CONICO LTD — Annual Report 2010

Sep 28, 2010

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for the Year Ended 30 June 2010

Table of Contents

Highlights for the Year to 30 June 2010	3
Corporate Directory	4
Review of Operations	5
Corporate Governance Statement	14
Directors’ Report	18
Auditor’s Independence Declaration	23
Statement of Comprehensive Income	24
Statement of Financial Position	25
Statement of Changes in Equity	26
Statement of Cash Flows	27
Notes to the Financial Statements	28
Directors’ Declaration	41
Independent Auditor’s Report	42
Additional Information for Listed Public Companies	45
Tenement Schedule	47

* Cover Photo: Cuttings from drill hole through mineralised zone - Mt Thirsty Nickel-Cobalt-Manganese Oxide Project

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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HIGHLIGHTS FOR THE YEAR TO 30 JUNE 2010

Mt Thirsty Project (WA)

Co-Ni Oxide Resource:

• Metallurgical process development study completed with favourable results

• Go ahead given for prefeasibility study; completion by April 2011

• PFS tender submissions received from selected globally recognised engineering companies

• Successful tenderer to be announced

• Mt Thirsty project showcased at China Nickel Conference in Shanghai

Ni Sulphide Exploration:

• Exciting new nickel sulphide discovery (6m @ 3.4%Ni)

• Follow up RC drilling in progress

Uranium Exploration (SA)

• Fission has sold its uranium rights over the Wynbring Project to Marmota Energy Ltd enabling it to focus on the Mt Thirsty Project

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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CORPORATE DIRECTORY

DIRECTORS:

Gregory H Solomon LLB (Executive) Douglas H Solomon BJuris LLB (Hons) (Non-Executive) Guy T Le Page B.A., B.Sc. (Hons).,M.B.A., F.FIN., MAusIMM (Non-Executive) James B Richardson (Non-Executive)

COMPANY SECRETARY:

Aaron P Gates B.Com CA

REGISTERED OFFICE:

Level 40, Exchange Plaza 2 The Esplanade Perth, Western Australia 6000 Tel +61 8 9282 5889 Fax +61 8 9282 5866 Email: mailroom@fissionenergy.com.au Website: www.fissionenergy.com.au

SOLICITORS:

Solomon Brothers Level 40, Exchange Plaza 2 The Esplanade Perth, Western Australia 6000

AUDITORS:

Grant Thornton Audit Pty Ltd Chartered Accountants Level 1 10 Kings Park Road West Perth, Western Australia 6005

SHARE REGISTRY:

Advance Share Registry Services 150 Stirling Highway Nedlands, Western Australia 6009

STOCK EXCHANGE LISTING:

ASX Code: FIS (ordinary shares)

Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Securities Exchange Limited.

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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REVIEW OF OPERATIONS

MT THIRSTY Co -Ni -Mn PROJECT (Fission 50%)

The Mt Thirsty Cobalt –Nickel -Manganese oxide project covering an area of 58km[2] is located 20km north-northwest of Norseman (Figures 1 & 2). Fission through its wholly owned subsidiary Meteore Metals Limited owns 50% of the project in joint venture with Barra Resources Limited. The Mt Thirsty deposit has the potential to emerge as a significant world cobalt supplier. Metallurgical testwork indicates that high recoveries of cobalt, nickel and manganese can be achieved through low temperature atmospheric leaching. Based on the current flowsheet design, approximately 27,000 tonnes of mixed sulphide precipitate (containing 2,700t Co & 10,000t Ni) and 33,000 tonnes of manganese carbonate could be produced annually from Mt Thirsty.

Mt Thirsty has a current JORC compliant Indicated Resource of 14.8 million tonnes at 0.14% Cobalt, 0.59% Nickel and 0.99% Manganese and a JORC compliant Inferred Resource of 14.2 million tonnes at 0.11% Cobalt, 0.52% Nickel and 0.77% Manganese over a length of 1.3 kilometres and a width of up to 850 metres.

As well as the Cobalt-Nickel–Manganese oxide resource, the Mt Thirsty joint venture tenements have potential for nickel sulphide mineralisation at greater depth within the same ultramafic sequence which hosts the near surface oxide deposit. A potentially significant nickel sulphide discovery was made early in 2010 and follow up exploration is currently in progress.

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Figure 1: Mt Thirsty project location and regional geology

Nickel Sulphide Exploration

A very thick sequence of originally olivine-rich, cumulate - textured ultramafic rocks has been intersected in previous holes drilled at Mt Thirsty. These rocks contain variable amounts of disseminated, vein and stringer-style sulphide mineralisation. The footwall contact where the best concentration of nickel sulphides might be expected was unable to be reached in any holes drilled by the MTJV until quite recently. Basal lava channel embayments located on ultramaficbasalt contacts are a preferred location for nickel sulphide accumulations eg. in the Kambalda region. Several of these basal embayment type structures have been identified within the project area and are currently being evaluated at Mt Thirsty.

Nickel sulphide exploration by the MTJV during the year involved the deepening of hole MTDD008 and drilling of a further 7 diamond holes and 7 RC holes. Drill hole collar details are shown in Table 1. The highlight of this exploration program was the discovery of massive stringer nickel sulphides (6m @ 3.4% Ni) adjacent to the footwall contact in hole MTRC015 within E63/373. Follow up drilling has commenced.

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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Figure 2: Southern Goldfields nickel deposits showing location of Mt Thirsty nickel sulphide discovery

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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Table 1: Drill Hole Collar Details (GDA94 Zone 51)

Hole No	mEast	mNorth	**Az.oM **	Incl.	Depth(m)
MTRC009	371078	6446665	270	-60	210
MTRC010	371050	6446472	270	-60	204
MTRC011	371240	6446264	270	-60	252
MTRC014	371050	6446250	270	-60	167
MTRC015	370970	6446450	270	-60	238
MTRC016	370980	6446650	270	-60	196
MTRC017	372600	6447500	270	-75	174
MTDD008	372493	6447411	270	-75	1,449.7
MTDD009	371605	6447697	270	-60	524.4
MTDD010	371274	6447398	270	-65	529.3
MTDD011	371240	6446264	270	-65	588.0
MTDD025	372500	6447150	270	-80	221.9
MTDD026	372500	6447561	90	-80	323.0
MTDD027	372396	6447160	90	-70	396.4
WCDD002	367556	6451232	290	-70	429.6

RC Drilling

Three RC holes (MTRC 009, 010 and 011) all inclined at 60[o] to the west were drilled to 210, 204 and 252m respectively in the vicinity of the footwall contact in the southern portion of E 63/373 (refer Figure 3) to test an interpreted footwall embayment. All three intersected thick magnetic, serpentinite altered ultramafics but were unable to reach the footwall contact. The lower portions of the hole were assayed for Ni, Cr, Mg and other elements that can act as vectors towards nickel sulphide mineralisation.

Four RC holes for a total of 775m (MTRC014-017) were subsequently drilled to test the footwall contact position of the interpreted basal lava channel embayment referred to above at shallower depth (Figures 6 to 8). A 6 metre thick zone of massive stringer nickel sulphides assaying 3.38% nickel (Table 2 and Figures 4 & 5) was intersected adjacent to the footwall basalt-ultramafic contact at a down hole depth of 201 metres (a vertical depth of approximately 190 metres) in hole MTRC015. This hole inclined at 60[o] to the west was the first to intersect the footwall contact zone. Sampling was undertaken with a spear and assayed by Inductively Coupled Plasma – Mass Spectroscopy (ICP MS). The average weight of the samples was 4 kg.

Holes MTRC014 and MTRC016, located 200 metres north and south of MTRC 015, failed to reach the footwall contact due to drilling constraints. These may be deepened by diamond drilling at a later date.

The zone of nickel sulphide mineralisation contains visible sulphide minerals including pyrrhotite, chalcopyrite, pentlandite, pyrite and magnetite. The mineralisation is located near the base of a 50m thick flow of serpentinised olivine-rich cumulate textured ultramafics.

The nickel sulphide stringer mineralisation in MTRC015 appears to have been remobilised from a nearby source. Geophysical interpretation based on aeromagnetic data indicates the lava channel has a strike length of at least 400m. The geology appears quite complex (Figure 5) with several flat dipping pegmatite sills breaking up the stratigraphy into segments similar to the geological setting of Western Areas Flying Fox Nickel Deposit at Forrestania.

Table 2: Nickel and copper assays for RC drill hole MTRC 015

Hole No	From (m)	To (m)	Downhole Width (m)	Ni (%)	Cu (%)
MTRC015	201	202	1.00	2.4%	0.05%
MTRC015	202	203	1.00	0.2%	0.43%
MTRC015	203	204	1.00	6.0%	0.12%
MTRC015	204	205	1.00	7.5%	0.15%
MTRC015	205	206	1.00	0.2%	0.01%
MTRC015	206	207	1.00	4.0%	0.08%

Based on the current geological interpretation, down hole intercepts are less than true width (refer Figure 5).

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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Figure 3: Mt Thirsty drill hole locations over TMI magnetic image showing interpreted footwall contact. Black dots are previous holes testing the oxide resource.

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Figure 4: Geology and Drill Hole Location Plan.

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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Figure 5: Interpreted Cross Section Through RC Holes MTRC010 & 015 Showing Location of Nickel Sulphide Intersection.

Diamond Drilling

Hole MTDD008 (Figure 3) was extended to 1,441m from the 1,084m reached in mid- 2009. The hole continued through thick cumulate textured ultramafics, and was finally abandoned after unexpectedly penetrating 100m of steeply dipping sediments. These sediments are very similar to those intersected in both the upper portion of the same hole as well as those intersected in hole MTDD009 (refer Figure 3) suggesting there is considerable structural complexity in this area which, in view of the limited deep drilling, is not well understood. The latest drilling results suggest that locally the footwall contact is still at considerable depth.

Hole MTDD010 was drilled on the same section as MTDD008 but much further up dip and encountered thick flows of olivine cumulate rocks. A narrow zone of stringer and disseminated sulphide mineralisation was intersected at 276m. The hole was terminated at 529.3m after entering a thick (+120m) pegmatite intrusion and failed to intersect the footwall contact.

MTDD011 was collared 420m to the south of MTDD010. This hole passed through a thicker sequence of cumulate rocks and a narrow (0.45m) zone of heavily disseminated and stringer sulphides (pyrrhotite, pyrite and chalcopyrite) was intersected at the base of a cumulate flow at 312.5m. The footwall contact was intersected at 478m implying an overall dip of 50[o] . A 10m thick zone of 5-8% disseminated sulphides was intersected above the footwall contact however no significant Ni assays were obtained from this interval. The hole was terminated at 588m.

Both holes MTDD010 and 011 also intersected thin (<1m) zones of zinc mineralisation, up to 6.25% Zn over 0.6m from 312.0 to 312.6m in hole MTDD011. The elevated zinc assays are associated with the presence of a massive black Zn bearing oxide? mineral which is believed to be franklinite. The latter may have formed as a skarn mineral related to the intrusion of the nearby pegmatites. The economic significance of this unusual style of zinc mineralisation within the ultramafics is uncertain at this stage. Zinc assays for the mineralised intervals are displayed in Table 3.

Table 3: Zn Assays MTDD010 & 011

Hole No	From m	To m	Interval m	Zn Assay %	Total Depth m
MTDD010	275.91	276.67	0.76	1.20	529.3
MTDD011	312.00	312.60	0.60	6.25	588.0
	485.46	485.62	0.16	1.60

ASX Code: FIS

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Two diamond holes MTDD025 and MTDD026 (Figure 3) totalling 544.90m were subsequently drilled to follow up MTDD008 which intersected a substantial zone of remobilised stringer nickel sulphides at 314m. This hole was originally drilled to test one of two EM conductors identified following a surface EM survey over the eastern portion of E63/373 in the vicinity of surface nickel sulphide gossans.

Holes MTDD025 and 026 were designed to test the centres of both EM conductors at around 300m depth. The EM anomalies were interpreted to be possible nickel sulphide accumulations at the base of the Mt Thirsty sill. MTDD025, designed to test the southern of the two conductors, was unable to reach target depth due to drilling problems.

MTDD026 was completed to a depth of 323m passing through a sulphide stringer zone at almost the same stratigraphic position as in hole MTDD008. This zone is 24m in thickness and commences at 274m down hole. EM surveying down MTDD026 confirmed a significant conductor at 250m depth which coincided with a 1m thick black shale unit. The stringer zone only recorded a weak off-hole EM response.

MTDD027 was also drilled to test the southern conductor, targeting the centre of the EM anomaly however this hole was abandoned at 396m in graphitic sediments which are the likely source of the EM anomaly. Minor disseminated sulphide mineralisation was intersected near the base of an orthocumulate unit from 294 to 303m.

At the Woodcutters prospect in E63/1113 (location shown in Figure 1) hole WCDD002 was drilled to target the strong off hole conductor detected in hole WCDD001 at 255m depth. This latest hole intersected a thick sequence of peridotite with minor pegmatite intrusions above the footwall contact at 241.9m. No sulphide mineralisation was observed however a 2m thick sulphidic black shale unit is present at the footwall contact and is most likely the cause of the off hole EM anomaly in WCDD001.

Future Program

Follow-up RC drilling around the strong nickel sulphide intersection in RC hole MTRC015 is currently in progress.

New Applications

Four EL applications and one prospecting licence application totalling 16.4km[2] , some of which cover strike extensions of the footwall contact zone north of E63/373, were granted during the year.

Mt Thirsty Co–Ni-Mn Oxide Deposit

The Mt Thirsty oxide deposit contains relatively high cobalt values. The particular mineralogy of the deposit, which is a product of a unique weathering history, allows for rapid high leaching recoveries (80% Co and 50% Ni), at moderate temperatures and normal atmospheric pressure utilising weak, acidic reagents. Metallurgical testwork is continuing and the Joint Venturers are optimistic that it will result in improved metal recoveries as the metallurgical process is optimised.

Process Development Study

Metallurgical consultants Independent Metallurgical Operations Pty Ltd (IMO) carried out further metallurgical testwork and completed a process development study which has demonstrated that there are no significant impediments in the production of a nickel-cobalt mixed sulphide precipitate (MSP) and a separate manganese carbonate product from Mt Thirsty oxide ore using low temperature atmospheric leaching.

A simplified version of the base line flowsheet, developed by IMO, is shown in Figure 6. Product samples produced from Mt Thirsty oxide ore in testwork based on the proposed flowsheet are shown in Figure 7.

Initial tests by IMO indicated that a two stage leach involving separate high and low Fe feed stocks would give optimal results. The latest testwork suggests that a simpler and more cost effective single stage leach can be achieved with SO2 injected to minimise Fe2+ generation while maintaining favourable metal recoveries (Figure 8).

Based on the current flowsheet design, approximately 27,000 tonnes of MSP and 33,000 tonnes of manganese carbonate could be produced from Mt Thirsty each year.

ASX Code: FIS

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Figure 6: Proposed Simplified Mt Thirsty Flowsheet

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

Manganese MSP
Carbonate
40% Ni, 10.4%Co
38% Mn
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Figure 7: Mt Thirsty Test Work products.

ASX Code: FIS

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

100 4.0
90
80 3.2
70
Ni Co
60 2.4
Fe Mn
50
Free Acid Fe (II)
40 1.6
30
20 0.8
10
0 0.0
0 5 10 15 20 25
Time (hrs)
Fe(II) Tenor (g/L)
Extraction (%) or Free acid (g/L)
----- End of picture text -----

Figure 8: Single Stage Leach – Extraction/Time curves for Ni, Co, Mn & Fe

Pre-Feasibility Study (PFS)

A process package and tender documents were prepared by IMO and distributed to selected globally recognised process engineering companies. All of the tender submissions received from the process engineers for carrying out a PFS have been evaluated and a short list compiled. The successful tenderer is still to be announced.

Further infill drilling to upgrade resource categories and confirmatory metallurgical test work to produce additional information and additional samples of the likely products will be completed prior to commencement of the PFS.

Pending a favourable outcome to the PFS the joint venture partners are confident the project has all of the necessary ingredients to attract a major international cobalt refiner/off-take partner to fund a final feasibility and project construction.

Process Water

A ground water consultant was engaged to carry out a hydrological review and identify suitable process water sources in the area for an oxide ore treatment plant. Several RC exploration holes drilled intersected strong water flows with favourable salinities (56,000 to 86,000 TDS) at shallow depths in both a palaeochannel and in fractured pegmatites.

Infill Resource Drilling

Infill resource drilling was delayed pending completion of an aboriginal heritage survey. This survey has now been completed and drilling is scheduled to commence in mid September. Approximately 150 holes will be drilled for about 7,500m mostly on the western side of the ore body within the current inferred resource. This will allow an updated ore resource estimation and enable open pit optimisation and mine scheduling studies to be carried out in conjunction with the prefeasibility study.

Metallurgical Testwork

10 large diameter triple tube PQ diamond core holes totalling 466.4m were drilled adjacent to existing air core holes within the oxide orebody. This core (see Figures 9 a & b) was used to further determine the metallurgical response across the deposit and the ore sensitive aspects of the proposed flow sheet.

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Figure 9a: Hole MTDD013 - 29.8 to 32m, dark cobalt-nickel bearing manganese oxides in broken strongly oxidised ultramafic rock.

ASX Code: FIS

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Figure 9b: Hole MTDD013 - 54.1 to 56.4m, - dark cobalt - nickel rich manganese oxide veins in oxidised ultramafic rock.

Advantages of the Mt Thirsty Project

IMO consultants made presentations on behalf of the Mt Thirsty Joint Venture at the China Nickel Conference in Shanghai and the Alta Metallurgical Conference in Perth. These presentations highlighted Mt Thirsty as having the following advantages compared to other nickel-cobalt oxide projects elsewhere in the world:

• World class cobalt orebody, with

• Favourable metallurgy, single stage leach which requires no autoclaves for high recoveries and has low acid consumptions

• Large proportion of revenue from cobalt which is perceived to have strong future price fundamentals

• Located in a developed country with low sovereign risk

• Located in a mining friendly state with very significant experience in the operation of hydrometallurgical treatment plants for nickel laterites

• Low rainfall area which allows disposal of tailings without the requirement for ocean disposal of plant effluents (compared with many global laterite projects)

• Good infrastructure – close to main highway, railway, gas and potable water pipelines, Esperance port etc.

URANIUM (SOUTH AUSTRALIA)

Wynbring Project (Fission 100% uranium rights sold to Marmota Energy Ltd)

Fission has sold its uranium rights over the Wynbring Project (Exploration Licence 4526, formerly 3306) on the Gawler Craton in South Australia to Marmota Energy Ltd for a cash consideration of $350,000.

Tasman Resources Ltd has also sold its residual interest in EL 4526 to Marmota and received 500,000 Marmota shares as consideration, escrowed for 12 months.

The consideration to each party was based on the relative exploration expenditures of Tasman and Fission on EL 4526.

Divestment of Wynbring allows Fission to focus on nickel sulphide exploration and development of the Mt Thirsty oxide project.

The interpretations and conclusions reached in this report are based on current geological theory and the best evidence available to the authors at the time of writing. It is the nature of all scientific conclusions that they are founded on an assessment of probabilities and, however high these probabilities might be, they make no claim for complete certainty. Any economic decisions that might be taken on the basis of interpretations or conclusions contained in this report will therefore carry an element of risk.

The information in this announcement, insofar as it relates to Mineral Exploration activities and Mineral Resources, is based on information compiled by Michael J. Glasson and Robert N Smith, who are members of the Australian Institute of Geoscientists, both of whom have more than five years experience in the field of activity being reported on. Mr Glasson and Mr Smith are consultants. Mr Glasson and Mr Smith have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Glasson and Mr Smith consent to the inclusion in the report of the matters based on their information in the form and context in which it appears.

It should not be assumed that the reported Exploration Results will result, with further exploration, in the definition of a Mineral Resource.

ASX Code: FIS

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CORPORATE GOVERNANCE STATEMENT

The Board of Directors

The Company’s constitution provides that the number of directors shall not be less than three and not more than ten. There is no requirement for any share holding qualification.

As and if the Company’s activities increase in size, nature and scope the size of the board will be reviewed periodically, and as circumstances demand.

The membership of the board, its activities and composition, is subject to periodic review. The criteria for determining the identification and appointment of a suitable candidate for the board shall include quality of the individual, background of experience and achievement, compatibility with other board members, credibility within the Company’s scope of activities, intellectual ability to contribute to board’s duties and physical ability to undertake board’s duties and responsibilities.

Directors are initially appointed by the full board subject to election by shareholders at the next general meeting. Under the Company’s constitution the tenure of a director (other than managing director, and only one managing director where the position is jointly held) is subject to reappointment by shareholders not later than the third anniversary following his or her last appointment. Subject to the requirements of the Corporation Act 2001, the board does not subscribe to the principle of retirement age and there is no maximum period of service as a director. A managing director may be appointed for any period and on any terms the directors think fit and, subject to the terms of any agreement entered into, may revoke the appointment.

The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the formation of separate or special committees at this time. The board as a whole is able to address the governance aspects of the full scope of the Company’s activities and to ensure that it adheres to appropriate ethical standards.

Role of the Board

The Board’s primary role is the protection and enhancement of long-term shareholder value.

To fulfil this role, the board is responsible for oversight of management and the overall corporate governance statement of the Company including its strategic direction, establishing goals for management and monitoring the achievement of these goals.

Appointments to Other Boards

Directors are required to take into consideration any potential conflicts of interest when accepting appointments to other boards.

Independent Professional Advice

The Board has determined that individual directors have the right in connection with their duties and responsibilities as directors, to seek independent professional advice at the Company’s expense. With the exception of expenses for legal advice in relation to director’s rights and duties, the engagement of an outside adviser is subject to prior approval of the Chairman and this will not be withheld unreasonably.

Continuous Review of Corporate Governance

Directors consider, on an ongoing basis, how management information is presented to them and whether such information is sufficient to enable them to discharge their duties as directors of the Company. Such information must be sufficient to enable the directors to determine appropriate operating and financial strategies for time to time in light of changing circumstances and economic conditions. The directors recognise that mineral exploration is an inherently risky business and that operational strategies adopted should, notwithstanding, be directed towards improving or maintaining the net worth of the Company.

ASX Principles of Good Corporate Governance

The board has reviewed its current practices in light of the ASX Principles of Good Corporate Governance and Best Practice Guidelines with a view to making amendments where applicable after considering the Company’s size and the resources it has available.

As the Company’s activities develop in size, nature and scope, the size of the board and the implementation of any additional formal corporate governance committees will be given further consideration.

The following table sets out the Company’s present position with regard to adoption of these Principles.

ASX Code: FIS

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	ASX Principle	Reference/comment
Principle 1: Lay solid foundations for management and oversight
1.1	Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions.	The Company has not adopted this recommendation to formalise and disclose the functions reserved to the board and those delegated to management. The roles and functions within the Company must remain flexible in order for it to best function within its level of available resources.
1.2	Companies should disclose the process for evaluating the performance of senior executives.	The Company does not have any senior executives and as such has not developed a process for evaluating the performance of senior executives.
1.3	Companies should provide the information indicated in the Guide to Reporting on Principle 1.	See above.
Principle 2: Structure the board to add value
2.1	A majority of board should be independent directors.	Due to the Company’s size, nature and extent of operations, the Company has departed from this principle
2.2	The chair should be an independent director.	Due to the Company’s size, nature and extent of operations, the Company has departed from this principle
2.3	The roles of chair and chief executive officer should not be exercised by the same individual.	The Company does not have a Chief Executive Officer.
2.4	The board should establish a nomination committee.	Acting in its ordinary capacity from time to time as required, the board carries out the process of determining the need for, screening and appointing new directors. In view of the size and resources available to the Company, it is not considered that a separate nomination committee is warranted.
2.5	Companies should disclose the process for evaluating the performance of the board, its committees and individual directors.	Acting in its ordinary capacity, the board from time to time carries out the process of considering and determining performance issues. Whenever relevant, any such matters are reported to the ASX.
2.6	Companies should provide the information indicated in Guide to Reporting on Principle 2.	The skills and experience of directors are set out in the Company’s Annual Report and on its website.
Principle 3: Promote ethical and responsible decision-making
3.1	Companies should establish a code of conduct and disclose the code or summary of the code as to: • the practices necessary to maintain confidence in the Company’s integrity • the practices necessary to take into account their legal obligations and the responsible expectations of their stakeholders • the responsibility and accountability of individuals reporting or investigating reports of unethical practices.	The Company has a Code of Conduct which can be viewed on the Company’s website.
3.2	Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity and for the board to assess annually both the objectives and progress in achieving them.	Due to the Company’s size, nature and extent of operations, the company has departed from this principle.

ASX Code: FIS

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3.3	Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them.	Due to the Company’s size, nature and extent of operations, the company has departed from this principle.
3.4	Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board.	Fission does not have any women employees in the whole organisation, women in senior executive positions or women on the board.
3.5	Companies should provide the information indicated in Guide to Reporting on Principle 3.	See above.

Principle 4: Safeguard integrity in financial reporting

4.1	The board should establish an audit committee.	Due to the Company’s size, nature and extent of operations, the company has departed from this principle. The Board itself is the forum that deals with this function.
4.2	The audit committee should be structured so that it: • consists only non-executive directors • consists of a majority of independent directors • is chaired by an independent chair, who is not the chair of the board • At least three members	See 4.1
4.3	The audit committee should have a formal charter.	See 4.1
4.4	Companies should provide the information indicated in Guide to Reporting on Principle 4.	See 4.1
Principle 5: Make timely and balanced disclosure
5.1	Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance and disclose those policies or a summary of those policies.	The Company has a Continuous Disclosure Policy which can be viewed on the Company’s website.
5.2	Companies should provide the information indicated in Guide to Reporting on Principle 5	See above.
Principle 6: Respect the rights of shareholders
6.1	Companies should design and disclose a communications policy for promoting effective communication with shareholders and encourage their participation at general meetings and disclose their policy or a summary of that policy.	The Company has a Communications Policy which can be viewed on the Company’s website.
6.2	Companies should provide the information indicated in Guide to Reporting on Principle 6.	See above.

ASX Code: FIS

Page 16 of 47

Fission Energy Ltd Annual Report for Year Ending June 2010

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Principle 7: Recognise and manage risk

7.1	Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies.	Due to the size and nature of the Company, the Company does not have formalised policies on risk management the board recognises its responsibility for identifying areas of material business risk and for ensuring that arrangements are in place for adequately managing these risks. This issue is regularly reviewed at board meetings and risk management culture is encouraged amongst employees and contractors.
7.2	The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks.	Due to the size and nature of the Company, the Company does not have formalised a risk management and internal control system. The board recognises its responsibility for identifying areas of material business risk and for ensuring that arrangements are in place for adequately managing these risks. This issue is regularly reviewed at board meetings and risk management culture is encouraged amongst employees and contractors.
7.3	The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.	The Executive Chairman and the Chief Financial Officer make this assurance to the board.
7.4	Provide information indicated in Guide to Reporting on Principle 7.	See above.
Principle 8: Remunerate fairly and responsibly
8.1	The board should establish a remuneration committee.	Due to the size and nature of the Company, the Company does not have a remuneration committee. The Company’s Constitution allows for a maximum amount per annum to be paid to non-executive directors, any changed to the annual amount must be approved at a General Meeting of members of the Company.
8.2	The remuneration committee should be structured so that it: • consists of a majority of independent directors • is chaired by an independent chair • has at least three members.	See 8.1
8.3	Companies should clearly distinguish the structure of non-executive directors remuneration from that of executives.	See 8.1
8.5	Companies should provide information indicated in ASX Guide to Reporting on Principle 8.	No schemes exist for retirement benefits for non-executive directors other than statutory superannuation.

ASX Code: FIS

Page 17 of 47

Fission Energy Ltd Annual Report for Year Ending June 2010

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DIRECTORS’ REPORT

Your directors present their report on the company for the financial year ended 30 June 2010.

Directors

The names of directors in office at any time during or since the end of the year are:

Gregory H Solomon

Douglas H Solomon

Guy T Le Page

James B Richardson

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

Company Secretary

The following person held the position of Company Secretary at the end of the financial year:

Mr Aaron P Gates has worked for Tasman Resources Ltd for the past 2 years. He is a Chartered Accountant and Chartered Secretary, has completed a Bachelor of Commerce (Curtin University) with majors in accounting and business law and completed a Diploma of Corporate Governance. Prior to joining Tasman he worked in public practice in audit and corporate finance roles.

Principal Activities

The principal activity of the company during the financial year ended 30th June 2010 was mineral exploration for uranium, cobalt, nickel and manganese.

Operating Results

The loss of the company after providing for income tax amounted to $780,138 (2009: $547,168).

Dividends Paid or Recommended

No dividends were paid or declared for payment during the year.

Review of Mineral Exploration Operations

A review of the operations of the Group during the year ended 30 June 2010 is set out in the Review of Operations on Page 4.

Financial position

The net assets of the Group have increased by $326,766 from 30 June 2009 to $15,323,691 in 2010. This increase has largely resulted from the issue of ordinary shares.

Significant Changes in State of Affairs

In the opinion of the directors, other than disclosed elsewhere in this report, there were no significant changes in the state of affairs of the company that occurred during the period of review.

After Balance Date Events

No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the company, the results of those operations, or the state of affairs of the company in future financial years.

Future Developments, Prospects and Business Strategies

The Company proposes to continue with its exploration program as detailed in the Review of Operations.

Environmental Issues

The Company is the subject of environmental regulation with respect to mining exploration and will comply fully with all requirements with respect to rehabilitation of exploration sites.

ASX Code: FIS

Page 18 of 47

Fission Energy Ltd Annual Report for Year Ending June 2010

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Information on Directors

Gregory H Solomon

Qualifications Experience

Interest in Shares and Options

Directorships held in other listed entities

Douglas H Solomon

Qualifications Experience

Interest in Shares and Options

Directorships held in other listed entities

Guy T Le Page

Qualifications Experience

Interest in Shares and Options Directorships held in other listed entities

James B Richardson

Qualifications Experience

Interest in Shares and Options Directorships held in other listed entities

Executive Chairman

LLB

Appointed chairman March 2006. Board member since March 2006. A solicitor with more than 30 years Australian and international experience in a wide range of areas including mining law, commercial negotiation (including numerous mining and exploration joint ventures) and corporate law. He is a partner in the Western Australian legal firm, Solomon Brothers and has previously held directorships of various public companies since 1984 including two mining/exploration companies.

500,000 Ordinary Shares 200,000 Options

Eden Energy Ltd Tasman Resources Ltd

Non-Executive

BJuris LLB (Hons)

Board member since 30 March 2006. A Barrister and Solicitor with more than 20 years experience in the areas of mining, corporate, commercial and property law. He is a partner in the legal firm, Solomon Brothers. 350,000 Ordinary Shares 125,000 Options

Eden Energy Ltd Tasman Resources Ltd

Non-Executive

B.A., B.Sc. (Hons).,M.B.A., F.FIN., MAusIMM

Board member since 30 March 2006. Currently a corporate adviser specialising in resources. He is actively involved in a range of corporate initiatives from mergers and acquisitions, initial public offerings to valuations, consulting and corporate advisory roles. He previously spent 10 years as an exploration and mining geologist in Australia, Canada and the United States. His experience spans gold and base metal exploration and mining geology and he has acted as a consultant to private and public companies.

15,878,837 Ordinary Shares

Eden Energy Ltd Palace Resources Ltd Tasman Resources Ltd 3D Resources Ltd Enerji Ltd Soil Sub Technologies Ltd Red Sky Energy Ltd

Non-Executive

Dip, Fin Plan

Board member since 11 November 2008. Currently a corporate advisor where he has been actively involved in a range of corporate activities, including the development, documentation, negotiation and marketing of a number of successful financial instruments for various companies encompassing various sectors of the investment market. He has also been employed as a specialist business development executive in some of the more successful national financial services organisations. Additionally, he has extensive experience in evaluating investment opportunities, structuring projects and negotiating financial transactions to meet the expectations of the investment market. 17,383,200 Ordinary Shares

None

ASX Code: FIS

Page 19 of 47

Fission Energy Ltd Annual Report for Year Ending June 2010

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Remuneration Report (Audited)

This report details the nature and amount of remuneration for each director of Fission Energy Ltd, and for the executives receiving the highest remuneration.

Remuneration Policy

The remuneration policy of Fission Energy Ltd has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the company’s financial results. The board believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the company, as well as create goal congruence between directors, executives and shareholders.

The board’s policy for determining the nature and amount of remuneration for board members and senior executives of

the company is as follows:

All executives receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits and options. Executives are also entitled to participate in the employee share and option arrangements. All directors and executives receive a superannuation guarantee contribution where required by the government, which is currently 9%, and do not receive any other retirement benefits.

All remuneration paid to directors and executives is valued at the cost to the company and expensed. Options are valued using the Black-Scholes methodology and other market based pricing. The board policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities.

The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are not linked to the performance of the company. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the company and are able to participate in the employee option plan.

Details of Remuneration for Year Ended 30 June 2010

The remuneration for each director and each of the executive officers of the company during the year was as follows:

Key Management Personnel Remuneration –

Key Management Person 2010 Gregory H Solomon Douglas H Solomon Guy T Le Page James B Richardson Aaron P Gates 2009 Gregory H Solomon Douglas H Solomon Guy T Le Page James B Richardson Aaron P Gates	Short-term Benefits Post- employment benefits Other long- term benefits Share-based payments Total Perfor- mance Related Salary and Fees Cash profit share Non- cash benefit Other Super- annuation Other Equity Options $ $ $ $ $ $ $ $ $ % 150,000 - - - 13,500 - - 40,300 203,800 - 24,000 - - - 2,160 - - 40,300 66,460 - 24,000 - - - 2,160 - - 40,300 66,460 - 24,000 - - - 2,160 - - - 26,160 - (i) - - - - - - 6,310 6,310 -
	222,000 - - - 19,980 - - 127,210 369,190 -
	165,000 - - - 14,850 - - - 179,850 - 30,000 - - - 2,700 - - - 32,700 - 30,000 - - - 2,700 - - - 32,700 - 17,100 - - - 1,539 - - - 18,639 - (i) - - - - - - 12,620 12,620 -
	242,100 - - - 21,789 - - 12,620 276,509 -

i - These management personnel are remunerated by Princebrook Pty Ltd under the Princebrook Management Services Contract.

ASX Code: FIS

Page 20 of 47

Fission Energy Ltd Annual Report for Year Ending June 2010

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Options issued as part of remuneration for the year ended 30 June 2010

Options are issued to directors and employees as part of their remuneration. The options are not issued on performance criteria, but are issued to the majority of directors and employees of Fission Energy Ltd to increase goal congruence between executives, directors and shareholders.

Options Granted as Remuneration

Key Management Person Gregory H Solomon Douglas H Solomon Guy T Le Page	Vested No. Granted No. Grant Date Value per option at grant date $ Exercise Price $ First Exercise date Last Exercise Date 1,000,000 1,000,000 20/11/2009 0.040 0.1375 20/11/2009 20/11/2012 1,000,000 1,000,000 20/11/2009 0.040 0.1375 20/11/2009 20/11/2012 1,000,000 1,000,000 20/11/2009 0.040 0.1375 20/11/2009 20/11/2012 3,000,000 3,000,000

All options were granted for nil consideration.

Directors Meetings

During the financial year, 1 meeting of directors were held. Attendances by each director were as follows:

	Directors’ Meetings	Directors’ Meetings
	Number eligible	Number
	to attend	attended
Gregory H Solomon	1	1
Douglas H Solomon	1	1
Guy T Le Page	1	1
James B Richardson	1	1

Indemnifying Officers or Auditor

The company has arranged for an insurance policy to insure the directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director of the company, other than conduct involving a wilful breach of duty in relation to the company. The total premium payable is approximately $9,700.

Proceedings on Behalf of Company

No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. The company was not a party to any such proceedings during the year.

Options

At the date of this report, the unissued ordinary shares of Fission Energy Ltd under option are as follows:

Grant Date Date of Expiry Exercise Price Various 28 February 2011 $0.20 18 June 2007 31 March 2011 $0.20 16 October 2008 26 May 2013 $0.19 17 April 2009 16 April 2012 $0.20 20 November 2009 20 November 2012 $0.1375 8 February 2010 8 February 2013 $0.12	Number under Option 44,824,992 1,000,000 500,000 511,508 3,000,000 888,888
	50,725,388

During the year ended 30 June 2010, no ordinary shares of Fission Energy Ltd were issued on the exercise of options granted under the Fission Energy Ltd Employee Share Option Plan. No shares have been issued since that date. No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of any other body corporate.

ASX Code: FIS

Page 21 of 47

Fission Energy Ltd Annual Report for Year Ending June 2010

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Non-audit Services

The board of directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons:

• all non-audit services are reviewed and approved prior to commencement to ensure they do not adversely affect the

• integrity and objectivity of the auditor; and

• the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

The following fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2010:

$ Tax consulting 7,950 7,950

Auditor’s Independence Declaration

The auditor’s independence declaration for the year ended 30 June 2010 has been received and can be found on page 24.

Signed in accordance with a resolution of the Board of Directors.

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Gregory H Solomon Chairman

Dated this 28[th] day of September 2010

ASX Code: FIS

Page 22 of 47

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Grant Thornton Audit Pty Ltd ABN 94 269 609 023

10 Kings Park Road West Perth WA 6005 PO Box 570 West Perth WA 6872

T +61 8 9480 2000 F +61 8 9322 7787 E admin@gtwa.com.au W www.grantthornton.com.au

Auditor’s Independence Declaration To the Directors of Fission Energy Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Fission Energy Limited for the year ended 30 June 2010, I declare that, to the best of my knowledge and belief, there have been:

• a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

• b no contraventions of any applicable code of professional conduct in relation to the audit.

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GRANT THORNTON AUDIT PTY LTD Chartered Accountants

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M J Hillgrove Director - Audit & Assurance Services

Perth, 28 September 2010

Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia.

Liability limited by a scheme approved under Professional Standards Legislation

Page 23 of 47

Fission Energy Ltd Annual Report for Year Ending June 2010

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STATEMENT OF COMPREHENSIVE INCOME FOR YEAR ENDED 30 JUNE 2010

Note Other Income 2 Accounting and audit Depreciation and amortisation Employee benefits expense Exploration expenditure written-off Finance Costs Impairment expense Legal and other consultants Management fees Administrative expenses Other expenses Loss before income tax Income tax expense 4 Loss for the year Other Comprehensive Income Revaluations of financial assets Income tax relating to comprehensive income Loss attributable to members of the parent entity Total Comprehensive Income / (Loss) attributable to members of the parent Basic earnings per share (cents per share) 7	Consolidated 2010 $ 2009 $ 156,406 428,780 (29,025) (26,968) (15,774) (16,306) (433,103) (355,819) - (43,557) - (2,516) (167,048) (177,127) (20,870) (32,443) (194,670) (210,420) (72,423) (106,289) (3,631) (4,503)
	(780,138) (547,168) - -
	(780,138) (547,168) (184,596) 56,497 - -
	(184,596) 56,497 (964,734) (490,671)
	(0.0062) (0.0048)

The accompanying notes form part of these financial statements.

ASX Code: FIS

Page 24 of 47

Fission Energy Ltd Annual Report for Year Ending June 2010

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STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2010

		Consolidated	Consolidated
	Note	2010	2009
		$	$
ASSETS
CURRENT ASSETS
Cash and cash equivalents	8	1,350,670	2,240,574
Trade and other receivables	9	113,155	91,614
TOTAL CURRENT ASSETS		1,463,825	2,332,188
NON-CURRENT ASSETS
Property, plant and equipment	10	80,840	94,385
Exploration and evaluation	11	14,181,960	13,170,199
Financial Assets	12	70,000	254,596
TOTAL NON-CURRENT ASSETS		14,332,800	13,519,180
TOTAL ASSETS		15,796,625	15,851,368
CURRENT LIABILITIES
Trade and other payables	15	222,934	198,528
Provisions	16	-	405,915
TOTAL CURRENT LIABILITIES		222,934	604,443
CURRENT LIABILITIES
Provisions	16	250,000	250,000
TOTAL NON-CURRENT LIABILITIES		250,000	250,000
TOTAL LIABILITIES		472,934	854,443
NET ASSETS		15,323,691	14,996,925
EQUITY
Issued capital	17	16,618,474	15,467,874
Reserves		349,351	393,047
Accumulated losses		(1,644,134)	(863,996)
TOTAL EQUITY		15,323,691	14,996,925

The accompanying notes form part of these financial statements.

ASX Code: FIS

Page 25 of 47

Fission Energy Ltd Annual Report for Year Ending June 2010

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STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED 30 JUNE 2010

Consolidated Group

Balance at 1 July 2008 Shares issued during the year Options Issues Total comprehensive Income / (Loss) Balance at 30 June 2009 Shares issued during the year Options issued during the year Total comprehensive Income / (Loss) Balance at 30 June 2010	Ordinary Share Capital Financial Asset Reserve Option Reserve Retained Earnings Total $ $ $ $ $ 7,048,046 - 285,000 (316,828) 7,016,218 8,419,828 - - - 8,419,828 - - 51,550 - 51,550 - 56,497 - (547,168) (490,671)
	15,467,874 56,497 336,550 (863,996) 14,996,925
	1,150,600 - - - 1,150,600 - - 140,900 - 140,900 - (184,596) - (780,138) (964,734)
	16,618,474 (128,099) 477,450 (1,644,134) 15,323,691

The accompanying notes form part of these financial statements.

ASX Code: FIS

Page 26 of 47

Fission Energy Ltd Annual Report for Year Ending June 2010

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CASH FLOW STATEMENT FOR YEAR ENDED 30 JUNE 2010

Note CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Net cash provided by (used in) operating activities 24 CASH FLOWS FROM INVESTING ACTIVITIES Exploration and evaluation expenditure Payment for subsidiary, net of cash acquired Purchase of property, plant and equipment Net cash provided by (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Proceeds from issue of options Net cash provided by (used in) financing activities Net increase / (decrease) in cash held Cash at beginning of financial year Cash at end of financial year 8	Consolidated 2010 $ 2009 $ 47,817 6,094 (573,789) (678,250) 72,421 221,401
	(453,551) (450,755)
	(1,178,809) (1,187,924) (405,915) (5,772,157) (2,229) (55,400)
	(1,586,953) (7,015,481)
	1,150,600 2,177,787 - -
	1,150,600 2,177,787
	(889,904) (5,288,449) 2,240,574 7,529,023
	1,350,670 2,240,574

The accompanying notes form part of these financial statements.

ASX Code: FIS

Page 27 of 47

Fission Energy Ltd Annual Report for Year Ending June 2010

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001 .

The financial report covers the consolidated group of Fission Energy Ltd and controlled entities, and Fission Energy Ltd as an individual parent entity. Fission Energy Ltd is a listed public company, incorporated and domiciled in Australia.

The financial report of Fission Energy Limited and controlled entities, and Fission Energy Limited as an individual parent entity complies with all International Financial Reporting Standards (IFRS) in their entirety.

The following is a summary of the material accounting policies adopted by the group in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

Basis of Preparation

The accounting policies set out below have been consistently applied to all years presented.

Reporting Basis and Conventions

The financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.

Going Concern

These financial statements have been prepared on a going concern basis, which contemplates continuity of normal business activities the realisation of assets and extinguishment of liabilities in the ordinary course of business.

Accounting Policies

a. Principles of Consolidation

A controlled entity is any entity Fission Energy Ltd has the power to control the financial and operating policies of so as to obtain benefits from its activities.

A list of controlled entities is contained in Note 13 to the financial statements. All controlled entities have a June financial year-end.

All inter-company balances and transactions between entities in the consolidated group, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity.

Where controlled entities have entered or left the consolidated group during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased.

Minority equity interests in the equity and results of the entities that are controlled are shown as a separate item in the consolidated financial report.

b. Interests in Joint Ventures

The consolidated group’s interests in joint venture entities are brought to account using the proportionate consolidation method of accounting in the consolidated financial statements. Details of the consolidated group’s interests are shown at Note 14.

c. Income Tax

The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.

ASX Code: FIS

Page 28 of 47

Fission Energy Ltd Annual Report for Year Ending June 2010

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

c. Income Tax Continued

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the company will derive sufficient future assessable income to enable the benefit to be realised.

d. Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses.

Plant and equipment

Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably.

Depreciation

The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over their useful lives to the company commencing from the time the asset is held ready for use.

The depreciation rates used for each class of depreciable assets are:

Class of Fixed Asset	Depreciation Rate
Plant and equipment	15.00–50.00%

Assets’ residual values and useful lives are reviewed and adjusted if appropriate, at each reporting date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement.

e. 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.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. 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.

f. Impairment of Non-financial Assets

At each reporting date, the company reviews the carrying values of its non-financial / tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement. Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

ASX Code: FIS

Page 29 of 47

Fission Energy Ltd Annual Report for Year Ending June 2010

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

• g. Cash and cash equivalents

• Cash comprises current deposits with banks.

h. Revenue

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

• Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.

i. Equity-settled compensation

The company operates a number of share-based compensation plans. These include both a share option arrangement and an employee share scheme. The bonus element over the exercise price of the employee services rendered in exchange for the grant of shares and options is recognised as an expense in the income statement. The total amount to be expensed over the vesting period is determined by reference to the fair value of the shares of the options granted.

j. Financial Instruments

Recognition

Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method.

Available-for-sale financial assets

Available-for-sale financial assets include any financial assets not included in the above categories. Availablefor-sale financial assets are reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity.

Financial liabilities

Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation.

Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Impairment

At each reporting date, the group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the income statement.

k. Provisions

Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

l. Comparative Figures

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

m. New accounting standards and interpretations not yet adopted

As a result of the revised AASB 101, there have been changes to the presentation and disclosure of the financial statements. Key changes include:

• statement of comprehensive income — a new statement, the statement of comprehensive income in which all income and expenses to be presented;

• terminology changes — including the amendment of the names of the primary financial statements;

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

• m. New accounting standards and interpretations not yet adopted continued

• reporting changes in equity — all changes in equity arising from transactions with owners, as owners, to be presented separately from non-owner changes in equity. Owner changes are to be presented in the statement of changes in equity, with non-owner changes presented in the statement of comprehensive income;

• Other comprehensive income — introduction the concept of ‘other comprehensive income’ which comprises of income and expenses that are not recognised in profit or loss as required by other Australian Accounting Standards. Other comprehensive income is to be disclosed in the statement of comprehensive income.

• The directors have assessed the new accounting standards issued but not yet effective at 30 June 2010 and noted no impact on the entity’s financial statements.

Critical Accounting Estimates and Judgments

The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the company.

Key Estimates — Exploration and Evaluation

The Group’s policy for exploration and evaluation is discussed in Note 1(e). The application of this policy requires management to make certain assumptions as to future events and circumstances. Any such estimates and assumptions may change as new information becomes available. At the date of this report the Group has sufficient reason to believe:

• rights to explore in specific areas, once expired, will be renewed;

• substantive expenditure on further exploration and evaluation in specific areas has been budgeted;

• exploration in specific areas is ongoing and the entity has not decided to discontinue such activities; and

• no specific sufficient data exists that indicates that the carrying amount of the exploration and evaluation asset is unlikely to be recovered.

The financial report was authorised for issue on 28 September 2010 by the board of directors.

NOTE 2: OTHER INCOME — sale of goods / services — interest received — options received Total Revenue NOTE 3: LOSS FOR THE YEAR a. Significant Expenses — depreciation expense NOTE 4: INCOME TAX EXPENSE a. The prima facie tax on profit from ordinary activities before income tax is reconciled to the income tax as follows: Prima facie tax payable on profit from ordinary activities before income tax at 30% (2009: 30%) Add tax effect of: — Deferred tax assets not brought to account Income tax attributable to entity The weighted average effective tax rates:	2010 $ 2009 $ 83,985 9,280 72,421 221,401 - 198,099
	156,406 428,780
	15,774 16,306 (234,041) (164,150)
	(234,041) (164,150) 234,041 164,150
	- -
	Nil% Nil%

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE 4: INCOME TAX EXPENSE CONTINUED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 NOTE 4: INCOME TAX EXPENSE CONTINUED
Note b. Unrecognised Deferred Tax Balances: Unrecognised deferred tax asset - losses Unrecognised deferred tax asset - other Unrecognised deferred tax liabilities Net Unrecognised deferred tax assets	2010 $ 2009 $ 1,318,146 803,003 95,189 211,990 (979,852) (711,335)
	433,483 303,658

NOTE 5: KEY MANAGEMENT PERSONNEL COMPENSATION

a. Names and positions held of key management personnel in office at any time during the financial year: Key Management Person Position

Gregory H Solomon	Executive Director
Douglas H Solomon	Non-Executive Director
Guy T Le Page	Non-Executive Director
James B Richardson	Non-Executive Director
Aaron P Gates	Company Secretary/CFO

Key management personnel remuneration is included in the Remuneration Report of the Directors’ Report

b. Options and Rights Holdings

Number of Options Held by Key Management Personnel

	Balance	Granted as	Options		Net Change	Balance	Total	Total Exer-	Total Unexer-
	1.7.2009	Compen-	Exercised		Other*	30.6.2010	Vested	cisable	cisable
		sation					30.6.2010	30.6.2010	30.6.2010
Gregory H Solomon	200,000	1,000,000		-	-	1,200,000	1,200,000	1,200,000	-
Douglas H Solomon	125,000	1,000,000		-	-	1,125,000	1,125,000	1,125,000	-
Guy T Le Page	-	1,000,000		-	(1,000,000)	-	-	-	-
James B Richardson	-	-		-	-	-	-	-	-
Aaron P Gates	500,000	-		-	-	500,000	300,000	300,000	200,000
Total	825,000	3,000,000		-	(1,000,000)	2,825,000	2,625,000	2,625,000	200,000

• Net Change Other refers to options and shares purchased or sold during the financial year.

c. Shareholdings

Number of Shares held by Key Management Personnel

Gregory H Solomon Douglas H Solomon Guy T Le Page James B Richardson Aaron P Gates Total	Balance 1.7.2008 Received as Compen- sation Options Exercised Net Change Other* Balance 30.6.2009 500,000 - - - 500,000 350,000 - - - 350,000 20,509,212 - - (4,630,375) 15,878,837 22,013,575 -- - (4,630,375) 17,383,200 - - - - -
	43,372,787 - - (9,260,750) 34,112,037

• Net Change Other refers to options and shares purchased or sold during the financial year.

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note NOTE 6: AUDITOR’S REMUNERATION Remuneration of the auditor for: — auditing or reviewing the financial report — other NOTE 7: EARNINGS PER SHARE a. Reconciliation of earnings to profit or loss Profit/(loss) Earnings used to calculate basic EPS b. Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS The share options on issue are not potentially dilutive shares. NOTE 8: CASH AND CASH EQUIVALENTS Cash at bank Reconciliation of cash Cash at the end of the financial year as shown in the cash flow statement is reconciled to items in the balance sheet as follows: Cash and cash equivalents NOTE 9: TRADE AND OTHER RECEIVABLES Other receivables NOTE 10: PROPERTY, PLANT AND EQUIPMENT Equipment: At cost Accumulated depreciation Total Plant and Equipment a. Movements in Carrying Amounts	2010 $ 2009 $ 18,075 23,055 5,300 - (780,138) (547,168)
	(780,138) (547,168) 124,633,653 114,878,570
	1,350,670 2,240,574
	1,350,670 2,240,574
	1,350,670 2,240,574
	1,350,670 2,240,574
	113,155 91,614
	113,155 91,614
	122,466 120,237 (41,626) (25,852)
	80,840 94,385

Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year

Movement in the carrying amounts for each class of property, plant and equipment and the end of the current financial year	between the beginning
Balance at 1 July 2009 Additions Depreciation expense Balance at 30 June 2010	Equipment Total $ $ 94,385 94,385 2,229 2,229 (15,774) (15,774)
	80,840 80,840

b. Impairment losses

The total impairment loss recognised in the income statement during the current period amounted to $Nil (2009: Nil).

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010
Note NOTE 11: EXPLORATION AND EVALUATION Balance at the beginning of the financial year Expenditure incurred during the year Acquired in acquisition of subsidiary Impairment losses Written off Balance at the end on the financial year	2010 $ 2009 $ 13,170,199 553,467 1,178,809 859,581 - 11,977,835 (167,048) (177,127) - (43,557)
	14,181,960 13,170,199

Recoverability of the carrying amount of exploration assets is dependent on the successful exploration and sale of the minerals.

Capitalised costs amounting to $1,178,809 (2009: $1,187,924) have been included in cash flows from investing activities in the cash flow statement for the consolidated entity.

NOTE 12: FINANCIAL ASSETS

NOTE 12: FINANCIAL ASSETS	NOTE 12: FINANCIAL ASSETS
Available-for-sale financial assets		12a	70,000	254,596
			70,000	254,596
a.	Available-for-sale financial assets comprise
	Unlisted investments, at fair value
	- unlisted options in listed public companies		70,000	254,596
	Total available-for-sale financial assets		70,000	254,596

NOTE 13: CONTROLLED ENTITIES

NOTE 13: CONTROLLED ENTITIES
	Country of	Percentage Owned (%)*
Controlled Entities Consolidated	Incorporation	2010	2009
Meteore Metals Pty Ltd	Australia	100	100

* Percentage of voting power is in proportion to ownership

NOTE 14: JOINT VENTURE

A controlled entity, Meteore Metals Pty Ltd, has a 50% interest in the Mt Thirsty Joint Venture, whose principal activity is the exploration and the development of the Mt Thirsty nickel, cobalt and manganese project. The interests in joint venture entities are accounted for using the proportionate consolidation method of accounting.

Note Share of joint venture entity’s results and financial position Current Assets Non-Current Assets Total Assets Current Liabilities Total Liabilities Revenues Expenses Profit / (Loss) before income tax Income tax expense Profit after income tax	2010 $ 2009 $ 164,928 36,807 1,347,190 170,839
	1,512,118 207,646
	172,697 116,484
	172,697 116,484
	5,885 2,104 (10,400) (1,697)
	(4,515) 407 - (122)
	(4,515) 285

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010
Note NOTE 15: TRADE AND OTHER PAYABLES Trade payables Sundry payables and accrued expenses	2010 $ 2009 $ 153,713 135,012 69,221 63,516
	222,934 198,528

NOTE 16: PROVISIONS
CURRENT
Other	16a	-	405,915
		-	405,915
NON-CURRENT
Other	16b	250,000	250,000
		250,000	250,000

a. Current Provisions

A provision for $405,915 has been recognised in relation to the estimated stamp duty payable on the acquisition of Meteore Metals Ltd which occurred on 4 July 2008.

b. Non-Current Provisions

A provision of $250,000 has been recognised in relation to the Group’s 50% share of the liability to pay the original owners of the Mt Thirsty project $500,000 upon the commencement of mining on the tenements.

NOTE 17: ISSUED CAPITAL

126,930,258 (2009: 119,280,258) ordinary shares a. Ordinary shares At the beginning of reporting period Shares issued prior year Shares issued during the year — 10 September 2009 — 5 October 2009 At reporting date	2010 2009 16,618,474 15,467,874
	16,618,474 15,467,874
	119,280,258 65,000,000 54,280,258 6,250,000 - 1,400,000 -
	126,930,258 119,280,258

Ordinary shares participate in dividends and the proceeds of winding up in proportion to the number of shares held. At the shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. The Company has no authorised share capital or par value.

b. Options

At the beginning of reporting period Options issued prior year Options lapsed prior year Options lapsed during the year Options issued during the year — 10 September 2009 — 5 October 2009 — 20 November 2009 — 8 February 2010 At reporting date	44,011,500 43,499,992 - 1,011,508 - (500,000) (1,000,000) - 3,125,000 - 700,000 - 3,000,000 - 888,888 -
	50,725,388 44,011,500

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE 17: ISSUED CAPITAL CONTINUED

c. Capital Management

Management controls the working capital of the Company in order to maximise the return to shareholders and ensure that the Company can fund its operations and continue as a going concern. Management effectively manages the Company’s capital by assessing the Company’s financial risks and adjusting its capital structure in responses to changes in these risks and in the market. These responses include the management of expenditure and debt levels, distributions to shareholders and share and option issues.

There have been no changes in the strategy adopted by management to control the capital of the Company since the prior year.

NOTE 18: PARENT COMPANY INFORMATION

a. Parent Entity Assets Current assets Non-current assets Total Assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued Capital Retained Earnings Reserves Financial assets reserve Option reserve Total reserves Financial performance Profit / (Loss) for the year Other comprehensive income Total comprehensive income	2010 $ 2009 $ 1,278,618 2,281,994 14,079,382 13,213,528
	15,358,000 15,495,522 72,641 486,309 - -
	72,641 486,309 16,618,474 15,467,874 (1,682,466) (851,708)) (128,099) 56,497 477,450 336,550
	349,351 393,047 (830,757) (534,880) (184,596) 56,497
	(1,015,353) 478,383

Contingent Liabilities

The Directors are not aware of any contingent liabilities as at 30 June 2010.

NOTE 19: CONTINGENT LIABILITIES AND CONTINGENT ASSETS

The Directors are not aware of any contingent assets or contingent liabilities as at 30 June 2010.

NOTE 20: EVENTS AFTER THE BALANCE SHEET DATE

No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the company, the results of those operations, or the state of affairs of the company in future financial years.

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 NOTE 21: CAPITAL AND LEASING COMMITMENTS

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010 NOTE 21: CAPITAL AND LEASING COMMITMENTS
Note a. Capital Expenditure Commitments Payable: — not later than 12 months — between 12 months and 5 years — greater than 5 years	2010 $ 2009 $ - - - - - -
	- -

b. Exploration Expenditure Commitments

In order to maintain current rights of tenure to exploration tenements, the company is required to perform minimum exploration work to meet the requirements specified by various State governments. Due to the nature of the company’s operations in exploring and evaluating areas of interest, it is very difficult to forecast the nature and amount of future expenditure. It is anticipated that expenditure commitments for the twelve months will be tenement rentals of $25,000 (2009: $25,000) and exploration expenditure of $197,000 (2009:$95,000). JV parties may effectively meet a significant portion of the commitment costs. These obligations can also be reduced by selective relinquishment of exploration tenure or application for expenditure exemptions.

Pursuant to the agreement made between the Company and Tasman Resources Ltd (“Tasman”) dated 2 April 2007, the Company was assigned all the rights to all uranium mineralisation which may be discovered in a number of tenements held by Tasman. The Company has no exploration commitments for these tenements however is committed to contribute towards fees, rents, rates and other monies payable under the Mining Act 1978 (SA) by Tasman Resources Ltd.

NOTE 22: SHARE-BASED PAYMENTS

The following share-based payment arrangements existed at 30 June 2010:

On 18 June 2007, 1,500,000 share options were granted to consultants to accept ordinary shares at an exercise price of $0.20. The options are exercisable at various dates but before 31 March 2011. The options hold no voting or dividend rights and are not transferable. At reporting date 500,000 options had lapsed.

On 16 October 2008, 500,000 share options were granted to consultants to accept ordinary shares at an exercise price of $0.19. The options are exercisable at any date before 26 May 2013. The options are not transferable.

On 17 April 2009, 511,508 share options were granted to consultants to accept ordinary shares at an exercise price of $0.20. The options are exercisable at any date before 16 April 2012. The options are not transferable.

On 20 November 2009, 3,000,000 share options were granted to directors to accept ordinary shares at an exercise price of $0.1375. The options are exercisable at any date before 20 November 2012.

On 8 February 2010, 888,888 share options were granted to consultants to accept ordinary shares at an exercise price of $0.12. The options are exercisable at any date before 8 February 2013. The options are not transferable.

Outstanding at the beginning of the year Granted Exercised Lapsed Outstanding at year-end Exercisable at year-end	2010 2009 Number of Options Weighted Average Exercise Price $ Number of Options Weighted Average Exercise Price $ 2,011,508 0.20 1,500,000 0.20 3,888,888 0.13 1,011,508 0.195 - - - - - - (500,000) 0.20
	5,900,396 0.16 2,011,508 0.20
	5,700,396 0.16 1,711,508 0.20

There were no options exercised during the year ended 2010.

The options outstanding at 30 June 2010 had a weighted average exercise price of $0.16 and a weighted average remaining life of 2.14 years. Exercise prices range from $0.12 to $0.20 for options outstanding at 30 June 2010.

The weighted average fair value of the options granted during the year was $0.036 (2009: $0.032).

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE 22: SHARE-BASED PAYMENTS CONTINUED

This value was calculated by using a Black Sholes option pricing model applying the following inputs:

Exercise price	$0.12 - $0.20	Expected share price volatility	60 - 108%
Life of the option	3 - 4.5 years	Risk free interest rate	3.25%

The life of the options is based on the historical exercise patterns, which may not eventuate in the future.

Included under employee benefits expense in the income statement is $147,210 (2009: $32,620), and relates, in full, to equity settled share-based payment transactions.

NOTE 23: SEGMENT REPORTING

The company operates predominately in one geographical segment and one business segment, being mineral exploration and development in Western Australia and South Australia.

NOTE 24: CASH FLOW INFORMATION a. Reconciliation of Cash Flow from Operations with Profit after Income Tax Loss after income tax Non-cash flows in profit Depreciation Explorations expenditure written off Impairment expense Other income – options received Options expense Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries (Increase)/decrease in trade and term receivables Increase/(decrease) in trade payables and accruals Cash flow from operations

2010 $ 2000 $ (780,138) (547,168) 15,774 16,306 - 43,557 167,048 177,127 - (198,098) 147,210 32,620 (27,851) (27,439) 24,406 52,340

(453,551) (450,755)

NOTE 25: RELATED PARTY TRANSACTIONS

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

Transactions with related parties:

a. Key Management Personnel

a.	Key Management Personnel
	Management fees and administration fees paid to Princebrook Pty Ltd, a company
	in which Mr GH Solomon and Mr DH Solomon have an interest.	194,670	210,420
	Legal and professional fees paid to Solomon Brothers, a firm of which Mr GH
	Solomon and Mr DH Solomon are partners.	6,371	77,824
	Commissions on placement of shares and consulting fees paid to R M Capital Pty
	Ltd, a company in which Mr G T Le Page and J B Richardson have an interest.	73,400	38,064
	Consulting fees paid to R M Corporate Finance Pty Ltd, a company in which Mr G T
	Le Page and Mr J B Richardson have an interest.	2,500	8,530
b.	Associated Companies
	Reimbursement to Tasman Resources Ltd (which has a 28% fully diluted interest in
	the Company) for employee costs on a hourly basis, in relation to Tasman staff
	utilised by the Company	36,963.20	106,094

On 8 February 2010 the Company issued 888,888 options to employees of Tasman Resources Ltd in exchange for a reduction of the hourly rate paid to Tasman in relation to Tasman staff utilised by the Company.

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

NOTE 26: FINANCIAL INSTRUMENTS

a. Financial Risk Exposures and Management

The main risks the company is exposed to through its financial instruments are interest rate risk, liquidity risk and credit risk.

• i. Interest Rate Risk

• Interest rate risk is managed by investing cash with major institutions in both cash on deposit and term deposit accounts. At 30 June 2010, the effect on the loss and equity as a result of a 2% increase in the interest rate, with all other variables remaining constant would be a decrease in loss by $27,000 (2009:$40,000) and an increase in equity by $27,000 (2009:$40,000). The effect on the loss and equity as a result of a 2% decrease in the interest rate, with all other variables remaining constant would be a increase in loss by $27,000 (2009:$40,000) and an decrease in equity by $27,000 (2009:$40,000).

• ii. Liquidity Risk

• The Company manages liquidity risk by monitoring forecast cash flows and ensuring that adequate funding is maintained. The Company’s operations require it to raise capital on an on-going basis to fund its planned exploration program and to commercialise its tenement assets. If the company does not raise capital in the short term, it can continue as a going concern by reducing planned but not committed exploration expenditure until funding is available and/or entering into joint venture arrangements where exploration is funded by the joint venture partner.

• iii. Credit risk

Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in a financial loss to the company. The company has adopted a policy of only dealing with credit worthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults.

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements.

The Company does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the company.

b. Financial Instruments

• i. Net Fair Values

The aggregate net fair values of the Financial assets and financial liabilities, at the balance date, are approximated by their carrying value.

• ii. Interest Rate Risk

The company’s exposure to interest rate risk and effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows:

	Weighted	Average
	Effective	Interest	Floating Interest Rate		Non Interest	Bearing	Total
	Rate
	2010	2009	2010	2009	2010	2009	2010	2009
			$	$	$	$	$	$
Financial Assets:
Cash and cash equivalents	3.80%	3.00%	1,350,670	2,240,574	-	-	1,350,670	2,240,574
Trade and other receivables	-	-	-	-	113,155	91,614	113,155	91,614
Total Financial Assets	3.80%	3.00%	1,350,670	2,240,574	113,155	91,614	1,463,825	2,332,188
Financial Liabilities:
Trade and sundry payables	-	-	-	-	222,934	198,528	222,934	198,528
Total Financial Liabilities	-	-	-	-	222,934	198,528	222,934	198,528

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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NOTE 27: COMPANY DETAILS

The registered office of the company is:

Fission Energy Limited Level 40, Exchange Plaza 2 The Esplanade Perth Western Australia 6000

The principal place of business is:

Fission Energy Limited Level 40, Exchange Plaza 2 The Esplanade Perth Western Australia 6000

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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DIRECTORS’ DECLARATION

In the opinion of the directors of Fission Energy Ltd (the “Company”):

• a. the financial statements and notes set out on pages 25 to 40, and the Remuneration disclosures that are contained in pages 20 to 21 of the Remuneration Report in the Directors’ Report, are in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the Group’s financial position as at 30 June 2010 and of its performance, for the financial year ended on that date; and

• (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

• (iii) complying with International Financial Reporting Standards as disclosed in Note 1.

• b. the remuneration disclosures that are contained in page 20 to 21 of the Remuneration Report in the Directors’ Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures and

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

The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2010.

This declaration is made in accordance with a resolution of the Board of Directors.

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Gregory H Solomon Chairman

Dated this 28[h] day of September 2010

ASX Code: FIS

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Grant Thornton Audit Pty Ltd ABN 94 269 609 023

10 Kings Park Road West Perth WA 6005 PO Box 570 West Perth WA 6872

T +61 8 9480 2000 F +61 8 9322 7787 E admin@gtwa.com.au W www.grantthornton.com.au

Independent Auditor’s Report To the Members of Fission Energy Limited

Report on the financial statements

We have audited the accompanying financial statements of Fission Energy Limited (the “Company”), which comprises the statement of financial position as at 30 June 2010, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes to the financial statements and the directors’ declaration of the consolidated entity comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ responsibility for the financial statements

The directors of the Company are responsible for the preparation and fair presentation of the financial statements in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. The directors also state, in the notes to the financial statements, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial statements, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with Australian Auditing Standards which require us to comply with relevant ethical requirements relating to audit engagements and plan and

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perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

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

Independence

In conducting our audit, we complied with applicable independence requirements of the Corporations Act 2001.

Auditor’s opinion

In our opinion,:

• a the financial statements of Fission Energy Limited are in accordance with the Corporations Act 2001, including:

• i giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of it’s performance for the year ended on that date; and

• ii complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

• b the financial statements also comply with International Financial Reporting Standards as disclosed in the notes to the financial statements.

Report on the remuneration report

We have audited the Remuneration Report included in pages 20 to 21 of the directors’ report for the year ended 30 June 2010. The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

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Auditor’s opinion on the remuneration report

In our opinion, the Remuneration Report of Fission Energy Limited for the year ended 30 June 2010, complies with section 300A of the Corporations Act 2001.

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GRANT THORNTON AUDIT PTY LTD Chartered Accountants

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M J Hillgrove Director – Audit & Assurance

Perth, 28 September 2010

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Fission Energy Ltd Annual Report for Year Ending June 2010

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ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

1. Shareholding as at 15 September 2010

Shareholding as at 15 September 2010
a. Distribution of Shareholders Category (size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over	Number of Shareholders 15 88 191 393 118
	805

• b. The number of shareholdings held in less than marketable parcels at 30 June 2010 is 104.

• c. The names and relevant interests of the substantial shareholders listed in the holding company’s register as at 15 September 2010 are:

September 2010 are:
Shareholder	Number of Ordinary shares
Tasman Resources Ltd	25,000,000
J Richardson	22,013,575
G T Le Page	20,509,212

• d. Voting Rights

Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands.

• e 20 Largest Shareholders — Ordinary Shares

Name 1. RBC Dexia Investor Services Australia Nominees Pty Ltd 2. Tasman Resources Ltd 3. Hiwan Pty Ltd 4. Gasmere Pty Limited 5. Guy T Le Page Pty Ltd 6. Wise Owl Limited 7. Mrs Anne Hatch 8. Mr Bruno J Lettich 9. Tadea Pty Ltd 10. Eternal Family Group Pty Ltd 11. Guy T Le Page & Associates Pty Ltd 12. Tadea Pty Ltd 13. Boulevade Investments Pty Ltd 14. Tadea Pty Ltd 15. AMI Global Holdings Inc 16. Mr Abdallah Wehbe 17. Hiwan Pty Ltd 18. Peto Pty Ltd 19. YYSC Superannuation Pty Ltd 20. Zanoube Pty Limited

Number Shares Held % of Issued Capital 28,587,596 22.522% 25,000,000 19.696% 8,906,250 7.017% 3,053,755 2.406% 2,191,000 1.726% 1,766,875 1.392% 1,736,000 1.368% 1,400,000 1.103% 1,350,000 1.063% 1,250,000 0.985% 1,224,313 0.965% 1,224,312 0.965% 1,205,000 0.949% 1,191,000 0.938% 1,000,000 0.788% 954,498 0.752% 672,500 0.530% 670,000 0.528% 625,000 0.492% 625,000 0.492%

84,633,099 66.677%

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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2. Optionholding as at 15 September 2010 (FISO: $0.20 Expiring 28 February 2011)

a. Distribution of Optionholders Category (size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over	Number of Optionholders 11 184 81 182 39
	497

b. 20 Largest Optionholders — FISO Name 1. Tasman Resources Ltd 2. Mr Alban Hasslinger 3. Mousetrap Nominees Pty Ltd 4. Paul Thomson Furniture Pty Ltd 5. Mr Bruno Lettich 6. Calama Holdings Pty Ltd 7. Mr Casey J Iddon 8. RBC Dexia Investor Services Australia Nominees Pty Ltd 9. AMH Custodian Pty Ltd 10. Mrs Li Ming Yu 11. Dejul Trading Pty Ltd 12. Mr Wilfred M Iddon 13. Melanto Pty Ltd 14. Mr Robert Sheil 15. Pot of Gold Enterprises Pty Ltd 16. Mr Michael K Mazalevskis 17. Ernie Pty Ltd 18. Mrs Kathleen Eddington 19. Pittar Nomineees Pty Ltd < The Pittar Family A/c> 20. Dr Serene Lim

Number Options Held % of Issued Capital 25,000,000 55.772% 1,500,000 3.346% 1,062,500 2.370% 811,083 1.809% 700,000 1.562% 650,000 1.450% 636,855 1.421% 555,550 1.239% 550,000 1.227% 451,000 1.007% 437,411 0.976% 417,220 0.931% 350,000 0.781% 270,000 0.602% 260,000 0.580% 237,000 0.529% 225,000 0.502% 225,000 0.502% 212,500 0.474% 208,950 0.466%

34,760,069 77.546%

1. Unlisted Options

.Unlisted Options
Holder Name Date of Expiry Exercise Price ESOP 31 March 2011 $0.20 ESOP 26 May 2013 $0.19 ESOP 16 April 2012 $0.20 ESOP 20 November 2012 $0.1375 ESOP 8 February 2013 $0.12	Number under Option Number of Holders 1,000,000 2 500,000 1 511,508 2 3,000,000 3 888,888 2
	5,900,396 10

ASX Code: FIS

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Fission Energy Ltd Annual Report for Year Ending June 2010

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TENEMENT SCHEDULE

Table 1 lists further details on the tenements.

Table 1: Fission Energy Tenement Schedule

State	Licence Type	Number	Interest %	Locality	Location
SA	EL	4168	100*	Wartaka	Approximately 50 km west of Port Augusta
SA	EL	4206	100*+	White Cliff	Approximately70 km NNW of Andamooka
SA	EL	4405	100*+	Fergusson Hill	Approximately120km northwest of Andamooka
SA	EL	4300	100*+	Andamooka	ImmediatelyENE of Andamooka
SA	ELA	2008/436	100*+	Todds Dam	Approximately45km west of Andamooka
SA	EL	4322	100*+	Andamooka North	Approximately140 km northwest of Leigh Creek
SA	EL	4475	100*	Iron Knob	Approximately50 km WSW of Port Augusta
SA	EL	3343	100*	Sandstone	Approximately90 km southwest of Coober Pedy
SA	EL	3423	100*	Wildingi Claypan	Approximately95 km southwest of Coober Pedy
SA	EL	3453	100*	Reid Lookout	Approximately70 km west of Port Augusta
SA	EL	3532	100*	GalaxyTank	Approximately85 km southwest of Coober Pedy
SA	EL	3739	100*	Old Wartaka	Approximately70 km west of Port Augusta
WA	ELA	EA28/1744	100	Ponton Creek	Approximately170 km ENE of Kalgoorlie
WA	PL	P63/1453	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	PL	P63/1490	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	PL	P63/1491	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	PL	P63/1492	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	PL	P63/1493	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	PL	P63/1494	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	PL	P63/1495	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	PL	P63/1496	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	PL	P63/1497	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	PL	P63/1498	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	PL	P63/1499	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	PL	P63/1500	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	PL	P63/1501	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	PL	P63/1502	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	PL	P63/1749	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	EL	E63/1113	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	EL	E63/373	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	EL	E63/1267	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	EL	E63/1268	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	EL	E63/1303	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	EL	E63/1304	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	MLA	MLA63/527	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	MiscLA	LA63/60	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	MiscLA	LA63/61	50	Mt Thirsty	Approximately20 km NW of Norseman
WA	MiscLA	LA63/62	50	Mt Thirsty	Approximately20 km NW of Norseman

• Fission has the uranium rights in these tenements under an agreement with Tasman.

• In ELs 4206, 4300, 4322, 4405 and 2008/436 Fission only has the right to uranium mineralisation in rocks above the basement.

ASX Code: FIS

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