Graynic Metals Limited (ACN 112 898 825) and Controlled Entities

Annual Financial Report

For the year ended 30 June 2007

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

Corporate Directory _________________________________________________________ 1 Directors' Report____________________________________________________________ 2 Auditor’s Independence Declaration____________________________________________ 23 Income Statement___________________________________________________________ 24 Balance Sheet _____________________________________________________________ 25 Cash Flow Statement________________________________________________________ 26 Statement Of Changes In Equity _______________________________________________ 27 Notes To The Financial Statements _____________________________________________ 28 Directors' Declaration_______________________________________________________ 54 Independent Audit Report To The Members Of Graynic Metals Limited________________ 55 Additional Shareholder Information ____________________________________________ 57 Corporate Governance ______________________________________________________ 60 Schedule Of Mineral Tenements _______________________________________________ 66

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

CORPORATE DIRECTORY

CHAIRMAN Ivan Hoffman

MANAGING DIRECTOR

Bronwyn Barnes

NON-EXECUTIVE DIRECTORS

Clive Jones Jonathan Downes

COMPANY SECRETARY David Round

PRINCIPAL & REGISTERED OFFICE

Suite 5 Level 1, 350 Hay Street SUBIACO WA 6008 Telephone: (08) 6364 0518 Facsimile: (08) 6210 1872

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

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

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 2007. 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:

Ivan Hoffman Chairman Bronwyn Barnes Managing Director (appointed 10 July 2007) Ronald Thom Managing Director (resigned 19 June 2007) Nathan McMahon Non-Executive Director (resigned 5 December 2006) Clive Jones Non-Executive Director Jonathan Downes Non-Executive Director Kent Hunter Company Secretary (resigned 19 July 2007) David Round Company Secretary (appointed 19 July 2007)

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

Ivan Hoffman

Chairman

Qualifications CPA, FCIS 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

Bronwyn Barnes

Managing Director (appointed 10 July 2007)

Qualifications B.Arts, Grad Dip Bus

Experience Ms. Barnes has over 10 years experience in the resources sector most recently as Manager External Affairs with BHP Billiton’s Nickel West and previously WMC Resources. In addition she has held senior roles in the corporate divisions of ConocoPhillips, Methanex Australia, and Anaconda Nickel. Ms. Barnes holds a Bachelor of Arts from UWA and a Graduate Diploma of Business from Edith Cowan University. Her primary role will be to focus on the potential of existing assets within the Graynic portfolio and consider growth opportunities. Interest in Shares 72,500 Interest in Options Nil

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

1. DIRECTORS (Cont.)

Ronald Thom

Managing Director (resigned 19 June 2007)

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 and resigned on 19 June 2007.

Interest in Shares Nil 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 1,000,000 $0.30 options exercisable on or before 31/07/09

Nathan McMahon

Non-Executive Director (resigned 5 December 2006)

Qualifications B.Comm (UWA)

Experience

Nathan is currently Joint Managing Director of Cazaly Resources Limited (appointed 15 August 2003) and is also a Non-Executive Director of Catalyst Metals Limited both of which are listed on the ASX. Nathan is also Chairman of South China Resources which is listed on the AIM market. 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 had been a director since the Company’s incorporation on 10 February 2005 and resigned from the Board on 5 December 2006.

Interest in Shares 1,074,869 Ordinary Shares Interest in Options 1,000,000 $0.30 Options expiring 30/4/08

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

1. DIRECTORS (Cont.)

Clive Jones

Non-Executive Director

Qualifications B. App. Sc (Geol) Experience Clive is currently Joint Managing Director for Cazaly Resources Ltd (appointed 15 September 2003) which is listed on the ASX. Clive is also a Non-Executive Director of Bannerman Resources Limited (appointed on 12 January 2007) and Chairman of Cortona Resources Limited both of which are ASX listed companies. Clive has formerly been a director of ASX Listed, Hamill Resources Limited, International Goldfields Limited, Jackson Gold Limited and Mount Burgess Mining Ltd. 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.

Interest in Shares 1,775,124 Ordinary Shares Interest in Options 1,000,000 $0.30 Options expiring 30/4/08 528,845 $0.20 options exercisable on or before 31/10/07

Jonathan Downes Non-Executive Director

Qualifications 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 Managing Director of Ironbark Gold Limited from its incorporation and a nonexecutive director of Wolf Minerals Limited

Interest in Shares 347,000 Ordinary Shares Interest in Options Nil

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 Bronwyn Barnes No other company directorship - Nathan McMahon Cazaly Resources Limited Appointed 15 August 2003 Clive Jones Cazaly Resources Limited Appointed 15 September 2003 Bannerman Resources Limited Appointed 12 January 2007 Jackson Gold Limited From 25 March 2002 to 4 December 2006 Cortona Resources Limited Appointed 12 January 2006 Ivan Hoffman Saracen Mineral Holding Ltd Appointed 13 May 2005 Jonathan Downes Ironbark Gold Limited Appointed 4 May 2006 Wolf Mineral Limited Appointed 20 September 2006

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

COMPANY SECRETARY

The following persons held the position of company secretary during the financial year:

David Round (appointed on 19 July 2007)

David Round was appointed Company Secretary on 19 July 2007. David Round is an experienced Accountant, Company Secretary and Corporate Advisor with over 15 years experience in Public Practice and Commerce. David has worked with KPMG, London as a Senior Manager and was also a senior consultant with Ernst & Young and Grant Thornton in Perth. David is a Certified Practicing Accountant, Registered Tax Agent and holds a Masters in Business Administration.

Kent Hunter (resigned on 19 July 2007)

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 and resigned on 19 July 2007.

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 $383,757 (2006:$2,859,113).

4. FINANCIAL POSITION

As at 30 June 2007 the Consolidated Entity has $575,822 cash on hand.

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

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

5. REVIEW OF OPERATIONS

The Company has base metal projects in the Eastern Pilbara of WA at Quartz Circle, at Gulf Creek near Tamworth NSW, as well as at Yanco Glen, Wertago and Copper Ridge in the Broken Hill area of NSW. During the year the Company relinquished its interest in the Jutson Rocks and Northampton projects, WA. Application for the Walgidee Hills diamond project was approved and other tenements including Napier Downs and Nookenbah in WA are not yet granted.

During the year the majority of the Company’s exploration focus continued 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 through the expenditure of $1 million on exploration.

In addition, 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.

WESTERN AUSTRALIAN PROJECTS

==> picture [342 x 461] intentionally omitted <==

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

5. REVIEW OF OPERATIONS (Cont.)

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

Introduction

The Quartz Circle area has been intermittently explored for base metals since the early 1970’s 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.

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 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, 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 separated by about 2.5km from the southern block. All of these are granted tenements.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

5. REVIEW OF OPERATIONS (Cont.)

==> picture [399 x 563] intentionally omitted <==

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

5. REVIEW OF OPERATIONS (Cont.) Igloo Prospect

To enable an in-house resource estimation and to obtain core for future metallurgical testing, ten vertical diamond drill holes IGD01 to IGD10, each 51m in depth were drilled into the known copper mineralisation (Figure 23) during the year. These drill holes will provide new assay data for a JORCcompliant resource estimate and will also provide material for preliminary metallurgical testing. Significant results from the diamond drilling are shown in Table 1. The secondary copper minerals are expected to be easily recoverable by heap leaching but no metallurgical testing has yet been undertaken.

Hole ID	Depth	Interval(m)	Cu %	Ag g/t	Aug/t
IGD03	28-30m	2	1.34
	32-33m	1	1.55
IGD05	22-23m	1	1.17	88	0.21
	42-47m	5	5.52 *	244	9.69
IGD07	21-22m	1	1.36	21
	25-27m	2	3.96	61
	30-44m	14	2.20		0.77
IGD08	22-48m	26	2.40
IGD09	25-31m	6	2.06
	33-35m	2	2.44
	41-45m	4	1.56
IGD10	27-28m	1	1.25
	32-35m	3	1.20

*primary chalcopyrite

Table 1 : Significant results from diamond drilling at Igloo Prospect, July 2006

Four RC drill holes, IGRC12 to IGRC15 totalling 450m were designed to test the extent of the chalcopyrite mineralisation at Igloo. Two of the holes intersected rich chalcopyrite and the assay results are shown in Table 3.

Hole ID	Depth	Interval (m)	Cu %	Ag g/t	Au g/t
IGRC12	40-52m	12	7.86	147	1.93
IGRC14	24-28m	4	2.39	48	0.48
	36-56m	20	4.66	52.80	1.07

Table 2 : Significant results from RC drilling at Igloo, August 2006

The Igloo Prospect, also contains some rich primary sulphide mineralisation consisting of chalcopyrite with high silver and gold values. It is now believed that the secondary copper deposit overlies (and is derived from) a small lens of chalcopyrite, and that the deposit occurs within the feeder zone or ‘stringer zone’ of a large VMS system. This implies a limited tonnage, a view which is supported by more recent drilling at this prospect.

Seven RC holes totalling 936m, IGRC17-23, were drilled at Igloo to test the continuity of mineralisation. IGRC17 was drilled between the Igloo Prospect and the Millers Vein Prospect but no significant mineralisation was intersected. IGRC18-23 were designed to test continuity of mineralisation open to the NW. This also coincided with the downdip direction of a interpreted plate modelled by SGC based on the results of a fixed loop and downhole EM survey (see section 6.4) at Igloo. The results showed no continuity of Cu mineralisation but some encouraging Au intersections were discovered. Table 3 gives significant assay results.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

5. REVIEW OF OPERATIONS (Cont.)

Hole ID	Depth	Interval (m)	Ag g/t	Au g/t
IGRC20	117-125m	8		4.1
		(Incl 1m	53	8.27)
IGRC21	70-78m	8		14.4
		(Incl 2m		47.19)
IGRC023	24-28m	4		1.2

Table 3 : Significant RC drilling results at Igloo Prospect, December 2006/January 2007

Conductance anomaly drilling January 2007

Three angled RC drillholes GMRC047, GMRC049 and GMRC050 were drilled in January 2007 within the boundary of this conductance feature. All three holes contained abundant disseminated pyrite but contained no significant base metal mineralisation.

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.

During the year, drilling at the Emperor Prospect was completed that provided further information on the prospect. A 100m deep diamond drill hole GMD021 was completed as a twin hole to the mineralised RC drill hole GMRC021. The diamond hole provided a check (Table 4) of the assays from GMRC021 and also provided information on the nature of the mineralisation and the host rocks.

Hole ID	Depth	Interval(m)	Zn %
GMD021	27-31m	4	3.03
	38-40m	2	2.15
	50-66m	16	5.19
	71-81m	10	2.87
	88-100m EOH	12	3.73

Table 4 : Mineralised intervals in GMD021

An RC drilling program consisting of 8 holes GMRC033 to GMRC040 mostly to about 200m depth was also completed (Figure 5). The program totalled 1491m. Significant assay results are shown in Table 4.

Hole ID	Depth	Interval (m)	Zn %	Ag g/t	Au g/t
GMRC034	32-76m	44	2.15
	(including	11	4.08		0.1)
GMRC036	177-180m	3	7.38	59	0.56

Table 5 : Significant intersections for RC drilling at Emperor Prospect, August 2006

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

5. REVIEW OF OPERATIONS (Cont.)

RC drilling program December 2006/January 2007

Emperor Prospect

A further RC drilling program was undertaken in December 2006 to January 2007 at the Emperor Prospect. Seven RC drill holes, GMRC041 to GMRC046 and also GMRC048 totalling 1628m were designed to further extend the zinc mineralisation at Emperor Prospect (Figure 5). Significant mineralised intersections from this program are show in Table 14.

Hole ID	Depth	Interval(m)	Zn %
GMRC042	228-232m	4	1.53
GMRC044	68-72m	4	1.4
GMRC045	156-164m	8	1.17
GMRC048	248-250m*	2	1.75

* end of hole

Table 6 : Significant RC drilling results at Emperor Prospect, December 2006/January 2007

Re-assays at Igloo Prospect and Emperor Prospect

For the programs IGRC12 to IGRC15 and GMRC033 to GMRC040 mineralised intervals based on 4m composites were reassayed as 1m splits (Table 7), usually resulting in mineralised intervals which are narrower but of higher grade.

Hole ID	Depth	Interval (m)	Cu %	Zn %	Ag g/t	Au g/t
		Igloo Prospect
IGRC12	43-53m	10	8.50		140	2.77
IGRC14	26-29m	3	5.08		122	1.79
	42-46m	4	7.18		40	0.52
	50-53m	3	13.6 6		146	5.52
		Emperor Prospect
GMRC034	33-35m	2		4.59
	39-44m	5		2.18
	53-64m	11		4.08	66	0.6
	69-70m	1		2.69
GMRC036	177-180	3		7.38
GMRC038	98 -100m	2		1.27	32	0.36

Table 7 : Significant intersections of August 2006 drilling using 1m re-splits

EM Survey August 2006

A helicopter-borne virtual time electromagnetic (VTEM) survey was undertaken by Geotech in August 2006 with the objective of identifying conductive targets. Copper sulphide was considered the most likely sulphide to be detected by this survey and indeed the known chalcopyrite at the Igloo Prospect was the only significant conductor to be revealed by the survey. Subsequently this conductor has been tested by fixed loop ground EM and by downhole EM but the chalcopyrite body at Igloo seems to be very small.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

5. REVIEW OF OPERATIONS (Cont.)

Of special interest is a large conductance anomaly revealed by the EM survey (Figure 2). This anomaly has a diameter of about 1.5km and is situated just to the south of the Emperor Lead- Zinc Prospect. Conductance is a measure of conductivity multiplied by conductor thickness and in this particular setting could represent a thick body of poorly conductive material such as zinc sulphide or disseminated pyrite. An IP survey by Alcoa in this area in 1978 revealed significant conductors within the boundary of the conductance anomaly and DH23 (now ALCO023) contained abundant pyrite.

==> picture [407 x 574] intentionally omitted <==

Figure 2 : VTEM image showing conductance anomaly against Alcoa IP anomalies and local collars

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

5. REVIEW OF OPERATIONS (Cont.)

Aboriginal Heritage Survey April 2007

An Aboriginal heritage survey was requested to get total exploration clearance for the area covered by the EM conductance anomaly in anticipation that success in preliminary drilling at the northern edge (where the ground has already been given heritage clearance) might lead to a more intensive program of drilling over the entire anomaly. The requested heritage survey was carried out in April 2007 over the entire EM conductance anomaly (Figure 3), again by Eureka Consulting, and total exploration clearance was granted. The formal report has not yet been received.

Gravity Survey February 2007

Graynic commissioned a ground-based gravity survey over most of the tenement block using lines spaced 100m apart and stations at 50m along each line. The survey was designed by Southern Geoscience Consultants and Daishsat Geophysics were engaged to do the data collection.

The gravity anomaly revealed is a NE-SW trending corridor broadly coinciding with the geochemical anomaly and overlapping the K radiometrics. A moderate anomaly was exposed in the Central area within P46/1363 whilst a more significant anomaly showed at the Imperial prospect in the southern area of P46/1366. This was interpreted as further evidence of a significant base metal footprint potential and so drilling was initiated in April 2007 (Figure 27).

RC drilling program May 2007

An RC drilling program, GMRC051-68, consisting of 19 holes totalling 3300m was completed in May 2007 (Figure 27). The program was designed to:

seek extensions to known Zn-Pb resource at Emperor (GMRC064-68)
test a ‘medium’ gravity anomaly at central prospect, where there is also strong Zn-Pb anomalism in the soils (GMRC051-55)
test a ‘strong’ gravity anomaly at Imperial Prospect, where there is strong Zn-Pb anomalism in the soils and anomalous rock chips up to 2.9% Pb (GMRC056-63)
penetrate another 96m into EM conductance anomaly by deepening GMRC047

Hole ID	Depth	Interval (m)	Zn %	Pb %	Ag g/t	Au g/t
GMRC058	100-108m	8	1.26	0.97	458
GMRC063	64-68m	4				21.8
GMRC065	100-104m	4	2.84	0.96	26
GMRC066	28-32m	4	2.50		8
	76-80m	4	1.35
	80-84m	4	2.54			0.26
	92-96m	4	2.00
	104-108m	4	1.56			0.30
GMRC067	64-68m	4	1.40			0.32
	68-72m	4	3.88
GMRC068	60-64m	4	1.82
	76-88m	12	5.48
	88-92m	4	1.51

Table 8 : Significant results from May 2007 RC drilling

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

5. REVIEW OF OPERATIONS (Cont.)

Drillhole GM 58 represents the first significant drill hole intersection of base metals at Imperial Prospect and confirms the prospect as a valid base metal target. In addition, the silver value is impressive and points to a richness of mineralisation that has been encountered elsewhere, e.g. at Igloo Prospect. The strong gravity anomaly in this vicinity (Figure 27) may represent base metals at greater depth than tested to date, which is about 200m vertical depth.

The gold interval in GM 63 occurs in the same vicinity as several other gold results achieved in the 1990s. The alignment of the mineralised holes suggests a possible continuous auriferous zone about 800m in strike length. Geological mapping in this area is planned to assess the zone.

The strong zinc mineralisation in GMRC068 lies adjacent to Graynic’s previous holes, GMRC021 and GMRC034. This hole was intended to provide additional data to model the zone of zinc enrichment. Other holes GMRC064-67 were drilled within or adjacent to the mineralised polygons to extend and corroborate previously-identified mineralisation.

WALGIDEE HILLS (Graynic 100%)

Exploration Licence 04/1551 was granted to the Company during the year. The licence hosts the entire Walgidee Lamproite Intrusion in the West Kimberley region of Western Australia. The Walgidee Lamproite is a known diamond-bearing intrusion from which 891 micro diamonds and 62 macro-diamonds have been recovered. The 11 macro-diamonds recovered by Diamond Rose NL in 1998 comprised 6 white (colourless) stones, 4 brown and 1 yellow, ranging in size from 0.8mm to 1.5mm.

The Walgidee Lamproite is reputedly the largest lamproite in the world, with a diameter of about 2.5km and an area of about 490ha. Various campaigns of bulk testing of pit samples as well as testing of drill samples have been carried out over the years, but most of these trials have been confined to the eastern half of the intrusion. It is the Company’s opinion that the amount of testing to date may have been inadequate for such a large intrusion and that there is good potential for a commercial diamond deposit to be discovered.

The project area is located approximately 80 kilometers south of the Ellendale Diamond mine operated by Kimberley Diamond Company NL and currently undergoing an expansion. In the same area Blina Diamonds NL has recently completed a bulk sampling program at its alluvial project at Ellendale 9 North and recovered 3766 diamonds weighing 1442 carats from a 3773 tonne gravel sample.

At the Walgidee Project, Diamond Rose NL has reported on a “ zone which may contain a very high potential for an economic discovery” (Diamond Rose NL Quarterly Report, March 2002) which has yet to be followed up. In addition “ some concentrates from bulk samples remain to be tested for macro-diamonds” . Although these concentrates may no longer be available, the comment points to the incompleteness of the previous evaluation programs.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

5. REVIEW OF OPERATIONS (Cont.)

NEW SOUTH WALES PROJECTS

==> picture [306 x 378] intentionally omitted <==

Acquisition of projects in NSW

During the last financial 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 $0.20 each 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%)

In 2006 Graynic Metals Ltd completed an RC drilling program to infill the previous Tungsten mineralization identified by CRAE, 19 RC holes were completed for 2100m. Upon completion of this Graynic commissioned an independent resource estimate to be calculated by Ravensgate Pty Ltd in September 2006 and this was stated as 0.83Mt @ 0.21% WO3 in the Inferred Mineral Resource category.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

5. REVIEW OF OPERATIONS (Cont.)

Graynic has now transferred its interest in the tin and tungsten potential on EL6489 to a new float, Wolf Minerals Limited, in exchange for 2 million Wolf shares at $0.20. Wolf was successfully admitted to official ASX list on 15 February 2007. The Graynic Board sees this deal as the best way for Graynic shareholders to derive an early benefit from their tungsten prospect. Wolf will be able to focus on these specialty metals in a time of buoyant prices while Graynic continues to progress its base and precious metals interests in WA and NSW.

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 will be investigated in 2007.

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. On 28 August 2007, the Company announced that it has entered into a Farm-In and Joint Venture Agreement with Proto Resources and Investment Limited (Proto), whereby Proto can earn up to 80% interest in the Company’s Wertago prospect in NSW by spending $1 million over 42 months and issue of shares in Proto to the Company.

Graynic has made limited progress on this tenement since a VTEM survey was completed in June 2006. This is in part due to commitments on the Company’s other tenement holdings but also budgetary constraints. The Company has already spent $160,000 over 2 years, mainly completing a high-quality VTEM survey over the most prospective part of the tenement.

The preliminary data for the Wertago EM survey has revealed a number of moderately-conductive targets. Geological mapping is required to add context to these conductors. Drilling should follow later in 2007 in a program combined with other NSW tenements.

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 heritage survey was completed during the year, and a drilling program has been planned for later in 2007 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 2007 but a preliminary field evaluation is planned later this year.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

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 Company 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 1 September 2006 the Company issued 3,235,294 ordinary shares at $0.34 each to various Brokers to raise $1.1 million.

On 5 December 2006 Mr Nathan McMahon resigned as Non-Executive Director of Graynic Metals Limited.

On 22 December 2006, the Company issued 1,000,000 Director Options exercisable at $0.30 on or before 31 July 2009, for nil consideration as passed by the members at the Annual General Meeting on 29 November 2006.

On 12 February 2007, the Company received 2,000,000 fully paid shares at $0.20 in Wolf Minerals Limited as part of the agreement to divest its tin and tungsten rights at the Yanco Glen project. Wolf Minerals Limited listed on the ASX on 15 February 2007.

On 19 June 2007, Mr Ron Thom resigned as Managing Director of Graynic Metals Limited.

8. SUBSEQUENT EVENTS

On 10 July 2007, Ms Bronwyn Barnes was appointed as Managing Director of Graynic Metals Limited.

On 28 August 2007, the Company announced that it has entered into a Farm-In and Joint Venture Agreement with Proto Resources and Investment Limited (Proto), whereby Proto can earn up to 80% interest in the Company’s Wertago prospect in NSW by spending $1 million over 42 months and the issue of 500,000 shares at a price to be determined at the end of the 42 month period in Proto to the Company.

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.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

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 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 was issued incentive options as part of his remuneration. Newly appointed managing director, Ms Bronwyn Barnes will also receive incentive options subject to shareholder approval. Mr Nathan McMahon and Mr Clive Jones have 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.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

12. REMUNERATION REPORT (Cont.)

The Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The Board, 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.

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

Ivan Hoffman Chairman (executive 19 June- 10 July 2007) Bronwyn Barnes Managing Director (appointed 10 July 2007) Ronald Thom Managing Director (resigned on 19 June 2007) Jonathan Downes Non-Executive Director Nathan McMahon Non-Executive Director (resigned on 5 December 2006) Clive Jones Non-Executive Director

Details of the nature and amount of emoluments of key management personnel are as follows:

	SHORT-TERM BENEFITS	SHORT-TERM BENEFITS	SHORT-TERM BENEFITS	POST EMPLOYMENT	POST EMPLOYMENT	SHARE-BASED PAYMENT	SHARE-BASED PAYMENT	TOTAL
	Salary, Fees & Superannuation	Cash Bonus	Non- Monetary	Superannuation	Retirement Benefits	Equity	Options	$
Directors
Ivan Hoffman – Chairman
2007 2006	40,000 27,957	- -	- -	3,600 2,516	- -	- -	- 36,332	43,600 66,805
Ron Thom – ManagingDirector	(resigned on 19June 2007)
2007 2006	137,198 116,591	- -	- -	12,636 10,493	- -	- -	78,000 36,332	227,834 163,416
Nathan McMahon – Non Executive Director(resigned		on 5 December 2006)
2007 2006	15,000 36,000	- -	- -	- -	- -	- -	- -	15,000 36,000
Clive Jones – Non Executive Director
2007 2006	36,000 36,000	- -	- -	- -	- -	- -	- -	36,000 36,000
Jonathan Downes – Non-Executive Director
2007 2006	30,476 6,000	- -	- -	2,743 -	- -	- -	- -	33,219 6,000
Total Remuneration Directors
2007 2006	258,674 222,548	- -	- -	18,979 13,009	- -	- -	78,000 72,664	355,653 308,221

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

12. REMUNERATION REPORT (Cont.)

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

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:

Grant Expiry Fair Value Exercise	Price of Estimated	Risk Free	Dividend
Date Date Per Option Date	Shares on Volatility	Interest Rate	Yield
	Grant Date
25.10.06 24.10.11 $0.21 24.10.11	$0.345 75%	5.48%	-
29.11.06 31.07.09 $0.078 31.07.09	$0.28 75%	5.48%	-
Estimated volatility approximates historic volatility. Each option entitles the holder to			purchase on
ordinary share in the Company.
*Options Granted to Directors and Executives*
During and since the end of financial year, an aggregate of 1,250,000 options over unissued share
were granted to various parties. 1,000,000 of	the total amount granted was issued to		the followin
director as disclosed in the table below:
Director/Executive Number Exercise Price Vesting Date		Expiry Date
Ron Thom 1,000,000 $0.30	29 November 2006	31 July 2009

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

During and since the end of financial year, an aggregate of 1,250,000 options over unissued shares were granted to various parties. 1,000,000 of the total amount granted was issued to the following director as disclosed in the table below:

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:

Director/Executives	Options granted Options exercised Options lapsed Value at grant date $ Value at exercise date $ Value at time of lapse $ Total value of options granted, exercised, lapsed $ 78,000 - (78,000) -
Ron Thom

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. Mr Thom subsequently resigned as managing director of Graynic Metals Limited on 19 June 2007. Ms Bronwyn Barnes was subsequently appointed managing director of the Company on 10 July 2007. The employment conditions of Ms Barnes were resolved by the Board on 12 July 2007, and a salary of $180,000 per annum plus superannuation was agreed to secure her services. All executives are permanent employees of Graynic Metals Limited.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

12. REMUNERATION REPORT (Cont.)

The employment of the Managing Director may be terminated by the Company or the managing director by giving the other 4 weeks in lieu of 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.

13. MEETINGS OF DIRECTORS

Directors	Board Meetings	Meetings
	Eligible to Attend	Attended
Bronwyn Barnes	-	-
Ivan Hoffman	8	8
Ronald Thom	8	8
Nathan McMahon	4	4
Clive Jones	8	8
Jonathan Downes	8	5

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	20 cents	12,219,643
16 June 2008	30 cents	2,000,000
30 April 2008	30 cents	6,000,000
31 October 2008	30 cents	2,000,000
31 July 2009	30 cents	1,000,000
24 October 2011	46 cents	250,000

25,871 ordinary shares were issued as a result of the exercise of options during or since the end of the financial year.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

16. AUDITOR’S INDEPENDENCE DECLARATION

The auditor’s independence declaration is included on page 23 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 APES 110 ( Code of Ethics for Professional Accountants )
No fees were paid or payable to the auditors for non-audit services performed during the year to 30 June 2007.

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

==> picture [190 x 64] intentionally omitted <==

Bronwyn Barnes Managing Director

Perth, 26 September 2007

O R D

P A R T N E R S

CHARTERED ACCOUNTANTS

26 September 2007

Ian K Macpherson CA

To the Board of Directors of Graynic Metals Limited

Robert W Parker CA

Dear Sirs

Craig A Vivian CA

AUDITORS 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 year ended 30 June 2007, there have been:

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

Yours faithfully

ORD PARTNERS

==> picture [156 x 78] intentionally omitted <==

Ian Macpherson Partner

Level 2, 47 Colin Street West Perth WA 6005 PO Box 359 West Perth WA 6872

� +61 8 9321 3514 � +61 8 9321 3523 [email protected] www.ordgroup.com.au

==> picture [59 x 51] intentionally omitted <==

Chartered Accountants

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2007

Note Revenue from continuing activities 2 (a) Other revenue 2 (b) Administrative expense Employee benefits expense Borrowing costs Consultancy expenses Compliance and regulatory expenses Occupancy expenses Directors fees Insurance expenses Depreciation expense Exploration expenditure expensed as incurred Increase/(Diminution) in value of held for trading financial assets Impairment of exploration expenditure Impairment of investments in controlled entities Loss on sale of held for trading financial assets Loss before income tax expense 3 Income tax expense Loss for the year Basic loss per share (cents per share) 20 Diluted loss per share (cents per share) 20	Consolidated Entity 2007 $ 2006 $ 95,149 110,741 182,332 - (51,218) (144,975) (130,400) (72,665) (200) - (75,017) (43,426) (56,721) (47,707) (33,443) (18,860) (246,403) (94,344) (5,572) (2,085) (3,705) (4,109) (95,923) (51,993) 63,189 (51,262) - (2,438,428) - - (25,825) - (383,757) (2,859,113) - - (383,757) (2,859,113) 0.97 9.92 0.59 5.80	The Company 2007 $ 2006 $ 95,149 110,041 182,332 - (51,213) (144,291) (130,400) (72,665) (200) - (75,017) (43,426) (56,171) (47,707) (33,443) (18,860) (246,403) (94,344) (5,572) (2,085) (3,705) (4,109) (95,923) (51,993) 63,189 (51,262) - - - (2,438,428) (25,825) -
		(383,202) (2,859,129) - -
		(383,202) (2,859,129)

The accompanying notes form part of these financial statements.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

BALANCE SHEET AS AT 30 JUNE 2007

Note CURRENT ASSETS Cash and cash equivalents 7 Trade and other receivables 8 TOTAL CURRENT ASSETS NON CURRENT ASSETS Other financial assets 9 Plant and equipment 10 Exploration and evaluation expenditure 11 TOTAL NON CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 12 Provisions 13 TOTAL CURRENT LIABILITIES NON CURRENT LIABILITIES Loans from controlled entities 12 TOTAL NON CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 14 Reserves 15 Accumulated losses 16 TOTAL EQUITY	Consolidated Entity 2007 $ 2006 $ 575,822 1,397,135 69,959 33,377 645,781 1,430,512 2,729,820 64,458 7,733 6,935 6,423,717 5,267,961 9,161,270 5,339,354 9,807,051 6,769,866 69,356 129,811 17,714 16,456 87,070 146,267 - - - - 87,070 146,267 9,719,981 6,623,599 9,681,818 8,631,979 3,426,395 996,095 (3,388,232) (3,004,475) 9,719,981 6,623,599	The Company 2007 $ 2006 $ 560,763 1,382,075 69,954 33,372
		630,717 1,415,447
		5,113,855 2,439,151 7,733 6,935 4,264,856 2,895,987
		9,386,444 5,342,073
		10,017,161 6,757,520
		69,356 129,811 5,384 4,126
		74,740 133,937
		221,901 -
		221,901 -
		296,641 133,937
		9,720,520 6,623,583
		9,681,818 8,631,979 3,426,395 996,095 (3,387,693) (3,004,491)
		9,720,520 6,623,583

The accompanying notes form part of these financial statements.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2007

Note Cash Flows from Operating Activities - Payments to suppliers and employees - Interest received - Other revenue - Payments for exploration and evaluation Net cash used in operating activities 21 Cash Flows From Investing Activities - Acquisition of controlled entity - Proceeds from sale of investment - Payment for investment securities - Purchase of plant and equipment - Payment for business Net cash provided by/(used in) investing activities Cash Flows from Financing Activities - Proceeds from issue of shares - Payment for costs of issue of shares -_Loan to controlled entity _Net cash provided by financing activities Net decrease in cash held Cash and cash equivalents at beginning of reporting period Cash and cash equivalents at end of reporting period 7	Consolidated Entity 2007 $ 2006 $ (561,766) (357,710) 98,985 93,778 12,153 16,962 (1,492,156) (982,615) (1,942,784) (1,229,585) - - 88,318 - (12,183) (115,722) (4,503) (2,457) - (54,949) 71,632 (173,128) 1,105,174 623,422 (55,335) (40,507) - - 1,049,839 582,915 (821,313) (819,798) 1,397,135 2,216,933 575,822 1,397,135	The Company 2007 $ 2006 $ (561,078) (361,930) 98,985 93,778 12,153 16,263 (1,483,501) (610,637)
		(1,933,441) (862,526)
		- (57,547) 88,318 - (12,183) (173,269) (4,503) (2,457) - -
		71,632 (233,273)
		1,105,174 623,422 (55,335) (40,507) (9,342) (321,974)
		1,040,497 260,941
		(821,312) (834,858) 1,382,075 2,216,933
		560,763 1,382,075

The accompanying notes form part of these financial statements.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED 30 JUNE 2007

Consolidated Entity	Issued	Accumulated	Asset	Option	Total
	Capital	Losses	Revaluation	Reserve
			Reserve
	$	$	$	$	$
Balance at 1 July 2006	8,631,979	(3,004,475)	-	996,095	6,623,599
Loss for the year	-	(383,757)	-	-	(383,757)
Contributions of equity	1,105,174	-	-	-	1,105,174
Transaction costs	(55,335)	-	-	-	(55,335)
Employee equity settled transactions	-	-	-	130,400	130,400
Asset valuation reserve	-	-	2,299,900	-	2,299,900
Balance at 30 June 2007	9,681,818	(3,388,232)	2,299,900	1,126,495	9,719,981
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
The Company	Issued	Accumulated	Asset	Option	Total
	Capital	Losses	Revaluation	Reserve
			Reserve
	$	$	$	$	$
Balance at 1 July 2006	8,631,979	(3,004,491)	-	996,095	6,623,583
Loss for the year	-	(383,202)	-	-	(383,202)
Contributions of equity	1,105,174	-	-	-	1,105,174
Transaction costs	(55,335)	-	-	-	(55,335)
Employee equity settled transactions	-	-	-	130,400	130,400
Asset valuation reserve	-	-	2,299,900	-	2,299,900
Balance at 30 June 2007	9,681,818	(3,387,693)	2,299,900	1,126,495	9,720,520
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

The accompanying notes form part of these financial statements.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

The financial report is a general purpose financial report that has been prepared in accordance with the Corporations Act 2001 , Accounting Standards and Interpretations, and complies with other requirements of the law.

The financial report covers the Consolidated 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.

Going Concern

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

The consolidated entity has future commitments of $504,700 comprising:

$161,200 for the Department of Industry and Resources (DoIR) expenditure commitments on granted Western Australian tenements and $12,078.22for the DoIR rental commitments on the same;
$343,500 for the Department of Primary Industries (DPI) expenditure commitments on granted New South Wales tenements. No rental commitments are required for New South Wales tenements.

In considering whether the going concern basis is appropriate for preparing this financial report, the directors recognise that current levels of working capital may be insufficient to meet the required level of funding in relation to the potential expenditure commitments required to maintain title to the licenses. However, in the informed opinion of the directors’, it has been concluded that the going concern basis is the appropriate basis for preparing the financial statements based on the following key considerations:

In relation to the expenditure commitment for the granted licenses, the directors
will pursue potential farm out activities on the company’s exploration assets;
will seek where appropriate to obtain exemptions on exploration and mining tenements where minimum expenditure commitments have previously been met or where resources have been defined and are awaiting mining leases approval;
expect that financial position will be improved from the sale of liquid investments in Wolf Minerals Limited held by the Company; and
expect that major shareholders of the Company will support fund raising as has been demonstrated in past share issues to the existing shareholder base.

The directors of the Company are confident that via a farm-out or a future capital raising, the necessary funds will be raised as required. Should such funding not be obtained then the Company may not be able to meet its planned and proposed levels of expenditure for the forthcoming year.

The directors of the Company are confident that the necessary funds will be raised as required as demonstrated during the financial year once again, following a successful placement of 3,235,294 shares at $0.34 each raising $1.1 million excluding issue costs.

Should the funding not be obtained then the Company may not be able to meet its planned and proposed levels of expenditure for the forthcoming year.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)

Going Concern (Cont.)

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

Statement of Compliance

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

Basis of Measurement

The consolidated financial information has been prepared on the accruals basis and is based on historical costs and does not take into account changing money values. Cost is based on the fair values of the consideration given in exchange for assets.

Use of Estimates and Judgements

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period have been disclosed in notes (c) Exploration and evaluation expenditure , and (i) Share based payment transactions

In the year ended 30 June 2007, the Group has reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 July 2006. It has been determined by the Company that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change in necessary to Consolidated Entity accounting policies.

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.

A list of controlled entities is contained in Note 27 to the financial statements. All controlled entities have a 30 June financial year-end.

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.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

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

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)

(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, carryforward 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:

a. 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.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)

(d) Plant and Equipment (Cont.)

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	Depreciation	Rate
	2007	2006
Plant and equipment	40.0%	40.0%
Office Furniture & Equipment	18.0%	18.0%

(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) Earnings Per Share

Basic earnings 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.

(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) Issued Capital

Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)

(j) 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.

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 ATO are classified as operating cash flows.

(k) 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.

(l) 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-sale, 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.

(m) 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.

(n) Share-based payment transactions

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’).

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)

(n) Share-based payment transactions (Cont.)

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.

(o) Impairment of Assets

The Consolidated Entity assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Consolidated Entity makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset's value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)

(o) Impairment of Assets (Cont.)

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 relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease).

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

(p) Segment Reporting

A segment is a distinguishable component of the Company that is engaged in a particular industry (business segment), or is operating within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Company’s primary format for segment reporting is based on business segment, being minerals exploration industry.

2. *REVENUE FROM CONTINUING* *ACTIVITIES* a)Revenue - interest received - other income b) Other revenue - profit from sale of assets	Consolidated Entity 2007 $ 2006 $ 84,760 94,478 10,389 16,263 95,149 110,741 182,332 -	The Company 2007 $ 2006 $ 84,760 93,778 10,389 16,263
		95,149 110,041
		182,332 -

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

3. EXPENSES

Loss before income tax includes the following specific expenses:

Minimum lease payments - Operating lease Employee benefit expense - equity settled transactions	Consolidated Entity 2007 $ 2006 $ 28,621 8,036 130,400 72,665	The Company 2007 $ 2006 $ 28,621 8,036
		130,400 72,665

4. KEY PERSONNEL REMUNERATION AND RETIREMENT BENEFITS

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

Ivan Hoffman Chairman Bronwyn Barnes Managing Director (appointed 10 July 2007) Ronald Thom Managing Director (resigned on 19 June 2007) Jonathan Downes Non-Executive Director Nathan McMahon Non-Executive Director (resigned on 5 December 2006) Clive Jones Non-Executive Director Kent Hunter Company Secretary (resigned 19 July 2007) David Round Company Secretary (appointed 19 July 2007)

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

4. KEY PERSONNEL REMUNERATION AND RETIREMENT BENEFITS (Cont.)

a) Details of the nature and amount of compensation paid, payable or otherwise made available to directors are as follows:

	SHORT-TERM BENEFITS	SHORT-TERM BENEFITS	SHORT-TERM BENEFITS	POST EMPLOYMENT	POST EMPLOYMENT	SHARE-BASED PAYMENT	SHARE-BASED PAYMENT	TOTAL
	Salary, Fees & Superannuation	Cash Bonus	Non- Monetary	Superannuation	Retirement Benefits	Equity	Options (i)	$
Directors
Ivan Hoffman - Chairman
2007 2006	40,000 27,957	- -	- -	3,600 2,516	- -	- -	- 36,332	43,600 66,805
Ron Thom – ManagingDirector(resigned on 19June 2007)
2007 2006	137,198 116,591	- -	- -	12,636 10,493	- -	- -	78,000 36,332	227,834 163,416
Nathan McMahon – Non Executive Director(resigned on 5 December 2006)
2007 2006	15,000 36,000	- -	- -	- -	- -	- -	- -	15,000 36,000
Clive Jones – Non Executive Director
2007 2006	36,000 36,000	- -	- -	- -	- -	- -	- -	36,000 36,000
Jonathan Downes – Non-Executive Director
2007 2006	30,476 6,000	- -	- -	2,743 -	- -	- -	- -	33,219 6,000
Total Remuneration Directors
2007 2006	258,674 222,548	- -	- -	18,979 13,009	- -	- -	78,000 72,664	355,653 308,221

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

b) Compensation options granted during the year:

During the financial year ended 30 June 2007, the following options were granted to the following key management personnel:-

Key Management Personnel R Thom	Granted Number Vested Number Grant Date Value per Option at Grant Date $ Exercise Price $ First Exercise Date Last Exercise Date
	1,000,000 1,000,000 29.11.2006 78,000 $0.30 29.11.2006 31.07.2009 1,000,000 1,000,000

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

4. KEY PERSONNEL REMUNERATION AND RETIREMENT BENEFITS (Cont.)

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	Volatility	Interest Rate	Yield
				Grant Date
29.11.2006	31.07.09	$0.078	31.07.09	$0.28	35%	5.48%	-

Each option entitles the holder to purchase one ordinary share in the Company.

c) Shares issued on exercise of compensation options:

During the financial year ended 30 June 2007, no shares were issued on exercise of compensation options.

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

2007 I Hoffman R Thom N McMahon C Jones J Downes	Balance 01.07.06 Granted as Remuneration Received on Exercise of Options Net Change - Other Balance at resignation Balance 30.06.07 - - - - - - 524,000 - - - 524,000 N/A 1,260,150 - - (185,281) 185,281 1,074,869/A 1,057,689 - - 717,435 - 1,775,124 97,000 - - 250,000 - 347,000
	2,938,839 - - 782,154 709,281 3,196,993

2006 I Hoffman R Thom N McMahon C Jones J Downes	Balance 01.07.05 Granted as Remuneration Received on Exercise of Options Net Change - Other Balance 30.06.06 - - - - - 524,000 - - - 524,000 1,260,150 - - - 1,260,150 1,057,689 - - - 1,057,689 47,000 - - 50,000(i) 97,000
	2,888,839 - - 50,000 2,938,839

(i) 50,000 ordinary share were purchase on market by Mr Jonathan Downes during the year.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

4. KEY PERSONNEL REMUNERATION AND RETIREMENT BENEFITS (Cont.)

(ii) Options held by key management personnel

2007 I Hoffman R Thom N McMahon C Jones J Downes 2006 I Hoffman R Thom N McMahon C Jones J Downes	Balance at 01.07.06 Received as remunera -tion Exercised Bought/ (sold) Lapsed Held at resigna- tion Balance at 30.06.07 Total Vested Total Exercisable 1,000,000 - - - - - 1,000,000 1,000,000 1,000,000 1,262,000 1,000,000 - - (1,000,000) 1,262,000 1,262,000 1,262,000 1,262,000 1,000,000 - - - - 1,000,000 1,000,000 1,000,000 1,000,000 1,528,845 - - - - - 1,528,845 1,528,845 1,528,845 - - - - - - - - -
	4,790,845 1,000,000 - - (1,000,000) 2,262,000 4,790,845 4,790,845 4,790,845
	Balance at 01.07.05 Received as remuneration Exercised Bought/ (sold) Held at resignation Balance at 30.06.06 Total Vested Total Exercisable - 1,000,000 - - - 1,000,000 1,000,000 1,000,000 - 1,000,000 - 262,000 - 1,262,000 1,262,000 1,262,000 1,000,000 - - - - 1,000,000 1,000,000 1,000,000 1,000,000 - - 528,845 - 1,528,845 1,528,845 1,528,845 - - - - - - - - 2,000,000 2,000,000 - 790,845 - 4,790,845 4,790,845 4,790,845

2007
I Hoffman
R Thom
N McMahon
C Jones
J Downes
2006
I Hoffman
R Thom
N McMahon
C Jones
J Downes

Balance at
01.07.06
Received
as
remunera
-tion
Exercised
Bought/
(sold)
Lapsed
Held at
resigna-
tion
Balance at
30.06.07
Total
Vested
Total
Exercisable
1,000,000
-
-
-
-
-
1,000,000
1,000,000
1,000,000
1,262,000
1,000,000
-
-
(1,000,000)
1,262,000
1,262,000
1,262,000
1,262,000
1,000,000
-
-
-
-
1,000,000
1,000,000
1,000,000
1,000,000
1,528,845
-
-
-
-
-
1,528,845
1,528,845
1,528,845
-
-
-
-
-
-
-
-
-

4,790,845
1,000,000
-
-
(1,000,000)
2,262,000
4,790,845
4,790,845
4,790,845

Balance
at
01.07.05
Received as
remuneration
Exercised
Bought/
(sold)
Held at
resignation
Balance
at
30.06.06
Total
Vested
Total
Exercisable
-
1,000,000
-
-
-
1,000,000
1,000,000
1,000,000
-
1,000,000
-
262,000
-
1,262,000
1,262,000
1,262,000
1,000,000
-
-
-
-
1,000,000
1,000,000
1,000,000
1,000,000
-
-
528,845
-
1,528,845
1,528,845
1,528,845
-
-
-
-
-
-
-
-
2,000,000
2,000,000
-
790,845
-
4,790,845
4,790,845
4,790,845

5. *AUDITORS’ REMUNERATION* Remuneration of the auditor (Ord Partners) for: - Auditing or reviewing the financial report	Consolidated Entity 2007 $ 2006 $ 24,050 16,000 24,050 16,000	The Company 2007 $ 2006 $ 24,050 16,000
		24,050 16,000

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

6. *INCOME TAX EXPENSE* (a) The components of the tax expense comprise: Current tax Deferred tax (b) 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% (2006: 30%) Add: Tax effect of: Other non-allowable items Tax benefit of revenue losses not recognised Less: Tax effect of: Tax benefit of equity raising costs not recognised Income tax attributable to entity (c) Unrecognised deferred tax balances: Deferred tax assets have not been recognised in respect of the following: Deferred Tax Assets: Carry forward revenue losses Capital raising costs Provisions and accruals Investments Deferred Tax Liabilities: Exploration expenditure Other Net unrecognized deferred tax balances	Consolidated Entity 2007 $ 2006 $ - - - - - - (115,126) (857,734) 39,120 21,874 131,966 838,291 (55,960) (2,431) - - Consolidated Entity 2007 $ 2006 $ 1,503,905 980,388 54,044 9,722 7,337 5,901 729,220 748,812 2,294,506 1,744,823 (1,253,131) (853,198) (54,673) (9,722) (1,307,804) (862,920) 986,702 881,903		The Company 2007 $ 2006 $ - - - - - - (114,959) (857,739) 39,120 21,874 131,799 838,296 (55,960) (2,431) - - The Company 2007 $ 2006 $ 1,503,905 980,388 54,044 9,722 7,337 5,901 729,220 748,812 2,294,506 1,744,823 (1,253,131) (853,198) (54,673) (9,722)






			(1,307,804) (862,920)
			986,702 881,903

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

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.

7. *CASH AND CASH EQUIVALENTS* Cash at bank Short-term deposits 8. *TRADE AND OTHER* *RECEIVABLES* Current Other receivables Prepayments 9. *OTHER FINANCIAL ASSETS* Non-Current Loan to controlled entities Shares in controlled entity-at cost Less provision for impairment Available for sale assets - at fair value	Consolidated Entity 2007 $ 2006 $ 327,108 302,922 248,714 1,094,213 575,822 1,397,135 Consolidated Entity 2007 $ 2006 $ 69,959 23,370 - 10,007 69,959 33,377 - - - - - - - - 2,729,820 64,458 2,729,820 64,458	The Company 2007 $ 2006 $ 312,049 287,862 248,714 1,094,213 560,763 1,382,075 The Company 2007 $ 2006 $ 69,954 23,365 - 10,007 69,954 33,372
		331,316 321,974 4,491,147 4,491,147 (2,438,428) (2,438,428)
		2,384,035 2,374,693 2,729,820 64,458
		5,113,855 2,439,151

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

*10.* *PLANT AND EQUIPMENT* Plant and Equipment At cost Accumulated depreciation Office Furniture and Equipment At cost Accumulated depreciation Total plant and equipment	Consolidated Entity 2007 $ 2006 $ 15,515 11,012 (8,686) (5,181) 6,829 5,831 1,445 1,445 (541) (341) 904 1,104 7,733 6,935	The Company 2007 $ 2006 $ 15,515 11,012 (8,686) (5,181)
		6,829 5,831
		1,445 1,445 (541) (341)
		904 1,104
		7,733 6,935

Reconciliations

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.

Consolidated and Company

2007 Balance at beginning of the year Additions Depreciation expense Balance at 30 June 2007 2006 Balance at beginning of the year Additions Depreciation expense Balance at 30 June 2006	Plant & Equipment Office Furniture & Equip Total $ $ $ 5,831 1,104 6,935 4,503 - 4,503 (3,505) (200) (3,705)
	6,829 904 7,733
	Plant & Equipment Office Furniture & Equipment Total $ $ $ 7,242 1,345 8,587 2,457 - 2,457 (3,868) (241) (4,109)
	5,831 1,104 6,935

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

*11.* *EXPLORATION AND EVALUATION* *EXPENDITURE* Non-Current Costs carried forward in respect of areas of interest in: -Exploration and evaluation phases – at cost - Less accumulated impairment losses Movement in carrying value: Brought forward Exploration assets acquired during the year Disposal of exploration asset Exploration expenditure capitalised during the year Impairment on exploration expenditure At reporting date	Consolidated Entity 2007 $ 2006 $ 8,958,009 7,706,389 (2,534,292) (2,438,428) 6,423,717 5,267,961 5,267,961 2,350,877 - 4,438,428 (221,900) 1,473,520 969,077 (95,864) (2,490,421) 6,423,717 5,267,961	The Company 2007 $ 2006 $ 4,360,720 2,895,987
		(95,864) -
		4,264,856 -
		2,895,987 2,350,877 221,900 - (221,900) - 1,464,733 597,103 (95,864) (51,993)
		4,264,856 2,895,987

The value of the exploration expenditure is dependent upon:

the continuance of the rights to tenure of the areas of interest;
the results of future exploration; and
the recoupment of costs through successful development and exploitation of the areas of interest, or alternatively, by their sale.

The Company has reviewed the carrying values of its exploration expenditure and concluded that no impairment indicators have been identified.

*12.* *TRADE AND OTHER PAYABLES* Current (unsecured) Trade creditors Other creditors and accruals	34,143 59,548 35,213 70,263 69,356 129,811	34,143 59,548 35,213 70,263
		69,356 129,811

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

12. TRADE AND OTHER PAYABLES (Cont.)

Non-Current

Amounts payable to:

Wholly-owned subsidiary

Consolidated Entity The Company 2007 2006 2007 2006 $ $ $ $ - - 221,901 -

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.

*13.* *PROVISIONS* Current Employee benefits Tax payable	Consolidated Entity 2007 $ 2006 $ 5,384 4,126 12,330 12,330 17,714 16,456	The Company 2007 $ 2006 $ 5,384 4,126 - -
		5,384 4,126

14. ISSUED CAPITAL

40,265,772 (2006: 37,004,607) ordinary shares Movement during the year Ordinary Shares Balance at beginning of reporting period Issued – placement Issued – to acquire subsidiary Issued – conversion of options Balance at end of reporting period	Consolidated Entity 2007 $ 2006 $ 9,681,818 8,631,979 Consolidated Entity 2007 No 2006 No 37,004,607 24,500,003 3,235,294 2,500,000 - 10,000,000 25,871 4,604 40,265,772 37,004,607	The Company 2007 $ 2006 $ 9,681,818 8,631,979
		The Company 2007 No 2006 No 37,004,607 24,500,003 3,235,294 2,500,000 - 10,000,000 25,871 4,604
		40,265,772 37,004,607

Movement during the year Ordinary Shares Balance at beginning of reporting period Issue – placement Issue – to acquire subsidiary Issue – conversion of options Capital raising costs Balance at end of reporting period	Consolidated Entity 2007 $ 2006 $ 8,631,979 4,371,565 1,100,000 500,000 - 3,800,000 5,174 921 (55,335) (40,507) 9,681,818 8,631,979	The Company 2007 $ 2006 $ 8,631,979 4,371,565 1,100,000 500,000 - 3,800,000 5,174 921 (55,335) (40,507)
		9,681,818 8,631,979

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

14. ISSUED CAPITAL (Cont.)

Terms of Ordinary Shares

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.

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.

15. RESERVES

Option premium reserve (a) Share based payments reserve (b) Asset revaluation reserve (c)	Consolidated Entity 2007 $ 2006 $ 122,501 122,501 1,003,994 873,594 2,299,900 - 3,426,395 996,095	The Company 2007 $ 2006 $ 122,501 122,501 1,003,994 873,594 2,299,900 -
		3,426,395 996,095

a) Option premium reserve

12,219,643 (2006: 12,245,514) listed option Movement during the year Options Balance at beginning of reporting period Issued – rights issue Options converted Balance at end of reporting period	Consolidated Entity 2007 $ 2006 $ 122,501 122,501 Consolidated Entity 2007 No 2006 No 12,245,514 - - 12,250,118 (25,871) (4,604) 12,219,643 12,245,514	The Company 2007 $ 2006 $ 122,501 122,501
		The Company 2007 No 2006 No 12,245,514 - - 12,250,118 (25,871) (4,604)
		12,219,643 12,245,514

Movement during the year Options Balance at beginning of reporting period Issued – rights issue Balance at end of reporting period	Consolidated Entity 2007 $ 2006 $ 122,501 - - 122,501 122,501 122,501	The Company 2007 $ 2006 $ 122,501 - - 122,501
		122,501 122,501

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

15. RESERVES (Cont.)

As at 30 June 2007, there are options over unissued shares as follows:

Type Expiry Date Exercise Price	No. Issued
Listed 31 October 2007 $0.20 Unlisted 16 June 2008 $0.30 Unlisted 30 April 2008 $0.30 Unlisted 31 October 2008 $0.30 Unlisted 31 July 2009 $0.30 Unlisted 24 October 2011 $0.46	12,219,643 2,000,000 6,000,000 2,000,000 1,000,000 250,000
	23,469,643

During the financial year ended 30 June 2007, 25,871 ordinary shares were issued as a result of the exercise of 31 October 2007 $0.20 options.

b) Share based payments reserve Balance at beginning of financial year Employee equity-settled benefit payments Equity settled vendor consideration Balance at end of financial year	Consolidated Entity 2007 $ 2006 $ 873,594 167,330 130,400 72,664 - 633,600 1,003,994 873,594	The Company 2007 $ 2006 $ 873,594 167,330 130,400 72,664 - 633,600
		1,003,994 873,594

This reserve is used to record the value of share based payments made to the employees and directors and other parties.

c) Asset revaluation reserve

Balance at beginning of financial year Increase in valuation during the year Balance at end of financial year	- - 2,299,900 - 2,299,900 -	- - 2,299,900 -
		2,299,900 -

This reserve is used to record the movement of fair value in available for sale investments.

*16.* *ACCUMULATED LOSSES* Balance at the beginning of financial year Loss for the year Balance at the end of financial year	Consolidated Entity 2007 $ 2006 $ 3,004,475 145,362 383,757 2,859,113 3,388,232 3,004,475	The Company 2007 $ 2006 $ 3,004,491 145,362 383,202 2,859,129
		3,387,693 3,004,491

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

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 as share based payment arrangements during the year:

At beginning of reporting period Granted during the period - Vendor consideration - Employee incentive options - Director remuneration Lapsed during the period Expired during the period Balance the end of reporting period Exercisable at end of reporting period	2007	2006
	Number of Options Weighted Average Exercise Price $	Number of Options Weighted Average Exercise Price $
	12,000,000 - 250,000 $0.46 1,000,000 $0.30 (1,000,000) (2,000,000) 10,250,000 10,250,000	6,000,000 $0.30 4,000,000 $0.30 - 2,000,000 $0.30 - - 12,000,000 $0.30 12,000,000

The options outstanding at 30 June 2007 had a weighted average exercise price of $0.30 and $0.46, and a weighted average remaining life between 0.37 year and 4.32 years.

The weighted average fair value of options granted during the year was between $0.07 and $0.21. Included under employee benefits expense in the income statement is $130,400 (2006:$72,664), which relates to employee equity-settled benefit payments.

Options Exercised and Expired

No compensation options were exercised during the financial year ended 30 June 2007.

18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

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:

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont.)

(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:

2007	Floating interest rate $	Fixed	interest maturingin	interest maturingin	Non- Interest bearing $	Total $
		1 year or less $	over 1 year less than 5 $	more than 5 years $
Financial Assets
Cash at Bank	327,108	248,714	-	-	-	575,822
Receivables	-	-	-	-	69,959	69,959
Held for sale investments	-	-	-	-	2,329,820	2,329,820
Weighted Average Interest Rate	4.59%	6.29%
Financial Liabilities
Trade creditors & accruals	-	-	-	-	69,356	69,356

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

19. FINANCIAL INSTRUMENTS (Cont.)

2006	Floating interest rate $	Fixed	interest maturingin	interest maturingin	Non- Interest bearing $	Total $
		1 year or less $	over 1 year less than 5 $	more than 5 years $
Financial Assets
Cash at Bank	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	3.5%	5.85%	-
Financial Liabilities
Trade creditors & accruals	-	-	-	-	129,811	129,811

On-balance sheet financial instruments

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

*20.* *LOSS PER SHARE* a) Loss used in the calculation of basic and dilutive EPS b) Weighted average number of ordinary shares outstanding during the year used in the calculation of basic earnings per share: Weighted average number of options Weighted average number of ordinary shares outstanding during the year used in the calculation of diluted earnings per share:	2007 $ 383,757 *Number of* *Shares* 39,702,302 24,994,334 64,696,636	2006 $ 2,859,113 *Number of* *Shares* 28,807,700 20,488,163
		49,295,863

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

*21.* *CASH FLOW INFORMATION* *(i) Reconciliation from the net loss to the* *net cash used in operating activities* - (Loss) after income tax Non-cash flows in loss - Depreciation - Options issued to directors as remuneration - Exploration expenditure written off - Diminution in listed investments - Exploration expenditure written off - intangible - Loss from sale of investment - Profit from sale of tenement - Write (up)/down of investments to recoverable amount Changes in assets and liabilities - (Increase)/Decrease in receivables and prepayments - Increase in exploration and evaluation expenditure - Increase/(decrease) in trade and other payables - Increase/ (decrease) in provisions Net cash used in operating activities	Consolidated Entity 2007 $ 2006 $ (383,757) (2,859,113) 3,705 4,109 130,400 72,664 95,923 51,993 - 51,262 - 2,438,428 21,592 - (178,099) - (63,189) - (37,260) 15,536 (1,473,580) (982,615) (59,777) (35,297) 1,258 13,448 (1,942,784) (1,229,585)	The Company 2007 $ 2006 $ (383,202) (2,859,129) 3,705 4,109 130,400 72,664 95,923 51,993 - 51,262 - - 21,592 (178,099) - (63,189) 2,438,428 (37,260) 15,541 (1,464,799) (610,637) (59,770) (27,875) 1,258 1,118
		(1,933,441) (862,526)

(ii) Non cash financing and investing activities

During the financial year ended 30 June 2007, the Consolidated Entity received 2,000,000 IPO shares in Wolf Minerals Limited as consideration for the disposal of its Yanco Glen tin and tungsten rights to Wolf Minerals Limited.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

22. 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 report and are payable:

Not longer than one year Longer than one year, but not longer than five years Longer than five years	2007 $ 504,700 2,018,800 2,523,500 5,047,000	2006 $ 82,200 328,800 411,000
		822,000

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.

23. SEGMENT INFORMATION

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

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

24. EVENTS SUBSEQUENT TO REPORTING DATE

On 10 July 2007, Ms Bronwyn Barnes was appointed as Managing Director of Graynic Metals Limited.

25. RELATED PARTY DISCLOSURES

i) Equity interests and loans to and from controlled entities in subsidiaries are disclosed in note 9.

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

iii) During the year, the Company sold its Yanco Glen project for a consideration of 2 million IPO shares at $0.20 each to Wolf Minerals Limited (“Wolf”), a company in which Mr Jonathan Downes is also director.

No amounts in addition to those disclosed in Note 4 to the financial statements were paid or payable to Directors of the Company at the end of the year.

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

26. CONTINGENT LIABILITIES

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

27. CONTROLLED ENTITIES

	Consolidated Entity	Consolidated Entity	Country of
	Interest	Interest	Incorporation
	2007	2006
Parent Entity
Graynic Metals Limited
Controlled Entity
Resources Investment	100%	100%	Australia
Group Pty Ltd

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

28. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2007 reporting periods. The Company’s assessment of these new standards and interpretations is set out below:

(i) AASB 7 Financial Instruments: Disclosures and AASB 2005-10 Amendments to Australian Accounting Standards [AASB 101, AASB 114, AASB 117, AASB 133, AASB 139, AASB 1, AASB 4, AASB 1023 & AASB 1038]
AASB 7 and AASB 2005-10 are applicable to annual reports periods beginning on or after 1 January 2007. The Company has not adopted the standards early. Application of the standards will be affect any of the amounts recognised in the financial statements, but will impact the type of information disclosed in relation to the Company’s financial instruments.
(ii) AASB-1 10 Interim Financial Reporting and Impairment AASB-1 10 is application to reporting periods commencing on or after 1 November 2006. The Company has not recognised an impairment loss in relation to goodwill, investments in equity instruments or financial assets carried out at cost in an interim reporting period but subsequently reversed the impairment loss in the annual report. Application of the interpretation will therefore have no impact on the Group’s or the parent entity’s financial statements.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

DIRECTORS' DECLARATION

The directors of the Company declare that:

the financial statements and notes, as set out on pages 24 to 52, are in accordance with the Corporations Act 2001 including:
(a) comply with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(b) give a true and fair view of the Company’s and Consolidated Entity financial position as at 30 June 2007 and of the performance for the year ended on that date; and
(c) 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.

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

==> picture [191 x 64] intentionally omitted <==

Bronwyn Barnes Managing Director Perth ,26[th] September 2007

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GRAYNIC METALS LIMITED

We have audited the accompanying financial report of Graynic Metals Limited, which comprises the balance sheet as at 30 June 2007, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end.

Directors’ responsibility for the financial report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes complies with International Financial Reporting Standards.

O R D P A R T N E R S

CHARTERED ACCOUNTANTS

Ian K Macpherson CA

Robert W Parker CA

Craig A Vivian CA

Auditor’s responsibility

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

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

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

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 , provided to the directors of Graynic Metals Limited on 26 September 2007, would be in the same terms if provided to the directors as at the date of this auditor’s report.

Level 2, 47 Colin Street West Perth WA 6005 PO Box 359 West Perth WA 6872 � +61 8 9321 3514 � +61 8 9321 3523 [email protected] www.ordgroup.com.au

Chartered Accountants

O R D

Graynic Metals Limited

Auditor’s opinion

In our opinion:

(a) the financial report of Graynic Metals Limited is in accordance with 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 2007 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 .
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Significant uncertainty regarding going concern

Without qualification to the opinion expressed above, attention is drawn to the following matter. As a result of the matters referred to in Note 1 “Going Concern” to the financial statements, there is significant uncertainty whether the entity will be able to continue as a going concern and therefore whether it will be able to pay its debts as and when they fall due and whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. The financial report does not include any adjustments relating to the recoverability and classification of recorded assets nor to the amounts and classification of liabilities that might be necessary should the entity not continue as a going concern.

ORD PARTNERS Chartered Accountants

==> picture [156 x 78] intentionally omitted <==

Ian Macpherson Partner

Perth, 26 September 2007

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

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

1. Substantial Shareholders

Shareholder	Number of Shares	Percentage
Katrina Peta Downes	3,333,333	8.278%
Megan Ruth Roberts	2,500,001	6.209%
Fleur Lesley Schell	2,500,000	6.209%

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

There are 632 holders of ordinary shares. Each shareholder is entitled to one vote per share held.

There are 250 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.

3 . Distribution schedule of the number of holders in each class of equity security as at 11 September 2007.

By Class 1-1,000 1,001 - 5,000 5,001 – 10,000 10,001 - 100,000 100,001 and over TOTALS	Holders of Ordinary Shares No. Of Ordinary Shares % Holders of Options No. of Options % 85 36,863 0.092% 41 19,278 0.158% 155 439,310 1.091% 95 342,357 2.802% 128 1,078,660 2.679% 30 233,177 1.908% 202 7,732,753 19.204% 65 2,177,399 17.819% 62 30,978,186 76.934% 19 9,447,432 77.313%

	632 40,265,772 100.00% 250 12,219,643 100.00%

4. Marketable Parcel

There are no shareholders with less than a marketable parcel.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

ADDITIONAL SHAREHOLDER INFORMATION (CONT.)

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 11 September 2007) is as follows:

Ordinary Shares

Name	No. Of Ordinary Shares	%
Katrina Peta Downes	3,333,333	8.278
Megan Ruth Roberts	2,500,001	6.209
Fleur Lesley Schell	2,500,000	6.209
Margaret Anne Mullins	1,666,666	4.139
Australian Heritage Group Pty Ltd	1,540,000	3.825
Nathan Bruce McMahon	1,074,869	2.669
Clive Bruce Jones	1,005,201	2.496
Mervyn Bassett & Mrs Shirley Ethel Bassett
	850,000	2.111
ANZ Nominees Limited	812,411	2.018
Pylara Pty Ltd	800,000	1.987
Widerange Corporation Pty Ltd	717,435	1.782
Chaldane Pty Ltd	524,000	1.301
Jezza Nominees Ltd	507,806	1.261
Dr Alastair Rowland Brown	500,000	1.242
Ninkasi Pty Ltd	500,000	1.242
Mrs Audrey Irving Butchart & Mr Bill Erskine Butchart
	500,000	1.242
Saxon Holdings Pty Ltd	500,000	1.242
UBS Wealth Management Australia Nominees Pty Ltd	480,000	1.192
Mr Mark Stephen Ghirardello	450,000	1.118
Mrs Kylee Lynne Keys	400,000	0.993
TOTAL	21,161,722	52.555

Options exercisable at $0.20 on or before 31 October 2007

Name	No. Of Options	%
HSBC Custody Nominees (Australia) Limited	3,503,234	28.669
CPA Financial Services Pty Ltd	878,400	7.188
Jezza Nominees Ltd	757,868	6.202
UBS Wealth Management Australia Nominees Pty Ltd	567,000	4.640
Tricom Nominees Pty Ltd	548,930	4.492
Alastair Brown Pty Ltd	529,224	4.331
Clive Bruce Jones	502,601	4.113
Fortis Clearing Nominees P/L	377,516	3.089
Dr Alastair Rowland Brown	225,000	1.841
Chaldane Pty Ltd	200,000	1.637
Melsim Pty Ltd	200,000	1.637
International Business Network (Services) Pty Ltd	200,000	1.637
Lapin Trading Pty Ltd	200,000	1.637
Mr Shane Sadler	165,000	1.350
Jezza Nominees Ltd	162,500	1.330
Mr Anthony John Vetter	120,000	0.982
Cyril Resources Pty Ltd	106,089	0.868
Deanna Demunka Miocevich	105,000	0.859
Mr Jim Lazarou	102,304	0.837
Peter Bowman C/- StirlingPartners	100,000	0.818
TOTAL	9,550,666	78.158

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

C. OTHER DETAILS

1. Company Secretary

The name of the company secretary is David Round.

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

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

Suite 5, Level 1, 350 Hay Street Subiaco Western Australia 6008 Telephone: +(61) 8 6364 0518 Facsimile: +(61) 8 6210 1872

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

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

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

5. Restricted Securities

The Company currently has no restricted securities on issues, the following securities were released from escrow on the respective dates disclosed below:

			Date Ceasing To Be
Class	of Equity Security	Number	Restricted Securities
Fully	Paid Ordinary Shares	2,894,564	30 June 2007
$0.30	Options expiring 30 April 2008	2,000,000	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 at the time of listing in a way consistent with its stated business objectives.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

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 IndependentChairman	1.2
Recommendation 2.3Role of theChairman andCEO	1.2
Recommendation 2.4 Establishment ofNominationCommittee	2.3
Recommendation 2.5 Reporting on Principle 2	1.2, 1.4.6, 2.3.2 and the Directors’ Report
Recommendation3.1 Directors’ and KeyExecutives’Code ofConduct	1.1
Recommendation3.2Company SecurityTradingPolicy	1.4.9
Recommendation3.3Reportingon Principle3	1.1 and 1.4.9
Recommendation 4.1 Attestations by CEOandCFO	1.4.11
Recommendation 4.2 Establishment of AuditCommittee	2.1
Recommendation 4.3 Structure of AuditCommittee	2.1.2
Recommendation 4.4 AuditCommitteeCharter	2.1
Recommendation 4.5Reportingon Principle 4	2.1
Recommendation5.1 PolicyforCompliancewithContinuous Disclosure	1.4.4
Recommendation5.2 Reportingon Principle5	1.4.4
Recommendation6.1CommunicationsStrategy	1.4.8
Recommendation6.2 Attendance of Auditor atGeneral Meetings	1.4.8
Recommendation 7.1 Policies on RiskOversight and Management	2.1.3
Recommendation 7.2 Attestations by CEOandCFO	1.4.11
Recommendation 7.3Reportingon Principle 7	2.1.3
Recommendation8.1 Evaluation of Board,Directors and KeyExecutives	1.4.10
Recommendation9.1 Remuneration Policies	2.2.4
Recommendation9.2 Establishment of RemunerationCommittee	2.2
Recommendation 9.3 Executive and Non-Executive Director Remuneration	2.2.4.1 and 2.2.4.2
Recommendation9.4 Equity-Based Executive Remuneration	2.2.4.1
Recommendation9.5Reportingon Principle9	2.2.2 and 2.2.4
Recommendation 10.1Company Code ofConduct	3

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

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

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 C Jones and Mr J Downes are Non-Executive Directors, however are not independent directors as they do not meet the following criteria for independence adopted by the Company. Mr Hoffman is a Non-Executive Director and, in accordance with the policies adopted by the company, is an independent director.

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;

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; 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 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;

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 Director’s ability to act in the best interests of the Company.

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. 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 participation at general meetings of the Company. Monitoring, Compliance and Risk Management: the development of the Company’s risk

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

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

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

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 general meetings of the Company;

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”.

1.4.10 Performance 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 2006. The objective of this evaluation will be to provide best practice corporate governance to the Company.

1.4.11 Attestations 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.

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

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

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.

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[i] 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 marketcompetitive 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.

2.2.3.2 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

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

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.

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.

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.

Annual Financial Report 2007

Graynic Metals Limited and Controlled Entities

SCHEDULE OF MINERAL TENEMENTS AS AT 11 SEPTEMBER 2007

*Project*	*Tenement*	*Interest held by Graynic Metals* *Limited*
Quartz Circle	P46/1360	80%
Quartz Circle	P46/1361	80%
Quartz Circle	P46/1362	80%
Quartz Circle	P46/1363	80%
Quartz Circle	P46/1364	80%
Quartz Circle	P46/1365	80%
Quartz Circle	P46/1366	80%
Quartz Circle	E46/0541	80%
Quartz Circle	P46/1441	80%
Quartz Circle	P46/1442	80%
Quartz Circle	E45/2602	80%
Quartz Circle	P46/1385	80%
Quartz Circle	P46/1386	80%
Wertago	E 6424	100%
Copper Ridge	E 6435	100%
Gulf Creek	E 6492	100%
Yanco Glen	E 6489	100%
Mount Dering	E 6760	100%
DIA-Walgidee	E04/1551	100%
DIA-Boodallana	E45/2788	100%
DIA- Noonkanbah	E04/1620	100%

P Prospecting Licence

E Exploration Licence

M Mining Licence

AI assistant

CORAZON MINING LIMITED — Annual Report 2007

64747_rns_2007-09-26_4657e44a-f4b5-47d6-a15e-c7bf60ef66f1.pdf

Graynic Metals Limited (ACN 112 898 825) and Controlled Entities

CONTENTS

CORPORATE DIRECTORY

MANAGING DIRECTOR

NON-EXECUTIVE DIRECTORS

PRINCIPAL & REGISTERED OFFICE

AUDITORS

SHARE REGISTRAR

STOCK EXCHANGE LISTING

BANKERS

DIRECTORS' REPORT

1. DIRECTORS

Ivan Hoffman

Bronwyn Barnes

1. DIRECTORS (Cont.)

Ronald Thom

B. Sc, Ph.D

Nathan McMahon

1. DIRECTORS (Cont.)

Directorships of other listed companies

COMPANY SECRETARY

2. PRINCIPAL ACTIVITIES

3. RESULT

4. FINANCIAL POSITION

5. REVIEW OF OPERATIONS

WESTERN AUSTRALIAN PROJECTS

5. REVIEW OF OPERATIONS (Cont.)

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

Introduction

Project area

5. REVIEW OF OPERATIONS (Cont.)

5. REVIEW OF OPERATIONS (Cont.) Igloo Prospect

5. REVIEW OF OPERATIONS (Cont.)

Conductance anomaly drilling January 2007

Emperor Zinc Prospect

5. REVIEW OF OPERATIONS (Cont.)

RC drilling program December 2006/January 2007

Emperor Prospect

Re-assays at Igloo Prospect and Emperor Prospect

EM Survey August 2006

5. REVIEW OF OPERATIONS (Cont.)

5. REVIEW OF OPERATIONS (Cont.)

Aboriginal Heritage Survey April 2007

Gravity Survey February 2007

RC drilling program May 2007

5. REVIEW OF OPERATIONS (Cont.)

WALGIDEE HILLS (Graynic 100%)

5. REVIEW OF OPERATIONS (Cont.)

NEW SOUTH WALES PROJECTS

Acquisition of projects in NSW

Yanco Glen Project, NSW (Graynic 100%)

5. REVIEW OF OPERATIONS (Cont.)

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

8. SUBSEQUENT EVENTS

9. FUTURE DEVELOPMENTS

10. ENVIRONMENTAL ISSUES

11. DIVIDENDS PAID OR RECOMMENDED

12. REMUNERATION REPORT

Remuneration Policy

12. REMUNERATION REPORT (Cont.)

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

Details of the nature and amount of emoluments of key management personnel are as follows:

12. REMUNERATION REPORT (Cont.)

Value of Options Granted to Directors and Executives

Employment Contracts of Directors and Senior Executives

12. REMUNERATION REPORT (Cont.)

13. MEETINGS OF DIRECTORS

14.

INDEMNIFYING OFFICERS OR AUDITOR

15. OPTIONS

Unissued Shares Under Option

16. AUDITOR’S INDEPENDENCE DECLARATION

17. NON AUDIT SERVICES

CORAZON MINING LIMITED Annual Report 2007