perth, WA 6005, Australia

Phone: (08) 9482 0482 Facsimile: (08) 9482 0499

Postal Address

P O Box 1177 West Perth Perth, WA 6872, Australia

Phone: (08) 9323 2000 Facsimile: (08) 9323 2033

‡ 56

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Visit us online at www.greenrock.com.au ASX Code: GRK

‡ www.greenrock.com.au

Identifying and developing geothermal energy resources to supply clean, carbon-free, renewable base load electricity.

asx code GRK

AI assistant

BLACK ROCK MINING LIMITED — Annual Report 2007

64531_rns_2007-10-28_e696899e-0cb5-4c94-a64f-e5cd99b78bbd.pdf

Company Particulars

DIRECTORs

COMPaNY sECRETaRY

PRINCIPaL PLaCE OF BUsINEss

REGIsTERED OFFICE

BaNKERs

aUDITORs

sHaRE REGIsTER

sTOCK ExCHaNGE

asx CODE

Contents

About Geothermal Energy

‡ Hydrothermal Systems

‡ Engineered Geothermal Systems (EGS)

‡ Hot Dry Rocks (HDR)

‡ Binary Power Plant

Managing Director’s Report

Dear Shareholder,

“During the year the Company

added leading geothermal

‡ Health, Safety and Environment

‡ Corporate Matters

‡ Funding

‡ Australian Geothermal Industry

South Australian Projects

The Olympic Dam Geothermal Energy Project, wholly owned by Green Rock Energy, is located within a few kilometres of a major electricity user and national power grid.

‡ Olympic Dam (100% owned)

South Australian (wholly owned) Projects Green Rock Energy is adding new geothermal projects to its portfolio where they show the required commercial potential.

‡ Patchawarra Project (100% owned)

‡ Upper Spencer Gulf Project (100% owned)

European Operations

Green Rock Energy is working towards the development of hydrothermal energy projects throughout Hungary.

‡ Hungary (33% owned)

Zala County, Hungary

Board of Directors

Principal Consultants

Roy Baria

Gary Meyer

Jeff Harding

Ian Campbell

for the year ended 30 June 2007 Annual Financial Report

INtroDuCtIoN

SKILLS, EXPErIENCE, EXPErtISE AND tErM oF oFFICE oF EACH DIrECtor

IDENtIFICAtIoN oF INDEPENDENt DIrECtorS

StAtEMENt CoNCErNING AVAILABILItY oF INDEPENDENt ProFESSIoNAL ADVICE

NoMINAtIoN CoMMIttEE

AuDIt CoMMIttEE

Directors’ Report

DIrECtorS

Directors’ Report

DIrECtorS (continued)

Particulars

CoMPANY SECrEtArY

CorPorAtE StruCturE

Directors’ Report

PrINCIPAL ACtIVItIES

South Australia

Hungary

Other

rEVIEW oF oPErAtIoNS

Results and Position

EXPLorAtIoN ACtIVItIES

Hungary

Directors’ Report

EXPLorAtIoN ACtIVItIES (continued)

Hungary (continued)

Olympic Dam

BoArD CHANGES

CorPorAtE MAttErS

CHANGES IN StAtE oF AFFAIrS

SuBSEquENt EVENtS

Directors’ Report

FuturE DEVELoPMENtS

ENVIroNMENtAL rEGuLAtIoNS

DIVIDENDS

SHArE oPtIoNS

Share options granted to directors and executives

BLACK ROCK MINING LIMITED Annual Report 2007