ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2006

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Corporate Directory	2
Project Review	3
Directors' Report	$^{14}$
Auditor Independence Statement	27
Income Statement	28
Balance Sheet	29
Cashflow Statement	30
Statement Of Changes in Equity	31
Notes to the Financial Statements	32
Directors' Declaration	51
Independent Audit Report To The Members of Graynic Metals Limited	52
Additional Shareholder Information	54

CHAIRMAN

Ivan Hoffman

MANAGING DIRECTOR

Ronald Thom

NON-EXECUTIVE DIRECTORS

Nathan McMahon Clive Jones Jonathan Downes

COMPANY SECRETARY

Kent Hunter

PRINCIPAL & REGISTERED OFFICE

Level 2, 22 Oxford Close Leederville WA 6007 Telephone: (08) 9381 1436 Facsimile: (08) 9381 1068

AUDITORS

Ord Partners Chartered Accountants Level 2, 47 Colin Street WEST PERTH WA 6005

SHARE REGISTRAR

Advanced Share Registry Services 110 Stirling Highway NEDLANDS WA 6009 Telephone: (08) 9389 8033 Facsimile: (08) 9389 7871

STOCK EXCHANGE LISTING

Australian Stock Exchange (Home Exchange: Perth, Western Australia) Code: GYN, GYNO

BANKERS

National Australia Bank 50 St Georges Terrace PERTH WA 6000

PROJECT REVIEW

The Company's leading project is a base metal prospect at Quartz Circle near Nullagine in WA. The Company also has important base metal projects in NSW at Gulf Creek near Tamworth, and at Yanco Glen, Wertago and Copper Ridge in the Broken Hill area. During the year the Company relinquished its interest in the Jutson Rocks and Northampton projects in WA. A full list of tenements current at the year end is given in the appendix.

Most of the exploration focus during the year was at Quartz Circle where a near-surface copper oxide deposit could provide a near-term cash flow, while outstanding zinc intersections in the same general area point to the potential for a substantial new base metal discovery. Under the terms of an agreement with Cazaly Resources Limited, Graynic had the right to earn an 80% interest in the Quartz Circle project by the expenditure of \$1M on exploration on that project, and that milestone was reached in August 2006.

In NSW some drilling was carried out at a tungsten occurrence within the Yanco Glen project area. An airborne EM survey was flown over a large part of the Wertago project area to advance the search for a base metal deposit in what could be a large-deposit geological setting adjacent to a major crustal fault structure. It is planned to commence drilling for copper at Gulf Creek as soon as heritage clearance has been granted.

AUSTRALIAN PROJECT LOCATIONS

WESTERN AUSTRALIAN PROJECTS

Quartz Circle base metal project, Nullagine, East Pilbara, WA (Graynic 80%)

Introduction

The Quartz Circle area has been intermittently explored for base metals since about 1970 and some exciting mineralisation was found during the early period from 1970 to 1995. Excellent drilling results obtained by Graynic in the past year using a new exploration model has increased hopes for a substantial base metal discovery.

The geological setting is consistent with a volcanic-hosted massive sulphide (VMS) system, in which the target minerals (copper, lead, and zinc accompanied by significant gold and silver) were exhaled on to an ancient sea floor from a submarine volcanic vent. Most of the VMS deposits known in the Pilbara region occur within the felsic volcanic rocks of the Duffer Formation or its stratigraphic equivalent, and this host sequence is widespread throughout Graynic's project area.

In addition to exploration for a large ore body Graynic is assessing a near-surface copper oxide deposit discovered by a previous explorer in 1992. The Igloo Copper Deposit consists mainly of chalcocite, native copper and malachite occurring as a discrete pod of mineralisation at a depth of between 25m and 50m from surface. At current copper prices the Igloo deposit could yield a useful cash flow and the economics of a short-term mining and treatment operation are currently being evaluated.

Project area

The project area consists of two blocks of tenements, a southern block consisting of P46/1360-1366, P 46/1385 and 1386, P46/1441 and 1442, and E46/541, and a northern block consisting of a single exploration licence E 45/2602 about 2.5km to the north. All of these are granted tenements.

PROJECT REVIEW

Igloo Copper Deposit

Within P46/136I is copper oxide deposit discovered in 1992 by a previous explorer but not exploited at that time. At current copper prices this small deposit could yield a useful cash flow in the short to medium term and the Company has commenced a scoping study to assess the viability of a small mining operation.

The Company has just completed 10 vertical diamond drill holes each about 50m deep to provide new data on this deposit. The assays will be combined with earlier drilling data to enable the estimation of a JORC-compliant resource and some core has been selected for preliminary metallurgical testing.

Significant recent intersections at Igloo copper deposit

		Hole ID Depth Interval Cu %		Au $g/t$ . Ag $g/t$

$-16.5$	$122-23$ m	$\sim 1 \text{m}$ .	$\sim 1.17$ and $0.21$		$\sim 88$
	$142-47$ m.	$\sim 5 \text{m}$ .	$-5.52$ $-$	$\sim 9.03$ and $\sim$	$-244$
$16.7^\circ$	$\sim$ (1.21-22m $_\odot$ )	$\sim$ $\sim$ 1 m $_{\odot}$	$\sim 1.36$ .	n, c tion.	$-21$
	$25-27m$	$\sim 2 \text{m}$ .	3.96		- 62
in the contract of the	$-30-44m$ $-14m$ .		$-2.2 -$
$\overline{168}$	$\sim$ 22-48m $\sim$	$\sim 26 \text{m}$	$-2.40$ .
$-1G.9$ .	${\sim}\,25\text{-}31\,\text{m}$ .	- 6m -	$\sim 2.06$
	$-33-35$ m.	$\lesssim 2\text{m}$ .	$\sim 2.44$ .
	$^{\circ}$ 41-45 $\rm m$ $^{\circ}$	$-4m$	$-1.56$

The main minerals chalcocite, native copper, and malachite are expected to be amenable to heap leaching and the Company will consider an on-site heap leaching operation as well as the alternative of trucking the copper ore to an existing copper processing facility for custom milling.

Chalcopyrite (primary copper ore) with high silver and gold values was encountered in IG 5 in the interval 42-47m. This Cu-Ag-Au mineralization has an impressive grade but its extent is at present unclear. The presence of similar high-grade Cu-Ag-Au mineralization at Millers Vein some 200m to the south of the Igloo deposit presents an exciting new target zone for exploration.

An airborne EM survey recently flown for the Company has highlighted significant conductivity over the Igloo copper oxide deposit and this may relate to the chalcopyrite. A ground EM survey and a downhole EM survey are on program to provide better definition of this conductive zone prior to drill testing.

QUARTZ CIRCLE PROJECT IGLOO PROSPECT DRILLING PLAN

Emperor Zinc Prospect

The Emperor Prospect lies about 700m southeast of the Igloo copper deposit. Exploration at Emperor commenced in the 1970s when some exciting results were obtained by Alcoa.

Historic drilling results Emperor Prospect

Hole ID	Company	Thickness	Zn %	РЬ %
	and date
$ALC$ 18	Alcoa 1977	19m –
$\sim$ ALC 19 $\cdot$	Alcoa 1977	$-17.74m$ .	16.09
$-$ ALC 26 $-$	Alcoa 1978	∵7.5պ	15.95
$\sim$ QCRC 6.	PanCon 1991	23m	18.44
		$\frac{1}{2}$ (inc. $9\text{m}$ )	-0.96	46.52
$\sim$ QCRC 14	PanCon 1992	7m	2.74
QCRC 23	PanCon 1992	4H)

Graynic's drill holes GM 5 to GM 9 completed in July 2005 gave the first significant results at this prospect in more than a decade. These results were reported last year on the basis of 4m composite samples and later reassaying using Im samples gave significantly better results. Drill holes GM 5 and GM 8 contain significant Pb as well as Zn.

The Company has since drilled another 24 RC drill holes, although some results are yet to be received. The best holes so far are GM 21 with two thick intervals of mineralisation - 16m @ 3.51% Zn from 49m and 27m @ 4.98% Zn from 71m, and GM 34 with 44m @2.1% Zn from 32m including 12m @ 3.7% Zn from 52m.

A twin diamond drill hole GMD 21 intersected bedding laminations nearly normal to the core axis, suggesting that drill hole GM 21 is perpendicular to the deposit and that the widths of the mineralized zones in GM 21 approximate to true thickness. This is therefore a substantial accumulation of zinc sulphide. The true thickness of the mineralisation in GM 34 is not known at this stage.

Significant results from Graynic's drilling at Emperor Prospect

Hole ID	Depth.	Thickness	$Z_{\rm B}$ %	$Pb^{-\theta}$	Ag g/t	Au $p/t$
GM 5	49-50m	łm	3.98.
	$61-62m$	łm	3.19.	0.76	20	0.2
	$67 - 71m$	4m	3.98	3.00	36.	0.7
	$.99-101m$	2m	3.57
GM 6	59-60m.	∄m	10.33
	$.74\text{-}76\text{m}$ .	2m	2.95		18	0.28.
GM7	$56 - 58m$ .	2m	7.43			0.23
GM 8	$-14-16m$ .	$2\,\mathrm{m}$	1.75	3.38	65	0.75
GM 9	$28 - 30m$ .	2m	$.3.49$ .			0.26
	58-66m	∙8m	2.29
GM 21	49-65m	16m	3.51
	(inc 52-56m)	4m	5.42)
	$-71-98$ m	27m	4.98
	(inc 72-80m)	8m	7.59)
GM34	$32-76m$	44m	2.1
	(incl. 52-64m)	12m	3.7

PROJECT REVIEW

Hole		Easting Northing Azimuth		Dip	Total
Æ					Depth.

GM ₅	209503	7600695	-250	60	$-319$
GM 6	209502	7600700	: 250	. 70	$-150$
:GM 7	209485	7600690	-250	- 60	- 70
~GM ₈	.209540	7600726	-325	-70	$-150$
$-GM9$	209507	-7600838	-330	65	- 250
$~cm$ 21	209534	-7601069	-360	-70	$-120$
"GM 34	$-209530$	-7601061.	-225	60	. 200

QUARTZ CIRCLE PROJECT EMPEROR Pb. Zn PROSPECT

QUARTZ CIRCLE PROJECT SOIL GEOCHEMICAL ANOMALIES

Drill core from GMD 21 also showed that the zinc sulphide (sphalerite) occurs in the matrix of a volcanic breccia, a texture which is consistent with a typical VMS deposit.

Geochemical and alteration 'footprint'

The Emperor Zinc Prospect and the Igloo Copper Oxide deposit both occur within a large geochemical anomaly revealed by previous soil sampling over most of the tenement area. The geochemical anomaly is of great interest because

It is of considerable extent, being about 3km long by 2km wide
It is a compound anomaly with a large Cu-Au anomaly spatially separate from a large Pb-Zn anomaly, as if reflecting a primary metal zonation at depth

These two anomalies are adjacent to a tonalite (granitic) intrusion in a geometrical arrangement consistent with a typical VMS deposit

A recent airborne radiometric survey revealed a large K-radiometric anomaly which may indicate potassium alteration of the volcanic rocks. This anomaly, which is also approximately 3km long, neatly overlies the geochemical anomaly and is independent evidence in favour of a large hydrothermal system.

Revised geochemical anomaly map

When the geochemical anomalies are recontoured using higher minimum cut-off values for Ca, Pb and Zn a number of parallel faults can be interpreted on the basis of abrupt changes in the contours. For example, copper anomalism seems confined to particular fault blocks, and both Zn and Pb contours show apparent displacement and terminations with respect to various faults. Elongate Pb and Cu anomalies coincident with some faults could be interpreted as leakage along these structures.

This presents better-defined targets for drilling, with results to date supporting the interpretation. Drill holes with Zn mineralization only and drill holes with both Zn and Pb mineralisation correspond closely to the new model. It appears that zinc sulphide covers a greater area than the lead sulphide, having traveled farther from the volcanic vent.

There are two separate copper-anomalous zones, suggesting there could be two feeder pipes (which normally contain some copper) and therefore perhaps two separate VMS systems within the area covered by this geochemical survey.

A typical VMS system

An idealised cross sections based on Canadian volcanogenic massive sulphide (VMS) system is presented here. The diagram shows a typical VMS rock sequence consisting of coarse volcanic fragmental rock (rhyolite breccia or agglomerate) forming a dome around the volcanic vent, with the copper, lead and zinc sulphide accumulated in a zonal arrangement above this agglomerate. As a final phase an exhalite (usually a cherty rock) caps the deposit and commonly extends for a considerable distance beyond the sulphides and the agglomerate.

An alteration envelope of silica and/or potassium addition is typically widespread below a deposit, whereas chlorite alteration is usually confined to the vicinity of the volcanic neck. Note that the volcanics above the exhalite were deposited after the formation of the VMS and usually show much less alteration.

Most of these features can be recognized in the vicinity of the Emperor zinc deposit. A photograph taken in the vicinity of drill hole GM 21 resembles the cross section of a typical VMS system.

IDEALISED CROSS SECTION OF A VMS SYSTEM

PROJECT REVIEW

VMS features recognizable in the field at Emperor Prospect, viewer looking to the south. About 250m to SW (off the photo to the right) is GM 21 with 43m grading 4.4% Zn and GM 34 with 44m grading 2.1% Zn. This location is at the eastern end of a geochemical anomaly about 3km long.

The big picture

A total of three separate VMS systems is tentatively proposed in the Quartz Circle area:

1. The Emperor VMS System

Contains the Emperor Zinc Prospect
Contains the Igloo copper oxide deposit
٠ Has a hydraulic breccia, possibly marking the original feeder pipe
Contains some bedded magnetite rock, intersected during previous drilling of a discrete magnetic anomaly. This is reminiscent of the Gossan Hill VMS deposit at Golden Grove in which iron oxide was deposited at an early stage from sulphur-poor volcanic fluids

2. The Imperial VMS System

Has a separate copper anomaly from system I, prompting the idea of a separate vent
Is characterised by more abundant arsenopyrite than system 1
Is characterized by higher gold content than system 1
Has had little previous drilling near the top of the system, where lead and zinc accumulations might be anticipated

The King VMS System 3.

First identified as a 2km-long K radiometrics anomaly
Has some intense rock alteration (including chlorite)
Contains some gossans
Has had no drilling to date

øj

VAN 1

Note: this map has been inverted to conform to original 'way up' of proposed VMS systems

This model puts existing drilling results into a geological context and is a useful guide to future exploration programs. The model will be refined as new data is received.

ANNUAL REPORT OG

PROJECT REVIEW

Quartz Circle Summary

The Quartz Circle project has considerably advanced over the past year. A growing number of strongly-mineralised drill intersections demonstrate in a practical way the economic potential of this area, whilst the exploration model suggests that this could be an environment in which to find a very large base metal deposit.

Other WA Projects

The Company withdrew from the Northampton and Jutson Rocks projects during the year. No work has been carried out on the Walgidee Hills or Brockman Creek projects as these tenements were not granted by the year end.

NSW PROJECTS

Acquisition of projects in NSW

During the year the Company bought a private company, Resource Investment Group Pty Ltd, in order to acquire three high quality projects near Broken Hill and another at Gulf Creek near Tamworth in New South Wales. The consideration was 10 million Graynic shares and 4 million options exercisable at 30 cents, and \$50,000 in cash. The projects, which are described in more detail below, include a scheelite (tungsten) resource, as well as two highly prospective copper projects. Other targets include Cu-Pb-Zn-Ag mineralization in a Broken Hill setting, porphyry copper, tin, and shear zone hosted gold.

The Company believes that these projects are a substantial and exciting addition to its original portfolio.

Tenements

The four tenements are Yanco Glen (E 6489), Copper Ridge (E 6435), Wertago (E 6424) and Gulf Creek (E 6492).

1. Yanco Glen Project, NSW (Graynic 100%)

Scheelite

At present the global tungsten market is buoyant, with current prices at historic highs. The two principal ores of tungsten are scheelite (calcium tungstate CaWO4) and wolframite ((Fe,Mn)WO4). Tangsten is used in the manufacture of certain hard steels and alloys and is in great demand at the moment due to the upsurge of steelmaking in China. Scheelite is often sold as a concentrate produced on site in a relatively cheap and straightforward process.

The previously-identified scheelite resources at Yanco Glen occur in the south of the tenement at a distance of about 30km north of Broken Hill. Scheelite was mined on a small scale in the 1930s and the small workings define the line of lode over a distance of about 2km. Between 1980 and 1984 CRA Exploration (CRAE) investigated the scheelite potential and estimated that there could be a significant scheelite resource present.

The prospect was tested in April 2006 in a program of 19 RC drill holes totaling 2100m. Most holes contained significant mineralization, and these are shown in the table below.

Hole ID	$\blacksquare$ From	Ŧο	W03 (calc)
			鲘

BHRC0002	32	34	$2m \ @ 0.26$
BHRC0003	81	83	2m @ 0.41
BHRC0005	.11	15	$4m \otimes 0.31$
BHRC0005	-34	35	Im @ 0.29
BHRC0005	69	71	$2m \otimes 0.35$
BHRC0006	26	27	[email protected]
BHRC0006	-39	41	$2m \otimes 1.42$
BHRC0007	-119	$-122$	:3m @ 0.32
BHRC0008	-37	78	$\text{Im}$ $@$ 0.40
BHRC0011	97	98	$\cdot$ lm @ 0.58
BHRC0012	- 2		$2\text{m}$ @ 0.26
BHRC0012	16		$\pm 1$ m $\cdot$ @ $\pm 0.38$
BHRC0013	Ŝ		$3m \otimes 0.24$
BHRC0013			$1m \otimes 0.29$
BHRC0013	30		$3m \otimes 0.26$
BHRC0013	36		$\mathop{\mathrm{Im}}\nolimits$ $@$ $0.38$
BHRC0014	-5		$4m \& 0.69$
BHRC0015	.30.	31	. 1m @ 0.29
BHRC0015	-63	64	$\ln \omega$ 0.25
BHRC0016	15.	19	$4m \ @ 0.48$
BHRC0019	-102	103	lm @ 0.35

Initial assays were done by fusion XRF, and the mineralized intervals were checked using ICP MS. Correlation between these methods has been excellent. Some checks have been made using pressed powder-XRF, again with excellent correlation. The assays provided a W content from which a WO3 equivalent was calculated, as on the world market tungsten prices are quoted in units of WO3.

The mineralisation has now been modeled by independent group Ravensgate Mineral Industry Consultants to provide a resource estimate consisting of 828,420 t grading 0.172% W in the Inferred category. This is equivalent to a grade of 0.21% WO3.

Gold

A line of small gold workings including the historic Anaconda mine occur in the northern part of the tenement. They have not been explored in recent times and represent an attractive future exploration target.

2. Wertago Cu-Pb-Zn Project, NSW (Graynic 100%)

The Wertago project encompasses an area of historical copper mining as well as the silver and lead workings of the Nutherungie Silver Field. Previous limited drilling by CRA has intersected some good grades including 2m @ 4.6% Cu below old copper workings but there is potential for a large deposit such as a Cu-Au porphyry or a Century-style zinc deposit.

The Grasmere copper deposit about 40km to the southeast of Wertago also lies immediately west of the Koonenberry Fault. Recent drilling at Grasmere by Black Range Minerals targeting EM conductors from a recent survey has returned some exciting copper intersections and has dramatically improved that project's prospectivity.

An airborne VTEM survey has now been completed over the eastern part of the exploration licence to encompass virtually all of the known mineralization and a large part of the Koonenberry fault. An image of the preliminary data has now been received and the final data is currently being interpreted by Southern Geoscience Consultants.

3. Gulf Creek Copper Project (Graynic 100%)

The Gulf Creek copper mine is the largest copper mine of its type in the New England region of NSW and was primarily mined between 1889 and 1912. Over 35,000 tonnes of Cu ore was mined at an average grade of 5% Cu over the mine life. Higher grades were recovered from some areas such as the Fishers Mine, with head grades exceeding 15% Cu. Mine records estimate that ore reserves up to 50,000 tonnes of ore grading 2.7% copper and 4.5% zinc could remain in the known ore lenses.

The mine reached a depth of 150m, had a strike length of 400m and the ore channel was 30m in width. The ore channel hosts 3 parallel lodes known as the Cornish Lode (2m wide at 6-6.5% Cu). Middle Lode (1.5-2m wide at 3-3.5% Cu), and the Big Lode (7m wide at 2-2.5% Cu). Records indicate Zn credits amount to nearly twice the Cu in the estimated ore reserves, but this will be verified by drilling.

The deposit has not been properly explored since mining ceased almost 100 years ago, creating an exceptional modern exploration opportunity for the Company. Zinc was of no interest to historic miners but with zinc being twice as rich as the copperin some of the ore this could be a valuable co- product in a mining operation.

It is intended to carry out a drilling program as soon as heritage clearance can be obtained.

ANNUAL REPORT 06

PROJECT REVIEW

4. Copper Ridge Project (Graynic 100%)

There is little published information on this prospect because it has never previously been held as an exploration licence. Previous work has been confined to small-scale copper mining for which there are no production records. The mineralization occurs as narrow individual lodes which repeat as parallel reefs, and may be a sheeted vein system. Alternatively the mineralization could relate to an intrusion of Cu porphyry style.

The zone of potential is 3.5km long and this has never been tested by modern exploration. There is no record of exploration drilling within the last 125 years.

No exploration was carried out on this project during the year because of other priorities but a field evaluation is planned for early 2007.

HISTORIC COPPER SMELTER AT GULF CREEK

DIRECTORS' REPORT

The directors of Graynic Metals Limited submit herewith the financial report of the Company and its controlled entities for the financial year ended 30 June 2006. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

1. DIRECTORS

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

Non-Executive Chairman (appointed 28 October 2005)
Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (appointed 10 April 2006)
Company Secretary

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

Non-Executive Chairman Ivan Hoffman CPA, FCIS
Qualifications Experience	Mr Ivan Hoffman is a Certified Practicing Accountant and a Fellow of the Institute of Corporate Managers,
Secretaries and Administrators. For about 18 years, Mr Hoffman was a corporate advisory consultant specialising in mergers and acquisitions and company reconstructions, during which period he served on the boards of several public listed companies, including mineral exploration and mining companies. Before that, Mr Hoffman worked several years with local and international financial institutions, including four years in investment management and project financing with Lloyds Bank International. Mr Hoffman is currently chairman of the Fortron group of companies and a non-executive director of Saracen Mineral Holdings Limited.
Interest in Shares	nil
Interest in Options	1,000.000	\$0.30 options exercisable on or before 31/10/08
Ronald Thom	Managing Director
Qualifications	B. Sc. Ph.D
Experience	Ron has extensive experience in base metals, platinum, lateritic nickel and industrial mineral exploration with a strong track record of success. He has field experience in every State and Territory in Australia. Throughout 30 years in the minerals industry Ron has acquired extensive experience in exploration management, budgeting, and exploration strategy.
	Ron has previously been an Exploration Manager and has been involved in several profitable mining ventures
		including Davyhurst and Tuckabiana. Ron has been a director since 21 February 2005.
Interest in Shares	524,000	Ordinary Shares
Interest in Options	262,000	\$0.20 options exercisable on or before 31/10/07
	1,000,000	\$0.30 options exercisable on or before 31/10/08

DIRECTORS' REPORT

Nathan McMahon Non-Executive Director Qualifications B.Comm (UWA)
Experience	Nathan is currently Managing Director - Corporate and Administration, for Cazaly Resources Limited (appointed 15 August 2003) which is listed on the ASX. Nathan was the founding director of Hamill Resources Ltd which listed on the ASX in June 2001 and which acquired significant exploration success and increase in market capitalization during his tenure. Nathan has demonstrated extensive skills in project acquisition and management. Nathan has been a director since the company's incorporation on 10 February 2005. Nathan was also a director of International Goldfields Limited from 10 November 2000 to 15 August 2003)
Interest in Shares	1,260,150	Ordinary Shares
Interest in Options	1,000,000	\$0.30 Options exercisable on or before 30/4/08
Clive Jones Qualifications Experience		Non-Executive Director B. App. Sc (Geol) Clive is currently Managing Director for Cazaly Resources Ltd (appointed 15 September 2003) which is listed on the ASX. Clive is also a Non-Executive Director of the Australian exploration company Jackson Gold Limited and was appointed on 25 March 2005. Clive has formerly been a director of Mount Burgess Mining Ltd and ASX Listed Hamilf Resources Limited and International Goldfields Limited (from 14 December 2000 to 19 December 2003), which both experienced significant market capitalisation growth during his tenure as a director. Clive has been involved in mineral exploration for over 20 years and has worked on the exploration for a range of commodities including gold, base metals, mineral sands, diamonds and industrial minerals. Clive was also previously a Director of Mount Bargess Mining Ltd where he oversaw the discovery of the high grade Red October gold deposit situated in the Eastern Goldfields of Western Australia.
Interest in Shares	1,057,689	Ordinary Shares
Interest in Options	1,000,000 528,845	\$0.30 Options exercisable on or before 30/4/08 \$0.20 options exercisable on or before 31/10/07
Jonathan Downes Qualifications	Non-Executive Director B.Sc Geol, MAIG
Experience Mr Downes has over ten years experience in the minerals industry and has specialised in exploration geology, acquisitions, project management, project valuation, project development and financial modelling. Mr Downes was a director of Siberia Mining Corporation Limited between 2004 and 2006. Mr Downes is currently a director of Ironbark Gold Limited from its incorporation
Interest in Shares	97,000	Ordinary Shares

Directorships of other listed companies

Directorships of other listed companies held by directors in the 3 years immediately before the end of the financial year are as follows:

Name	Company	Period of directorship
Nathan McMahon	Cazaly Resources Limited	Appointed 15 August 2003
Clive Jones	Cazaly Resources Limited	Appointed 15 September 2003
	Jackson Gold Limited	Appointed 25 March 2002
	International Goldfields Limited	From 14 December 2000 to 19 December 2003
	Cortona Resources Limited	Appointed 12 January 2006
Ivan Hoffman	Saracen Mineral Holding Ltd	Appointed 13 May 2005
Jonathan Downes	fronbank Gold Limited	Appointed 4 May 2006

ANNOAL REPORT OF

COMPANY SECRETARY

The following person held the position of company secretary at the end of the financial year:

Kent Hunter

Mr Hunter is a Chartered Accountant with over 15 years corporate and company secretarial experience. He has been involved in the listing of 20 junior gold and mineral exploration companies on ASX in the past five years. He has experience in capital raisings, ASX compliance and regulatory requirements and is currently a non-executive director of Cazaly Resources Limited. Gryphon Minerals Limited, Elixir Petroleum Limited and Scimitar Resources Limited and is company secretary of three other ASX listed entities. Mr Hunter was appointed as Company Secretary on the incorporation of the Company.

2. PRINCIPAL ACTIVITIES

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

There were no significant changes in the nature of the Consolidated Entity's principal activities during the financial year.

3. RESULT

The loss of the Consolidated Entity after providing for income tax amounted to \$2,859,113 (2005:\$145,362).

4. FINANCIAL POSITION

On 20 December 2005 the Company issued 2,500,000 ordinary shares at \$0.20 each to raise \$500,000.

As at 30 June 2006 the Consolidated Entity has \$1.4 million cash on hand.

The Directors believe that the Consolidated Entity currently has sufficient capital to effectively explore its current landholdings.

5. REVIEW OF OPERATIONS

The Company has base metal projects in WA at Quartz Circle and in NSW at Gulf Creek near Tamworth, as well as at Yanco Glen, Wertago and Copper Ridge in the Broken Hill area. During the year the Company relinquished its interest in the Jutson Rocks and Northampton projects, WA. Several tenements such as Walgidee Hills and Brockman Creek in WA are not yet granted.

Most of the exploration focus during the year was at Quartz Circle where a near-surface copper oxide deposit could provide a near-term cash flow and outstanding drill results point to the prospect of a substantial new discovery. Under the terms of an agreement with Cazaly Resources Limited, Graynic has now earned an 80% interest in the Quartz Circle project by the expenditure of \$1M on exploration on that project.

Some attention was also directed towards a promising tungsten occurrence within the Yanco Glen project area, and an airborne EM survey was flown over a large part of the Wertago project area to advance the search for a base metal deposit in what could be a largedeposit geological setting adjacent to a major crustal fault structure.

ANNUAL REPORT 06

WESTERN AUSTRALIA PROJECTS

Quartz Circle base metal project, Nullagine, East Pilbara, WA (Graynic 80%)

Introduction

The Quartz Circle area has been intermittently explored for base metals since about 1970 and some exciting mineralisation was found during the early period up to 1995. An apparent lack of continuity in the mineralization discouraged previous explorers but excellent drilling results obtained by Graynic in the past year using a new exploration model has increased hopes for a substantial base metal discovery.

In addition to exploration for a large ore body Graynic is assessing a small, near-surface copper oxide deposit discovered by a previous explorer in 1992. The Igloo Copper Deposit consists mainly of chalcocite, native copper and malachite occurring as a discrete pod of mineralisation at a depth of between 25m and 50m from surface. At current copper prices this small deposit could yield a useful cash flow and the economics of a short-term mining and treatment operation are currently being evaluated.

Project area

The project area consists of two blocks of tenements, a southern block consisting of P46/1360-1366, P46/1385 and 1386, P46/1441 and 1442, and E46/541, and a northern block consisting of a single exploration licence E 45/2602 separated by about 2.5km from the southern block. All of these are granted tenements.

Igloo Copper Deposit

Within P46/1361 is small copper oxide deposit discovered in 1992 by a previous explorer but not exploited at that time. At current copper prices this small deposit could yield a useful cash flow in the short to medium term and the Company has commenced a scoping study to assess the viability of a small mining operation.

The Company has just completed redrilling the deposit with 10 vertical diamond drill holes each about 50m deep. These drill holes will provide new assay data for a JORC-compliant resource estimate and will also provide material for preliminary metallurgical testing.

The main minerals chalcocite, native copper, and malachite are probably amenable to heap leaching and the Company will consider an on-site heap leaching operation as well as the alternative of trucking the copper ore to an existing copper processing facility for custom milling.

Emperor Zinc Prospect

Exploration at this prospect commenced in the early 1970s and some exciting results were obtained by Alcoa. Good results were also obtained by Pancontinental in the early 1990s but the apparent discontinuity of the mineralization discouraged further exploration.

Graynic's drill holes GM 5 to GM 9 completed in July 2005 gave the first significant results at this prospect in more than a decade. These results were reported last year on the basis of 4m composite samples and when later reassayed using 1m samples the results were significantly better. Drill holes GM 5 and GM 8 contain significant Pb as well as Zn.

The Company has since drilled another 24 RC drill holes, although the results from GM 33 to GM 40 are still awaited. The best hole so far is GM 21 with two thick intervals of mineralisation - 16m @ 3.51% Zn from 49m and 27m @ 4.98% Zn from 71m. A twin diamond drill hole GMD 21 intersected bedding laminations nearly normal to the core axis, suggesting that drill hole GM 21 is perpendicular to the deposit and that the widths of the mineralized zones in GM 21 approximate to true thickness.

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DIRECTORS' REPORT

Hole 1D	Depth	Thickness	$\mathbf{Zn}$ %	Pb %	Au g/t
GM 5	49-50	m	3.98
	$61-62$	Im	3.19	0.76	9. Z
	$-67 - 71$	4m	3.98	.00
	99-101	2m	- 3.57
:GM 6	$59 - 60$	ÌШ	10.33
	$74 - 76$	$2\,\mathrm{m}$	2.95
-GM 7	$-56 - 58$	$_{\rm 2m}$	$7.43\,$		0.23
GM ₈	$-14-16$	$2\,\mathrm{m}$	1.75		0.75
GM 9	$-28 - 30$	2111	3.49		0.26
	58-66m	8m	$-2.29$
GM 21	$49 - 65$	16m	3.51
	$($ inc 52-56 $m$	4m	5.42)
	$-71-98m$	7m	4.98
	(inc.72-80m)	8m	(7.59)

The drill core from GMD 21 also showed that the zinc sulphide (sphalerite) occurs in the matrix of a volcanic breccia, a texture which is consistent with a typical VMS deposit. This core is currently being assayed as a routine check on the assays from RC hole GM21.

NEW SOUTH WALES PROJECTS

Acquisition of projects in NSW

During the year the Company bought a private company, Resource Investment Group Pty Ltd, in order to acquire three high quality projects near Broken Hill and at another at Gulf Creek near Tamworth in New South Wales. The consideration was 10 million Graynic shares and 4 million options exercisable at 30 cents, and \$50,000 in cash. The projects, which are described in more detail below, include an identified scheelite (tungsten) resource, as well as two highly prospective copper projects. Other targets include Cu-Pb-Zn-Ag mineralization in a Broken Hill setting, porphyry copper, tin, and shear zone hosted gold.

The Company believes that these projects are a substantial and exciting addition to its existing portfolio, and that evaluation drilling at the scheelite prospect could well lead to an early cash flow for the Company in the current buoyant tungsten market.

Yanco Glen Project, NSW (Graynic 100%)

Scheelite

The identified scheelite resources at Yanco Glen occur in the south of the tenement at a distance of about 30km north of Broken Hill. Scheelite was mined on a small scale in the 1930s and the small workings define the line of lode over a distance of about 2km. Between 1980 and 1984 CRA Exploration (CRAE) investigated the scheelite potential and estimated that there could be a significant scheelite resource present.

ANNUAL REPORT 06

DIRECTORS' REPORT

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The prospect was tested in April 2005 in a program of 19 RC drill holes totaling 2100m. Most holes contained significant mineralization, and these are shown in the table below.

Hole ID	From	To	WO3 (calc) %
BHRC0002	32	34	$2m \otimes 0.26$
BHRC0003		83	$2m \otimes 0.41$
BHRC0005		15	$4m \otimes 0.31$
BHRC0005	34	35	$\text{Im} \otimes 0.29$
BHRC0005	69	71	$2m \otimes 0.35$
BHRC0006	26	27	$\text{Im} \otimes 0.26$
BHRC0006	-39	- 41	$-2\,\mathrm{m}$ @ 1.42
BHRC0007	119	122	$3m \otimes 0.32$
BHRC0008	77	$\sqrt{78}$	$\lceil \ln \omega \rceil 0.40$
BHRC0011	97	98	Im @ 0.58
BHRC0012 BHRC0012	ĥ		$2m \otimes 0.26$ $\mathbb{I}$ m $\circledR$ 0.38
BHRC0013			$3m \otimes 0.24$
BHRC0013			, Jm @ $0.29$
BHRC0013	30	33	$3m \otimes 0.26$
BHRC0013	36	37	$\dim \circledR$ $0.38$
BHRC0014		$\cdot$	4m @ 0.69
BHRC0015	30		$\text{Im} \otimes 0.29$
BHRC0015	63	64	$\ln \omega$ 0.25
BHRC0016	15		$-4m$ @ 0.48
BHRC0019		-83	$1m \otimes 0.35$

The occurrence of scheelite is believed to be stratigraphically controlled and in most of the drill holes there are several zones of tungsten enrichment representing slightly different stratigraphic horizons. Results so far suggest a tendency for one of these mineralised zones to be of a higher grade than the others. The assay results are currently being modeled to give a resource estimate.

Initial assays were done by fusion XRF, and the mineralized intervals were checked using ICP MS. Correlation between these methods has been excellent. Some checks have been made using pressed powder XRF, again with excellent correlation. The assays provided a W content, from which a WO3 equivalent was calculated. Tungsten prices are quoted in units of WO3.

Gold

A line of small gold workings including the historic Anaconda mine occur in the northern part of the tenement. They have not been explored in recent fimes and will be investigated in 2006.

Wertago Cu-Pb-Zn Project, NSW (Graynic 100%)

The Wertago project encompasses an area of historical copper mining as well as the Silverfields silver and lead workings. Previous limited drilling by CRA has intersected some good grades including 2m @ 4.6% Cu below old copper workings but there is potential for a large deposit such as a Cu-Au porphyry or a Century-style zinc deposit.

The regional-scale Koonenberry Fault immediately to the east of the known mineralization could have been the conduit for substantial fluid flow and the project area is believed to have the ideal geological setting for a large deposit. The Grasmere copper deposit about 40km to the southwest of Wertago also lies immediately east of the Koonenberry Fault. Recent drilling at Grasmere by Black Range Minerals targeting EM conductors from a recent survey has returned some exciting copper intersections and has dramatically improved that project's prospectivity.

Gulf Creek Copper Project (Graynic 100%)

The Gulf Creek copper mine represents the largest copper mine of its type in the New England region of NSW and was primarily mined between 1889 and 1912. Over 35,000 tonnes of Cu ore was mined at an average grade of 5% Cu over the mine life. Higher grades were recovered from some areas such as the Fishers Mine, with head grades exceeding 15% Cu. Mine records estimate that ore reserves up to 50,000 tonnes of ore grading 2.7% copper, and 4.5% zinc could remain in the known ore lenses. A drilling program has been planned for later this year, as soon as heritage clearance can be obtained.

Copper Ridge Project (Graynic 100%)

No exploration was carried out by the Company during the year to June 2006 but a preliminary field evaluation is planned later this year.

6. BUSINESS STRATEGIES AND PROSPECTS FOR THE FORTHCOMING YEAR

The Company remains committed to adding to shareholder wealth and whilst the current focus is on base metals, nickel and platinum group elements, all wealth generating opportunities will be examined.

As exploration progresses the Consolidated Entity may decide to add projects to or divest projects from its current portfolio.

7. SIGNIFICANT CHANGES IN STATE OF AFFAIRS

The following significant changes in the state of affairs of the Consolidated Entity occurred during the financial year:

On 18 August 2005 the Company issued a Prospectus offering shareholders the opportunity to participate in a 1 for 2 non-renounceable entitlements issue for a total of 12,250,002 options at 1 cent each to raise a total of \$122,500 before the costs of the issue. The offer was closed fully subscribed on 16 September 2005.

On 28 October 2005 Mr Ivan Hoffman was appointed as Non-Executive Chairman of Graynic Metals.

On I4 December 2005 the Company lodged a Short Form Prospectus for the issue of 2,500,000 Shares at an issue price of \$0.20 to raise \$500,000

The placement was completed on 16 January 2006 and 2,500,000 shares issued at \$0.20 to raise \$500,000 pursuant to the short form prospectus lodged with ASIC on 14 December 2005.

On 17 February 2006 a General Meeting of Members approved the acquisition of a private company, Resource Investment Group Pty Ltd, the holder of three high quality projects near Broken Hill and at another at Gulf Creek near Tamworth in New South Wales by issuing to the vendors 10 million Graynic shares and 4 million options exercisable at 30 cents, together with a payment of \$50,000 in cash.

On 10 April 2006 the Company appointed Mr Jonathan Downes as Non-Executive Director.

DIRECTORS' REPORT

8. SUBSEQUENT EVENTS

On I September 2006 the Consolidated Entity issued 3,235,294 ordinary shares to various Brokers to raise \$1.1 million.

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

9. FUTURE DEVELOPMENTS

The Consolidated Entity will continue its mineral exploration activity at and around its exploration projects with the object of identifying commercial resources.

10. ENVIRONMENTAL ISSUES

The Consolidated Entity is aware of its environmental obligations with regards to its exploration activities and ensures that it complies with all regulations when carrying out any exploration work.

11. DIVIDENDS PAID OR RECOMMENDED

The directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a dividend to the date of this report.

12. REMUNERATION REPORT

This report details the nature and amount of remuneration for each director of Graynic Metals Limited.

Remuneration Policy

The remuneration policy of Graynic Metals Limited has been designed to align director objectives with shareholder and business objectives by providing a fixed remuneration component which is assessed on an annual basis in line with market rates. The board of Graynic Metals Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best directors to run and manage the company, as well as create goal congruence between directors and shareholders.

The Board's policy for determining the nature and amount of remuneration for board members is as follows:

The remuneration policy, setting the terms and conditions for the executive directors and other senior staff members, was developed by the managing director and approved by the board after seeking professional advice from independent external consultants.

In determining competitive remuneration rates, the Board seeks independent advice on local and international trends among comparative companies and industry generally. It examines terms and conditions for employee incentive schemes, benefit plans and share plans. Independent advice is obtained to confirm that executive remuneration is in line with market practice and is reasonable in the context of Australian executive reward practices.

All executives receive a base salary (which is based on factors such as length of service and experience), superannuation and fringe benefits.

The Company is an exploration entity, and therefore speculative in terms of performance. Consistent with attracting and retaining talented executives, directors and senior executives are paid market rates associated with individuals in similar positions, within the same industry. The Board however does not endorse the use of incentive and bonus payments for directors and senior executives at this point in time. Mr Ron Thom however was issued shares as part of the terms of the Initial Public Offer and Mr Nathan McMahon and Mr Clive Jones received shares as part of the in-specie distribution to Cazaly Resources Ltd shareholders. Board members have largely retained these securities which assist in aligning their objectives with overall shareholder value.

Performance incentives will be issued in the event that the entity moves from an exploration to a producing entity, and key performance indicators such as profits and growth will be used as measurements for assessing Board performance.

The executive directors and executives receive a superannuation guarantee contribution required by the government, which is currently 9% and do not receive any other retirement benefits.

All remuneration paid to directors is valued at the cost to the company and expensed. Shares given to directors and executives are valued as the difference between the market price of those shares and the amount paid by the director or executive. Options are valued using the Black-Scholes methodology.

The Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The managing director in consultation with independent advisors determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. 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.

Company Performance, Shareholder Wealth and Directors' and Executives' Remuneration

The remuneration policy has been tailored to increase goal congruence between shareholders and directors and executives. This has been achieved by the issue of options to the majority of the directors and executives to encourage the alignment of personal and shareholder interest.

Ivan Hoffman	Non-Executive Chairman (appointed 28 October 2005)
Ronald Thom	Managing Director
Jonathan Downes	Non-Executive Director (appointed 10 April 2006)
Nathan McMahon	Non-Executive Director
Clive Jones	Non-Executive Director

ANNUAL REPORT 06

DIRECTORS' REPORT

SHORT TERM BENEFITS POST EMPLOYMENT SHARE-BASED TOTAL PAYMENT Options Salary, Fees Cash Non-Super-Retirement Lquity S. & Superannuation Bonus Monetary annuation Benefits (i) Directors Ivan Hoffman - Chairman $-2006$ $-27,957$ 2.516 36,332 66.805 $2005$ Ron Thom - Managing Director $2006$ 116,591 10,493 36,332 163,416 2005 30,328 2.730 33,058 Nathan McMahon - Non Executive Director $-2006$ $36,000$ $36,000$ 2005 6,000 17,816 23,816 Clive Jones - Non Executive Director 2006 36,000 $36,000.$ $2005\,$ $6,000$ $\sim$ 17, 816 $\sim$ 11. $23,816$ Jonathan Downes - Non-Executive Director ų, $2006$ $6,000$ $6,000$ Total Remuneration Directors 2006 222,548 13,009 72,664 $308,221$ $\sim$ 2005. 2,730 $-35,632$ $42,328$ . $\sim$ 80, 690 $\ldots$ .

Details of the nature and amount of compensation paid, payable or otherwise made available to directors

There were no other directors or executives employed by the Company during the financial year.

(i) The fair value of the Options is calculated at the date of grant using a Black-Scholes model.

The following factors and assumptions were used in determining the fair value of options issued to Directors on grant date:

Yield Volatility Date Date. Per Option Shares on Interest Rate Date
------------------------------------------------------------------------------------------

Estimated volatility approximates historic volatility. Each option entitles the holder to purchase one ordinary share in the Company.

Options Granted to Directors and Executives

During and since the end of financial year, an aggregate of 2,000,000 options over unissued shares were granted to various parties. The total amount granted was issued to the following directors and executives as disclosed in the table below:

Director/Executive	Nimber	Exercise Price	Vesting Date	Expiry Date
lvan Hoffman	រារារា .000		December 2005		-2008-
Thom	.000		December 2005.

The options were issued free of charge, and were valued using the Black & Scholes valuation model. These options vest upon issue and are not performance related.

Value of Options Granted to Directors and Executives

The following table sets out the value of options granted, exercised and lapsed during the year:

and the country	Options ( granted	()ptions: exercised	Options lapsed .	Total value of options.	Value of options included in	Percentage of remuneration for
				granted.	remuneration for	the year that
	Value at	Value at	Value at time	exercised	the year	consists of
Director/	grant date	exercise date	of lapse	lapsed		options
Executives	Ж		Ж.	А.		W.
ivan Hoffman-	.554			36.332	36.332
Ron Thom	36,332			36.332	36.332	.23%

Employment Contracts of Directors and Senior Executives

The employment conditions of the managing director, Ronald Thom was resolved by the Board on 14 July 2006 and a salary of \$160,000 per annum including superannuation was agreed. Other than the managing director, all executives are permanent employees of Graynic Metals Limited. Ron Thom's new employment contract commenced on 14 July 2006.

The employment may be terminated by the Company or Mr Thom by giving the other 4 weeks notice in writing. Alternatively, the employment may be terminated by the Company providing compensation instead of the period of notice required. Termination payments due are four weeks lieu of notice if the termination period is not worked out. Termination payments are not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the company can terminate employment at any time. Any options issued as remuneration not exercised before or on the date of termination will lapse.

DIRECTOR'S REPORT

13. MEETINGS OF DIRECTORS

13. DIRECTORS m
	Board of Directors
Directors	Held	Attended
van Hoffman. $\sim$ $\sim$

In accordance with the Company's Corporate Governance Policies, the Company does not have a separate audit committee or nomination committee because it would not be a more efficient mechanism than the full Board for focusing the Company on specific issues.

14. INDEMNIFYING OFFICERS OR AUDITOR

In accordance with the Constitution, except as may be prohibited by the Corporations Act 2001 every Officer, auditor or agent of the Company shall be indemnified out of the property of the Company against any liability incurred by him in his capacity as Officer, auditor or agent of the Company or any related corporation in respect of any act or omission whatsoever and howsoever occurring or in defending any proceedings, whether civil or criminal.

15. OPTIONS

Unissued Shares Under Option

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

Expiry Date		Exercise Price	Number of Shares
31 October 2007 28 March 2007 28 March 2008 30 April 2008 31.October 2008		cent 20 cents 30 cents cont	.220.514 1,000,000 . AAAA AAA

There have been no issue of ordinary shares as a result of the exercise of options during or since the end of the financial year.

16. AUDITORS INDEPENDENCE DECLARATION

The auditor's independence declaration is included on page 27 of the financial report.

17. NON AUDIT SERVICES

The board of directors is satisfied that the provision of non-audit services performed during the year by the Consolidated Entity's auditors 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 reason:

The nature of the services provided do not compromise the general principles relating to auditors independence as set out in the Institute of Chartered Accountants in Australia and CPA Australia's Professional Statement F1: Professional Independence.
No fees were paid or payable to the auditors for non-audit services performed during the year to 30 June 2006.

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

Nathan McMahon Director

Perth, 27 September 2006

27th September 2006

To the Board of Directors of Graynic Metals Limited

Dear Sirs

AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2006 there have been:

no contraventions of the auditor independence requirements as set out in the Corporations $\bullet$ Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit. $\bullet$

Yours sincerely ORD PARTNERS

lan Keith Macpherson Partner

PARTNERS CHARTERED ACCOUNTANTS

Ian K Macpherson CA

Robert W Parker CA

Craig A Vivian CA

Mahalilahan Ma

Level 2, 47 Colin Street West Perth WA 6005

PO Box 359 West Perth WA 6872

■ +61 8 9321 3514 $\boxplus$ +61893213523

[email protected] www.ordgroup.com.au

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INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2006

		Consolidated Entity		The Company
	Note	2006 唱.	2006 \$	10 February 2005 to 30 June 2005
Revenue from continuing activities		110,741	110,041	8,489
Administrative expense Employee benefits expense		(144, 975) (71,676)	(144, 291) (71,676)	(28, 724) (9, 264)
Borrowing costs expense Consultancy expenses. Compliance and regulatory expenses		(43, 426) $-(47, 707)$	(43, 426) (47,707)	(540) (31, 461) (16, 765)
Occupancy expenses Directors fees - Insurance expenses		(18, 860) (95, 333) (2,085)	(18, 860) (95, 333) (2,085)	(4,157) (56, 805) (4,722)
Depreciation expense Exploration expenditure written off Diminution in value of investments		(4,109) (51,993) (51,262)	(4,109) (51, 993) (51,262)	(1, 413)
Exploration expenditure written off-intangible Write down of investments to recoverable amount		(2,438,428)	(2,438,428)
Loss before income tax expense		(2,859,113)	(2,859.129)	(145.362)
Income tax expense Loss for the year.		(2,859,113)	(2,859,129)	(145, 362)
Basic loss per share (cents per share)	20	9.92		3.94
Diluted loss per share (cents per share)	20	5.80		3.39
		The accompanying notes form part of these financial statements.

ANNUAL REPORT 06

BALANCE SHEET AS AT 30 JUNE 2006

		Consolidated		The Company
	Note	Entity 2006	2006	10 February 2005 to 30 June 2005
		\$	$\$\,$	\$.
CURRENT ASSETS
Cash and cash equivalents.	7	1,397,135	1,382,075	2,216,933
Trade and other receivables.	8	33,377	33,372	48,913
TOTAL CURRENT ASSETS		1,430,512	1,415,447	2,265,846
NON CURRENT ASSETS
Loans to associated companies	8		321,974
Other financial assets	- 9	64,458	2,117,177
Plant and equipment Exploration and evaluation expenditure	$.10\,$ $\mathbf{H}% =\mathbf{H}(\mathbf{Q})\mathbf{1}_{\mathbf{Q}}\times\mathbf{H}^{(\textrm{IV})}$	6,935 5,267,961	$-6,935$ 2,895,987	$-8,587$ 2,350,877

TOTAL NON CURRENT ASSETS		5,339,354	5,342,073	2,359,464
TOTAL ASSETS		6,769,866	6,757,520	4,625,310
CURRENT LIABILITIES
Trade and other payables	12	129,811	129,811	228,769
Provisions	13	16,456	4.126	3,008
TOTAL CURRENT LIABILITIES		146,267	133,937	231,777
TOTAL LIABILITIES		146,267	133,937	231,777
NET ASSETS		6,623,599	6,623,583	4,393,533
EQUITY.
Issued capital	14	8,631,979	8,631,979	4,371,565
Option reserve Accumulated losses	.15. -16	996,095 (3,004,475)	996,095 (3,004,491)	167,330 (145, 362)
TOTAL EQUITY		6,623,599	6,623,583	4,393,533

The accompanying notes form part of these financial statements.

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CASH FLOW STATEMENT annes Den R FOR THE YEAR ENDED 30 JUNE 2006

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	Consolidated Entity	The Company
	Note	2006 \$	2006 翡	10 February 2005 to 30 June 2005
Cash Flows from Operating Activities
Payments to suppliers and employees		(357,710)	(361, 930)	(48,311)
Interest received		93,778	93,778	8,489
Other revenue.		$-16,962$	16,263
Payments for exploration and evaluation		(982, 615)	(610, 637)	(250, 516)
Net cash used in operating activities	21	(1, 229, 585)	(862, 526)	(290, 338)
Cash Flows From Investing Activities
Acquisition of controlled entity			(57, 547)
Payment for investment securities.		(115, 722)	(173, 269)
Purchase of plant and equipment.		(2,457)	(2, 457)	(10,000)
Payment for business.	21iii	(54,949)
Net cash used in investing activities		(173, 128)	(233, 273)	(10,000)
Cash Flows from Financing Activities
Proceeds from issue of shares.		623,422	623,422	2,650,503
Payment for costs of issue of shares		(40, 507)	(40, 507)	(147,240)
Proceeds from borrowings				14.008
Loan to controlled entity			(321, 974)
Net cash provided by financing activities		582,915	260,941	2,517,271
Net (decrease)/increase in cash held		(819,798)	(834, 858)	2,216,933
Cash and cash equivalents at beginning		2,216,933	2,216,933
of reporting period
		1,397,135	1,382,075	2,216,933

STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED 30 JUNE 2006

Consolidated Entity	Issued Capital	Accumulated	Option	Total
		Losses	Reserve
	Ŝ		$\mathbb{S}_1$ .	S.
Balance at 1 July 2005	$-4,371,565$	(145,362)	167,330	4,393,533
Loss for the year		(2,859,113)		(2,859,113)
Contributions of equity	4,300,921		756,101	5,057,022
Transaction costs	(40,507)			(40,507)
Employee equity settled transactions			72,664	72,664
Balance at 30 June 2006	8,631,979	(3,004,475)	996,095	6,623,599

Balance at incorporation
Loss for the year
Contributions of equity
Transaction costs $\tilde{\phantom{a}}$
Employee equity settled transactions
Balance at 30 June 2005
Consolidated Entity	Issued Capital	Accumulated	Option	Total
		Losses	Reserve
	S	\$	S.	紫
Balance at 1 July 2005	4,371,565	(145,362)	$-167,330$	4,393,533
Loss for the year		(2,859,129)		(2,859,129)
Contributions of equity.	4,300,921		756,101	5,057,022
Transaction costs	(40,507)			(40,507)
Employee equity settled transactions			72,664	72,664
Balance at 30 June 2006	8,631,979	(3,004,491)	996,095	6,623,583

Balance at incorporation
Loss for the year		(145, 362)		(145,362)
Contributions of equity. Transaction costs	4,650,503			$-4,650,503$
Employee equity settled transactions	(278,938)		167,330	(278, 938) 167,330
Balance at 30 June 2005	4,371,565	(145, 362)	167,330	4,393,533

The accompanying notes form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

Little Mark Stephen

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The financial report covers the economic entity of Graynic Metals Limited and controlled entities, and Graynic Metals Limited as an individual parent entity. Graynic Metals Limited is a listed public company, incorporated and domiciled in Australia. .
Registration of the Co 94 C

The financial report of Graynic Metals Limited and controlled entities, and Graynic Metals Limited as an individual parent entity comply with all Australian equivalents to International Financial Reporting Standards (AIFRS) in their entirety.

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

(a) Principles of Consolidation

A controlled entity is any entity Graynic Metals Limited has the power to control the financial and operating policies of so as to obtain benefits from its activities. sa ji

A list of controlled entities is contained in Note 26 to the financial statements. All controlled entities have a 30 June financial year-end. in kasa di kacamatan

All inter-company balances and transactions between entities in the Consolidated Entity, 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 Company.

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

$(b)$ Income Tax

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

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

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

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

Income taxes relating to items recognised directly in equity are recognised in equity are not in the Income Statement.

$(c)$ Exploration and evaluation expenditure.

Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are carried forward only if they relate to an area of interest for which rights of tenure are current and in respect of which:

(i) such costs are expected to be recouped through successful development and exploitation or from sale of the area; or
(ii) exploration and evaluation activities in the area have not, at balance date, reached a stage which permit a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active operations in, or relating to, the area are continuing.

Accumulated costs in respect of areas of interest which are abandoned 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.

(d) Plant and Equipment

Plant and equipment is stated at cost less accumulated depreciation and any impairment in value.

Impairment

The carrying amounts of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. If any such indication exists and where the carrying values exceed the recoverable amount, the assets or cash generating units are written down to their recoverable amount.

The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses are recognised in the Income Statement in the cost of sales line item.

Depreciation

The depreciable amount of all plant and equipment is depreciated on a diminishing value 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
	.2006 -	$2005 -$

Plant and equipment	40.0%	40.0%
Office Furniture & Equipment	18.0%	$\sim$ 18.0% $\sim$

(e) Leases

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.

$(f)$ Loss Per Share

Basic loss per share is calculated by dividing the net loss attributable to members for the reporting period, after excluding any costs of servicing equity, by the weighted average number of ordinary shares of the Company, adjusted for any bonus issue.

NOTES TO THE FINANCIAL STATEMENTS

siya da da sanayay

$(g)$ Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Consolidated Entity and the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Interest and other income

Revenue is recognised as the income accrues.

(h) Cash and cash equivalents

Cash and short-term deposits in the Balance Sheet comprise cash at bank and in hand and short-term deposits.

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

$(i)$ Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office ("ATO"). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Balance Sheet are shown inclusive of GST. in salah sala

The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the Balance Sheet.

Cash flows are included in the Cash Flow Statement on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATQ are classified as operating cash flows.

$(i)$ Joint Venture Operations

Graynic has certain contractual arrangements with other participants to engage in joint activities where all significant matters of operating and financial policy are determined by the participants such that the operation itself has no significant independence to pursue its own commercial strategy. These contractual arrangements do not create a joint venture entity due to the fact that the policies are those of the participants, not a separate entity carrying on a trade or a business of its own.

$(k)$ Investments.

All investments are initially recognised at cost, being the fair value of the consideration given and including acquisition charges. associated with the investment.

After initial recognition, investments, which are classified as held for trading and available-for-sake, are measured at fair value. Gains or losses on investments held for trading are recognised in the Income Statement.

Gains or losses on available-for-sale investments are recognised as a separate component of equity until the investment is sold, collected or otherwise disposed of, or until the investment is determined to be impaired, at which time the cumulative gain or loss. previously reported in equity is included in the Income Statement.

$(l)$ Employee Benefits

Provision is made for the Company's liability for employee benefits arising from services rendered by employees to balance date. Employee benefits expected to be settled within one year together with entitlements arising from wages and salaries and annual leave which will be settled after one year, have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Other employee benefits payable later than one year have been measured at the present value of the estimated. future cash outflows to be made for those benefits.

Contributions are made by the Company to employee superannuation funds and are charged as expenses when incurred.

(m) Share-based payment transactions

Martinalist

The Company provides benefits to employees (including directors) of the Company in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares ('equity-settled transactions').

.......................................

There is currently an Employee Share Option Plan (ESOP), which provides benefits to directors and senior executives.

The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using Black-Scholes model, further details of which are given in note 4.

In valuing equity-settled transactions, there are no performance conditions relating to the exercise of the equity share based payments.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award ('vesting date').

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Company, will ultimately vest, This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been. modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

NOTES TO THE FINANCIAL STATEMENTS

C. Ann Pàrt

	Consolidated Entity	The Company
	2006 \$	2006 . \$	10 February 2005 to 30 June 2005.
2. REVENUE FROM CONTINUING ACTIVITIES
Revenue - Ta - interest received	$-94,478$	93,778	8.489
- other income	16,263 110,741	16,263 110,041	8,489
3. EXPENSES
Loss before income tax includes the following specific expenses:
Borrowing costs other persons			540
Write down of investment to recoverable amount		2,438,428
Exploration expenditure written off - intangible	2,438,428
Exploration expenditure written off	51,993	51,993
Minimum lease payments Operating lease	8,036	8.036	3,140
Employee benefit expense - equity settled transactions	72,665	72,665	35,632

KEY PERSONNEL REMUNERATION AND RETIREMENT BENEFITS 4.

$Th\xi$

e names of directors in office at any time during or since the end of the year are:
- Non-Executive Chairman (appointed 28 October 2005) Ivan Hoffman
-Managing Director Ronald Thom
Jonathan Downes Non-Executive Director (appointed 10 April 2006)
- Nathan McMahon - Non-Executive Director
Clive Jones Non-Executive Director.

COMPANY SECRETARY:

The following person held the position of company secretary at the end of the financial year:

Kent Hunter

Mr Hunter is a Chartered Accountant with over 15 years corporate and company secretarial experience. He has been involved in the listing of 20 junior gold and mineral exploration companies on ASX in the past five years. He has experience in capital raisings, ASX compliance and regulatory requirements and is currently a non-executive director of Cazaly Resources Limited, Gryphon Minerals Limited, Elixir Petroleum Limited and Scimitar Resources Limited and is company secretary of three other ASX listed entities. Mr-Hunter was appointed as Company Secretary on the incorporation of the Company.

(a) Details of the nature and amount of compensation paid, payable or otherwise made available to directors
SHORT-TERM BENEFITS			POST EMPLOYMENT		SHARE-BASED PAYMENT	TOTAL.
Salary, Fees Cash & Superannuation Bonus	$N\mathbf{m}$ Monetary	Super - annuation	Retirement Benefits	- Equity -	Contigns (i)

Directors.
. Ivan Hoffman - Chairman.
$-2006$ $-27,957$		2,516			36.332	$-66,805$
-2005 .
Ron Thom - Managing Director
12006 - $\sim$ 116.591 $\,$		10.493			36,332	$163.416$ .
$2005$ , $\frac{3}{2000}$ , $\frac{30,328}{20000}$		2,730				$-33,058$ .
Nathan McMahon - Non Executive Director
$2006 -$ $=36,000$ .						36,000
$2005$ $-0.7600$					17,816	23,816
Clive Jones - Non Executive Director
$\sim 2006$ , $\sim 36.000$ .						$-36,000$
$2005$ , $-6.000$ , $-$ Thursday					.17. 816.	23,816
Jonathan Downes - Non-Executive Director
$-2006$ , $-6,000$						$-6,000$
Total Remuneration Directors
$.2006$ . $-222,548$		13,009			$-72,664$ .	308,221
2005 $-42,328$		2.730			35,632	89,690

(i) The fair value of the Options is calculated at the date of grant using a Black-Scholes model.

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(ii) Kent Hunter resigned as a director on 22 February 2005, however retained his role as Company Secretary, for which he was paid \$18,600 for IPO compliance and accounting assistance via Mining Corporate Advisory Services Pty Ltd, an entity controlled by Mr. Hunter. No estados de

Section u.

(b) Compensation options granted during the year:

the cape During the financial year ended 30 June 2006, the following options were granted to the following key management personnel:-

Kev -	:Granted:	Vested	Grant Date Value per		Exercise	First Exercise Last Exercise.
Management Number		Number		Option at	Price	Date	- Date
Personnel				Grant Date


I Hoffman	L.000.000 -	$1.000.000$ .	$-12.12.2005$	$1.36.332$ . $5.301$ . $12.12.2005$			30.04.2008
R Thom	1.000.000	1,000,000	12.12.2005				30.04.2008
	2,000,000	2.000.000

NOTES TO THE FINANCIAL STATEMENTS

Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria Maria M

the announce

		The following factors and assumptions were used in determining the fair value of options issued to Directors on grant date:

Grant	Expiry	Fair Value	Exercise		Price of Estimated Risk Free Dividend
Date	Date	Per Option	Date :	Shares on Grant Date	Volatility Interest Rate		- Yield -
$-12.12.2005$	$\scriptstyle\lesssim30.04.2008$ .		$-30.04.2008$	\$0.19	-50%	5.33%
		Betimated volatility approximates historic volatility. Each ontion entitles the holder to purchase one ordinary share in the Company''

$\mathcal{L}$ . Shares issued on exercise of compensation options:

During the financial year ended 30 June 2006, no shares were issued on exercise of compensation options.

d) Share and option holdings
(i) Shares held by key management personnel

2006	Balance	Granted	Received on	Net Change.	Balance
	[01.07, 05]	as Remuneration	Exercise of	Other	30.06.06
			Options

Hoffman
R Thom	524.000				$-524.000$
N McMahon	1.260.150.				: 260.150
C Jones	1.057.689.				,057,689
J Downes	47.000			50,000(i)	97.000
	2.888,839			50.000	2,938,839

$(1)$ 50,000 ordinary share were purchased on market by Mr Jonathan Downes during the year.

-2005	Balance on Granted as Received on		Net Change	Balance	Balance
	Incorporation Remuneration Exercise of		$\sim$ -Other $\sim$	on resignation 30.06.05
		Options -

- R Thom			$-524,000(a)$		$-524.000$ .
N McMahon.			1,260,150(b)		1,260,150
. C Jones			1,057,689(b)		$-1,057.689$
K Hunter			192,829(b)	192,830
			3.034.668	192,830	2,841,839

a) Mr.R Thom received 500,000 ordinary shares at \$0.001 on the Initial Public Offer, the remaining 24,000 ordinary share were purchased. on-market.

ka kungi Mangusa taun tau

b) These ordinary shares were received as part of the Cazaly Resources Ltd in-specie distribution.

a de la caractería de la Caractería de la caractería de la caractería de la caractería de la caractería de la
La caractería de la caractería de la caractería de la caractería de la caractería de la caractería de la carac (ii) Options held by key management personnel

2006	at	Balance Received as Exercised Bought/ Held at Balance at 1999 remuneration.	(sold)	$\sim$ retirement $\sim 30.06.06$		Total Vested	Total Exercisable
	01.07.05
I Hoffman		1,000,000			1,000,000	1,000,000	$-1,000,000$
R Thom		1,000,000	262,000		1,262,000	1,262,000	1,262,000
N McMahon	1,000,000				1,000,000	1,000,000	1,000,000
C Jones	1,000,000		528,845		1,528,845	1,528,845	1,528,845
J Downes.
	2,000,000	2,000,000	790,845		4,790,845	4,790,845	4,790,845

2005	Balance	Received as Exercised	Bought/	Held at	Balance at	Total	Total
	$AB$ .	remuneration	(sold)	retirement	30.06.06	Vested	Exercisable
	Incorporation
R Thom
N McMahon		1,000,000			1,000,000	1,000,000	1,000,000
C Jones		1,000,000			1,000,000	1,000,000.	1,000,000
K Hunter
		2,000.000			2,000.000	2,000.000	2,000.000

				Consolidated		The Company
				Entity 2006		2006	10 February 2005
							to 30 June 2005
						я
5.	AUDITORS' REMUNERATION
		Remuneration of the auditor (Ord Partners) for:

		Auditing or reviewing the financial report		16,000	16,000		5,275
	Other services						3,500
				16,000	16,000		8,275

NOTES TO THE FINANCIAL STATEMENTS

	Consolidated		The Company
	Entity 2006	2006	2005
6. INCOME TAX EXPENSE
The components of the tax expense comprise:
Current tax
Deferred tax

The prima facie tax on loss from ordinary activities
before income tax is reconciled to the income tax as follows:

Prima facie tax (benefit) on loss from ordinary activities. before income tax at 30% (2005; 30%)	(857, 734)	(857, 739)	(43, 609)

Add:
Tax effect of: Other non-allowable items	$-21,874$	21,874
Tax benefit of revenue losses not recognised	838,291	838,296	43,609

Less:
Tax effect of: Tax benefit of equity raising costs not recognised	(2,431)	(2,431)

Income tax attributable to entity
The following deferred tax balances at 30% (2005: 30%)
have not been recognised
Deferred Tax Assets:
Carry forward revenue losses	98,485	98,485	34,649
Capital raising costs	$-9,722$	$-9,722$
Provisions and accruals	5,901	5,901	36,798
Other.	748,812 862,920	748,812 862,920	2,540 73,987
$\mathcal{P}{\mathcal{P}{\mathcal{P}{\mathcal{L}}}}$ n Program to region? $\sim$ ੇਲ ਪ੍ਰ in Prince and a series of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract o $\sim$ $\sim$ $\mathcal{D}{\text{max}}$ and	in Michael Stevensky
in a shekarar 1 ta gundek $\left\langle \gamma_{\alpha} \right\rangle \gamma_{\alpha \beta \gamma} \lesssim \left\langle \gamma_{\alpha} \right\rangle \gamma_{\alpha \beta}$ $\tau_{\rm w} \approx 8$ $\left\langle \begin{array}{ccccc} \alpha_{\alpha\beta} & & & \ & \alpha_{\alpha_{\alpha\beta} & & \ & & \alpha_{\alpha_{\beta\gamma} & \ & & & \alpha_{\beta_{\gamma\gamma} \end{array}} \right\rangle$ الأربيبية والمستن $\mathcal{H}{\mathcal{A},\mathcal{C}}$ N. Persia d Termine a 医内皮内静脉计固定磁体 $\mathcal{N}{\mathcal{N}_i}$ $1.5\pm 0.7$ 医结肠切除术化氢 and the co-	والرباب
the starting energy $\sim$ $\sim$ Perus. $\sim 10^{-10}$ and a series of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract of the contract o in tala
$\sim 10^7$ $\sim$ n e tale STAR
No. of the ing nan on Botanica
$\alpha$ - $\alpha$ - $\beta$ - $\beta$ $\sim$ 化反应率 Romania Northerne $\label{eq:1} \alpha_{\rm{eq}} = \alpha_{\rm{eq}} \beta_{\rm{eq}} \gamma_{\rm{eq}} + \gamma_{\rm{eq}}$

$\sim 100$ 100000

	Consolidated	The Company
	2006	2006	2005
6. INCOME TAX EXPENSE (CONT.)

The tax benefits of the above Deferred Tax Assets
will only be obtained if:

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

(b) the company continues to comply with the conditions
for deductibility imposed by law; and
(c) no changes in income tax legislation adversely affect
the company in utilising the benefits.

Deferred Tax Liabilities:
Exploration expenditure	853,198	853,198	73.987
Other-	9,722	9.722
	862,920	862,920	73.987

a sa pina
Na

The above Deferred Tax Liabilities have not been recognised as they have given rise to the carry forward revenue losses for which the $\cdot$ Deferred Tax Asset has not been recognised. ting. in sa_lam i in massaca til kanad Side School and Society

	Consolidated Entity		The Company
	2006	2006	2005
	£
CASH AND CASH EQUIVALENTS 7,

Cash at bank.	302,922	287,862	2,216,933
Short-term deposits.	1,094,213	1,094,213
	1,397,135	1,382,075	2,216,933


	Consolidated Entity	The Company
	2006	2006	2005
		-8	Ś.
8. TRADE AND OTHER RECEIVABLES

Current

Other receivables	23,370	23,365	48,913
Prepayments	10,007	10,007
	33,377	33,372	48,913

Non-Current

Amounts receivable from:
-Wholly-owned subsidiary		321.974

NUTES TO THE FINANCIAL STATEMENTS

ELEVATION COMMUNIST

Maria Maria Maria (

	Consolidated Entity	The Company
	2006	2006	2005
	S	\$
OTHER FINANCIAL ASSETS
Non-Current
		-4,491,147
Shares in controlled entity-at cost Less provision for impairment		(2,438,428)
		2,052,719

Listed investments - at fair value	64,458	64,458
	64,458	2,117,177


10. PLANT AND EQUIPMENT
Plant and Equipment
At cost	11,012	11,012	8.555
		(5,181)	(1,313)
Accumulated depreciation	(5,181)
	5,831	5,831

Office Furniture and Equipment
At cost -	1,445	1,445	7,242 1,445
Accumulated depreciation	(341)	(341)	(100)
	1,104	1,104	1,345

Reconciliations According to the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of the Contract of Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year are set out below. NASA MARA 1999 - 1999
1990 - 1990 na para a ing.
Sala $\label{eq:1} \mathcal{H}{\mathcal{G}}(\mathcal{H}{\mathcal{G}}) = \mathcal{H}{\mathcal{G}}(\mathcal{H}{\mathcal{G}}) = \mathcal{H}{\mathcal{G}}(\mathcal{H}{\mathcal{G}})$

Consolidated and Company

$-2006.$	Plant &	Office Furniture	Total
	Equipment	& Equip


Balance at beginning of the year.	7,242	345	8.587
Additions	2,457		2.457
Depreciation expense:	(3,868)	(241)	(4,109)
Carrying amount at 30 June 2006.	5,831	1,104	6,935


2005	Plant &	Office Furniture	Total
	Equipment	& Equip


Balance at beginning of the year.
Additions	8,555.	.445	10.000
Depreciation expense	(1,313)	(100)	(1, 413)

	Consolidated Entity
	2006	2006	2005


ENDITURE

11. EXPLORATION AND EVALUATION EXP

.
References

Non-Current
Costs carried forward in respect of areas of interest in:
Exploration and evaluation $phases - at cost$	3.267.961	2.895.987	2,350,877
Fair value of exploration assets acquired	4.438.428
Less accumulated impairment losses.	(2,438,428)
	2.000.000

Carried forward exploration, evaluation expenditure	5,267,961	2,895,987	2,350,877
Movement in carrying value:
Brought forward	2,350,877	2.350.877	2,350,877
Consideration of the exploration assets acquired.
during the year - at valuation	4,438,428		$-2.000.000$
Exploration expenditure capitalised during the year	. 969.077	597.103.	350.873
Impairment losses charged to profit	$\left( 2.438,428\right)$
Exploration expenditure written off	(51,993)	(51,993)
At reporting date	5,267.961	2,895.987	2,350,877

ina (n. 1876).
Ngjarje The value of the exploration expenditure is dependent upon:

• the continuance of the rights to tenure of the areas of interest;

Dina Robin

× the results of future exploration; and $\mathbb{Z}$ and $\mathbb{Z}$ and $\mathbb{Z}$

the recompment of costs through successful development and exploitation of the areas of interest, or alternatively, by their sale. ¢, and the model of the moment

The Company has reviewed the carrying values of its exploration expenditure and has identified an impairment of \$2,438,428. This is based on the original valuation of \$2 million in the agreement dated 12 December 2005 which the directors believe is also the best indicator of the assets value at the year end.

	Consolidated Entity		The Company
	$-2006$	2006	2005

12. TRADE AND OTHER PAYABLES
Current (unsecured)
Trade creditors - --	$-59.548$	59.548	85,219
Other creditors and accruals.	70,263	70,263	143,550
	129.811	129.811	228,769

Trade payables are non interest bearing and are normally settled on 28 day terms. Other payables are non interest bearing and have an

average term of 60 days.

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NOTES TO THE FINANCIAL STATEMENTS

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

tii riikkaad rya myan

			Consolidated Entity 2006	2006	The Company	2005
13. PROVISIONS			Ś,	\$.		\$
Current :
Employee benefits			16,456	4,126		3,008
14. ISSUED CAPITAL
37,004,607 (2005: 24,500,003) ordinary shares			8,631,979	8,631,979		4,371,565
	Consolidated	The Company		Consolidated		The Company
	Entity 2006 No	2006 No	2005 No.	Entity 2006 \$	2006 \$	2005 \$
Ordinary shares	37,004,607	37,004,607	24,500,003	8,631,979	8,631,979	4,371,565
	Consolidated Entity 2006 Nο	2006 No	The Company 2005 Nο.	Consolidated Entity 2006 \$.	2006 \$	The Company 2005 \$
Movement during the year
Ordinary Shares
Balance at beginning of reporting period.	24,500,003	$-24,500,003$		4,371,565	4,371,565
Issue - Incorporation $lssue -$ Promoter shares			500,000			-3 -500
Issue - Seed capital shares.			1,500,000			150,000
Issue - Exploration assets acquisition			10,000,000			2,000,000
$Issue - IPO.$			12,500,000			2,500,000
	2,500,000	2,500,000 10,000,000		500,000 3,800,000	500,000 3,800,000
Issue - Placement
$lssue - To acquire subsidiary$	10,000,000			921	921
Issue - Conversion of options Capital raising costs	4,604	4,604		(40, 507)	(40,507)	(278, 938)

Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held and in proportion to the amount paid up on the shares held. to, basil

At shareholders meetings each ordinary share is entitled to one vote in proportion to the paid up amount of the share when a poll is called, otherwise each shareholder has one vote on a show of hands.

a kang aku ng mga taong 2011.
Kabupatèn Pakunan Palawan

	15. RESERVES

			Consolidated Entity		- The Company
			$-2006$	2006		$-2005$
			S
Option premium reserve $(a)$			122,501	122,501
Share based payments reserve (b).			873,594	873.594		167,330
			996,095	996,095		167,330

a) Option premium reserve			Consolidated Entity		The Company
			2006	2006		2005
12,245,514 (2005: 12,245,514) listed option premium			- % 122,501	S. 122.501

	Consolidated		The Company	Consolidated		The Company
	Entity			Entity
	2006 No	2006 No	2005 Nο	2006	2006. S	2005 \$.
Movement during the year

Options.

Balance at beginning of reporting period
$\text{Is sue} - \text{Right} \text{ is sue}$	12,250,118	12,250,118		122,501	122.501
Options converted	(4,604)	(4,604)
Balance at end of reporting period.	12,245.514	12,245,514		122,501	122,501

As at 30 June 2006, there are options over unissued shares as follows:

Type	Expiry Date	Exercise Price.	No. Issued

Listed	31. October 2007	\$0.20	$-12.245.514$
:Unlisted	28 March 2007	$$0.20$ .	$-2,000,000$ .
Unlisted .	28 March 2008	$- $0.30$	12,000,000
-Unlisted -	30 April 2008.	\$0.30.	6,000,000
Unlisted	31 October 2008.	\$0.30	2,000,000
			24,220,514

During the financial year ended 30 June 2006, 4,604 ordinary shares were issued as a result of the exercise of 31 October 2007 \$0.20 options.

the company of the company	Consolidated Entity	- The Company
	2006	2006	2005

b) Share based payments reserve.
Balance at beginning of financial year	167,330	167.330
Employee equity-settled benefit payments	-72.664	72 RRA	35.632.
Consultant and advisor option consideration			131.698
- Equity settled vendor consideration	633,600	633,600
Balance at end of financial year.	873,594	873.594	167,330

This reserve is used to record the value of equity benefits provided to the employees and directors as part of their remuneration. $\mathbb{R}^3$

NOTES TO THE FINANCIAL STATEMENTS

ET ALTER

	Consolidated Entity		The Company
	2006	2006	2005

6. ACCUMULATED LOSSES

Balance at the beginning of financial year	(145, 362)	(145, 362)
-Loss for the year $\scriptstyle\sim$	(2,859,113)	(2,859,129)	(145, 362)
Balance at the end of financial year.	(3.004.475)	(3.004.491)	(145.362)

17. SHARE BASED PAYMENTS

Options are issued to vendors as part of purchase consideration and also to key management personnel as part of their compensation under the company's Employee Share Option Plan. The options issued are not subject to performance criteria and are issued to key management personnel of Graynic Metals Limited to increase goal congruence between key management personnel and shareholders.

The following table illustrates the number and weighted average exercise prices (WAEP) of and movements in share options issued during the year: -

	2006		-2005
	Number of	Weighted		Weighted Average
	Options	Average	Number of	Exercise Price
		Exercise Price	Options


At beginning of reporting period	$6{,}000{,}000$
Granted during the period
$\mathcal{L}$ - Vendor consideration .	1,000,000	\$0.30
- Consultant and advisor options			4,000.000	$$0.20 - $0.30$
— Director remuneration .	2.000.000	-\$0.30-	2.000.000	\$0.30
Forfeited during the period.
Exercised during the period
Expired during the period -
Balance the end of reporting period	L2,000.000		6,000,000

Exercisable at end of reporting period	12.000.000		6.000.000

The options outstanding at 30 June 2006 had a weighted average exercise price of \$0.20 and \$0.30, and a weighted average remaining life between 0.74 year and 2.34 years.

The weighted average fair value of options granted during the year was between \$0.01 and \$0.15. Included under employee benefits expense in the income statement is \$72,664 (2005;\$35,632), which relates to employee equitysettled benefit payments.

Options Exercised

During the financial year ended 30 June 2006, no compensation options were exercised.

18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

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Albanya kasalah

The Consolidated Entity's principal financial instruments comprise cash and short term deposits. The main purpose of the financial instruments is to earn the maximum amount of interest at a low risk to the entity. The Consolidated Entity also has other financial instruments such as trade debtors and creditors which arise directly from its operations.

The main risks arising from the Consolidated Entity's financial instruments are interest rate risk and credit risk, The Board reviews and agrees policies for managing each of these risks and they are summarised below.

(a) Interest Rate Risk

The Consolidated Entity's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rate for each class of financial assets and financial liabilities comprises. The Consolidated Entity does not have short or long term debt, and therefore this risk is minimal.

(b) Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Consolidated Entity. The Consolidated Entity has adopted the 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 Consolidated Entity does not have any significant credit risk exposure to any single counterparty or any entity of counterparties having similar characteristics. The carrying amount of financial assets recorded in the financial statements, net of any provisions for losses, represents the Consolidated Entity's maximum exposure to credit risk.

19. FINANCIAL INSTRUMENTS

The following table sets out the carrying amount by maturity, of the financial instruments that are exposed to interest rate risk;

2006.
	Floating		I year over 1 year more than Non-Interest Total
	interest rate or less less than 5 5 years bearing
	- \$	S.	- S :
Financial Assets -
$\left[$ Cash at Bank $\left[ \right]$	302,922	1,094,213		1,397,135
Receivables			33,377	$-33,377$
Held for sale investments			64,458	64,458
Weighted Average Interest Rate	.5%.	5.85%
Financial Liabilities
Trade creditors & accruals			129,811	129,811

2005.

Financial Assets
Cash at Bank	$-2,216,933$			2,216,933
Receivables :			48,913	48,913
Weighted Average Interest Rate :	$\sim$ 18, 28, 28, 20, 20%
Financial Liabilities
Trade creditors & accruals.			228.769	228,769

NOTES TO THE FINANCIAL STATEMENTS

a katika katika kutoka kutoka kutoka kutoka kutoka kutoka kutoka kutoka kutoka kutoka kutoka kutoka kutoka kut
Katika kutoka kutoka kutoka kutoka kutoka kutoka kutoka kutoka kutoka kutoka kutoka kutoka kutoka kutoka kutok

On-balance sheet financial instruments Program (1999), San Party (1994)

The carrying value approximates the fair values of financial assets and liabilities at balance. ing c

	2006	2005

20. LOSS PER SHARE

(a) Earnings / (Loss) used in the calculation of basic and dilutive EPS	(2,859.113)	(145.362)
	Number of	Number of
	Shares	Shares.
(b) Weighted average number of ordinary shares outstanding during the
year used in the calculation of basic earnings per share:	28,807.700	3.685.717
Weighted average number of options	20.488.163	600.000
Weighted average number of ordinary shares outstanding during the year
used in the calculation of diluted earnings per share:	49.295.863	4.285.717

	Consolidated Entity		The Company
	2006	2006	10 February 2005
			to 30 June 2005
	Ж
21. CASH FLOW INFORMATION

Reconciliation from the net loss to the net cash Ш.
used in operating activities .
(Loss) after income tax	(2.859.113)	(2,859,129)	(145, 362)

Non-cash flows in loss
Depreciation and the same	4,109	$-4,109$	$\cdot 1.413$
Options issued to directors as remuneration	72,664	72,664	35.63.
Exploration expenditure written off	51,993	51,993
Diminution in listed investments [14].	51,262	51,262
Exploration expenditure written off - intangible	2,438,428
Write down of investments to recoverable amount		2,438.428

Changes in assets and liabilities
Increase in receivables and prepayments	15,536	15.541	(48, 913)
Increase in exploration and evaluation expenditure.	(982, 615)	(610.637)	(350, 875)
Increase in trade and other creditors and accruals	(35, 297)	(27,875)	$-214.709$
Movement in provisions	13,448	-1.118	3.008

Net cash used in operating activities . .	.
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(ii) Non cash financing and investing activities Common Contract of the Common Contract of the Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common Common

Non cash financing and investing activities were disclosed in Note 23.(i) .

(ii) Business Acquired
$\sim$ The net cash outflow on acquisition on Resources Investment Group Pty Ltd ("RIG") was
Cash and cash equivalent consideration - 57.547
$\sim$ Less cash balances acquired $\sim$ (2.598)
54.949

Further details of the acquisition of RIG is contained in Note 22.

22. ACQUISITION OF ENTITY

.......................................

On 31 March 2006, the company acquired 100% interest in Resources Investment Group Pty Ltd. The principal activity of Resources Investment Group Pty Ltd was share trading and tenement acquisition. Details of this transaction are as follows:

		Consolidated
		Entity
		2006
		S
Purchase consideration		4.491,147
Cash consideration.		57,547
Equity consideration (a)
$\epsilon$ Ordinary shares		3,800,000
- Options		633,600
Total consideration		4,491,147


	Book Value	Fair Value
Assets and liabilities held at acquisition date:
Cash	$-2,598$	$-2,598$
Receivables	50,005	-50.005
Intangibles.	- 645	- 645
: Exploration assets	50.000	4,488.428
Payables	(50, 529)	(50, 529)
Fair value of net assets	52,719	4,491,147

Goodwill on consolidation

$(a)$ 10,000,000 ordinary shares were issued at \$0.38 being the share price on date of issue and 4,000,000 options exercisable at \$0.30 on or before 30/4/08 as part of the consideration for the purchase of Resources Investment Group Pty Ltd.

23. COMMITMENTS

In order to maintain current rights of tenure to mining tenements, the Company has the following discretionary exploration. expenditure requirements up until expiry of leases. These obligations, which are subject to renegotiation upon expiry of the leases, are not provided for in the financial statements and are payable:

Not longer than one year.
Longer than one year, but not longer than five years and account of the
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		∵r⊁ 979. –

NOTES TO THE FINANCIAL STATEMENTS

gyikan kar

The Company has the right to earn an 80% interest in each or all of its three projects (Quartz Circle, Northampton and Jutson Rocks) by the expenditure of \$1 million on each or all of these projects within a 42 month period. The Company intends to carry out expenditure on each project in such a way that it could, if exploration results warranted, complete the necessary expenditure within the time frame to earn the interest. Future funding and/or farm-out options will be considered on an ongoing basis to ensure the Company has sufficient funds to comply with its commitments.

It should be noted that the right to earn an 80% as detailed above is not an obligation. Subject to results obtained from such exploration as carried out and ongoing assessment of each of the Company's projects, the Company may farm-out, or relinquish its rights to earn on any or all of its Projects, thereby reducing its level of commitments disclosed above.

If the Company decides to relinquish certain leases and/or does not meet these obligations, assets recognised in the balance sheet may require review to determine the appropriateness of carrying values. The sale, transfer or farm-out of exploration rights to third parties will reduce or extinguish these obligations.

24. SEGMENT INFORMATION

The Company operates predominantly in one geographical segment, being Australia, and in one industry, mineral mining and exploration.

25. EVENTS SUBSEQUENT TO REPORTING DATE

On 1 September 2006 the Consolidated Entity issued 3,235,294 ordinary shares to various Brokers to raise \$1.1 million.

. Astrika menganji ini Kira Teen Politikers. المحالفة والمستحيرة والمحالية والمتحالة No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Consolidated Entity, the results of those operations, or the state of affairs of the Consolidated Entity in future financial years.

26. RELATED PARTY DISCLOSURES

(i) Equity interests in subsidiaries are disclosed in notes 9 and 28

(ii) Key management personnel equity holdings are disclosed in note 4.

26. CONTINGENT LIABILITIES

There are no contingent liabilities at the end of the year.

28. CONTROLLED ENTITIES

		Consolidated Entity - Consolidated Entity	Country of
		Interest	Incorporation

Parent Entity
Graynic Metals Limited
Controlled Entities
Resources Investment Group Pty Ltd.	The Control of the

DIRECTORS' DECLARATION

The directors declare that:

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

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

Nathan McMahon Director Perth, 27 September 2006

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF GRAYNIC METALS LIMITED SCOPE

The financial report and directors' responsibility

We have audited the financial report of Graynic Metals Limited ('the Company') for the financial year ended 30 June 2006, consisting of the income statements, statements of changes in equity, balance sheets, statements of cash flows, accompanying notes, and the directors' declaration. The financial report includes the consolidated financial statements of the consolidated entity, comprising the Company and the entities it controlled at the end of the year or from time to time during the financial year.

The Company's directors are responsible for the financial report. The directors are also responsible for preparing the relevant reconciling information regarding the adjustments required under the Australian Accounting Standard AASB I First-time Adoption of Australian equivalents to International Financial Reporting Standards.

We have conducted an independent audit of this financial report in order to express an opinion on it to the members of the Company.

Audit approach

We have conducted an independent audit in order to express an opinion to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards in order to provide reasonable assurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgment, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, Accounting Standards and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company's and the consolidated entity's financial position, and of their performance as represented by the results of their operations and cash flows.

We formed our audit opinion on the basis of these procedures, which included:

examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and
assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors.

While we considered the effectiveness of management's internal controls over financial reporting when determining the nature and extent of our procedures, our audit was not designed to provide assurance on internal controls.

Ian K Macpherson CA

PARTNERS CHARTERED ACCOUNTANTS

Robert W Parker CA

Craig A Vivian CA

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Level 2, 47 Colin Street West Perth WA 6005

PO Box 359 West Perth WA 6872

$\mathbf{R}$ +61 8 9321 3514 $\widehat{=}$ +61893213523

[email protected] www.ordgroup.com.au

INDEPENDENT AUDIT REPORT

Independence

In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

Opinion

1. In our opinion, the financial report of Graynic Metals Limited is in accordance with:
(a) the Corporations Act 2001, including:
- (i) giving a true and fair view of the Company's and consolidated entity's financial position as at 30 June 2006 and of their performance for the financial year ended on that date, and
- (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) other mandatory professional reporting requirements in Australia.

ORD PARTNERS

Chartered Accountants

lan Macpherson Partner

Dated this 27^th day of September 2006 Perth, WA

ADDITIONAL SHAREHOLDER INFORMATION

A. CORPORATE GOVERNANCE

A statement disclosing the extent to which the Company has followed the best practice recommendations set by the ASX Corporate Governance Council during the reporting period is located at the end of this report.

B. SHAREHOLDING

$\mathbf{1}$ . Substantial Shareholders

Number of Shares Shareholder Percentage

trina Peta Downes
Megan Ruth Roberts

2. Number of holders in each class of equity securities and the voting rights attached

There are 664 holders of ordinary shares. Each shareholder is entitled to one vote per share held.

There are 302 holders of listed options. There are no voting rights attached to these options.

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

Distribution schedule of the number of holders in each class of equity security as at 4 September 2006. 3.

By Class	Holders of	No. Of	$\mathcal{H}_{\mathbf{0}}$	Holders of	No. of	胁。
		Ordinary Shares Ordinary Shares		Options	Options
$-1.000$		39.405	0.098		22.281
$.001 - 5.000$	168	468.397	.163	114	416,005	$3.404$ .
$0.01-10.00$	:37	1.164.685	$-2.893$	-34	258,708	2.117
10,001 - 100,000	226	8.577.768	21.303	91	3.327,695	$-27.230$
100.001 and over	53	30.014.646	74.543	I6	8,195,825	67.066
TOTALS		40,264,901	100.00	-289	.220.514	100.000

4. Marketable Parcel

There are no shareholders with less than a marketable parcel.

5. Twenty largest holders of each class of quoted equity security

The names of the twenty largest holders of each class of quoted equity security, the number of equity security each holds and the percentage of capital each holds (as at 13 September 2006) is as follows:

ADDITIONAL SHAREHOLDER INFORMATION

Ordinary Shares Name

Name	No. of Ordinary Shares	$\eta_{\rm h}$
Westpac Custodian Nominees	6,625,000	16.454
Katrina Peta Downes	3,333,333	8.279
Megan Ruth Roberts	2,500,001	6.209
Fleur Lesley Schell	2,500,000	6.209
Margaret Anne Mullins	1,666,666	4.139
Nathan Bruce McMahon.	1,069,893	2.657
Clive Bruce Jones	995,248	2.472
Pylara Pty Ltd	800,000	1.987
Cyril Alan Ryman	700,000	1.738
Mervyn Ian Leo Bassett & Shirley Ethel Bassett
$\langle$ Y-Z Superannuation Fund A/C>	.650,000	1.614
Chaldane Pty Ltd	$.524,000$ .	1.301
Mark Stephen Ghirardello	450,000	1.118
Kylee Lynne Keys	400,000	0.993
RAB Special Situations (Master Fund) Limited	375,000	0.931
Robin Scrimgeour	375,000	0.931
Peter Barnes	325,000	0.807
AFM Perseus Fund Limited	300,000	0.745
Alastair Rowland Brown C/-JDV Limited	300,000	0.745
Saxon Holdings Pty Ltd	300,000	0.745
Jeremy Robert Antill Pockley	300,000	0.745
- TOTAL	24,489,141	60.820

Options exercisable at \$0.20 on or before 31 October 2007

Name

Westpac Custodian Nominees Limited	3,500,000	28.640
CPA Financial Services Pty Ltd	878,400	7.188
Jezza Nominees Ltd	821,868	6.725
Clive Bruce Jones	497,624	4.072
Tricom Nominees Pty Ltd .	$400,000$ .	3.273
Fortis Clearing Nominees P/L	300,000	$-2.455$
Chaldane Pty Ltd.	,262,000	2.144
Drake Resources Limited	$-250,000$	2.046
David Halliday	250,000	2.046
Alastar Rowland Brown	225,000	1.841
Charmaine Marie Willoughby	$-183,600$	1.502
M&M Media & Marketing Consultants Pty Ltd	165,000	1.350
Forbar Custodians Limited	150,000	1.227
Cyril Resources Pty Ltd	106,089.	$-0.868$
Deanna Demunka Miocevich	105,000	0.859
Simon Wallington	101,244	0.828
Maincoast Pty Ltd	100,000	0.818
Bannerman Resources Pty Ltd	100,000	0.818
Peter Bowman C/- Stirling Partners	100,000.	0.818
Melsim Pty Limited	$-100,000$	0.818
TOTAL	8,595,825	70.339

No. of Options

C. OTHER DETAILS

1. Company Secretary

The name of the company secretary is Kent Hunter.

2. Address and telephone details of the entity's registered and administrative office

The address and telephone details of the registered and administrative office:

Level 2, 22 Oxford Close West Leederville Western Australia 6008 Telephone: +(61) 8 9381 1436 Facsimile: +(61) 8 9381 1068

3. Address and telephone details of the office at which a register of securities is kept

The address and telephone number of the office at which a registry of securities is kept:

Advanced Share Registry Services 110 Stirling Highway NEDLANDS Western Australia 6009 Telephone: +(61) 8 9389 8033 Facsimile: +(61) 8 9389 7871

Stock exchange on which the Company's securities are quoted 4.

The Company's listed equity securities are quoted on the Australian Stock Exchange.

Restricted Securities 5.

The Company has issued the following restricted securities:

		Date Ceasing to be
Class of Equity Security	Ammher	Restricted Securities
Fully Paid Ordinary Shares		30 June 2007
\$0.30 Options expiring 30 April 2008.	. 888.	20 June 2007

6. Review of Operations

A review of operations is contained in the Directors' Report.

7. Consistency with business objectives

The Company has used its cash and assets in a form readily convertible to cash that it had a the time of listing in a way consistent with its stated business objectives.

ANNUAL REPORT 06

ADDITIONAL SHAREHOLDER INFORMATION

CORPORATE GOVERNANCE

The Company is committed to implementing the highest standards of corporate governance. In determining what those high standards should involve the Company has turned to the ASX Corporate Governance Council's Principles of Good Corporate Governance and Best Practice Recommendations. The Company is pleased to advise that the Company's practices are largely consistent with those ASX guidelines. As consistency with the guidelines has been a gradual process, where the Company did not have certain policies or committees recommended by the ASX Corporate Governance Council (the Council) in place during the reporting period, we have identified such policies or committees.

Where the Company's corporate governance practices do not correlate with the practices recommended by the Council, the Company is working towards compliance however it does not consider that all the practices are appropriate for the Company due to the size and scale of Company operations.

To illustrate where the Company has addressed each of the Council's recommendations, the following table cross-references each recommendation with sections of this report. The table does not provide the full text of each recommendation but rather the topic covered. Details of all of the recommendations can be found on the ASX Corporate Governance Council's website at http://www.asx.com.au/about/CorporateGovernance_AA2.shtm.

Recommendation	Section
Recommendation 1.1 Functions of the Board and Management	1.1
Recommendation 2.1 Independent Directors	1.2
Recommendation 2.2 Independent Chairman	1.2
Recommendation 2.3 Role of the Chairman and CEO	1.2
Recommendation 2.4 Establishment of Nomination Committee	2.3
Recommendation 2.5 Reporting on Principle 2	1.2, L4.6, 2.3.2 and the Directors' Report
Recommendation 3.1 Directors' and Key Executives' Code of Conduct	$\mathbf{1}$
Recommendation 3.2 Company Security Trading Policy	1.4.9
Recommendation 3.3 Reporting on Principle 3	1.1 and 1.4.9
Recommendation 4.1 Attestations by CEO and CFO	1.4.11
Recommendation 4.2 Establishment of Audit Committee	2.1
Recommendation 4.3 Structure of Audit Committee	2.1.2
Recommendation 4.4 Audit Committee Charter	2.1
Recommendation 4.5 Reporting on Principle 4	2.1
Recommendation 5.1 Policy for Compliance with Continuous Disclosure	1.4.4
Recommendation 5.2 Reporting on Principle 5	1.4.4
Recommendation 6.1 Communications Strategy	1.4.8
Recommendation 6.2 Attendance of Auditor at General Meetings	1.4.8
Recommendation 7.1 Policies on Risk Oversight and Management	2.1.3
Recommendation 7.2 Attestations by CEO and CFO	1.4.11
Recommendation 7.3 Reporting on Principle 7	2.1.3
Recommendation 8.1 Evaluation of Board, Directors and Key Executives	1.4.10
Recommendation 9.1 Remuneration Policies	2.2.4
Recommendation 9.2 Establishment of Remuneration Committee	2.2
Recommendation 9.3 Executive and Non-Executive Director Remuneration	2.2.4.1 and 2.2.4.2
Recommendation 9.4 Equity-Based Executive Remuneration	2.2.4.1
Recommendation 9.5 Reporting on Principle 9	2.2.2 and 2.2.4
Recommendation 10.1 Company Code of Conduct	3

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1. Board of Directors

1.1 Role of the Board

The Board's role is to govern the Company rather than to manage it. In governing the Company, the Directors must act in the best interests of the Company as a whole. It is the role of senior management to manage the Company in accordance with the direction and delegations of the Board and the responsibility of the Board to oversee the activities of management in carrying out these delegated duties.

In carrying out its governance role, the main task of the Board is to drive the performance of the Company. The Board must also ensure that the Company complies with all of its contractual, statutory and any other legal obligations, including the requirements of any regulatory body. The Board has the final responsibility for the successful operations of the Company.

To assist the Board carry out its functions, it has developed a Code of Conduct to guide the Directors, the Chairman and other key executives in the performance of their roles.

1.2 Composition of the Board

To add value to the Company the Board has been formed so that it has effective composition, size and commitment to adequately discharge its responsibilities and duties given its current size and scale of operations. The names of the Directors and their qualifications and experience are stated in the Directors' Report along with the term of office held by each of the Directors. Directors are appointed based on the specific skills required by the Company and on their decision-making and judgment skills.

The Company recognises the importance of Non-Executive Directors and the external perspective and advice that Non-Executive Directors can offer. Mr N McMahon and Mr C Jones are Non-Executive Directors, however are not independent directors as they do not meet the following criteria for independence adopted by the Company.

Mr I Hoffman and Mr J Downes are Non-Executive Director of the Company and meet the Company's criteria for independence. Their experience and knowledge of the Company makes their contribution to the Board such that it is appropriate for them to remain on the Board.

An Independent Director is a Non-Executive Director and:

is not a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company; ٠
٠ within the last three years has not been employed in an executive capacity by the Company or another group member, or been a Director after ceasing to hold any such employment;
٠ within the last three years has not been a principal of a material professional adviser or a material consultant to the Company or another group member. Or an employee materially associated with the service provided;
is not a material supplier or customer of the Company or another group member, or an officer of or otherwise associated directly or indirectly ٠ with a material supplier or customer;
has no material contractual relationship with the Company or other group member other than as a Director of the Company; ٠
has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the Director's ability to act in the best interests of the Company; and
is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the ٠ Director's ability to act in the best interests of the Company.

Mr I Hoffman, Mr N McMahon, Mr C Jones and Mr J Downes are Non-Executive Director of the Company and do not meet the Company's criteria for independence. However, their experience and knowledge of the Company makes their contribution to the Board such that it is appropriate for them to remain on the Board.

Mr R Thom is an Executive Director of the Company and meets the Company's criteria for independence.

1.3 Responsibilities of the Board

In general, the Board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company. It is required to do all things that may be necessary to be done in order to carry out the objectives of the Company.

ANNUAL REPORT 06

ADDITIONAL SHAREHOLDER INFORMATION

Without intending to limit this general role of the Board, the principal functions and responsibilities of the Board include the following.

Leadership of the Organisation: overseeing the Company and establishing codes that reflect the values of the Company and guide the conduct of the Board.
Strategy Formulation: to set and review the overall strategy and goals for the Company and ensuring that there are policies in place to govern the operation of the Company.
Overseeing Planning Activities: the development of the Company's strategic plan.
Shareholder Liaison: ensuring effective communications with shareholders through an appropriate communications policy and promoting $\blacksquare$ participation at general meetings of the Company.
Monitoring, Compliance and Risk Management: the development of the Company's risk management, compliance, control and accountability $\bullet$ systems and monitoring and directing the financial and operational performance of the Company.
Company Finances: approving expenses and approving and monitoring acquisitions, divestitures and financial and other reporting.
Ensuring the Health, Safety and Well-Being of Employees: in conjunction with the senior management team, developing, overseeing and reviewing the effectiveness of the Company's occupational health and safety systems to ensure the well-being of all employees.
Delegation of Authority: delegating appropriate powers to the CEO to ensure the effective day-to-day management of the Company and establishing and determining the powers and functions of the Committees of the Board.

Full details of the Board's role and responsibilities are contained in the Board Charter, a copy of which is available for inspection at the Company's registered office.

1.4 Board Policies

1.4.1 Conflicts of Interest

Directors must:

disclose to the Board actual or potential conflicts of interest that may or might reasonably be thought to exist between the interests of the Director and the interests of any other parties in carrying out the activities of the Company; and
if requested by the Board, within seven days or such further period as may be permitted, take such necessary and reasonable steps to remove any conflict of interest.

If a Director cannot or is unwilling to remove a conflict of interest then the Director must, as per the Corporations Act, absent himself or herself from the room when discussion and/or voting occurs on matters about which the conflict relates.

1.4.2 Commitments

Each member of the Board is committed to spending sufficient time to enable them to carry out their duties as a Director of the Company.

1.4.3 Confidentiality

In accordance with legal requirements and agreed ethical standards, Directors and key executives of the Company have agreed to keep confidential, information received in the course of the exercise of their duties and will not disclose non-public information except where disclosure is authorised or legally mandated.

1.4.4 Continuous Disclosure

The Board has designated the Company Secretary as the person responsible for overseeing and coordinating disclosure of information to the ASX as well as communicating with the ASX. In accordance with the ASX Listing Rules the Company immediately notifies the ASX of information:

concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Company's securities; and
that would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the Company's securities.

1.4.5 Education and Induction

It is the policy of the Company that new Directors undergo an induction process in which they are given a full briefing on the Company. Where possible this includes meetings with key executives, tours of the premises, an induction package and presentations. Information conveyed to new Directors include:

٠ details of the roles and responsibilities of a Director;
٠ formal policies on Director appointment as well as conduct and contribution expectations;
٠ access to a copy of the Board Charter;
٠ guidelines on how the Board processes function;
٠ details of past, recent and likely future developments relating to the Board;
background information on and contact information for key people in the organisation; ۰
٠ an analysis of the Company;
a synopsis of the current strategic direction of the Company; and
۰ a copy of the Constitution of the Company,

In order to achieve continuing improvement in Board performance, all Directors are encouraged to undergo continual professional development. Specifically, Directors are provided with the resources and training to address skills gaps where they are identified.

1.4.6 Independent Professional Advice

The Board collectively and each Director has the right to seek independent professional advice at the Company's expense, up to specified limits, to assist them to carry out their responsibilities.

1.4.7 Related Party Transactions

Related party transactions include any financial transaction between a Director and the Company. Unless there is an exemption under the Corporations Act from the requirement to obtain shareholder approval for the related party transaction, the Board cannot approve the transaction.

1.4.8 Shareholder Communication

The Company respects the rights of its shareholders and to facilitate the effective exercise of those rights the Company is committed to:

communicating effectively with shareholders through releases to the market via ASX, information mailed to shareholders and the ٠ general meetings of the Company;
۰ giving shareholders ready access to balanced and understandable information about the Company and corporate proposals;
making it easy for shareholders to participate in general meetings of the Company; and
requesting the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditor's report.

The Company also makes available a telephone number and email address for shareholders to make enquiries of the Company.

1.4.9 Trading in Company Shares

Due to the size of the Company, the Board does not consider it appropriate to implement a Share Trading Policy. Rather, it reminds directors, officers and employees of the prohibition in the Corporations Act 2001 concerning trading in the Company's securities when in possession of "inside information".

1.4.10Performance Review/Evaluation

It is the policy of the Board to conduct evaluation of its performance. The evaluation process was introduced via the Board Charter adopted on 30 June 2004 and will be implemented for the financial period ended 30 June 2005. The objective of this evaluation will be to provide best practice corporate governance to the Company.

ANNUAL REPORT 06

ADDITIONAL SHAREHOLDER INFORMATION

1.4. HAttestations by CEO and CFO

It is the Board's policy, that the CEO and the CFO make the attestations recommended by the ASX Corporate Governance Council as to the Company's financial condition prior to the Board signing the Annual Report. However, as at the date of this report the Company does not have a designated CEO or CFO. Due to the size and scale of operations of the Company these roles are performed by the Board as a whole.

2. Board Committees

2.1 Audit Committee

Due to the size and scale of operations of the Company the full Board undertakes the role of the Audit Committee. Below is a summary of the role and responsibilities of an Audit Committee.

2.1.1 Role

The Audit Committee is responsible for reviewing the integrity of the Company's financial reporting and overseeing the independence of the external auditors.

As the whole Board only consists of five (5) members, the Company does not have an audit committee because it would not be a more efficient mechanism than the full Board for focusing the Company on specific issues and an audit committee cannot be justified based on a cost-benefit analysis. However, in accordance with the ASX Listing Rules, the Company is moving towards establishing an audit committee consisting primarily of Independent Directors.

In the absence of an audit committee, the Board sets aside time to deal with issues and responsibilities usually delegated to the audit committee to ensure the integrity of the financial statements of the Company and the independence of the external auditor.

2.1.2 Responsibilities

The Audit Committee or as at the date of this report the full Board of the Company reviews the audited annual and half-yearly financial statements and any reports which accompany published financial statements and recommends their approval to the members.

The Audit Committee or as at the date of this report the full Board of the Company each year reviews the appointment of the external auditor, their independence, the audit fee, and any questions of resignation or dismissal.

The Audit Committee or as at the date of this report the full Board of the Company is also responsible for establishing policies on risk oversight and management.

2.1.3 Risk Management Policies

The Board's Charter clearly establishes that it is responsible for ensuring there is a good sound system for overseeing and managing risk. Due to the size and scale of operations, risk management issues are considered by the Board as a whole. On 20 September 2005 Mr Ron Thom (Managing Director) and Mr Kent Hunter (Company Secretary) provided the Board with written assurance that the financial statements are founded on a sound system of risk management and internal compliance. Their statement assured the Board that the risk management and internal compliance and control system is operating efficiently and effectively in all material respects.

2.2 Remuneration Committee

2.2.1 Role

The role of a Remuneration Committee is to assist the Board in fulfilling its responsibilities in respect of establishing appropriate remuneration levels and incentive policies for employees.

As the whole Board only consists of five (5) members, the Company does not have a remuneration committee because it would not be a more efficient mechanism than the full Board for focusing the Company on specific issues.

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2.2.2 Responsibilities

The responsibilities of a Remuneration Committee, or the full Board include setting policies for senior officers' remuneration, setting the terms and conditions of employment for the Chief Executive Officer, reviewing and making recommendations to the Board on the Company's incentive schemes and superannuation arrangements, reviewing the remuneration of both Executive and Non-Executive Directors and making recommendations on any proposed changes and undertaking reviews of the Chief Executive Officer's performance, including, setting with the Chief Executive Officer goals and reviewing progress in achieving those goals.

2.2.3 Remuneration Policy

Directors' Remuneration was approved by resolution of the Board on 21 February 2005.

2.2.3.1 Senior Executive Remuneration Policy

The Company is committed to remunerating its senior executives in a manner that is market-competitive and consistent with best practice as well as supporting the interests of shareholders. Consequently, under the Senior Executive Remuneration Policy the remuneration of senior executive may be comprised of the following:

fixed salary that is determined from a review of the market and reflects core performance requirements and expectations;
a performance bonus designed to reward actual achievement by the individual of performance objectives and for materially improved Company performance;
participation in any share/option scheme with thresholds approved by shareholders;
statutory superannuation.

By remunerating senior executives through performance and long-term incentive plans in addition to their fixed remuneration the Company aims to align the interests of senior executives with those of shareholders and increase Company performance. During the year there were no Non-Director Executives.

The value of shares and options were they to be granted to senior executives would be calculated using the Black and Scholes method.

The objective behind using this remuneration structure is to drive improved Company performance and thereby increase shareholder value as well as aligning the interests of executives and shareholders.

The Board may use its discretion with respect to the payment of bonuses, stock options and other incentive payments.

2.2.3.1 Non-Executive Director Remuneration Policy

Non-Executive Directors are to be paid their fees out of the maximum aggregate amount approved by shareholders for the remuneration of Non-Executive Directors. Non-Executive Directors do not receive performance based bonuses and do not participate in equity schemes of the Company.

Non-Executive Directors are entitled to but not necessarily paid statutory superannuation.

2.2.4 Current Director Remuneration

Full details regarding the remuneration of Directors, is included in the Directors' Report.

2.3 Nomination Committee

2.3.1 Role

The role of a Nomination Committee is to help achieve a structured Board that adds value to the Company by ensuring an appropriate mix of skills are present in Directors on the Board at all times.

As the whole Board only consists of five (5) members, the Company does not have a nomination committee because it would not be a more efficient mechanism than the full Board for focusing the Company on specific issues.

ANNUAL REPORT 06

AODITIONAL SHAREHOLDER INFORMATION

2.3.2 Responsibilities

The responsibilities of a Nomination Committee would include devising criteria for Board membership, regularly reviewing the need for various skills and experience on the Board and identifying specific individuals for nomination as Directors for review by the Board. The Nomination Committee would also oversee management succession plans including the CEO and his/her direct reports and evaluate the Board's performance and make recommendations for the appointment and removal of Directors. Currently the Board as a whole performs this role.

2.3.3 Criteria for selection of Directors

Directors are appointed based on the specific governance skills required by the Company. Given the size of the Company and the business that it operates, the Company aims at all times to have at least one Director with experience appropriate to the Company's target market. In addition, Directors should have the relevant blend of personal experience in accounting and financial management and Director-level business experience.

3. Company Code Of Conduct

The Board has decided against the implementation of a code of conduct as it does not believe that it is in the best interests of its employees or other stakeholders to have what purports to be an exhaustive code of conduct. The Board feels that such a code may be too prescriptive and not allow the employees the discretion they need to best serve the Company's stakeholders.

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SCHEDULE OF MINERAL TENEMENTS

AS AT 20 SEPTEMBER 2006

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	E46/0541	-80%
	P46/1441	-80%
	P46/1442.	80%
	E45/2602	80%
	P46/1385	.80%
Quartz Circle	P46/1386	809

NSW.
Yanco Glen	E6489	.100%
Wertago	E6424	100%
Copper Ridge Gulf Creek	E6435 E6492	100% 100%

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HAVAL2, 22 ONTORD CLOST. WEST LEEDERVILLE WA 6007
TELEPHONE: (08) 9381 1436 EACSIMIRE (03) 9381 1068

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CORAZON MINING LIMITED — Annual Report 2006

64747_rns_2006-10-30_1de6dc11-e356-47db-8f3b-710e0629f514.pdf

TABLE OF CONTENTS

CHAIRMAN

MANAGING DIRECTOR

NON-EXECUTIVE DIRECTORS

COMPANY SECRETARY

PRINCIPAL & REGISTERED OFFICE

AUDITORS

SHARE REGISTRAR

STOCK EXCHANGE LISTING

BANKERS

PROJECT REVIEW

AUSTRALIAN PROJECT LOCATIONS

WESTERN AUSTRALIAN PROJECTS

Quartz Circle base metal project, Nullagine, East Pilbara, WA (Graynic 80%)

Introduction

Project area

PROJECT REVIEW

Igloo Copper Deposit

Emperor Zinc Prospect

PROJECT REVIEW

Geochemical and alteration 'footprint'

Revised geochemical anomaly map

A typical VMS system

PROJECT REVIEW

The big picture

1. The Emperor VMS System

2. The Imperial VMS System

The King VMS System 3.

PROJECT REVIEW

Quartz Circle Summary

Other WA Projects

NSW PROJECTS

Acquisition of projects in NSW

Tenements

1. Yanco Glen Project, NSW (Graynic 100%)

Scheelite

Gold

2. Wertago Cu-Pb-Zn Project, NSW (Graynic 100%)

3. Gulf Creek Copper Project (Graynic 100%)

ANNUAL REPORT 06

PROJECT REVIEW

4. Copper Ridge Project (Graynic 100%)

HISTORIC COPPER SMELTER AT GULF CREEK

DIRECTORS' REPORT

1. DIRECTORS

DIRECTORS' REPORT

Directorships of other listed companies

COMPANY SECRETARY

Kent Hunter

2. PRINCIPAL ACTIVITIES

3. RESULT

4. FINANCIAL POSITION

5. REVIEW OF OPERATIONS

WESTERN AUSTRALIA PROJECTS

Quartz Circle base metal project, Nullagine, East Pilbara, WA (Graynic 80%)

Introduction

Project area

Igloo Copper Deposit

Emperor Zinc Prospect

DIRECTORS' REPORT

NEW SOUTH WALES PROJECTS

Acquisition of projects in NSW

Yanco Glen Project, NSW (Graynic 100%)

Scheelite

DIRECTORS' REPORT

Gold

Wertago Cu-Pb-Zn Project, NSW (Graynic 100%)

Gulf Creek Copper Project (Graynic 100%)

Copper Ridge Project (Graynic 100%)

6. BUSINESS STRATEGIES AND PROSPECTS FOR THE FORTHCOMING YEAR

7. SIGNIFICANT CHANGES IN STATE OF AFFAIRS

DIRECTORS' REPORT

8. SUBSEQUENT EVENTS

9. FUTURE DEVELOPMENTS

10. ENVIRONMENTAL ISSUES

11. DIVIDENDS PAID OR RECOMMENDED

12. REMUNERATION REPORT

CORAZON MINING LIMITED Annual Report 2006

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