CULLEN RESOURCES LIMITED — Interim / Quarterly Report 2007

Mar 13, 2007

ACN 006 045 790

HALF-YEAR FINANCIAL REPORT

AT

31 DECEMBER 2006

Directors' Report

Your directors submit their report for the half-year ended 31 December 2006.

Directors

The names of the company's directors in office during the half year and until the date of this report are as below. Directors were in office for the entire period.

Dr Denis Clarke BSc, BA, PhD, FAIMM (Independent Non-Executive Chairman)

Denis Clarke has more than 30 years experience in exploration and mining operations. Over 15 years with Plutonic Resources ("Plutonic"), he contributed significantly at the General Manager level to it's success as it developed from a small explorer in 1983 to one of Australia's largest gold miners prior to its take-over in 1998 in a transaction which valued Plutonic at \$1 billion. Dr. Clarke at various times managed the exploration, finance, administration and corporate divisions. He brings to the Board broad technical, financial, administrative and corporate experience and a wide range of industry contacts. Currently Dr. Clarke is Non – Executive Chairman of Beaconsfield Gold NL, a Non-Executive Director of Troy Resources NL, Anglo Australian Resources NL and Allstate Exploration NL.

Grahame Hamilton BSc, MSc, MAIG (Non-Executive Director)

Grahame Hamilton, a graduate of the University of NSW, has extensive experience over 30 years in exploration, corporate and project management. He has wide ranging expertise in project evaluation. Between 1994 and 1996 he managed the Brocks Creek exploration, environmental impact statement, feasibility study, mine development and construction for Solomon Pacific Resources NL. Before Solomon, Grahame worked with Getty Oil Development Co- minerals division as Queensland Manager. Mr Hamilton, previously an Executive Director, became a Non-Executive Director on 1 November 2006. He is currently an Executive Director of Mariana Resources Limited.

John Horsburgh BSc MSc, FAIMM (Non-Executive Director)

John Horsburgh, a graduate of the Royal School of Mines, has over 32 years industry experience including 11 years with Solomon Pacific Resources NL. Prior to this he gained extensive experience in Australia and overseas with Getty Oil Development Co., Billiton and RTZ Group. Mr Horsburgh, previously an Executive Director, became a Non-Executive Director on 1 November 2006. He is currently an Executive Director of Mariana Resources Limited.

Wavne John Kernaghan BBus, ACA, FAICD, ACIS (Non-Executive Director and Company Secretary)

Wayne Kernaghan is a member of the Institute of Chartered Accountants in Australia with a number of years experience in various areas of the mining industry. He is also a Fellow of the Australian Institute of Company Directors, Mr Kernaghan is also a Director of Goldlink IncomePlus Limited and Gulf Resources Limited.

Directors' Report (continued)

Dr Chris Ringrose BSc, Phd, MBA, MAIMM (Managing Director)

Chris Ringrose has been an exploration geologist based mainly in Western Australia since he completed his geology degrees in Scotland in 1982. His career has included experience with EZ, Chevron and Aztec, and prior to joining Cullen, Chris was Exploration Manager with Troy Resources NL for nine years. Chris has also completed an MBA at Deakin University and brings to the Company significance management, exploration and project evaluation experience gained both in Australia and overseas. Mr Ringrose, previously Exploration Director, became Managing Director on 1 November 2006.

Principal Activities

The principal activities for the economic entity during the course of the half year were mineral exploration. There was no significant change in the nature of the economic entity during the half vear.

Results for the Half-Year

The loss of the economic entity for the half-year was \$648,773 [2005: Loss of \$980,867].

Review of Operations

During the half year under review, the Company continued its mineral exploration activities which included: field review; project evaluations; database reviews and new project area identification. The Company also advanced its discussions and documentation relating to new farm-out arrangements with other companies for certain projects.

Company activities, including those of the Joint Venture managers, occur across Australia in New South Wales, Queensland, Northern Territory, South Australia and Western Australia, as follows:

• In Western Australia, in the Ashburton and West Pilbara: North East and Eastern $\blacksquare$ Goldfields, and Forrestania Region;
• In the Northern Territory, applications for tenements are being progressed in the $\blacksquare$ Amadeus and Arunta Regions;
• In Queensland the Company has a Joint Venture in the Mt Isa Region; $\blacksquare$
• In South Australia the company has made two applications for new ground which it is $\blacksquare$ pursuing; and
• In New South Wales the company has one project for which it is seeking a Joint $\bullet$ Venture partner.

Directors' Report (continued)

Auditor's Independence Declaration

We have obtained an independence declaration from our auditors, Ernst & Young, which follows the Directors Report.

Signed in accordance with a resolution of the directors

Alngon

C Ringrose Director Sydney 14 March 2007

EU ERNST & YOUNG

Ernst & Young Centre 680 George Street
Sydney NSW 2000
Australia

ø Tel − 61-2 9348 5555 $Fax = 61292485959$
DX Sydney Stock Exchange 10172

GPO Box 2646 Sydney NSW 2001

Auditor's Independence Declaration to the Directors of Cullen Resources Limited

In relation to our review of the financial report of Cullen Resources Limited for the half-year ended 31 December 2006, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young
Ernst & Young
M. Thist

Michael Elliott Partner 14 March 2007

Balance Sheet at 31 December 2006

	Consolidated 31 December 2006 S	Consolidated 30 June 2006 S
Current Assets
Cash and cash equivalents	1,881,261	1,129,107
Total Current Assets	1,881,261	1,129,107
Non Current Assets
Other Financial Assets	100,000	100,000
Property & Equipment	5,956	7,180
Other - Exploration	4,885,912	4,649,807
Total Non Current Assets	4,991,868	4,756,987
Total Assets	6,873,129	5,886,094
Current Liabilities
Trade and other payables	102,588	116,750
Provisions	38,485	94,631
Total Current Liabilities	141,073	211,381
Non Current Liabilities
Provisions	8,373	32,386
Total Non Current Liabilities	8,373	32,386
Total Liabilities	149,446	243,767
Net Assets	6,723,683	5,642,327
Equity
Contributed Equity (note 4)	23,002,656	21,313,506
Reserves	53,816	12,837
Accumulated Losses	(16, 332, 789)	(15,684,016)
Total Equity	6,723,683	5,642,327

Income Statement for the half-year ended 31 December 2006

	Consolidated	Consolidated
	31 December	31 December
	2006	2005
	S	S
Revenue and other income (note 3)	54,511	34,550
Rent	(47, 675)	(43,382)
Salaries and Consultants	(327,109)	(128, 398)
Share based payments (note 6)	(40, 979)
Compliance costs	(54, 688)	(44, 653)
Exploration expenditure written off (note 3)	(133,762)	(716, 442)
Depreciation	(4,167)	(12,751)
Administration	(64, 864)	(54, 284)
Other expenses	(30,040)	(15,507)
Loss before income tax expense	(648,773)	(980, 867)
Income tax expense
Net loss attributed to parent	(648, 773)	(980, 867)
Basic loss per share (cents per share)	(0.2)	(0,3)
Diluted loss per share (cents per share)	(0.2)	(0.3)

Cash Flow Statement for the half-year ended 31 December 2006

	Consolidated 31 December 2006 \$	Consolidated 31 December 2005 \$
	Inflows/ (Outflows)	Inflows/ (Outflows)
Cash flows from operating activities
Payments to suppliers and employees	(618, 697)	(247, 931)
Interest received	24,695	34,550
Net cash flows from operating activities	(594,002)	(213, 381)
Cash flows from investing activities
Payments for exploration	(590, 051)	(501, 146)
Payment for plant and equipment	(2,943)
Proceeds from sale of mining tenements	250,000
Net cash flows used in investing activities	(342,994)	(501, 146)
Cash flows from financing activities
Proceeds from issue of shares	1,772,000
Share issue expenses	(82, 850)
Net cash flows from financing activities	1,689,150
Net increase/(decrease) in cash and cash equivalents	752,154	(714, 527)
Cash and cash equivalents at beginning of the
financial period	1,129,107	1,668,537
Cash and cash equivalents at end of the
financial period	1,881,261	954,010

Statement of Changes in Equity
for the half-year ended 31 December 2006

	Contributed Equity S	Reserves \$	Accumulated Losses S	Total Equity S
At 1 July 2005	20,214,506		(13,719,228)	6,495,278
Loss for the period	and a state of the		(980, 867)	(980, 867)
Total income / expense for the Period			(980, 867)	(980, 867)
At 31 December 2005	20,214,506		(14,700,095)	5.514.411
At 1 July 2006	21,313,506	12,837	(15,684,016)	5,642,327
Loss for the period			(648, 773)	(648, 773)
Total income / expense for the Period			(648, 773)	(648,773)
Issue of share capital	1,772,000			1,772,000
Share issue costs	(82, 850)			(82, 850)
Share based payments		40,979		40,979
At 31 December 2006	23,002,656	53,816	(16, 332, 789)	6,723,683

Notes to the Half-Year Financial Statements For the half-year ended 31 December 2006

Note 1 Corporate Information

The financial report of Cullen Resources Limited (the Company) for the half-year ended 31 December 2006 was authorised for issue in accordance with a resolution of the directors on 13 March 2007. Cullen Resources Limited is a company incorporated in Australia and limited by shares, which are publicly traded on the Australian Stock Exchange.

The nature of the operations and principal activities of the Group are described in note 5.

Summary of Significant Accounting Policies Note 2

The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report.

The half-year financial report should be read in conjunction with the annual Financial Report of Cullen Resources Limited as at 30 June 2006.

It is also recommended that the half-year financial report be considered together with any public announcements made by Cullen Resources Limited and its controlled entitles during the half-year ended 31 December 2006 in accordance with the continuous disclosure obligations arising under the Corporations Act 2001.

(a) Basis of preparation

The half year financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, applicable Accounting Standards including AASB 134 "Interim Financial Reporting" and other mandatory professional reporting requirements. The half-year financial report has been prepared on a historical cost basis.

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

(b) Significant accounting policies

The half-year consolidated financial statements have been prepared using the same accounting policies as used in the annual financial statements for the year ended 30 June 2006.

Notes to the Half-Year Financial Statements For the half-year ended 31 December 2006

(c) Basis of consolidation

The half-year consolidated financial statements comprise the financial statements of Cullen Resources Limited and its subsidiaries as at 31 December 2006("the Group").

(d) Accounting standards issued but not applicable

The company assessed whether the new accounting standards issued but not applicable may have a material impact on the company. It is the company's view that there should not be a material impact resulting from the accounting standards issued but not applicable at 31 December 2006.

Note 3 Revenue, Income and Expenses

Loss before income tax has been determined after:

	31 December 2006	31 December 2005
	S
(a) Revenue and other income
Interest from other persons	24,695	34,550
Profit on sale of mining tenements	29,816
	54,511	34,550
(b) Charging as expense:
Exploration expenditure written off	133,762	716,442
Share based payments	40.979

Notes to the Half-Year Financial Statements For the half-year ended 31 December 2006

Contributed Equity Note 4

Contributed Equity	31 December 2006	30 June 2006
Ordinary shares (issued and fully paid) $*$	S	S.
452,039,763 (2005: 392,773,096)	23,002,656	21,313,506

Movement in issued shares for the half year

	31 December 2006		30 June 2006
	Number of Shares	S	Number of Shares	\$
Beginning of the financial period: Issued at 5 cents on exercise of	392,973,096	21,313,506	364,056,282	20,214,506
options			200,000	10,000
Issued at 4 cents Issued at 4.52 cents - acquisition			27,500,000	1,100,000
of tenement			1,216,814	55,000
Issued at 3 cents	59,066,667	1,772,000
Share issue expenses		(82,850)		(66,000)
End of the financial period:	452,039,763	23,002,656	392,973,096	21,313,506

* Fully paid ordinary shares carry one vote per share and carry the right to dividends.

Note 5 Segment Information

The consolidated entity operated during the period in one geographical segment, being Australia. The consolidated entity operated in one business segment being exploration.

Notes to the Half-Year Financial Statements For the half-vear ended 31 December 2006

Note 6 Share Based payments

On 30 November 2006 the Company issued Dr Chris Ringrose, Managing Director with 8,000,000 options as approved by shareholders at the Annual General Meeting of the Company held on 3 November 2006. 4,000,000 of the options are exercisable at 5 cents and 4,000,000 options are exercisable at 8 cents each. The fair value of the options granted is estimated taking into account the terms and conditions upon which the options were granted using the Black & Scholes options pricing model. The following table lists the inputs to the model used for these options.

Call Option Valuation	Input	Input
Share price at 18 September 2006	\$0.032	\$0.032
Exercise Price	\$0.050	\$0.080
Risk Free Rate	5.5%	5.5%
Volatility (Annualised)	119%	119%
Time (years) to expiry	3.25 years	3.25 years
Value per option	\$0.0216	\$0.0193
Number of options	4.000,000	4,000,000
Total value	\$86,705	\$77,210

The options will vest as follows:

• 1 million exercisable at 5 cents and 1 million exercisable at 8 cents both expiring 28 February 2010 have vested.
• 1 million exercisable at 5 cents and 1 million exercisable at 8 cents both expiring 28 February 2010 on 28 February 2007.
• 1 million exercisable at 5 cents and 1 million exercisable at 8 cents both expiring 28 February 2010 on 28 February 2008.
• 1 million exercisable at 5 cents and 1 million exercisable at 8 cents both $\omega_{\rm{eff}}$ expiring 28 February 2010 on 28 February 2009.

Note 7 Contingent Liabilities

There are no known contingent liabilities. There have been no changes in contingent liabilities or contingent assets since the last annual reporting date.

Note 8 Events subsequent to Balance Date

There are no known events subsequent to balance date that would have a material affect on these financial statements.

Directors' Declaration

In accordance with a resolution of the directors of Cullen Resources Limited, I state that:

In the opinion of the directors:

• $(a)$ the financial statements and associated notes of the consolidated entity are in accordance with Corporations Act 2001 including;
• $(i)$ give a true and fair view of the financial position as at 31 December 2006 and the performance for the half year ended on that date of the consolidated entity; and
• comply with Accounting Standard AASB 134 "Interim Financial $(ii)$ Reporting" and the Corporations Regulations 2001; and
• $(b)$ there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

On behalf of the Board

Changon

C Ringrose Director

Sydney 14 March 2007

$\bar{z}$

EII FRNST & YOU INC.

# Ernst & Young Centre 680 George Street
Sydney NSW 2000 Aostralia CPO Box 2646

■ Tel 61 2 9248 5555 Fax 61.2.9248.5959
DX Sydney Stock Exchange 10172

Sydney NSW 2001

To the members of Cullen Resources Limited - Report on the Half Year Condensed Financial Report

We have reviewed the accompanying half year financial report of Cullen Resources Limited and the entities it controlled during the period, which comprises the condensed balance sheet as at 31 December 2006, and the condensed income statement, condensed statement of changes in equity and condensed cash flow statement for the half year ended on that date, other selected explanatory notes and the directors' declaration.

Directors' Responsibility for the Half Year Financial Report

The directors of the company are responsible for the preparation and fair presentation of the half year financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the half year financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor's Responsibility

Our responsibility is to express a conclusion on the half year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity's financial position as at 31 December 2006 and its performance for the half year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 and other mandatory financial reporting requirements in Australia. As the auditor of Cullen Resources Limited and the entities it controlled during the half year, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

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

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor's Independence Declaration, a copy of which is included in the Directors' Report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of Cullen Resources Limited and the entities it controlled during the half year, is not in accordance with:

• the Corporations Act 2001, including: $(a)$
• giving a true and fair view of the consolidated entity's financial position as at 31 $(i)$ December 2006 and of its performance for the half year ended on that date; and
• complying with Accounting Standard AASB 134 Interim Financial Reporting and $(ii)$ the Corporations Regulations 2001; and
• other mandatory financial reporting requirements in Australia. $(b)$

Inst & Jaung

Michael Elliott Partner Sydney

14 March 2007