CARNAVALE RESOURCES LIMITED — Interim / Quarterly Report 2012

Mar 13, 2012

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ABN 49 119 450 243

AND CONTROLLED ENTITIES

HALF YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2011

CARNAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CONTENTS

Page

Directors' Report ......................................................................................................	2
Auditor’s Independence Declaration ........................................................................	4
Condensed Statement of Comprehensive Income ....................................................	5
Condensed Statement of Financial Position .............................................................	6
Condensed Statement of Changes in Equity ............................................................	7
Condensed Statement of Cash Flows .......................................................................	8
Notes to the Financial Statements ............................................................................	9
Directors’ Declaration ..............................................................................................	14
Independent Auditor’s Review Report .....................................................................	15

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CARNAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS’ REPORT

DIRECTORS' REPORT

Your directors submit the financial report of the consolidated entity for the half-year ended 31 December 2011. The directors report as follows:

Directors

The directors of the Company during or since the end of the half-year are listed below. All directors were in office for this entire period unless otherwise stated.

Ron Gajewski Executive Chairman Peter Christie Non-Executive Director Klaus Eckhof Non-Executive Director

Results

The consolidated loss for the half-year after tax was $285,699 (2010: $472,189).

Review of Operations

Exploration Licence E38/2055, WA (100%)

During the period, the Company acquired Exploration Licence E38/2055 which is located approximately 7kms south of the Granny Smith Mine and approximately 25km south of Laverton in the Mt Margaret Mineralfield. The Licence covers the area adjacent and south of the Acacia Resources area of Windich South which lies between the Granny Smith Mine and the licence.

The area of the licence lies within the North Eastern Goldfields province of Western Australia, in metamorphosed greenstone belt rocks of Archaean age. The tenement is located on the southerly plunging eastern limb of the Margaret anticline, within a regional north- south fault system known as the Laverton Tectonic Zone.

Shallow dipping splay faults branch off the main zone of sub-vertical strike–slip faults and are often associated with gold mineralization. Gold mines and deposits hosted by the Laverton tectonic zone include Granny Smith, Chide Harold, Keringal and Sunrise Dam.

Most of the tenement area overlies recent Tertiary sediments of Lake Carey, a large, normally dry salt lake with only limited outcrop in the north west of the licence. The outcrop area known as Two Hills, consist of complexly folded sheared and deformed BIF’S, medasediments black shales and mafic to intermediate volcanics. These units have been intruded by granitoid rocks.

Carnavale intends to review all historical data before completing a geophysical program to determine if a drilling program is warranted.

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CARNAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS’ REPORT

Lambouka Oil And Gas Exploration Project

In March 2010, Carnavale Resources Limited (“Carnavale” or the “Company”) entered into an agreement with ADX Energy Limited to acquire a 20% working interest in ADX Energy Limited’s (ASX: ADX) two contiguous offshore Exploration Permits, G.R15.PU and Kerkouane (the “Permits”). G.R15.PU is located offshore the island of Pantelleria southwest of Sicily in Italian waters and the Kerkouane Permit is located offshore northeast Tunisia.

During the period, Carnavale entered into an agreement to relinquish its interest in the Lambouka oil and gas project, located in Sicily and Tunisia.

In consideration for the relinquishment of the 20% working interest, Carnavale:

• (i) received 11,172,535 shares in ADX;

• (ii) may receive US $1 million cash payment, from commercial production resulting from hydrocarbons which were intersected by the ‘Lambouka 1’ well drilled in 2010. Any payment to be made after production continuing uninterrupted at a steady state for a continuous period of 6 months (other than interruptions as a result of scheduled maintenance); and

• (iii) may receive a further US $1 million cash payment, from commercial production resulting from hydrocarbons which were intersected by the ‘Lambouka 1’ well drilled in 2010. Any payment to be made after production continuing uninterrupted at a steady state for a continuous period of 12 months (other than interruptions as a result of scheduled maintenance).

During the period, the Company disposed of 3,172,535 shares in ADX for net proceeds of $242,251.

Parmegiana Iron Ore project (100%) Brazil

During the period, the Company withdrew from the Parmegiana Iron Ore Project and transferred the licences back to the original vendors.

Corporate

The Board is continuing to review new mineral projects and corporate opportunities.

Auditor’s Independence Declaration

Section 307C of the Corporations Act 2001 requires the Company’s auditors, HLB Mann Judd, to provide the directors of the Company with an Independence Declaration in relation to the review of the half-year financial report. This Independence Declaration is set out on the next page and forms part of this directors’ report for the half-year ended 31 December 2011.

This report is signed in accordance with a resolution of the Board of Directors made pursuant to s.306(3) of the Corporations Act 2001.

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R Gajewski Executive Chairman Perth Dated this 14th day of March 2012

Scientific or technical information has been prepared under the supervision of Mr Klaus Eckhof, a Technical Director of the Company and a member of the Australasian Institute of Mining and Metallurgy (AusIMM). Mr Eckhof has sufficient experience which is relevant to the style of mineralisation under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (the JORC Code). Mr Eckhof consents to the inclusion in this report of the Information, in the form and context in which it appears.

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AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the review of the financial report of Carnavale Resources Limited for the half-year ended 31 December 2011, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• a) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• b) any applicable code of professional conduct in relation to the review.

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Perth, Western Australia 14 March 2012

M R W OHM Partner, HLB Mann Judd

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HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4 130 Stirling Street Perth 6000 PO Box 8124 Perth BC 6849 Western Australia. Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of

International, a world-wide organisation of accounting firms and business advisers

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CARNAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

For the half y ear ended 31 December 2011

Note REVENUES Interest income Foreign exchange gain EXPENSES Administrative expenses Exploration expenditure written off Net loss on disposal of available-for-sale investments Impairment of property, plant and equipment Depreciation expense Foreign exchange (loss) Loss before income tax 2 Income tax expense Net loss for the period Other comprehensive income / (loss) Exchange differences on translation of foreign operations Net change in fair value of available-for-sale financial assets Total comprehensive loss for the period Basic earnings / (loss) per share (cents per share)	Consolidated Consolidated 6 Months Ended 6 Months Ended 31 December 31 December 2011 2010 $ $ 28,068 110,128 27,400 -
	55,468 110,128 (278,369) (327,316) (17,095) (123,191) (27,414) - (18,038) - (251) (2,503) - (129,307)
	(285,699) (472,189) - -
	(285,699) (472,189) - (9,889) (136,000) -
	(421,699) (482,078)
	(0.33) (0.54)

The accompanying notes form part of these financial statements.

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CARNAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CONDENSED STATEMENT OF FINANCIAL POSITION

As at 31 December 2011

		Consolidated	Consolidated
	Notes	31 December	30 June
		2011	2011
		$	$
Assets
Current Assets
Cash and cash equivalents		1,523,764	2,254,178
Trade and other receivables		12,683	11,860
Other assets		7,727	16,327
Total Current Assets		1,544,174	2,282,365
Non-Current Assets
Available-for-sale financial assets		544,000	-
Property, plant and equipment		402	18,691
Exploration and evaluation expenditure	3	7,948	949,665
Total Non-Current Assets		552,350	968,356
Total Assets		2,096,524	3,250,721
Liabilities
Current Liabilities
Trade and other payables		19,966	752,464
Total Current Liabilities		19,966	752,464
Total Liabilities		19,966	752,464
Net Assets		2,076,558	2,498,257
Equity
Issued capital	4	22,625,370	22,625,370
Option premium reserve	5	1,249,661	1,249,661
Financial assets reserve	6	(136,000)	-
Foreign currency translation reserve		(6,135)	(6,135)
Accumulated losses		(21,656,338)	(21,370,639)
Total Equity		2,076,558	2,498,257

The accompanying notes form part of these financial statements.

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CARNAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CONDENSED STATEMENT OF CHANGES IN EQUITY

For the half y ear ended 31 December 2011

Consolidated Balance at 1 July 2010 Loss attributable to members of the parent entity Exchange differences arising on translation of foreign operations Total comprehensive loss for the period Shares issued, net of costs Balance at 31 December 2010 Balance at 1 July 2011 Loss attributable to members of the parent entity Revaluation of available-for- sale financial assets Total comprehensive loss for the period Balance at 31 December 2011	Issued Capital Accumulated Losses Option Premium Reserve Financial assets reserve Foreign Currency Translation Reserve Total Equity
	$ $ $ $ $ 22,082,968 (10,623,294) 1,249,661 - 4,794 12,714,129 - (472,189) - - - (472,189) - - - - (9,889) (9,889)
	- (472,189) - - (9,889) (482,078) 542,402 - - - - 542,402
	22,625,370 (11,095,483) 1,249,661 - (5,095) 12,774,453
	22,625,370 (21,370,639) 1,249,661 - (6,135) 2,498,257 - (285,699) - - - (285,699) - - - (136,000) - (136,000)
	- (285,699) - (136,000) - (421,699)
	22,625,370 (21,656,338) 1,249,661 (136,000) (6,135) 2,076,558

The accompanying notes form part of these financial statements.

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CARNAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

CONDENSED STATEMENT OF CASH FLOWS

For the half y ear ended 31 December 2011

Cash flows from operating activities Cash payments in the course of operations Interest received Net cash used in operating activities Cash flows from investing activities Payments for exploration and development expenditure Proceeds received from disposal of investment Net cash used in investing activities Cash flows from financing activities Proceeds from exercise of options Net cash provided by financing activities Net decrease in cash held Cash at the beginning of the reporting period Effects of exchange rate fluctuations on the balances of cash held in foreign currencies Cash at the end of the reporting period	Consolidated Consolidated 6 Months Ended 6 Months Ended 31 December 31 December 2011 2010 $ $ (281,090) (343,184) 28,068 118,251
	(253,022) (224,933)
	(747,043) (3,917,776) 242,251 -
	(504,792) (3,917,776)
	- 542,401
	- 542,401
	(757,814) (3,600,308) 2,254,178 6,311,818 27,400 (133,718)
	1,523,764 2,577,792

The accompanying notes form part of these financial statements.

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CARNAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS

For the half y ear ended 31 December 2011

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

These interim consolidated financial statements are a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001, applicable accounting standards including AASB 134: Interim Financial Reporting, Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board (‘AASB’). Compliance with AASB 134 ensures compliance with IAS 34 ‘Interim Financial Reporting’.

This condensed half-year report does not include full disclosures of the type normally included in an annual financial report. Therefore, it cannot be expected to provide as full an understanding of the financial performance, financial position and cash flows of the Group as in the full financial report.

It is recommended that this financial report be read in conjunction with the annual financial report for the year ended 30 June 2011 and any public announcements made by Carnavale Resources Limited and its subsidiaries during the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001 and the ASX Listing Rules.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.

Basis of preparation

The interim report has been prepared on a historical cost basis. Cost is based on the fair value of the consideration given in exchange for assets. The company is domiciled in Australia and all amounts are presented in Australian dollars, unless otherwise noted.

For the purpose of preparing the interim report, the half-year has been treated as a discrete reporting period.

Significant accounting judgements and key estimates

The preparation of interim financial reports requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.

In preparing this interim report, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial report for the year ended 30 June 2011.

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CARNAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS

For the half y ear ended 31 December 2011

Adoption of new and revised Accounting Standards

In the half-year ended 31 December 2011, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 July 2011.

It has been determined by the Directors that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change is necessary to Group accounting policies.

The Directors have also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the half-year ended 31 December 2011. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to Group accounting policies.

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CARNAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS

For the half y ear ended 31 December 2011

2. LOSS BEFORE INCOME TAX EXPENSE

Consolidated 31 December 2011 $ The following revenue and expense items are relevant in explaining the financial performance for the half-year: Revenue Interest received 28,068 Foreign exchange gain 27,400 Total 55,468 Expenses Write-off of capitalised exploration expenditure (17,095) Impairtment of property, plant and equipment (18,038) DEFERRED EXPLORATION AND EVALUATION EXPENDITURE Consolidated 31 December 2011 (6 months) $ Costs carried forward in respect of areas of interest in the following phases: Exploration and evaluation phase – at cost Balance at 1 July 949,665 Expenditure incurred 25,043 Exploration expenditure impaired (17,095) Amount transferred to available-for-sale financial assets (i) (949,665) Net foreign currency differences - Balance at 31 December 7,948	Consolidated 31 December 2011 $ 28,068 27,400	Consolidated 31 December 2010 $ 110,128 -
	55,468	110,128
		(123,191) - Consolidated 30 June 2011 (12 months) $ 6,334,981 4,725,061 (10,110,377) - - 949,665

3. DEFERRED EXPLORATION AND EVALUATION EXPENDITURE

The recoupment of costs carried forward in relation to areas of interest in the exploration and evaluation phases are dependent on the successful development and commercial exploitation or sale of the respective areas.

(i) During the period, the Company entered into an agreement with ADX Energy Limited to dispose of its 20% interest in the Lambouka Project in Tunisia. In consideration for the disposal of the 20% working interest, Carnavale received 11,172,535 shares in ADX.

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CARNAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS

For the half y ear ended 31 December 2011

4. ISSUED CAPITAL

ISSUED CAPITAL
(a) Issued and paid-up share capital 87,739,708 (30 June 2011: 87,739,708) ordinary shares, fully paid Movements in Ordinary Shares: Balance at 1 July 2011 Balance at 31 December 2011 OPTION RESERVE Option Reserve There were no movements during the period FINANCIAL ASSETS RESERVE Balance at 1 July 2011 Revaluation of available-for-sale financial assets Balance at 31 December 2011		Consolidated 31 December 2011 $ 22,625,370 Number 87,739,708	Consolidated 30 June 2011 $ 22,625,370
			$ 22,625,370
		87,739,708	22,625,370
		Consolidated 31 December 2011 $ 1,249,661 Consolidated 31 December 2011 $ - (136,000) (136,000)	Consolidated 30 June 2011 $ 1,249,661
			Consolidated 30 June 2011 $ - -
			-

5. OPTION RESERVE

6. FINANCIAL ASSETS RESERVE

7. CONTINGENT LIABILITIES

There has been no change in contingent liabilities since the last annual reporting date.

8. EVENTS OCCURRING SUBSEQUENT TO BALANCE DATE

There are no matters or circumstances that have arisen since 31 December 2011 that have or may significantly affect the operations, results, or state of affairs of the consolidated entity in future financial periods.

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CARNAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO THE FINANCIAL STATEMENTS

For the half y ear ended 31 December 2011

9. SEGMENT REPORTING

The directors have considered the requirements of AASB 8 – Operating Segments and the internal reports that are reviewed by the chief operating decision maker (the Board) in allocating resources and have concluded that, during the period, Carnavale operated in the oil exploration industry in Tunisia, mineral exploration industry in Brazil and investing activities in Australia.

31 December 2011	Investing Mineral Exploration Oil Exploration Eliminations $ $ $ $	Consolidated $
Business segments Revenue Other external revenue Total segment revenue Results Operating loss before income tax Income tax expense Net loss 31 December 2011 Assets Segment assets Liabilities Segment liabilities 31 December 2010	55,468 - - -	55,468
	55,468 - - -	55,468
	(249,596) (19,008) (17,095) -	(285,699) -
	2,088,576 7,948 - - 15,576 4,390 - - Investing Mineral Exploration Oil Exploration Eliminations $ $ $ $
		(285,699)
		2,096,524
		19,966
		Consolidated $
Business segments Revenue Other external revenue Total segment revenue Results Operating loss before income tax Income tax expense Net loss 30 June 2010 Assets Segment assets Liabilities Segment liabilities	110,128 - - -	110,128
	110,128 - - -	110,128
	(340,857) (131,332) - -	(472,189) -
	2,575,883 56,977 10,183,159 - 36,008 5,559 - -
		(472,189)
		12,816,019
		41,567

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CARNAVALE RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS' DECLARATION 31 December 2011

In the opinion of the directors:

• (a) the financial statements and notes of the consolidated entity, as set out on pages 5 to 13, are in accordance with the Corporations Act 2001 including:

• (i) complying with Accounting Standard AASB 134: Interim Financial Reporting, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

• (ii) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and of its performance for the half-year then ended; and

• (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is signed in accordance with a resolution of the Board of Directors made pursuant to s.303 (5) of the Corporations Act 2001.

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R Gajewski Executive Chairman

Dated at Perth this 14th day of March 2012

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INDEPENDENT AUDITOR’S REVIEW REPORT

To the members of Carnavale Resources Limited

Report on the Condensed Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Carnavale Resources Limited (“the company”) which comprises the condensed statement of financial position as at 31 December 2011, the condensed statement of comprehensive income, condensed statement of changes in equity and condensed statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the half-year end or from time to time during the half-year.

Directors’ responsibility for the half-year financial report

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such controls as the directors determine is necessary to enable the preparation of the half year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of the company, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

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HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of

International, a worldwide organisation of accounting firms and business advisers.

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Matters relating to the electronic presentation of the reviewed half-year financial report

This review report relates to the half-year financial report of the company for the half-year ended 31 December 2011 included on the company’s website. The company’s directors are responsible for the integrity of the company’s website. We have not been engaged to report on the integrity of this website. The review report refers only to the half-year financial report identified above. It does not provide an opinion on any other information which may have been hyperlinked to/from the half-year financial report. If users of the half-year financial report are concerned with the inherent risks arising from publication on a website they are advised to refer to the hard copy of the reviewed half-year financial report to confirm the information contained in this website version of the half-year financial report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Carnavale Resources Limited is not in accordance with the Corporations Act 2001 including:

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

• b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

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HLB MANN JUDD

Chartered Accountants

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Perth, Western Australia 14 March 2012

M R W OHM Partner

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