CORAZON MINING LIMITED — Annual Report 2011

Sep 22, 2011

2011 ANNUAL REPORT

Corazon Mining Limited (ABN: 87 112 898 825) and Controlled Entities

CONTENTS

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CONTENTS

CORPORATE DIRECTORY .............................................................3 CHAIRMAN’S LETTER .................................................................4 DIRECTORS’ REPORT .................................................................5 AUDITOR’S INDEPENDENCE DECLARATION ....................................19 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ..............20 CONSOLIDATED STATEMENT OF FINANCIAL POSITION .....................21 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .....................22 CONSOLIDATED STATEMENT OF CASH FLOWS ...............................23 NOTES TO THE FINANCIAL STATEMENTS ......................................24 DIRECTORS’ DECLARATION ........................................................55 INDEPENDENT AUDITOR’S REPORT .............................................56 ADDITIONAL INFORMATION FOR LISTED COMPANIES ......................58 CORPORATE GOVERNANCE ........................................................62

Corazon Mining Limited – Annual Report 2011

Page 2

CORPORATE DIRECTORY

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CORPORATE DIRECTORY

NON EXECUTIVE CHAIRMAN Clive Jones

EXECUTIVE MANAGING DIRECTOR

Brett Smith

NON EXECUTIVE DIRECTORS

Adrian Byass Jonathan Downes

COMPANY SECRETARY

Robert Orr

PRINCIPAL & REGISTERED OFFICE

Level 1, 350 Hay Street SUBIACO WA 6008 Telephone: (08) 6142 6366 Facsimile: (08) 6210 1872

AUDITORS

PKF Mack & Co Level 2, 35 Havelock Street WEST PERTH WA 6005 Telephone: (08) 9322 2798 Facsimile: (08) 9481 2019

SHARE REGISTRAR

Advanced Share Registry Services 2/150 Stirling Highway NEDLANDS WA 6009 Telephone: (08) 9389 8033 Facsimile: (08) 9389 7871

SECURITIES EXCHANGE LISTINGS

Australian Securities Exchange (Home Exchange: Perth, Western Australia) Code: CZN

BANKERS

National Australia Bank 50 St Georges Terrace PERTH WA 6000

WEBSITE

www.corazon.com.au

Corazon Mining Limited – Annual Report 2011

Page 3

CHAIRMAN’S LETTER

CHAIRMAN’S LETTER

Dear Shareholder,

On behalf of the Board of Directors of Corazon Mining Limited, I am pleased to present the Annual Report for the Company for the 2010/2011 year.

Twelve months ago Corazon had just acquired an option to purchase the Lynn Lake Project and were coming to terms with more than 70 years of exploration history and data. The Lynn Lake Project presented a unique opportunity for the Company to potentially discover and subsequently develop significant resources of nickel sulphides, a goal which we believe we are firmly on the path of. The Company has had a very successful year exploring the project. Our priority target has been the previously untested extensions to the EL Mine, the highest grade mine in the Lynn Lake nickel camp. The highlights of the years work include:-

• Definition of a remnant inferred resource, based primarily on historical drilling;

• Definition of an exploration target for the EL Deposit down to the regional mining depth of about 1,100 metres below surface;

• Improving the potential for shallow mineralisation around the old EL Mine workings;

• The discovery of nickel-copper sulphide mineralisation at the 150 Prospect immediately south of the EL Deposit; and

• The discovery of a high-grade nickel-copper sulphide breccia at depth below the EL Mine.

The year culminated in the discovery of the high-grade nickel-copper sulphide mineralisation at our main target, the down plunge extension to the EL Deposit. The discovery drill intercept of 23.75 metres at 3.34% nickel, 1.54% copper and 0.08% cobalt is an exceptional result and substantiates the belief the Board and Management has in the potential of the Lynn Lake Project in Canada.

Looking forward, the immediate work programs will aim to establish the value of the EL Deposit. Both the resource and exploration targets for the EL Deposit do not include the recent spectacular results, and as such these can be expected to be upgraded in the near future.

Despite what can be summarised as a difficult year for the financial markets, the quality of the Lynn Lake asset and exploration success throughout the year has meant that we have not had any difficulties in raising capital for exploration. As exploration continues, we believe the potential of the Project will be further realised, for the benefit of Corazon shareholders.

In closing I would like to thank our small team lead by Brett Smith and Andrew Thompson who continue to strongly focus on delivering value to the Company through their efforts in exploring the Lynn Lake mine district.

Yours faithfully,

Clive Jones Chairman

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Corazon Mining Limited – Annual Report 2011

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DIRECTORS’ REPORT

DIRECTORS’ REPORT

Your Directors present their report on the Company and its controlled entities (together the “Consolidated Entity”) for the financial year ended 30 June 2011.

Directors

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

Clive Jones Non Executive Chairman Brett Smith Executive Managing Director Adrian Byass Non Executive Director Jonathan Downes Non Executive Director

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

Company Secretary

Mr Robert Orr, CA holds the position of Company Secretary. Mr Orr has acted as Chief Financial Controller and Company Secretary for a number of ASX listed companies, with over 20 years experience in public practice and commerce. He has worked extensively in the resource industry with experience in capital raisings, project development, contract negotiation and mining operations.

Operating Results

The consolidated loss of the Consolidated Entity after providing for income tax and eliminating inter-company interests amounted to $3,310,491 (2010: $4,373,262)

Principal Activities and Significant Changes in Nature of Activities

The principal activity of the Consolidated Entity during the financial year has been exploration for nickel and development of nickel mining activities. There were no significant changes in the nature of the Consolidated Entity’s principal activities during the financial year.

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.

Review of Operations

Corazon Mining Limited (ASX Code:CZN) (“the Company” or “Corazon”) is an Australian based company committed to the exploration and development of the Lynn Lake nickel-copper sulphide project in Canada. The Lynn Lake Project is a historical mining camp, the third largest nickel producing region in Canada. This project has good development potential and excellent exploration up-side. This opinion has been reinforced by the Company’s recent exploration success, the discovery of a high-grade nickel-copper sulphide breccia below the historic EL Mine.

Corazon has the option to purchase 100% equity in the Lynn Lake Project, by spending C$3 million within three years (to 21 October 2012) and by paying C$2 million in cash and 4.5 million CZN shares.

Since commencing exploration at the Lynn Lake Project, the Company has committed to a very active work program, including resource modeling, geophysics and drilling. This exploration has resulted in the following highlights:-

• Estimation of an initial Inferred Resource for the EL Deposit

• Estimation of an Exploration Target for the EL Deposit

• Discovery of the 150 Nickel Deposit south of the EL Deposit

• Discovery of the down-plunge extensions to the Lake Francis VMS Deposit

• Discovery of a new high-grade sulphide breccia at depth below the EL Mine

The Company has, or is in the process of, divesting all Australian projects to focus on this Canadian asset.

Corazon Mining Limited – Annual Report 2011

Page 5

DIRECTORS’ REPORT

Review of Operations (continued)

The Lynn Lake Project

The Lynn Lake nickel camp is Canada’s third largest nickel producing region, mining 22Mt of nickel/copper/cobalt ore between 1953 and 1976. There has been minimal exploration in the region since this time.

Corazon is the largest land holder in the Lynn Lake camp, with the tenement package containing the historical high-grade nickel-copper sulphide EL Mine, as well as several drill defined nickel and VMS (zinc, copper, lead, silver, gold) deposits and numerous un-tested geophysical anomalies. The region is well serviced by mining infrastructure and support, offering rapid development potential. The Thompson Nickel Refinery is located only 320km from the project and is accessible by an all weather road. In addition there is rail access (currently under care and maintenance) to the Flin Flon zinc-copper concentrators approximately 250km to the south.

The EL Deposit

The EL Mine, the highest grade deposit at Lynn Lake, produced 1.9Mt @ 2.5% nickel and 1.15% copper between 1954 and 1962. The host rocks are a defined geological unit with good predictability down plunge. Mining was conducted to a depth of 210 metres below surface, with development to 270 metres and drilling defined mineralisation to a depth of at least 900 metres (from recent drilling by Corazon). The mining depth at other nickel deposits in the area is in excess of 1,100 metres below surface.

The Company recently announced the discovery of high-grade, semi-massive nickel/copper mineralisation below the EL Mine (8th June, 2011). The high-grade mineralisation within drill hole XND001W1 returned;

23.75m @ 3.34% Ni, 1.54% Cu & 0.079% Co from 731.25 m

Including:

• 13.0m @ 4.27% Ni, 0.89% Cu & 0.099% Co from 732 m

• 2.46m @ 3.80% Ni, 0.34% Cu & 0.089% Co from 751.94 m

The discovery of this mineralisation is significant and may represent a breccia body similar to the high grade nickel/copper/cobalt sulphide deposit mined at surface within the EL mafic/ultramafic pipe. Drilling indicates extensive sulphide mineralisation to approximately 900 metres down hole, as the drilling trended away from the mineralised core of the mafic/ultramafic plug. The extensive amount of sulphide mineralisation is indicative of a large, strongly mineralised system, analogous to the previous mined areas within the EL Deposit.

XND001W1 is the deepest hole drilled at the EL Deposit, drilled to a depth of 1,205m. This drilling was the first by Corazon to test for repeats of high-grade mineralisation at depth below the historic EL Mine.

EL Deposit – Resource Statement

Exploration by Corazon at the EL Deposit has established an initial inferred resource. The resource is considered a conservative estimate based on limited drill density, and the potential remains to extend the resource with further drilling.

This resource has not been upgraded following recent drilling by Corazon, which has indicated there is considerable scope for growth.

At a cut-off grade of 0.6% Ni equivalent[(1)] , the resource defines 1.8 Mt at 1% Ni equivalent[(1)] , including contained metal of 14,000t nickel, 9,000t copper and 400t cobalt (Table 1).

Corazon have yet to complete mining studies or metallurgical/processing analysis on the EL Mine mineralisation. However, Lynn Lake is an historical nickel, copper and cobalt mining camp which operated for more than 20 years. Reported historical mine base cut-off grades were between 0.5% and 0.7% nickel. Metal recoveries reported were approximately 85% for nickel, 93% for copper and 80% for cobalt.

Past mining utilized very simple open stope with sublevel mining methods. The historical EL Mine main stope is up to 100 metres in diameter, plus 200 metres in depth, and provided a large tonnage – low cost mining opportunity.

Whilst the defined boundary of the mineralised host unit is well established, drilling in areas of the resource has not been of sufficient density to accurately define the distribution of high-grade sulphide mineralisation. For this reason, the influence of the high grade material within the resource has been restricted and consequently the resource is categorised as inferred. This resource provides a very good base from which to focus ongoing exploration, and it is the Company’s opinion that it is conservative in terms of the full potential of the deposit and that additional drilling will provide a more accurate model particularly for the distribution of high-grade mineralisation.

Corazon Mining Limited – Annual Report 2011

Page 6

DIRECTORS’ REPORT

Review of Operations (continued)

Table 1 Deposit, Lynn Lake Manitoba CA Inferred Mineral Resource, October 2010

COG Tonnes	COG Tonnes	Grade	Grade	Grade	Grade	Contained Metal	Contained Metal	Contained Metal
Ni% Equiv*	k tonnes	Ni%	Cu%	Co%	Ni% equiv(1)	Tonnes Ni	Tonnes Cu	Tonnes Co
0.5	2,300	0.7	0.4	0.02	0.9	16000	9000	500
0.6	1,800	0.8	0.4	0.02	1.0	14000	7000	400
0.7	1,300	0.9	0.4	0.03	1.1	12000	6000	340
0.8	900	1.0	0.5	0.03	1.3	9000	4000	260
0.9	700	1.1	0.5	0.03	1.3	8000	4000	230
1.0	600	1.2	0.5	0.03	1.4	7000	3000	200

(1) Ni Equiv = Nickel equivalent which has been estimated within the Block Model using the formula:-

• Ni Equiv = Ni%+(Cu%(3/8.75))+(Co%(18/8.75)) where Ni = 8.75$ US/lb Cu = 3.00 $US/lb Co = 18.00 $US/lb

Nickel equivalent grades are provided as an indicator of value in a multi-metallic deposit. Lynn Lake has a long history as a nickel, copper and cobalt mining camp. It is the Company’s opinion that all elements included in the metal equivalent calculation have a reasonable potential to be recovered.

Mineral Resources have been estimated using standard accepted industry practices. All Resources have been estimated via Block Ordinary Kriging using 2m composite samples. No top cuts have been applied which was considered appropriate for the nature and style of the mineralization. Directional Variography was modeled for all zones based on 2m composites. Geological and mineralization modeling has been achieved by 3D modeling of the inner and outer core of the intrusive mafic/ultramafic plug and the mined voids. A Block model was developed for the deposit incorporating a suitable parent and sub block dimension to allow adequate volume resolution of modeled geology and mineralization. Grade interpolation (via Block Ordinary Kriging) was then undertaken using a multiple estimation pass strategy.

Mineral Resources are classified on a basis of drill-hole spacing, geological continuity and predictability, sampling, analytical, spatial and density QAQC criteria.

Where quoted, Mineral Resource and Ore Reserve tonnes, pounds or ounces are rounded to appropriate levels of precision.

EL Deposit – Exploration Target

Corazon has defined an Exploration Target[(2)] for the EL Mine of between 3.5Mt and 4.6Mt, which includes the existing Inferred Resource. The target has grade ranges of between 0.8% and 1.45% nickel, 0.4 and 0.7% copper, along with 0.01% and 0.03% cobalt. At these grade ranges, the contained metal for this Exploration Target[(2)] equates to between 28,100t & 66,000t nickel, 14,000t & 31,400t copper and 770t to 1,730t cobalt.

This Exploration Target has yet to be re-assessed following the discovery (23 May 2011) of high-grade mineralisation at depth within the EL Deposit.

• (2) This exploration target is conceptual in nature, there has been insufficient exploration (namely drilling) to define a mineral resource and it is uncertain if further exploration will result in the determination of a mineral resource. The basis for this target includes:-

• Historical mining at the deposit to a depth of 210 metres below surface

• Historical mine development to at least 270 metres below surface

• Exploration drilling to a depth of approximately 600 metres below surface

• An inferred resource has been calculated to approximately 600 metres below surface

• Good continuity and predictability of geology down-plunge

• Geological evidence for a deep-seated, explosive mineralising event.

• Past exploration and mining records for the EL Mine are extensive and reflects high standards of work.

The nickel sulphide deposits at Lynn Lake are polymetallic with metals such as copper and cobalt easily recovered and providing extremely valuable production credits. The entire Lynn Lake Nickel Camp operated for 23 years and produced 22.2Mt at 1% Ni and 0.5% Copper. These deposits are large-tonnage/low-grade in nature and at such grades can provide a very robust mining project.

Corazon Mining Limited – Annual Report 2011

Page 7

DIRECTORS’ REPORT

Review of Operations (continued)

150 Nickel Sulphide Prospect

IP geophysical surveys identified the 150 Prospect as a priority drill target, with subsequent work by the company defining sulphides over a strike of approximately 250 metres. The style of mineralisation looks similar to that of the disseminated mineralisation which surrounds the massive sulphide (high-grade) mineralisation at the EL Deposit, located 1.2 km to the northeast.

Results of drill hole CRZ005A confirmed the above observations. This hole intersected two broad zone of mineralisation, the first being approximately 18 metres down hole in width and the second 41 metres in width. The grades of these intercepts are summarized as:-

18m @ 0.58% Ni, 0.38% Cu & 0.013% Co from 14m

Including:

• 9.07m @ 0.81% Ni, 0.53% Cu & 0.016% Co from 14m

41m @ 0.42% Ni, 0.34% Cu & 0.011% Co from 59m

Including:

• 6.00m @ 0.64% Ni, 0.61% Cu & 0.016% Co from 78m

The 150 Prospect provides the Company with an additional exploration front at Lynn Lake. The shallow nature of the defined mineralisation, as well as the significant widths and strike length of the sulphide mineralisation is very encouraging. The proximity of the 150 Prospect to the high-grade EL Deposit suggests the area has good potential for high-grade nickel sulphide mineralisation.

Lynn Lake VMS Deposits

The VMS deposits within Corazon’s project area include Francis Lake, Eldon Lake East, Nicoba, Y Deposit, Z Deposit and Gods Lake (FL). These deposits were mostly discovered in the 1940’s and since then have only had intermittent exploration in the 1970’s and 1990’s. They are predominantly zinc/copper mineralisation with variable amounts of lead, silver and gold. Not all metals have been historically reported.

Highlights from past drilling within the main zones of the three better defined VMS deposits include:

Francis Lake

• 6.5m @ 13.8% Zn, 0.7% Cu, 0.9% Pb, 22.2g/t Ag & 3.7g/t Au

• 1.2m @ 10.6% Zn, 0.2% Cu, 6.1% Pb, 135.1g/t Ag & 8.7g/t Au

• 1.3m @ 9.6% Zn, 0.7% Cu, 1.4% Pb, 59.5g/t Ag & 0.9g/t Au

• 13.7m @ 4.0% Zn, 0.2% Cu, 0.6% Pb, 23.7g/t Ag & 0.4g/t Au

• 5.8m @ 5.5% Zn, 0.6% Cu, 3.3g/t Ag & 0.9g/t Au

Eldon Lake East

• 26.1m @ 4.2% Zn, 0.8% Cu & 6.2g/t Ag

• 16.9m @ 3.9% Zn, 1.0% Cu & 9.3g/t Ag

Nicoba

• 0.3m @ 12.3% Zn, 2.3% Cu, 44.6g/t Ag & 16.3g/t Au

• 0.5m @ 22.5% Zn, 0.7% Cu, 17.1g/t Ag & 0.3g/t Au

• 0.9m @ 21.8% Zn, 1.1% Cu, 6.9g/t Ag & 0.6g/t Au.

Corazon completed drilling at the Francis Lake VMS (zinc-copper-lead-silver-gold) Deposit, located 5 km to the west of the EL Deposit. Frances Lake is possibly the most explored of the VMS deposits at Lynn Lake. The deposit outcrops, with drilling defining good mineralisation over a strike of 400 metres, to depths of approximately 300 metres, and widths of between 1.2 and 13.7 metres down hole.

This deposit has not been extensively tested down plunge or along strike, and it was believed historical drilling had defined the extents to the mineralisation. Corazon drilled one hole to test the concept of a differing plunge to the mineralisation (than that previously interpreted). Drilling by Corazon intersected mineralisation of a similar sulphide content to the main VMS body at Francis Lake. Results returned include:-

• 5.0m @ 2.15% Zn, 0.20% Cu, 0.08% Pb, 18.0g/t Ag & 0.30g/t Au

While these results are encouraging, they do suggest the drill hole has intersected the margin of the high-grade Francis Lake mineralisation.

Corazon Mining Limited – Annual Report 2011

Page 8

DIRECTORS’ REPORT

Review of Operations (continued)

Competent Person

The information is this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Andrew John Thompson, B.Sc Hons(Geol), Member AusIMM an employee of Corazon Mining Limited. Mr Thompson has sufficient experience that is relevant to the style of mineralization and type of deposit under consideration and to the activity where he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Thompson consents to the inclusion in the report of the matters based on this information in the form and context in which it appears.

Corporate

The Board believes enormous value exits for Corazon shareholders at Lynn Lake and is committed to ensuring that the Company has sufficient funding to complete exploration, while minimizing dilutive the effects of capital raisings. Despite several small raisings throughout the year, Corazon has only 101,891,415 shares on issue and is well leverage for exploration success.

Financial Position

The net assets of the Consolidated Entity have increased from $1,496,945 at 30 June 2010 to $3,239,661 at 30 June 2011. This is as a result of the investment in Manitoba Inc during the year.

As at 30 June 2011 the Consolidated Entity had $1,513,449 cash on hand.

The Directors are confident that the Company will raise capital through the issue of additional shares when and as required.

Significant Changes in State of Affairs

The following significant changes in the state of affairs of the parent entity occurred during the financial year:

• i. On 1 July 2010, the Company appointed Mr Brett Smith as Managing Director.

• ii. On 13 July 2010, Corazon Mining Limited announced that it had finalised a placement of fully paid ordinary shares to sophisticated investors raising approximately $500,000 after fees at a price of $0.065 per share. The funds to be utilised for exploration of its high grade nickel sulphide Lynn Lake project in Canada.

• iii. On 13 July 2010, the Company acquired a subsidiary entity Manitoba Nickel Pty Ltd which holds an option to acquire a 100% interest in the Lynn Lake project for C$3 million in expenditure over 3 years, followed by a C$2million vendor payment. Corazon paid as consideration 4,500,000 fully paid ordinary shares, 3,000,000 Class A Options exercisable at $0.07 on or before 13 July 2013 and 5,000,000 Class B Options exercisable on completing Lynn Lake earn in at lower of $0.20 on or before 13 July 2012 or 30 day VWAP on 21 October 2011.

• iv. On 12 August 2010, the Company ceased to be a substantial shareholder of Wolf Minerals Limited as a result of the sale of 2,000,000 shares for $600,000.

• v. On 15 December 2010, Corazon announced it had successfully completed a $923,400 Share Placement (before costs) via the placement to sophisticated investors of 9,234,000 ordinary shares at an issue price of $0.10 per share. The placement was issued in one tranche under Corazon’s 15% placement capacity. The funds were used to immediately commence an exploration program at the Lynn Lake Nickel Sulphide Project in Canada.

• vi. On 25 January 2011, the Board of Corazon offered eligible shareholders the opportunity to participate in a Shareholder Share Purchase Plan to acquire additional Shares at the same issue price of 10 cents per Share as that paid by investors under the Placement completed in December 2010. This Plan was fully underwritten by Barclay Wells Limited and closed on 22 February 2011, raising $2.3M for the exploration of the Lynn Lake Nickel Sulphide Project in Canada.

Corazon Mining Limited – Annual Report 2011

Page 9

DIRECTORS’ REPORT

After Balance Date Events

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.

Future Developments, Prospects and Business Strategies

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

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.

INFORMATION ON DIRECTORS

Mr Clive Jones	Non Executive Chairman
Qualifications	B App Sc (Geol)
Experience	Mr Jones has been involved in the minerals industry for over 25 years and has worked on the
	exploration and development of a range of commodities including gold, base metals, uranium, mineral sands, iron ore and industrial minerals both in Australia and overseas and has a history of corporate and technical successes. Aside from his role as Chairman of Corazon Mr Jones is currently joint managing Director of Cazaly Resources Ltd, a Director of Bannerman Resources Ltd and is Chairman of Cortona Resources Ltd. All of these companies are currently listed on the Australian Securities Exchange whilst Bannerman is also jointly listed on the Toronto and Namibian Stock Exchanges.
Interest in Shares and Options	2,453,969 fully paid ordinary shares and 3,151,985 options in Corazon Mining Limited
Directorships held in other listed entities in the last three years	Bannerman Resources Ltd from 12 January 2007 to present Cortona Resources Ltd from 17 March 2006 to present Cazaly Resources Ltd from 15 September 2003 to present
Mr Brett Smith	Executive Managing Director (appointed 1 July 2010)
Qualifications	BSc Hons, MAusIMM, MAIG, MAICD
Experience	Mr Smith has been involved in the mining and exploration industry for over 25 years as a geologist, manager and director of publicly listed companies. Mr Smith is currently a Director of the ASX companies Cauldron Energy Ltd, Jacka Resources Ltd and Blackham Resources Ltd and has acquired broad industry experience in exploration and development. The Board is confident that Mr Smith brings the right mix of energy and experience required to advance the assets of the Company.
Interest in Shares and Options	2,000,000 options in Corazon Mining Limited
Directorships held in other listed entities in the last three years	Jackson Minerals Ltd from May 2006 to June 2009 Cauldron Energy Ltd from June 2009 to present Blackham Resources Ltd from July 2007 to present Jacka Resources Ltd from July 2009 to present Eclipse Uranium Ltd from March 2010 to present

Corazon Mining Limited – Annual Report 2011

Page 10

DIRECTORS’ REPORT

INFORMATION ON DIRECTORS (continued)

INFORMATION O	N DIRECTORS(continued)
Mr Jonathan Downes	Non Executive Director
Qualifications	B Sc Geol, MAIG
Experience	Mr Downes has over 15 years experience in the minerals industry and has worked in various
	geological and corporate capacities. Mr Downes has experience in nickel, gold and base metals and
	has been intimately involved with numerous private and public capital raisings. Mr Downes was a
	founding director of Hibernia Gold (now Moly Mines Ltd) and Siberia Mining Corporation Ltd. Mr
	Downes is currently Managing Director of Ironbark Zinc Ltd.
Interest in Shares and Options	925,930 fully paid ordinary shares and 2,245,771 options in Corazon Mining Ltd
Directorships held in other listed	Ironbark Zinc Ltd from 18 April 2006 to present
entities in the last three years	Wolf Minerals Ltd from 20 September 2006 to present
	Sabre Resources Ltd from 14 December 2007 to present
	Waratah Resources Ltd from 17 July 2008 to present
Mr Adrian Byass	Non Executive Director (appointed 3 September 2009)
Qualifications	B Sc Hon (Geol), B Econ, FSEG, MAIG
Experience	Mr Byass has over 15 years experience in the mining and minerals industry. This experience has
	principally been gained through mining, resource estimation, and mine development roles for
	several gold and nickel mining and exploration companies. Through his experience in resource estimation and professional association membership, Mr Byass is a competent person for reporting to the ASX for certain minerals. Mr Byass has also gained experience in corporate finance and financial modelling during his employment with publicly listed mining companies. Mr Byass was a founder of Siberia Mining Corporation Ltd and Hibernia Gold (now Moly Mines Ltd). Mr Byass is currently a Non Executive Director of Wolf Minerals Ltd, an Executive Director of Ironbark Zinc Ltd and was appointed Interim Managing Director of Corazon Mining Ltd on 3 September 2009 through to 1 July 2010.
Interest in Shares and Options	3,022,696 fully paid Ordinary Shares and 3,398,849 options in Corazon Mining Ltd
Directorships held in other listed entities in the last three years	Ironbark Zinc Ltd from 18 April 2006 to present Wolf Minerals Ltd from 20 September 2006 to present

Corazon Mining Limited – Annual Report 2011

Page 11

DIRECTORS’ REPORT

REMUNERATION REPORT (AUDITED)

This report details the nature and amount of remuneration for each key management person of Corazon Mining Limited.

Names and positions held of consolidated and parent entity key management personnel in office at any time during the financial year are:

Key Management Personnel Position Clive Jones Non Executive Chairman Brett Smith Executive Managing Director Adrian Byass Non Executive Director Jonathan Downes Non Executive Director

REMUNERATION POLICY (audited)

This remuneration report, which forms part of the Directors’ Report, sets out information about the remuneration of Corazon Mining Limited’s key management personnel, comprising the directors of the Company, for the financial year ended 30 June 2011. Disclosures required under AASB 124 Related Party Disclosures have been transferred from the financial report and have been audited. The additional disclosures required by the Corporations Act 2001 and the Corporations Regulations 2001 have not been audited.

The remuneration policy of Corazon Mining Limited has been designed to align key management personnel objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the Consolidated Entity’s financial results. The Board of Corazon Mining Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best key management personnel to run and manage the Consolidated Entity, as well as create goal congruence between directors, executives and shareholders.

The Board’s policy for determining the nature and amount of remuneration for key management personnel of the Consolidated Entity is as follows:

• The remuneration policy, setting the terms and conditions for the key management personnel, was developed and approved by the Board.

• All key management personnel receive a base salary (which is based on factors such as length of service and experience) and their package may include superannuation, fringe benefits, options and performance incentives.

• The Board reviews key management personnel packages annually by reference to the Consolidated Entity’s performance, executive performance and comparable information from industry sectors.

The Board’s remuneration policy is designed to attract the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth.

Key management personnel are also invited to participate in employee option arrangements.

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

Shares given to key management personnel are valued as the difference between the market price of those shares and the amount paid by the key management personnel. Options are valued using the Black-Scholes option pricing model.

The Board policy is to remunerate Non Executive Directors at market rates for time, commitment and responsibilities. The Board determines payments to the Non Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. 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 Consolidated Entity. 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 incentive scheme (‘EIS’).

Corazon Mining Limited – Annual Report 2011

Page 12

DIRECTORS’ REPORT

REMUNERATION REPORT (AUDITED) (continued)

Performance-based remuneration

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 does not endorse the use of bonus payments for directors and senior executives at this point in time. 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 growth and profits will be used as measurements for assessing Board performance.

Company performance, shareholder wealth and director and executive remuneration

The remuneration policy has been tailored to increase goal congruence between shareholders, directors and executives by the issue of options to some directors and key executives to encourage the alignment of personal and shareholder interests.

Key terms of employment contracts

• The contracts for service between the Company and its directors are on a continuing basis, the terms of which are not expected to change in the immediate future. Upon retirement key management personnel are paid employee benefit entitlements accrued to date of retirement.

• The employment contract states a three month resignation notice period. The Company may terminate an employment contract without cause by providing three months’ written notice or making payment in lieu of notice based on the individual’s annual salary component.

Names and positions held of consolidated and parent entity key management personnel in office at any time during the financial year are:

Company Key Management Personnel	Position held as at 30 June 2011 and any change during the year	Contract details	Proportion of elements of remuneration related to performance	Proportion of elements of remuneration related to performance	Proportion of elements of remuneration related to performance	Proportion of elements of remuneration not related to performance	Proportion of elements of remuneration not related to performance
			Non-Salary cash-based incentives %	Shares/ Units %	Options/ Rights %	Fixed salary/ Fees %	Total %
Clives Jones	Non Executive Chairman	No fixed term.	-	-	76	24	100
Brett Smith	Executive Managing Director	No fixed term. 3 months notice required to terminate.	-	-	43	57	100
Adrian Byass	Non Executive Director	No fixed term.	-	-	80	20	100
Jonathan Downes	Non Executive Director	No fixed term.	-	-	84	16	100

This report details the nature and amount of remuneration for each key management person of Corazon Mining Limited, and for the executives receiving the highest remuneration.

Corazon Mining Limited – Annual Report 2011

Page 13

DIRECTORS’ REPORT

REMUNERATION REPORT (AUDITED) (continued)

A. DETAILS OF THE NATURE AND AMOUNT OF COMPENSATION PAID, PAYABLE OR OTHERWISE MADE AVAILABLE TO DIRECTORS (audited)

Key Management Personnel Remuneration

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

Key Management Personnel Short Term Post Employment Share Based Total
Employee Benefits Benefits Payments
Cash and salary Superannuation Options
$ $ $ $
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2011
Clive Jones	34,102	-	109,800	143,902
Adrian Byass	26,666	-	109,800	136,466
Brett Smith	205,675	1,425	158,000	365,100
Jonathan Downes	19,200	1,728	109,800	130,728
	285,643	3,153	487,400	776,196
2010
Clive Jones	28,800	-	-	28,800
Adrian Byass	16,667	-	-	16,667
Bronwyn Barnes	51,135	4,602	-	55,737
Mark Fletcher	56,827	5,114	-	61,941
Jonathan Downes	20,800	1,872	-	22,672
	174,229	11,588	-	185,817

Corazon Mining Limited – Annual Report 2011

Page 14

DIRECTORS’ REPORT

REMUNERATION REPORT (AUDITED) (continued)

B. COMPENSATION OPTIONS GRANTED DURING THE YEAR

Options are issued to directors and executives as part of their remuneration. The options are not issued based on performance criteria, but are issued to the directors and executives of Corazon Mining Limited and its subsidiaries to increase goal congruence between executives, directors and shareholders.

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||||||||
|---|---|---|---|---|---|---|
|2011|Number|Options|Total|Options|Options|Total|
|Granted|Granted|Remuneration|Exercised|Lapsed|
|as Part of|Represented|
|Remuneration|by Options|
|Value at Grant|
|Date|
|No.|$|%|$|($)|$|
|Director|
|Clive Jones|2,000,000|109,800|76|-|-|109,800|
|Adrian Byass|2,000,000|109,800|80|-|-|109,800|
|Brett Smith|2,000,000|158,000|43|-|-|158,000|
|Jonathan Downes|2,000,000|109,800|84|-|-|109,800|
|2011|Number|Number|Grant Date|Expiry Date|Exercise Price|Fair Value at|
|Granted|Vested|Grant Date|
|No.|No.|$|$|
|Director|
|Clive Jones|2,000,000|2,000,000|04/03/2011|25/04/2014|0.145|0.055|
|Adrian Byass|2,000,000|2,000,000|04/03/2011|25/04/2014|0.145|0.055|
|Brett Smith|2,000,000|2,000,000|16/12/2010|30/11/2013|0.120|0.079|
|Jonathan Downes|2,000,000|2,000,000|04/03/2011|25/04/2014|0.145|0.055|

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Details of factors used in option valuation calculation for the options granted during the financial period are:

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Inputs into the Model Option 1 Option 2
----- End of picture text -----

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

||||
|---|---|---|
|Grant date share price|$0.115|$0.12|
|Exercise price|$0.145|$0.12|
|Expected volatility|100%|105%|
|Option life|3 years|2.96 years|
|Risk-free interest rate|5.16%|5.27%|

----- End of picture text -----

All options vest upon grant date and expire within 3 years of vesting and were granted for nil consideration.

C. SHARES ISSUED ON EXERCISE OF COMPENSATION OPTIONS

During the financial year ended 30 June 2011, no shares were issued on exercise of compensation options.

Corazon Mining Limited – Annual Report 2011

Page 15

DIRECTORS’ REPORT

REMUNERATION REPORT (AUDITED) (continued)

D. SHARE AND OPTION HOLDINGS

(i) Shareholdings

Number of Shares held by Key Management Personnel

2011	Balance 1.7.2010	Received as Compensation	Options Exercised	Net Change Other*	Balance on Resignation / Appointment	Balance 30.6.2011
Clive Jones 2,303,969		- - 150,000 - 2,453,969
Brett Smith -		- - - - -
Adrian Byass 2,767,696		- - 255,000 - 3,022,696
Jonathan Downes 575,930		- - 350,000 - 925,930
5,647,595		- - 755,000 - 6,402,595

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

2010	Balance 1.7.2009	Received as Compensation	Options Exercised	Net Change Other*	Balance on Resignation / Appointment	Balance 30.6.2010
Clive Jones	2,225,237	-	-	78,732	-	2,303,969
Adrian Byass	-	-	-	-	2,767,696	2,767,696
Bronwyn Barnes	371,414	-	-	-	(371,414)	-
Mark Fletcher	255,000	-	-	45,000	(300,000)	-
Jonathan Downes	491,541	-	-	84,389	-	575,930
Total	3,343,192	-	-	208,121	2,096,282	5,647,595

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

• (ii) Options and Rights Holdings

Number of Options Held by Key Management Personnel

2011	Balance 1.7.2010	Granted as Compensation	Options Exercised	Net Change Other	Balance	Total Vested and Exercisable
Clive Jones 1,151,985		- - 2,000,000 3,151,985 3,151,985
Brett Smith -		- - 2,000,000 2,000,000 2,000,000
Adrian Byass 1,398,849		- - 2,000,000 3,398,849 3,398,849
Jonathan Downes 245,771		- - 2,000,000 2,245,771 2,245,771
2,796,605		- - 8,000,000 10,796,605 10,796,605

Corazon Mining Limited – Annual Report 2011

Page 16

DIRECTORS’ REPORT

REMUNERATION REPORT (AUDITED) (continued)

D. SHARE AND OPTION HOLDINGS (continued)

• (ii) Options and Rights Holdings (continued)

Number of Options Held by Key Management Personnel

2010	Balance 1.7.2009	Granted as Compensation	Options Exercised	Net Change Other	Balance	Total Vested and Exercisable
Clive Jones -		- - 1,151,985 1,151,985 1,151,985
Adrian Byass -		- - 1,398,849 1,398,849 1,398,849
Bronwyn Barnes 4,000,000		- - (4,000,000) - -
Mark Fletcher 4,000,000		- - (4,000,000) - -
Jonathan Downes -		- - 245,771 245,771 245,771
8,000,000		- - (5,203,395) 2,796,605 2,796,605

Meetings of Directors

During the financial year, 7 meetings of directors were held. Attendances by each director during the year were as follows:

Directors’ Meetings	Directors’ Meetings
Number eligible to attend	Number attended
Clive Jones 7 7
Brett Smith 7 6
Adrian Byass 7 5
Jonathan Downes 7 7

Indemnifying Officers

During or since the end of the financial year the Company has given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums as follows:

The Company has paid premiums to insure each of the Directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of Director of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The amount of the premium was $2,000 and extends to cover the following Directors:-

• Clive Jones

• Brett Smith

• Jonathan Downes

• Adrian Byass

Corazon Mining Limited – Annual Report 2011

Page 17

DIRECTORS’ REPORT

Options

At the date of this report, the unissued ordinary shares of Corazon Mining Limited under option are as follows:

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Grant Date Date of Expiry Exercise Price Number under Option
----- End of picture text -----

07/07/2010	07/07/2012	$0.07	2,970,000
16/06/2011	07/07/2012	$0.20	5,000,000
16/12/2010	30/11/2013	$0.12	2,000,000
04/03/2011	25/02/2014	$0.15	8,500,000
09/03/2010	30/04/13	$0.20	19,101,870
29/04/2010	30/04/13	$0.20	28,965,840
			66,537,710

During the year ended 30 June 2011, 30,000 ordinary shares of Corazon Mining Limited were issued on the exercise of options.

No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate.

Proceedings on Behalf of Company

The Company was not a party to any such proceedings during the year.

Non-Audit Services

The Board of Directors, in accordance with advice from the audit committee, is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons:

• all non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they do not adversely affect the integrity and the objectivity of the auditor; and

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

Auditor’s Independence Declaration

The lead auditor’s independence declaration for the year ended 30 June 2011 has been received and can be found on page 19 of the Directors’ Report.

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

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Brett Smith Executive Managing Director

Dated this 23rd day of September 2011

Corazon Mining Limited – Annual Report 2011

Page 18

�

HEADING For the year ended 30 June 2011

AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF CORAZON MINING LIMITED

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2011 there have been:

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

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

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PKF Mack & Co

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N A Calder

Partner 23 September 2011

West Perth, Western Australia

Corazon Mining Limited – Annual Report 2011

Page 19

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR YEAR ENDED 30 JUNE 2011

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Note 2011 2010
$ $
----- End of picture text -----

Other revenue 2	300,069	258,179
Administrative expense	(86,316)	(45,360)
Employee benefits expense	(229,362)	(110,004)
Equitycompensationpayment	(624,650)	-
Depreciation and amortisation expense	(16,060)	(14,541)
Consultancyexpense	(73,187)	(25,409)
Compliance and regulatoryexpense	(118,169)	(84,486)
Occupancyexpense	(40,149)	(34,618)
Directors fees	(79,968)	(59,531)
Insurance expense	(10,479)	(10,120)
Capitalised exploration expenditure written off 12	-	(3,976,603)
Exploration expense	(2,332,220)	(270,769)
Loss before income tax 3	(3,310,491)	(4,373,262)
Income tax expenses 4	-	-
Loss for theyear	(3,310,491)	(4,373,262)
Other comprehensive income
Net changes in fair value of available for sale financial assets	(134,435)	(440,233)
Other comprehensive loss (net of tax)	(134,435)	(440,233)
Total comprehensive loss for theyear	(3,444,926)	(4,813,495)
Basic lossper share (centsper share) 5	4.13	7.88
Diluted lossper share (centsper share) 5	4.13	7.88

The accompanying notes form part of these financial statements.

Corazon Mining Limited – Annual Report 2011

Page 20

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2011

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Note 2011 2010
$ $
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CURRENT ASSETS
Cash and cash equivalents 6	1,513,449	578,363
Trade and other receivables 7	140,247	79,032
Financial assets 8	-	600,000
TOTAL CURRENT ASSETS	1,653,696	1,257,395
NON-CURRENT ASSETS
Financial assets 8	84,800	87,033
Intangible asset 10	1,348,197	-
Plant and equipment 11	53,356	65,372
Exploration and evaluation expenditure 12	308,164	300,000
TOTAL NON-CURRENT ASSETS	1,794,517	452,405
TOTAL ASSETS	3,448,213	1,709,800
CURRENT LIABILITIES
Trade and otherpayables 13	197,122	148,850
Provisions 14	9,090	4,050
TOTAL CURRENT LIABILITIES	206,212	152,900
NON-CURRENT LIABILITIES
Deferred tax liabilities 4	2,340	59,955
TOTAL NON-CURRENT LIABILITIES	2,340	59,955
TOTAL LIABILITIES	208,552	212,855
NET ASSETS	3,239,661	1,496,945
EQUITY
Issued capital 15	16,851,806	12,817,304
Reserves 16	1,398,938	380,233
Accumulated losses	(15,011,083)	(11,700,592)
TOTAL EQUITY	3,239,661	1,496,945

The accompanying notes form part of these financial statements.

Corazon Mining Limited – Annual Report 2011

Page 21

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED 30 JUNE 2011

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Issued Option Fair Value Share Based Contingent Accumulated Total
Capital Reserve Reserve Payments Reserves Losses
Reserve
$ $ $ $ $ $ $
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	Issued Capital	Option Reserve	Fair Value Reserve	Share Based Payments Reserve	Contingent Reserves	Accumulated Losses	Total
	$	$	$	$	$	$	$
Balance at 1 July 2009	12,825,841	-	580,127	2,109,111	-	(9,424,623)	6,090,456
Loss for theyear	-	-	-	-	-	(4,373,262)	(4,373,262)
Other comprehensive income
Available for sale asset movement	-	-	(440,233)	-	-	-	(440,233)
Total other comprehensive income	-	-	(440,233)	-		(4,373,262)	(4,813,495)
Transactions with owners, recorded directly in equity
Prior period adjustment to retained earnings	-	-	-	-	-	(11,818)	(11,818)
Transaction costs on share issue	(8,537)	-	-	-	-	-	(8,537)
Options issued	-	240,339	-	-	-	-	240,339
Options lapsed	-	-	-	(2,109,111)	-	2,109,111	-
Balance at 30 June 2010	12,817,304	240,339	139,894	-	**- **	(11,700,592)	1,496,945
Loss for theyear	-	-	-	-	-	(3,310,491)	(3,310,491)
Other comprehensive income
Available for sale asset movement	-	-	(134,435)	-	-	-	(134,435)
Total other comprehensive income	-	-	(134,435)	-	-	(3,310,491)	(3,444,926)
Transactions with owners, recorded directly in equity
Issue of share capital	4,256,700	-	-	-	-	-	4,256,700
Transaction costs on share issue	(223,458)	-	-	-	-	-	(223,458)
Share option exercised	1,260	-	-	(1,260)	-	-	-
Equitycompensation beneft	-	-	-	850,650	-	-	850,650
Contingent consideration	-	-	-	-	303,750	-	303,750
Balance at 30 JUNE 2011	16,851,806	240,339	5,459	849,390	**303,750 **	(15,011,083)	3,239,661

The accompanying notes form part of these financial statements.

Corazon Mining Limited – Annual Report 2011

Page 22

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CASH FLOWS FOR YEAR ENDED 30 JUNE 2011

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Note 2011 2010
$ $
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CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees		(661,453)	(347,184)
Explorationgrant		59,419	-
Other income		67,983	115,000
Interest received		30,881	24,823
Payments for exploration and evaluation		(2,369,412)	(684,427)
Net cash used in operatingactivities	20	(2,872,582)	(891,788)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of shares		586,917	-
Purchase ofplant and equipment		(4,044)	(36,183)
Purchase of investments		(350,947)	(10,000)
Net cashgenerated from/(used in) investingactivities		231,926	(46,183)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares		3,799,200	240,339
Payments for costs of issue of shares		(223,458)	(8,536)
Net cashgenerated from financingactivities		3,575,742	231,803
Net increase/(decrease) in cash and cash equivalents held		935,086	(706,168)
Cash and cash equivalents at beginningof financialyear	6	578,363	1,284,531
Cash and cash equivalents at end of financialyear	6	1,513,449	578,363

Corazon Mining Limited – Annual Report 2011

Page 23

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

The financial report of Corazon Mining Limited for the year ended 30 June 2011 was authorised for issue in accordance with a resolution of Directors on 23 September 2011.

This financial report includes the consolidated financial statements and notes of Corazon Mining Limited and controlled entities (‘Consolidated Entity’ or ‘Group’).

Corazon Mining Limited is a listed public company, trading on the Australian Securities Exchange, limited by shares, incorporated and domiciled in Australia.

The financial report of and controlled entities, and as an individual parent entity comply with Australian Accounting Standards and International Financial Reporting Standards (IFRS).

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

Basis of Preparation

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

Statement of Compliance

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standard Board (AASB) and the Corporations Act 2001 . The consolidated financial report of the Group and the financial report of the Company comply with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).

Basis of Measurement

The financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

Going Concern basis

The financial statements have been prepared on the going concern basis. As at 30 June 2011 the Consolidated Entity had net assets of $3,239,661 (2010: $1,496,945) and $1,513,449 (2010: $578,363) in cash and cash equivalents. The Group recorded a loss of $3,310,491 and had a net working capital surplus of $1,447,484 (2010: $1,104,495).

The Group will require further funding during the 2012 financial year in order to meet day to day obligations as they fall due and progress its exploration projects.

In the event that the Group is not successful in raising funds from the issue of new equity there exists uncertainty as to whether the Group will be able to continue as a going concern and realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

The Directors anticipate that future financing for exploration and mining activities will be secured in a reasonable timeframe and accordingly the Directors consider it appropriate to prepare the financial statements on a going concern basis.

Corazon Mining Limited – Annual Report 2011

Page 24

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

a. Significant accounting estimates, judgments and assumptions

The preparation of financial statements requires management to make judgments and estimates relating to the carrying amounts of certain assets and liabilities. Actual results may differ from the estimates made. Estimates and assumptions are reviewed on an ongoing basis.

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 accounting period are:

(i) Share based payment transactions

The Consolidated Entity measures the cost of equity settled transactions by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of share options is determined by an external valuer using an appropriate valuation model.

• (ii) Impairment of exploration and evaluation assets and investments in and loans to subsidiaries

The ultimate recoupment of the value of exploration and evaluation assets, the Company’s investment in subsidiaries, and loans to subsidiaries is dependent on the successful development and commercial exploitation, or alternatively, sale, of the exploration and evaluation assets.

Impairment tests are carried out on a regular basis to identify whether the asset carrying values exceed their recoverable amounts. There is significant estimation and judgement in determining the inputs and assumptions used in determining the recoverable amounts.

The key areas of judgement and estimation include:

• Recent exploration and evaluation results and resource estimates;

• Environmental issues that may impact on the underlying tenements;

• Fundamental economic factors that have an impact on the operations and carrying values of assets and liabilities.

(iii) Income tax expenses

Judgement is required in assessing whether deferred tax assets and liabilities are recognised on the statement of financial position. Deferred tax assets, including those arising from temporary differences, are recognised only when it is considered more likely than not that they will be recovered, which is dependent on the generation of future assessable income of a nature and of an amount sufficient to enable the benefits to be utilised.

• (iv) Classification of investments

The group has decided to classify investments in listed securities as available for sale. These securities are accounted for at fair value. Any increments or decrements in their value at year end are charged or credited to the revaluation reserves.

(v) Intangible assets

Intangible assets represent the cost of acquisition of an option to acquire Lynn Lake Nickel project. As the ownership in Lynn Lake is an option to acquire, exploration and evaluation expenditure has been expensed in the income statement until such time that the Company converts its option to an ownership interest.

Corazon Mining Limited – Annual Report 2011

Page 25

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

a. Significant accounting estimates, judgments and assumptions (continued)

Exploration and Evaluation Assets

Exploration and evaluation costs, including the costs of acquiring licences, are capitalised as exploration and evaluation assets on an area of interest basis. Costs incurred before the Consolidated Entity has obtained the legal rights to explore an area are recognised in the statement of comprehensive income.

Exploration and evaluation assets are only recognised if the rights of interest are current and either:

• The expenditures are expected to be recouped through successful development and exploitation of the area of interest; or

• Activities in the area of interest have not, at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing.

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.

An impairment exists when the carrying amount of capitalised exploration and evaluation expenditure relating to an area of interest exceeds its recoverable amount. The asset is then written down to its recoverable amount. Any impairment losses are recognised in the statement of comprehensive income.

Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from exploration and evaluation expenditure to mining property and development assets within property, plant and equipment and depreciated over the life of the mine.

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

b. Principles of Consolidation

The consolidated financial statements incorporate the financial statements of Corazon Mining Limited and entities controlled by Corazon Mining Limited(its subsidiaries). A list of subsidiaries is contained in Note 9. All controlled entities have a 30 June financial year-end. Control is achieved where Corazon Mining Limited has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of the subsidiaries acquired or disposed of during the year are included in consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other member of the Corazon Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred by the Consolidated Entity, liabilities incurred by the Group to the former owners of the acquiree and the equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

Corazon Mining Limited – Annual Report 2011

Page 26

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

b. Principles of Consolidation (continued)

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that:

• Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measure in accordance with AASB 112 ‘Income Taxes’ and AASB 119 ‘Employee Benefits’ respectively;

• Liabilities or equity instruments related to share-based payment arrangement of the acquiree or share-based payments of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with AASB 2 ‘Share-based Payment’ at the acquisition date; and

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any noncontrolling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Where the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified.

Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasure at subsequent reporting dates in accordance with AASB 139, or AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets’, as appropriate, with the corresponding gain or loss being recognised in profit or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

Corazon Mining Limited – Annual Report 2011

Page 27

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

c. Income Tax

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

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

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

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

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

Tax Consolidation

Corazon Mining Limited and its wholly-owned Australian subsidiaries have not formed an income tax consolidated group under tax consolidation legislation.

d. Property, Plant and Equipment

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

Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.

Plant and equipment

Plant and equipment are measured on the cost basis.

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

The cost of fixed assets constructed within the Consolidated Group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.

Corazon Mining Limited – Annual Report 2011

Page 28

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

e. Depreciation

The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated on a diminishing value basis over the asset’s useful life to the Consolidated Entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

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

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Class of Fixed Asset Depreciation Rate
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Plant and equipment	30-40%
Paintings	1.5%
Office furniture and equipment	18%

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

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

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings

f. Financial Instruments

The Consolidated Entity classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.

• (i) Financial assets at fair value through profit or loss

This category has two sub-categories; financial assets held for trading, and those designated at fair value through profit or loss on initial recognition. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. The policy of management is to designate a financial asset if there exists the possibility it will be sold in the short term and the asset is subject to frequent changes in fair value. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months of the reporting date.

• (ii) Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Consolidated Entity provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position.

Corazon Mining Limited – Annual Report 2011

Page 29

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

f. Financial Instruments (continued)

(iii) Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date.

Purchases and sales of investments are recognised on trade-date being the date on which the Consolidated Entity commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership.

Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method. Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in the statement of comprehensive income in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of non monetary securities classified as available-for-sale investments revaluation reserve are recognised in equity in the “available for sale revaluation reserve”. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the statement of comprehensive income as gains and losses from investment securities.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Consolidated Entity establishes fair value by using valuation techniques. These include reference to the fair values of recent arm’s length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis, and option pricing methods refined to reflect the issuer’s specific circumstances.

The Consolidated Entity assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss, is removed from equity and recognised in the statement of comprehensive income. Impairment losses recognised in the statement of comprehensive income on equity instruments are not reversed through the statement of comprehensive income.

g. Fair value

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-forsale securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Consolidated Entity is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. The Consolidated Entity uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments.

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Consolidated Entity for similar financial instruments.

Corazon Mining Limited – Annual Report 2011

Page 30

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

h. Impairment

• (i) Financial Assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised either in the statement of comprehensive income or revaluation reserves in the period in which the impairment arises.

• (ii) Exploration and Evaluation Assets

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount at the reporting date.

Exploration and evaluation assets are tested for impairment in respect of cash generating units, which are no larger than the area of interest to which the assets relate.

• (iii) Non-financial Assets other than Exploration and Evaluation Assets

The carrying amounts of the Consolidated Entity’s non-financial assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated at each reporting date.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 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.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the statement of comprehensive income. Impairment losses recognised in respect of cashgenerating units are allocated first to reduce the carrying amount of any goodwill allocated to the units, then to reduce the carrying amount of the other assets in the unit on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exits. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss has been recognised.

Corazon Mining Limited – Annual Report 2011

Page 31

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i. Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the statement of comprehensive income, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the statement of comprehensive income.

Group companies

The financial results and position of foreign operations whose functional currency is different from the Consolidated Entity’s presentation currency are translated as follows:

• assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;

• income and expenses are translated at average exchange rates for the period; and

• retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred directly to the Consolidated Entity’s foreign currency translation reserve in the statement of financial position. These differences are recognised in the statement of comprehensive income in the period in which the operation is disposed.

Corazon Mining Limited – Annual Report 2011

Page 32

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

j. Employee Benefits

• a. Wages, salaries and annual leave

Liabilities for wages, salaries and annual leave expected to be settled within one year of the reporting date are recognised in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

• b. Employee benefits payable later than one year

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.

• c. Superannuation

Contributions are made by the Consolidated Entity to superannuation funds as stipulated by statutory requirements and are charged as expenses when incurred.

• d. Employee benefit on costs

Employee benefit on costs, including payroll tax, are recognised and included in employee benefits liabilities and costs when the employee benefits to which they relate are recognised as liabilities.

• e. Options

The fair value of options granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date.

The fair value at grant date is independently determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

Equity-settled compensation

The Group operates equity-settled share-based payment employee share and option schemes. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using a Black–Scholes pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

k. Provisions

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

l. Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of 12 months or less, and bank overdrafts.

m. Revenue and Other Income

Interest revenue is recognised as it accrues. Dividend revenue is recognised when the right to receive a dividend has been established.

Corazon Mining Limited – Annual Report 2011

Page 33

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

n. 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. 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 statement of financial position are shown inclusive of GST.

Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

o. Receivables

Collectibility of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised when some doubt as to collection exists.

p. EPS

Basic earnings per share

Basic earnings per share is determined by dividing the net profit after income tax attributable to members of the Consolidated Entity, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

q. Contributed Equity

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration.

r. Investments

Interests in listed and unlisted securities are initially brought to account at cost.

Controlled entities are accounted for in the consolidated financial statements as set out in note 1(a).

Other securities are included at fair value at reporting date. Unrealised gains/losses on securities held for short term investment are accounted for as set out in Note 1 (f) (i) financial assets at fair value through profit or loss. Unrealised gains/losses on securities held for long term investment are accounted for as set out in Note 1 (f) (iii) available for sale financial assets.

s. Acquisition of Assets

The purchase method of accounting is used for all acquisitions of assets regardless of whether equity instruments or other assets are acquired. Cost is determined as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition.

t. Comparative Figures

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

Corazon Mining Limited – Annual Report 2011

Page 34

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

u. New standards and interpretations not yet adopted

The AASB has issued the following new and amended accounting standards and interpretations that have mandatory application dates for future reporting periods. The Group has decided against early adoption of these standards, and has not yet determined the potential impact on the financial statements from the adoption of these standards and interpretations.

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AASB No. Title Issue Date Operative Date
(Annual reporting
periods beginning
on or after)
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AASB No.	Title	Issue Date	Operative Date (Annual reporting periods beginning on or after)
9	Financial Instruments	Dec 2010	1 Jan 2013
10	Consolidation	Aug2011	1 Jan 2013
11	Joint Arrangements	Aug2011	1 Jan 2013
12	Disclosure of Interests in Other Entities	Aug2011	1 Jan 2013
13	Fair Value Measurement	Sep2011	1 Jan 2013
1053	Application of Tiers of Australian AccountingStandards	Jun 2010	1 Jul 2013
2010 – 2	Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements	Jun 2010	1 Jul 2013
2010 – 6	Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets [AASB 1 & AASB 7]	Nov 2010	1 Jul 2011
2010 – 7	Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2,5,10,12,19 & 127]	Dec 2010	1 Jan 2013
2010 – 8	Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets [AASB 112]	Dec 2010	1 Jan 2012
2010 – 9	Amendments to Australian Accounting Standards – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters [AASB 1]	Dec 2010	1 Jul 2011
2010 – 10	Further Amendments to Australian Accounting Standards – Removal of Fixed Dates for First-time Adopters [AASB 2009-11 & AASB 2010-7]	Dec 2010	1 Jan 2013
2011 – 1	Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project [AASB 1, AASB 5, AASB 101, AASB 107, AASB 108, AASB 121, AASB 128, AASB 132 & AASB 134 and Interpretations 2, 112 & 113]	May 2011	1 Jul 2011
2011 – 2	Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project – Reduced Disclosure Requirements [AASB 101 & AASB 1054]	May 2011	1 Jul 2013
2011 – 4	Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements [AASB 124]	Jul 2011	1 Jul 2013

Corazon Mining Limited – Annual Report 2011

Page 35

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 2: OTHER REVENUE	2011 $	2010 $
Operatingactivities
Profit on sale of exploration assets	- 231,248
Profit on sale of shares	186,735 -
Interest received	43,180 26,931
Grant	59,419 -
Other	10,735 -
Total Other Revenue	300,069 258,179

NOTE 3: LOSS FOR THE YEAR

NOTE 3: LOSS FOR THE YEAR
Losses for theyear are arrived at after chargingthe following.
Write-off of capitalised exploration expenditure	-	3,976,603
Significant Revenue and Expenses
The following significant revenue and expense items are relevant in explaining the financial performance:
– Employee benefit expense	229,362	110,004
– Equitycompensationpayment	624,650	-

Corazon Mining Limited – Annual Report 2011

Page 36

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 4: INCOME TAX EXPENSES	2011 $	2010 $
a. The components of 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 payable on loss from ordinary activities before income tax at 30% (2010: 30%)	(993,147)	(1,312,005)

Add:
Tax effect of:
–	Accrued income	-	-
–	Other non-allowable items	1,988	966
–	Share basedpayments	187,395	-
–	Provisions and accruals	4,919	-
–	Impairment of investments	-	206,103
–	Exploration and evaluation expenditure	-	843,904
–	Overseas exploration expenditure	697,369	-
–	Revenue losses not recognised	134,100	291,950
		1,025,771	1,342,923
Less:
Tax effect of:
–	Property, plant and equipment	-	10,945
–	Provisions and accruals	-	3,832
–	Exploration and evaluation expenditure	2,449	-
–	Capital raisingcosts	26,486	15,509
–	Accrued income	3,689	632
		32,624	30,918
Income tax	expense/(benefit)	-	-
The applicable average weighted tax rates are as follows:		0%	0%

Corazon Mining Limited – Annual Report 2011

Page 37

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

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2011 2010
$ $
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NOTE 4: INCOME TAX EXPENSES (continued)

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||||
|---|---|---|
|c.|The following deferred tax balances have been recognised:|
|Deferred tax liabilities at 30% :|
|Asset revaluation reserve|2,340|59,955|
|The following deferred tax balances have not been recognised:|
|Deferred Tax Assets at 30% :|
|Carry forward revenue losses|2,657,043|2,522,943|
|Impairment of investments|1,297,631|1,297,631|
|Capital raising costs|64,413|23,862|
|Provisions and accruals|6,623|5,370|
|4,025,710|3,849,806|

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

• (a) The Company derives future assessable inco ~~m~~ e of a nature and an amount sufficient to enable the benefits to be utilised; and

• (b) The Company continues to comply with the conditions for deductibility conditions imposed by the law; and

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|||||
|---|---|---|---|
|(c)|No change in income tax legislation adversely affects the Company in utilising the|
|benefits.|
|Deferred tax liabilities at 30% :|
|Exploration and evaluation expenditure|92,449|90,000|
|Property,|plant and equipment|14,061|17,727|
|Accrued income|4,679|990|
|111,189|108,717|

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The above Deferred Tax Liabilities have not been recognised as they have given rise to the carry forward revenue losses for which the Deferred Tax Assets have not been recognised.

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|||||
|---|---|---|---|
|2011|2010|
|$|$|
|NOTE 5: LOSS PER SHARE|
|a.|Loss used in the calculation of basic and diluted EPS|(3,310,491)|(4,373,262)|
|b.|Weighted average number of ordinary shares outstanding during the year used in|
|calculating basic EPS|80,085,075|55,485,415|
|c.|Weighted average number of ordinary shares outstanding during the year used in|
|calculating dilutive EPS|80,085,075|55,485,415|

----- End of picture text -----

Corazon Mining Limited – Annual Report 2011

Page 38

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 6: CASH AND CASH EQUIVALENTS	2011 $	2010 $
Cash at bank and in hand	478,449	458,363
Short-term bank deposits	1,035,000	120,000
	1,513,449	578,363
Reconciliation of cash Cash at the end of the financial year as shown in the cash flow statement is reconciled to items in the statement of financialposition as follows:
Cash and cash equivalents	1,513,449	578,363
NOTE 7: TRADE AND OTHER RECEIVABLES
CURRENT
Other receivables	140,247	79,032
	140,247	79,032
NOTE 8: FINANCIAL ASSETS
CURRENT
Available-for-sale financial assets	-	600,000
	-	600,000
NON-CURRENT
Available-for-sale financial assets	84,800	87,033
	84,800	87,033

Available-for-sale financial assets comprise of investments in the ordinary issued capital of various entities. There are no fixed returns or fixed maturity dates attached to these investments.

The Consolidated Entity’s exposure to credit, market and liquidity risk related to financial assets is disclosed in Note 23.

NOTE 9: CONTROLLED ENTITIES

	Country of Incorporation	Percentage Owned(%)*	Percentage Owned(%)*
		2011	2010
Subsidiaries of Corazon MiningLtd:
Graynic Metals (Guatemala) PtyLtd	Australia	100	100
Resource Investment GroupPtyLtd	Australia	100	100
Manitoba Nickel PtyLtd	Australia	100	-
Manitoba Nickel Inc	Canada	100	-

• Percentage of voting power is in proportion to ownership

Corazon Mining Limited – Annual Report 2011

Page 39

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 10: INTANGIBLE ASSET

In July 2010, the Consolidated Entity entered into an option agreement to acquire a 100% interest in the Lynn Lake nickel copper sulphide project (Project) in Manitoba Canada, held by Manitoba Nickel Pty Ltd (Manitoba).

Details of the purchase consideration are as follows:

	$
Consideration transferred
Cashpaid	360,947
Issue of 5,500,000 fully paid shares in Corazon	457,500
Issue of 3,000,000 class A options in Corazon	126,000
Issue of 5,000,000 class B options in Corazon	100,000
*Contingent consideration	303,750
	1,348,197

*Contingent consideration relates to issue of further 4,500,000 shares in Corazon at the completion of title to the Lynn Lake Project in accordance with the terms of the Lynn Lake option agreement.

The only asset of the acquired subsidiary is an option to acquire an exploration tenement. Therefore, the acquisition is in substance an acquisition of an option to a project. Accordingly, in the consolidated financial statements, such transaction is accounted for in accordance with AASB138, Intangible assets .

The option has been impairment tested on the basis that there is no indication at this stage that the Consolidated Entity would not continue its exploration activities in the Lynn Lake project.

Corazon Mining Limited – Annual Report 2011

Page 40

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

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

||||
|---|---|---|
|2011|2010|
|$|$|
|NOTE 11: PLANT AND EQUIPMENT|
|Plant and equipment:|
|At cost|125,594|121,551|
|Accumulated depreciation|(73,307)|(57,482)|
|52,287|64,069|
|Office furniture and equipment|
|At cost|2,713|2,713|
|Accumulated depreciation|(1,644)|(1,410)|
|1,069|1,303|
|Total Plant and Equipment|53,356|65,372|

----- End of picture text -----

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

Consolidated Group Plant and Office Furniture Total
Equipment and Equipment
$ $ $
----- End of picture text -----

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

|||||
|---|---|---|---|
|Balance at 1 July 2009|42,217|1,513|43,730|
|Additions|36,183|-|36,183|
|Depreciation expense|(14,331)|(210)|(14,541)|
|Balance at 30 June 2010|64,069|1,303|65,372|
|Additions|4,044|-|4,044|
|Depreciation expense|(15,826)|(234)|(16,060)|
|Balance at 30 June 2011|52,287|1,069|53,356|

----- End of picture text -----

Corazon Mining Limited – Annual Report 2011

Page 41

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 12: EXPLORATION AND EVALUATION EXPENDITURE	2011 $	2010 $
NON-CURRENT
Exploration expenditure capitalised
– exploration and evaluationphases	308,164	10,318,654
Accumulated impairment losses	-	(10,018,654)
Total exploration expenditure	308,164	300,000
Movement in carryingvalue:
Brought forward	300,000	3,800,023
Exploration expenditure capitalised duringtheyear	8,164	476,580
Impairment of exploration expenditure	-	(3,976,603)
At reportingdate	308,164	300,000

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.

NOTE 13: TRADE AND OTHER PAYABLES	2011 $	2011 $	2010 $
CURRENT
Tradepayables	182,217		129,977
Sundry payables and accrued expenses	14,905		18,873
	197,122		148,850
NOTE 14: PROVISIONS
	2011 $		2010 $
Current	9,090		4,050
Non-current	-		-
	9,090		4,050
		Employee benefts $
Openingbalance at 1 July2010		4,050
Additionalprovisions		5,040
Balance at 30 June 2011		9,090

Corazon Mining Limited – Annual Report 2011

Page 42

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 15: ISSUED CAPITAL	2011 $	2010 $
101,891,415 (2010: 55,485,415) fully paid ordinaryshares	17,486,162	12,825,841
Less: Capital raisingcosts	(634,356)	(8,537)
	16,851,806	12,817,304
	2011 No.	2010 No.
a. Ordinary shares
At the beginningof reporting period	55,485,415	55,485,415
Shares issued duringtheyear
– Placement	41,876,000	-
– Consideration for acquisition	4,500,000	-
– Conversion of options	30,000	-
At reportingdate	101,891,415	55,485,415

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.

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

b. Options

For information relating to the Corazon Mining Limited employee option plan, including details of options issued, exercised and lapsed during the financial year and the options outstanding at year-end, refer to Note 19 Share-based Payments.

c. Capital Management

The Directors’ primary objective is to maintain a capital structure that ensures the lowest cost of capital to the Consolidated Entity. At reporting date the Group has no external borrowings. The Directors are confident that the Company will raise capital through the issue of additional shares when and as required. The Group is not subject to any externally imposed capital requirements.

Corazon Mining Limited – Annual Report 2011

Page 43

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 16: RESERVES

	2011	2011			2010	2010
	Option reserve	Fair value reserve		Contingent reserve	Option reserve	Fair value reserve
Balance 1 July	240,339 139,894		- -			580,127
Movement duringtheyear	849,390 (134,435)		303,750 240,339			(440,233)
Balance 30 June	1,089,729 5,459		303,750 240,339			139,894

a. Fair Value Reserve

The asset revaluation reserve records revaluations of non-current assets. Under certain circumstances dividends can be declared from this reserve.

b. Option Reserve

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

c. Contingent Reserves

This reserve is used to record the contingent consideration that relates to the issue of a further 4,500,000 shares in Corazon on the completion of the acquisition of title to the Lynn Lake Project in accordance with the terms of the Lynn Lake option agreement.

NOTE 17: CAPITAL COMMITMENTS	2011 $	2010 $
Payable:
– Not longer than oneyear	700,000	150,000
– Longer than oneyear and not longer than 5year	2,000,000	-

Capital Expenditure Commitments

In order to maintain current rights of tenure to exploration tenements the Consolidated Entity is required to perform minimum exploration work to meet the minimum expenditure requirements specified by various State governments. These obligations can be reduced by selective relinquishment of exploration tenure or renegotiation.

On 13 July 2010, the Consolidated Entity acquired a subsidiary entity Manitoba Nickel Pty Ltd which holds an option to acquire a 100% interest in the Lynn Lake project for approximately $3 million in expenditure over 3 years, followed by a $2 million vendor payment.

As at 30 June 2011, the Consolidated Entity has spent approximately $2.3 million on exploration and evaluation at Lynn Lake Project. Following the completion of the expenditure requirement, the Company has the discretion to exercise the option to acquire Lynn Lake project by paying $2 million before 21 October 2012. The Directors intend on exercising the option before the option expires.

Corazon Mining Limited – Annual Report 2011

Page 44

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 18: OPERATING SEGMENTS

Identification of reportable segments

The Consolidated Entity has identified its operating segments based on the internal reports that are reviewed and used by the chief operating decision maker to make decisions about resources to be allocated to the segments and assess their performance.

Operating segments are identified by Management based on the mineral resource and exploration activities in Australia and Canada. Discrete financial information about each project is reported to the chief operating decision maker on a regular basis.

The reportable segments are based on aggregated operating segments determined by the similarity of the economic characteristics, the nature of the activities and the regulatory environment in which those segments operate.

The Consolidated Entity has two reportable segments based on the geographical areas of the mineral resource and exploration activities in Australia and Africa. Unallocated results, assets and liabilities represent corporate amounts that are not core to the reportable segments.

	Mining & Exploration	Unallocated	Total
	$	$	$
30 June 2011
Revenue	59,419	240,650	300,069
Total segment revenue	59,419	240,650	300,069
Segment net operating loss after tax	(2,337,647)	(972,844)	(3,310,491)
Interest revenue	-	43,180	43,180
Depreciation	5,427	10,633	16,060
Segment assets	1,687,117	1,761,096	3,448,213
Segment liabilities	16,633	191,919	208,552
	Mining & Exploration	Unallocated	Total
	$	$	$
30 June 2010
Revenue	-	258,179	258,179
Total segment revenue	-	258,179	258,179
Segment net operating loss after tax	(3,976,603)	(396,659)	(4,373,262)
Interest revenue	-	26,931	26,931
Depreciation	-	14,541	14,541
Segment assets	300,000	1,409,800	1,709,800
Segment liabilities	-	212,855	212,855

Corazon Mining Limited – Annual Report 2011

Page 45

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 19: SHARE BASED PAYMENTS

Options are issued to key management personnel as part of their compensation under the Company’s Employee Share Option Plan. The options issued may be subject to performance criteria and are issued to key management personnel of Corazon Mining Limited to increase goal congruence between key management personnel and shareholders.

Number and weighted average exercise prices of share options

The following table illustrates the number and weighted average exercise prices (WAEP) of and movements in share options issued under Share Based Payment Scheme during the year:

	2011	2011	2010	2010
	Number of Options	Weighted Average Exercise Price $	Number of Options	Weighted Average Exercise Price $
Outstandingat the beginningof theyear	- - 9,000,000 0.41
Granted	10,500,000 0.14 - -
Exercised	- - - -
Expired	- - (9,000,000) 0.41
Outstandingatyear-end	10,500,000 0.14 - -
Exercisable atyear-end	10,500,000 0.14 - -

No compensation options were exercised or forfeited during the year ended 30 June 2011.

Included under employee benefits expense in the statement of comprehensive income is $624,650 (2010: $Nil), and relates, in full, to equity-settled share-based payment transactions.

The options were valued using a Black and Scholes option pricing model.

NOTE 20: CASH FLOW INFORMATION	2011 $	2010 $
Reconciliation of Cash Flow from Operations with Net Loss
Loss after income tax	(3,310,491)	(4,373,262)
Non-cash flows inprofit
Depreciation	16,060	14,541
Other income	-	(59,000)
Equitycompensationpayment	624,650
Profit on disposal of investment	(186,735)	-
Write off exploration	-	3,976,603
Changes in assets and liabilities,net of the effects ofpurchase and disposal of subsidiaries
(Increase)/decrease in receivables andprepayments	(61,215)	(60,073)
(Increase)/decrease in exploration and evaluation expenditure	(8,164)	(476,663)
Increase/(decrease) in trade and otherpayables	48,273	96,689
Increase/(decrease) inprovisions	5,040	(10,623)
Cashflow from operations	(2,872,582)	(891,788)

Corazon Mining Limited – Annual Report 2011

Page 46

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 21: KEY MANAGEMENT PERSONNEL COMPENSATION

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

Clive Jones Non Executive Chairman Brett Smith Executive Managing Director Adrian Byass Non Executive Director Jonathan Downes Non Executive Director

Key management personnel remuneration has been included in the Remuneration Report section of the Directors’ Report.

a. Option holdings of key management personnel

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2011 Balance Granted as Options Net Change Balance Total
1.7.2010 Compensation Exercised Other Vested and
Exercisable
Clive Jones 1,151,985 - - 2,000,000 3,151,985 3,151,985
Brett Smith - - - 2,000,000 2,000,000 2,000,000
Adrian Byass 1,398,849 - - 2,000,000 3,398,849 3,398,849
Jonathan Downes 245,771 - - 2,000,000 2,245,771 2,245,771
2,796,605 - - 8,000,000 10,796,605 10,796,605
2010 Balance Granted as Options Net Change Balance Total
1.7.2009 Compensation Exercised Other Vested and
Exercisable
Clive Jones - - - 1,151,985 1,151,985 1,151,985
Adrian Byass - - - 1,398,849 1,398,849 1,398,849
Bronwyn Barnes 4,000,000 - - (4,000,000) - -
Mark Fletcher 4,000,000 - - (4,000,000) - -
Jonathan Downes - - - 245,771 245,771 245,771
8,000,000 - - (5,203,395) 2,796,605 2,796,605
Shareholdings of key management personnel
2011 Balance Received as Options Net Change Balance on Balance
1.7.2010 Compensation Exercised Other Resignation / 30.6.2011
Appointment
Clive Jones 2,303,969 - - 150,000 - 2,453,969
Brett Smith - - - - - -
Adrian Byass 2,767,696 - - 255,000 - 3,022,696
Jonathan Downes 575,930 - - 350,000 - 925,930
5,647,595 - - 755,000 - 6,402,595
----- End of picture text -----*

b. Shareholdings of key management personnel

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

Corazon Mining Limited – Annual Report 2011

Page 47

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

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NOTE 21: KEY MANAGEMENT PERSONNEL COMPENSATION (continued)

b. Shareholdings of Key Management Personnel (continued)

0	Balance 1.7.2009	Received as Compensation	Options Exercised	Net Change Other*	Balance on Resignation / Appointment	Balance 30.6.2010
Jones	2,225,237	-	-	78,732	-	2,303,969
n Byass	-	-	-	-	2,767,696	2,767,696
wyn Barnes	371,414	-	-	-	(371,414)	-
Flth	255,000	-	-	45,000	(300,000)	-
ecer
than Downes	491,541	-	-	84,389	-	575,930
	3,343,192	-	-	208,121	2,096,282	5,647,595

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

c. Key management personnel compensation

management personnel compensation
	2011 $	2010 $
keymanagementpersonnel compensation comprised:
t term employment benefits	288,796	185,817
e basedpayments	487,400	-
	776,196	185,817

d. Individual directors’ and executives’ compensation disclosure

Information regarding individual directors’ and executives’ compensation and some equity instruments disclosures as required by Corporation Regulation 2M.3.03 is provided in the remuneration report section of the Directors’ Report.

Apart from the details disclosed in this note, no director has entered into a material contract with the Group since the end of the previous financial year and there were no material contracts involving directors’ interest existing at the year end.

e. Wholly-owned group transactions

Loans to key management personnel

There were no loans to key management personnel at the end of the year.

f. Other

Transactions between other related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. These transactions include payments for rent and shared occupancy and staff costs. At 30 June 2011 the Company owed $77,063.95 to Ironbark Zinc Ltd for rent and shared occupancy costs.

Corazon Mining Limited – Annual Report 2011

Page 48

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 22: AUDITORS’ REMUNERATION	2011 $	2010 $
PKF Mack & Co for:
Remuneration of the auditor of theparent entityfor:
– auditingor reviewingthe financial report	63,000	28,050
Ord Partners for:
Remuneration of the auditor of theparent entityfor:
– auditingor reviewingthe financial report	-	17,950
Total remuneration for audit services	63,000	46,000

Corazon Mining Limited – Annual Report 2011

Page 49

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 23: FINANCIAL RISK MANAGEMENT

Financial Risk Management Policies

The Consolidated Entity’s financial instruments consist mainly of deposits with banks, local money market instruments, equity investments, accounts receivable and payable and loans to and from subsidiaries.

i. Capital Management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Consolidated Entity defines as net operating income divided by total shareholders’ equity.

ii. Treasury Risk Management

The Board of Directors meet on a regular basis to analyse financial risk exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts.

The Board’s overall risk management strategy seeks to assist the Consolidated Group in meeting its financial targets, whilst minimising potential adverse effects on financial performance.

Risk management policies are approved and reviewed by the Board on a regular basis. These include the use of credit risk policies and future cash flow requirements.

iii. Financial Risk Exposures and Management

The main risks the Consolidated Entity is exposed to through its financial instruments are liquidity risk, market risk, credit risk and price risk.

(a) Liquidity risk

Liquidity risk is the risk that the Consolidated Entity will not be able to meet its financial obligations as they fall due. The Consolidated Entity’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Consolidated Entity currently does not have major funding in place. However, the Group continuously monitors forecasts and actual cash flows and the maturity profiles of financial assets and liabilities to manage its liquidity risk. Surplus funds are generally only invested in short term bank deposits.

Typically the Consolidated Entity ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 90 days; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The Directors are confident that the Company will raise capital through the issue of additional shares when and as required.

The decision on how the Consolidated Entity will raise future capital will depend on market conditions existing at that time.

(b) Market Risk

Market risk is the risk that changes in market prices, such as interest rates and equity prices will affect the Consolidated Entity’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Corazon Mining Limited – Annual Report 2011

Page 50

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 23: FINANCIAL RISK MANAGEMENT (continued)

iii. Financial Risk Exposures and Management (continued)

(c) Credit risk

Credit risk arises from the financial assets of the Consolidated Entity, which comprise cash and cash equivalents, other receivables and available-for-sale financial assets. Receivable balances are monitored on an ongoing basis with the result that the Consolidated Entity’s exposure to bad debts is not significant. The Consolidated Entity has adopted the policy of only dealing with credit worthy counterparties.

The Group’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments.

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

• (d) Equity Price risk

The Group is exposed to equity securities price risk from investments held that are classified on the statement of financial position as available for sale. Material investments are managed on an individual basis and all buy and sell decisions are approved by the Board.

The Consolidated Entity holds the following financial instruments:

	2011 $	2010 $
Financial Assets:
Cash and cash equivalents	1,513,449	578,363
Receivables	140,247	79,032
Investments	84,800	687,033
Total Financial Assets	1,738,496	1,344,428
Financial Liabilities:
Trade and sundry payables	197,122	148,850
Total Financial Liabilities	197,122	148,850
Trade and sundry payables are expected to bepaid as followed:
Less than 1 month	197,122	148,850
Greater than 1year	-	-
	197,122	148,850

Corazon Mining Limited – Annual Report 2011

Page 51

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 23: FINANCIAL RISK MANAGEMENT (continued)

iv. Net Fair Values

The net fair values of:

• Listed investments have been valued at the quoted market bid price at reporting date, adjusted for transaction costs expected to be incurred. For unlisted investments where there is no organised financial market, the net fair value has been based on a reasonable estimation of the underlying net assets or discounted cash flows of the investment.

• Cash and cash equivalents, receivables and payables are carried at fair value.

No financial assets and financial liabilities are readily traded on organised markets in standardised form other than listed investments.

Fair values are materially in line with carrying values.

v. Sensitivity Analysis

Interest Rate Risk and Price Risk

The Consolidated Entity has performed sensitivity analysis relating to its exposure to interest rate risk at reporting date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks.

(a) Interest Rate Sensitivity Analysis

At 30 June 2011, the effect on profit and equity as a result of changes in the interest rate, with all other variables remaining constant would be as follows:

	2011 $	2010 $
Change inprofit
— Increase in interest rate by1%	10,594 4,048
— Decrease in interest rate by1%	(10,594) (4,048)
Change in Equity
— Increase in interest rate by1%	10,594 4,048
— Decrease in interest rate by1%	(10,594) (4,048)

Corazon Mining Limited – Annual Report 2011

Page 52

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 23: FINANCIAL RISK MANAGEMENT (continued)

v. Sensitivity Analysis (continued)

(b) Price Risk Sensitivity Analysis

The majority of the Consolidated Entity’s and the parent entity’s equity investments are publicly traded and are included in the ASX. The table below summarises the impact of increases/decreases of this index on the Consolidated Entity’s and the parent entity’s post tax profit for the year and on equity. The analysis is based on the assumption that equity indexes had increased/ decreased by 10% (2010: 10%) with all other variables held constant and all the Group’s equity instruments moved according to the historical correlation with the index.

	2011 $	2010 $
Change inprofit
— Increase in ASX All Ordinaries Index by10%	-	-
— Decrease in ASX All Ordinaries Index by10%	-	-
Change in equity
— Increase in ASX All Ordinaries Index by10%	5,936	48,092
— Decrease in ASX All Ordinaries Index by10%	(5,936)	(48,092)

The above interest rate and price risk sensitivity analysis has been performed on the assumption that all other variables remain unchanged.

NOTE 24: CONTINGENT ASSETS AND LIABILITIES

The Consolidated Entity is unaware of any contingent assets or liabilities that that may have a material impact on the company’s financial position other than those which may arise from the events disclosed in Note 25.

NOTE 25: EVENTS AFTER THE BALANCE SHEET DATE

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.

NOTE 26: DIVIDENDS

There were no dividends paid or declared during the financial year.

Corazon Mining Limited – Annual Report 2011

Page 53

NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2011

NOTE 27: PARENT ENTITY DISCLOSURES	2011 $	2010 $
Financialposition
Assets
Current assets	1,567,979	1,256,684
Non-current assets	1,794,521	453,116
Total assets	3,362,500	1,709,800
Liabilities
Current liabilities	206,213	152,900
Non-current liabilities	2,340	59,955
Total liabilities	208,553	212,855
Net assets	3,153,947	1,496,945
Equity
Issued capital	16,851,807	12,817,304
Option reserves	1,089,729	240,339
Contingent reserves	303,750	-
Investment reserves	5,459	139,894
Accumulated losses	(15,096,798)	(11,700,592)
Total equity	3,153,947	1,496,945
Financialperformance
Profit/(loss) for theyear	(3,396,205)	(4,373,262)
Other comprehensive income/(loss)	(134,435)	(440,233)
Total comprehensive income/(loss)	(3,530,640)	(4,813,495)

NOTE 28: COMPANY DETAILS

The registered office of the Company is:

Suite 5, Level 1 350 Hay Street SUBIACO WA 6008

The principal place of business is:

Corazon Mining Limited Suite 5, Level 1 350 Hay Street SUBIACO WA 6008

Corazon Mining Limited – Annual Report 2011

Page 54

DIRECTORS’ DECLARATION

DIRECTORS’ DECLARATION

The Directors of the Company declare that:

1. The financial statements, notes and additional disclosures included in the Directors’ Report and designated as audited, are in accordance with the Corporations Act 2001 and:

2. a. comply with Accounting Standards (including Australian Accounting Interpretations) and the Corporations Regulations 2001;

3. b. give a true and fair view of the financial position as at 30 June 2011 and of the performance for the year ended on that date of the Company and Consolidated Group; and

4. c. the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

5. The Chief Executive Officer and Chief Finance Officer have each declared that:

6. a. the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001 ;

7. b. the financial statements and notes for the financial year comply with the Accounting Standards;

8. c. the financial statements and notes for the financial year give a true and fair view; and

9. d. any other matters that are prescribed by regulations for the purposes of Section 295A(2) in relation to the financial statements and notes for the financial year are satisfied.

10. in the Directors’ opinion there are reasonable grounds to believe that the Consolidated Entity 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 [117 x 46] intentionally omitted <==

Brett Smith Executive Managing Director

Dated this 23rd day of September 2011

Corazon Mining Limited – Annual Report 2011

Page 55

�

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

HEADING
For the year ended 30 June 2011
----- End of picture text -----

INDEPENDENT AUDIT REPORT TO MEMBERS OF CORAZON MINING LIMITED

Report on the Financial Report

We have audited the accompanying financial report of Corazon Mining Limited, which comprises the statement of financial position as at 30 June 2011, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies, other explanatory information, and the directors’ declaration of Corazon Mining Limited (the company) and the consolidated entity. The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.

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. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about 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 of the financial report that gives a true and fair view 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.

Corazon Mining Limited – Annual Report 2011

Page 56

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

HEADING
For the year ended 30 June 2011
----- End of picture text -----

Opinion

In our opinion:

• (a) the financial report of Corazon Mining Limited and the consolidated entity 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 2011 and of their performance for the year ended on that date; and

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

• (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Going concern

Without qualification to the statement expressed above, as noted in note 1, the directors are of the opinion that the company and the consolidated entity are able to continue as going concerns and be able to pay their debts as and when they fall due and realise their assets and extinguish their liabilities in the normal course of business and at amounts stated in the year end financial report. The financial report of the Group do not include any adjustments in relation to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Company and/or the Group not continue as going concerns.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 12 to 17 of the Directors’ report for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion, the Remuneration Report of Corazon Mining Limited for the year ended 30 June 2011, complies with section 300A of the Corporations Act 2001.

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PKF MACK & CO

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N A CALDER

PARTNER Dated 23 September 2011

WEST PERTH, WESTERN AUSTRALIA

Corazon Mining Limited – Annual Report 2011

Page 57

ADDITIONAL INFORMATION FOR LISTED COMPANIES

ADDITIONAL INFORMATION FOR LISTED COMPANIES

The following additional information is required by the Australian Securities Exchange Ltd in respect of listed public companies only.

Ordinary share capital

101,891,415 fully paid shares are held by 831 individual shareholders.

There were no shareholdings held in less than marketable parcels.

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

Options

48,067,710 quoted options are held by 213 individual option holders.

18,470,000 unquoted options are held by 22 individual option holders.

Options do not carrying a right to vote.

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Distribution of holders of equity securities Number
Category (size of holding) Fully paid ordinary shares Options
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|||||
|---|---|---|---|
|1 –|1,000|65|11|
|1,001 –|5,000|129|28|
|5,001 – 10,000|101|19|
|10,001 – 100,000|366|76|
|100,001 – and over|170|79|
|831|213|

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Substantial shareholders

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||||
|---|---|---|
|Ordinary shareholders|Number of Ordinary Fully|% Held of|
|Paid Shares Held|Issued Ordinary|
|Capital|
|UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD|6,147,444|6.03%|

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Corazon Mining Limited – Annual Report 2011

Page 58

ADDITIONAL INFORMATION FOR LISTED COMPANIES

20 Largest Shareholders – Ordinary Shares

A record of the 20 largest shareholders as at 2 September 2011 is as follows:-

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Ordinary shareholders Number of % Held of Issued
Ordinary Fully Ordinary Capital
Paid Shares Held
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1.	UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD	6,147,444	6.03
2.	KATRINA PETA DOWNES	3,401,637	3.34
3.	VALIANT EQUITY MANAGEMENT PTY LTD	2,993,076	2.94
4.	MACQUARIE BANK LIMITED	2,969,179	2.91
5.	MACQUARIE BANK LIMITED	2,435,000	2.39
6.	BULLSEYE GEOSERVICES PTY LTD	2,000,000	1.96
7.	MRS DEBRA LEE MCMAHON	1,611,308	1.58
8.	MR CLIVE BRUCE JONES	1,507,802	1.48
9.	PYLARA PTY LTD	1,500,000	1.47
10.	MR MERVYN IAN LEO BASSETT + MRS SHIRLEY ETHEL BASSETT	1,400,000	1.38
11.	MR RICHARD GRANT MANNERS HILL + MRS FLEUR LESLEY SCHELL	1,400,000	1.37
12.	POPCORN ENTERTAINMENT PTY LTD	1,280,000	1.26
13.	MR PHILIP KIRCHLECHNER + MRS YUKO KASAJIMA KIRCHLECHNER	1,250,000	1.23
14.	DR ALASTAIR ROWLAND BROWN	1,175,000	1.15
15.	WILLIAM TAYLOR NOMINEES PTY LTD	1,150,000	1.13
16.	MARGARET ANNE MULLINS	1,100,000	1.08
17.	PETER DUNLOP	1,000,000	0.98
18.	SHANE YOUNG INVESTMENTS PTY LTD	1,000,000	0.98
19.	MS ELIZABETH JANE RYMAN	1,000,000	0.98
20.	MR DAVID DIRK DEVOS	1,000,000	0.98
		37,320,446	36.62

Corazon Mining Limited – Annual Report 2011

Page 59

ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

20 Largest Options holders – Options

A record of the 20 largest option holders as at 2 September 2011 is as follows:-

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Option holders Number of % Held of
Options Held Issued Options
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1.	CANGU PTY LTD	5,430,280	11.3
2.	DR ALASTAIR ROWLAND BROWN	3,125,000	6.50
3.	MR KEITH STUART LIDDELL + MRS SHELAGH JANE LIDDELL	3,000,000	6.24
4.	GEBA PTY LTD	2,620,572	5.45
5.	KATRINA PETA DOWNES	1,700,819	3.54
6.	MR PAUL ROBERT BASTER + MS CATHERINE BELLEMORE	1,500,000	3.12
7.	VALIANT EQUITY MANAGEMENT PTY LTD	1,384,039	2.88
8.	MRS AMANDA HARGREAVES	1,325,750	2.76
9.	ALASTAIR R BROWN PTY LTD	1,000,000	2.08
10.	MR RICHARD GRANT MANNERS HILL + MRS FLEUR LESLEY SCHELL	1,000,000	2.08
11.	ZIMBALI NOMINEES PTY LTD	1,000,000	2.08
12.	MR TERRY JAMES GARDINER + MR TREVOR JAMES GARDINER	875,000	1.82
13.	MR PAUL ANTHONY GILLETT	800,000	1.66
14.	DR ALASTAIR ROWLAND BROWN	800,000	1.66
15.	MR CLIVE BRUCE JONES	753,901	1.57
16.	MRS DEBRA LEE MCMAHON	730,654	1.52
17.	MRS AUDREY IRVING BUTCHART + MR BILL ERSKINE BUTCHART	600,000	1.25
18.	SOUNAR PTY LTD	588,211	1.22
19.	BENBECCA PTY LTD	560,744	1.17
20.	MRS MARGARET ANNE DOWNES	554,853	1.15
		29,349,823	61.05

Corazon Mining Limited – Annual Report 2011

Page 60

ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

Unquoted equity security holdings greater than 20%

Unquoted equity security holdings greater than 20%
	Number of Options Held	% Held of Options in an unquoted class
Option exercised at $0.07, expiring at 07/07/2013
1. Bullseye Geoservices PtyLtd	1,800,000 60%
Option exercised at $0.20, expiring at 07/07/2012
1. Bullseye Geoservices PtyLtd	3,000,000 60%
Option exercised at $0.12, expiring at 30/11/2013
1. Brett Smith	2,000,000 100%
Option exercised at $0.15, expiring at 25/02/2014
1. Clive Jones	2,000,000 23.53%
2. Jonathan Downes	2,000,000 23.53%
3. AndyThompson	2,000,000 23.53%
4. Adrian Byass	2,000,000 23.53%

Schedule of Interests in Mining Tenements

Project	Location of tenements	% of interest
1. Quartz Circle	Western Australia	100%
2. Lynn Lake	Canada	100%*

*Option to acquire 100% of Lynn Lake project.

Company secretary

Mr Robert Orr

Principal registered office

Suite 5, Level 1 350 Hay Street SUBIACO WA 6008 Telephone +61 (0) 8 6142 6366 Facsimile +61 (0) 8 6210 1872

Share registry

Advanced Share Registry Services 2/150 Stirling Highway NEDLANDS WA 6009 Telephone +61 (0) 8 9389 8033

Corazon Mining Limited – Annual Report 2011

Page 61

CORPORATE GOVERNANCE

CORPORATE GOVERNANCE

Corazon Mining Limited and its controlled entities (“the Consolidated Entity”) are committed to high standards of corporate governance. Policies and procedures which follow the “Principles of Good Corporate Governance and Best Practice Recommendations” issued by the Australian Securities Exchange (“ASX”) Corporate Governance Council, to the extent they are applicable to the Consolidated Entity, have been adopted.

Principle 1: Lay solid foundations for management and oversight

• 1.1 Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions.

Comply

Yes

The role of the Board is formally set out in the Board Charter. This charter summarizes the role and responsibility of the Board of the Consolidated Entity. The disclosure of the role and responsibility of the Board is designed to assist those affected by corporate decisions to better understand the respective accountabilities and contributions of the Board and management of the Consolidated Entity.

The roles and responsibilities of the Board will evolve as the Consolidated Entity moves forward. As such, a regular review of the balance of responsibilities will ensure that the division of the functions remains appropriate to the needs of the Consolidated Entity.

The key responsibilities of the Board include:

• Appointing, evaluating, rewarding and if necessary, the removal of the Managing Director and senior management;

• Development of corporate objectives and strategy with management and approving plans, new investments, major capital and operating expenditures and major funding activities proposed by management;

• Monitoring actual performance against defined performance expectations and reviewing operating information to understand at all times the state of the health of the Consolidated Entity;

• Overseeing the management of business risks, safety and occupational health, environmental issues and community development;

• Satisfying itself that the financial statements fairly and accurately set out the financial position and financial performance of the Consolidated Entity for the period under review;

• Satisfying itself that there are appropriate reporting systems and controls in place to assure the board that proper operational, financial, compliance, risk management and internal control process are in place and functioning appropriately. Further, approving and monitoring financial and other reporting;

• Assuring itself that appropriate audit arrangements are in place, when considered appropriate by the board;

• • Ensuring that the Consolidated Entity acts legally and responsibly on all matters and assuring itself that the Company has adopted, and that it’s practice is consistent with, a number of guidelines, being:

  • Directors and Executive Officers Code of Conduct;

  • Dealings in Company Securities; and

  • Reporting and Dealing with Unethical Practices

• Reporting to and advising shareholders.

• 1.2 Companies should disclose the process for evaluating the performance of senior executives.

Yes

The process and outcomes of the evaluation is disclosed in the Remuneration Report contained in the Directors’ Report.

Corazon Mining Limited – Annual Report 2011

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CORPORATE GOVERNANCE

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||||
|---|---|---|
|Principle 2 : Structure the board to add value|
|2.1|A majority of the Board should be independent directors.|No|
|The Consolidated Entity has not complied with this recommendation. The following Directors are not considered to be|
|independent:|
|•|Brett Smith – Executive Managing Director|
|The independent directors are:|
|•|Clive Jones|
|•|Jonathan Downes|
|•|Adrian Byass|
|The Board considers that the interests of the Group are best served by appointing directors with the relevant skills and|
|expertise to enhance the Group’s performance. The Board believes each director bring an independent, objective judgment|
|to the deliberations of the Board.|
|2.2|The Chair should be an independent director.|Yes|
|•|The Consolidated Entity complies with this recommendation. Mr. Clive Jones, an independent director, is the Chair.|
|2.3|The roles of Chair and Chief Executive Officer should not be exercised by the same individual.|Yes|
|The Consolidated Entity complies with this recommendation. Mr. Brett Smith is the Chief Executive Officer.|
|2.4|The board should establish a nomination committee.|No|
|The Consolidated Entity does not have a nomination committee. The Board believes that due to the Group’s relatively|
|small size, a nomination committee is not necessary as the Board can undertaken all functions normally delegated to a|
|nomination committee. The Corporate Governance Board Charter contains procedures for the appointment and resignation|
|of Directors.|
|2.5|Companies should disclose the process for evaluating the performance of the board, its committees and individual directors.|Yes|
|The Corporate Governance Board Charter contains the details of the procedures for the performance reviews and evaluation.|

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Comply No

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||||
|---|---|---|
|Principle 3 : Promote ethical and responsible decision-making|Comply|
|3.1|Companies should establish a code of conduct and disclose the code or a summary of the code.|Yes|
|A formal Directors and Executive Officers’ code of conduct forms part of the Corporate Governance Charter.|
|3.2|Companies should establish a policy concerning trading in company securities by directors, senior executives and employees|Yes|
|and disclose the policy or a summary of that policy.|
|The Consolidated Entity has adopted a Securities Trading Policy. All Directors, key management personnel, employees|
|and its related companies are prohibited by law from trading in the Group’s securities or other securities if they are in|
|possession of market sensitive information or during closed periods. Directors of the Company must advice the Company|
|Secretary of their trading in the Group’s securities within 5 days.|

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Corazon Mining Limited – Annual Report 2011

Page 63

CORPORATE GOVERNANCE

Principle 4 : Safeguard integrity in financial reporting

• 4.1 The Board should establish an audit committee.

Comply No

The Consolidated Entity does not have an audit committee. The Board believe that due to the modest size of the Group, an audit committee is not necessary as the Board can undertaken all functions normally delegated to an audit committee.

The full Board is responsible to review the financial report of the Group. The financial report is prepared on a sound system of risk management and internal compliance which implements the policies and procedures approved by the Board and that these systems work effectively and efficiently.

The external auditor is also invited to attend Board of meeting when the financial report are submitted for review and approval.

4.2 The audit committee should be structured so that it: N/A

• Consists only of Non Executive Directors

• Consists of a majority of independent directors

• Is chaired by an independent chair, who is not chair of the board

• Has at least three members

• 4.3 The audit committee should have a formal charter. N/A Principal 5 : Make timely and balanced disclosure Comply 5.1 Companies should promote timely and balanced disclosure of all material matters concerning the Company. Yes

The Board has adopted a Disclosure Policy, which sets out the key obligation of the Managing Director and Company Secretary to ensure that the Consolidated Entity complies with its disclosure obligations under the ASX Listing Rules and The Corporations Act 2001 (Cth).

Principal 6 : Respect the rights of shareholders Comply

• 6.1 Companies should design a communications policy for promoting effective communication with shareholders and Yes encouraging their participation at general meetings and disclose their policy or a summary of that policy.

The Board has adopted a Communication Strategy. The Directors of the Company recognise the importance of forthright communication. The Consolidated Entity posts all the report, ASX announcements, media release, business presentation and Group information on the Group’s website.

Corazon Mining Limited – Annual Report 2011

Page 64

CORPORATE GOVERNANCE

Principal 7 : Recognise and manage risk

Comply

• 7.1 Companies should establish policies for the oversight and management of material business risks and disclose a summary Yes of those policies. The Board has adopted a Risk Management and internal Control Policy. Procedures have been established at the board and executive management levels which are designed to safeguard the assets and interests of the Consolidated Entity, and to ensure the integrity of reporting.

• 7.2 The Board should require management to design implement the risks and report to it on whether those risks are being Yes managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the Company’s management of its material business risks. The Board is responsible for identifying the risks facing the Company, assessing the risks and ensuring that there are controls for these risks, which are to be designed to ensure that any identified risk is reduced to an acceptable level. Management is required to report on material business risks at each Board of Director’s meeting.

• 7.3 The Board should disclose whether it has received assurance from the Chief Executive Officer (or equivalent) and the Chief Yes Financial Officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. The Chief Executive Officer and Chief Financial Officer have provided the written statements required by 7.3.

• Principal 8 : Remunerate fairly and responsibly Comply 8.1 The Board should establish a remuneration committee. No The Consolidated Entity does not have a remuneration committee. The board believe that due to the modest size of the Group, a remuneration committee is not necessary as the board can undertaken all functions normally delegated to a remuneration committee. The full Board of the Group is responsible for determining and reviewing compensation arrangement for Managing Director, Executive Director and Non-executive Director.

• 8.2 The remuneration committee should be structured so that it: N/A • Consists of a majority of independent directors • Is chaired by an independent chair • Has at least three members

• 8.3 Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors N/A and senior executives.

Corazon Mining Limited – Annual Report 2011

Page 65

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Level 1, 350 Hay Street Subiaco WA 6008 T: +61 8 6142 6366 F: +61 8 6210 1872 W: www.corazon.com.au E: admin@corazon.com.au