CYCLIQ GROUP LTD — Annual Report 2010

Sep 30, 2010

MODENA RESOURCES LIMITED ACN 119 749 647

ANNUAL REPORT

30 JUNE 2010

CORPORATE DIRECTORY

DIRECTORS

Anthony Hamilton Craig Willis James Row Tony Izelaar

COMPANY SECRETARY

Jay Stephenson

REGISTERED AND PRINCIPAL OFFICE

1186 Hay Street West Perth WA 6005

Telephone: (08) 9226 1247 Facsimile: (08) 9226 1257 Website: www.modenaresources.com

SHARE REGISTRY

Computershare Investor Services Pty Ltd Level 2, Reserve Bank Building 45 St Georges Terrace Perth WA 6000

Telephone: (08) 9323 2000 Facsimile: (08) 9323 2033

AUDITORS

BDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008

Telephone: (08) 9360 4200 Facsimile: (08) 9481 2524

AUSTRALIAN SECURITIES EXCHANGE

Modena Resources Limited shares (MDA) and options (MDAOA) are listed on the Australian Securities Exchange.

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Modena Resources Limited

CHAIRMAN'S LETTER

Dear Shareholders,

It is with great pleasure that I and the incumbent Board present to you your company’s annual report. This year has seen your company emerge as a Gas and Oil production company following the completion of the purchase of the Modena Petroleum LLC operations in South Texas and Padre Island.

Modena Petroleum LLC holds oil and gas production assets both onshore and offshore in the USA. In addition the company has opened offices in Houston both operational and Administration and recruited a new Management team of excellent Industry professionals to manage those assets in the USA.

Modena Petroleum LLC has 24 production wells connected to the gas network that had been shut in due to the previous owner’s status under Chapter 11, (Bankruptcy) proceedings. The Company’s immediate focus is to re establish production from these wells and implement a growth strategy to increase production capacity with workovers and modernization.

Your company is well on its way to reestablishing our targeted production by 30[th] June 2011 of 14,900 MCFPD.

In addition to the production wells, Modena Petroleum’s acquisition includes 15,000 acres of highly prospective exploration ground surrounding existing production leases and significant gas infrastructure assets and equipment.

Modena has announced two significant exploration prospects which have the potential to provide assets of world class status along with other advanced targets.

Your Management team is focused and working extremely hard to develop the company’s assets and the Board would like to thank all the Management, staff and contractors for their efforts to date.

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Modena Resources Limited

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CHAIRMAN'S LETTER

The Company has a longer term exploration and development strategy to increase production over the next 24 months to a level of production previously achieved by the former operator.

The Company will also consider a number of potential targets to increase oil & Gas production by acquisition of strategically aligned assets to complement our existing operations.

The Directors are pleased to have completed this complex and timely acquisition of assets which present a blend of production, growth and exploration targets in an area renowned for prolific production success.

Your Company remains committed to increasing its production profile and developing into an Oil & Gas production company and providing a return on investment to our shareholders, whose continued support is critical to the success of your company.

Yours sincerely

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A R Hamilton Chairman

Modena Resources Limited

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Modena Resources Limited

DIRECTORS REPORT

Your Directors present their report on the Company consisting of Modena Resources Limited and its controlled entities (“the Group”) for the year ended 30 June 2010.

DIRECTORS

The names of the Directors of the Company in office during the financial year and up to the date of this report are as follows:

Anthony Hamilton – appointed 2 November 2009 Craig Willis James Row – appointed 26 March 2010 Tony Izelaar – appointed 13 April 2010 David Sutherland – resigned 13 April 2010 Douglas Jendry – appointed 13 January 2010; resigned 2 February 2010 Wayne Bellman – resigned 2 November 2009 Paul Black – resigned 31 July 2009

Directors were in office from the beginning of the financial year until the date of this report unless otherwise stated.

The particulars of the qualifications, experience and special responsibilities of each Director are as follows:

Anthony Hamilton, Executive Chairman

Mr Hamilton is a fellow of the Institute of Directors in London and previously CEO of an International Mining company based in London.

He has extensive public company and corporate governance experience with both Australian and International resource expertise in gold, diamonds, oil & gas and base metals, having established operations in Africa, North America and Australia.

Director since 2 November 2009.

During the past 3 years, Mr Hamilton has also served as a director of the following listed companies:

• Eldore Mining Corporation Ltd (20 November 2009 to present)

• Acclaim Exploration NL (26 October 2009 to present)

Craig Willis, Executive Director

Mr Willis is currently a Director of Acclaim Exploration Limited and previously with listed company Syntech Group Limited. He has significant experience in dealing with government instrumentalities pertaining to contract negotiations between private and public entities. He has previously project managed a number of successful operational developments within Australia Post. He has considerable project management and technology development experience, holding a number of public and private company directorships.

Director since 11 September 2006.

During the past three years Mr Willis has held the following other listed company directorships:

• Acclaim Exploration NL (30 June 2003 – present)

James Row

Mr. Row is currently CEO of a successful oil and gas operator based in Houston, Texas. He has significant industry expertise, including operations, project origination and producer finance.

Director since 26 March 2010.

No other directorships in listed companies in the last 3 years.

Tony Izelaar

Mr Izelaar born in the Netherlands has been educated as a chartered accountant. The early days of his career he worked with KPMG in the Netherlands, before moving in 1990 to the Netherlands Antilles. Mr. Izelaar has been employed as controller, involved in finance and re-insurance divisions, of quoted companies (UK and Amsterdam) before founding an audit and advisory firm under the BDO network.

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Modena Resources Limited

DIRECTORS REPORT

After 15 years Mr Izelaar decided to remigrate to Europe (Monaco) where he is engaged in financial planning and consulting activities for global clients, both individuals and corporations.

Director since 13 April 2010.

During the past 3 years, Mr Izelaar has also served as a director of the following listed companies:

• Eldore Mining Corporation Ltd (26 October 2007 to present)

• Arturus Capital Ltd (March 2009 – 8 April 2010)

David Sutherland , Non-Executive Director

Mr Sutherland has worked in the investment banking and funds management industry for over 28 years. He was initially involved in the merchant banking industry, then later was a Director in charge of fixed income with Credit Suisse First Boston.

Mr Sutherland has managed a private investment fund and acts as a consultant to investment funds and individuals.

Mr Sutherland resigned as a director on 13 April 2010.

Douglas Jendry

Mr Jendry has more than 35 years experience in the petroleum industry and has been an Executive Director of a number of successful publicly listed oil and gas companies including First Australian Resources, Omega Oil, Impress Energy, Carpathian Resources and Amerisur Resources. During his tenure with these companies he has gained experience in Australia, USA, New Zealand, Colombia, Indonesia, Thailand, Syria, Papua New Guinea and Paraguay.

Mr Jendry is a Member of the Australasian Institute of Mining and Metallurgy.

Mr Jendry was appointed a director on 13 January 2010 and resigned on 2 February 2010.

Wayne Bellman , BBus (Major Accounting), GDip Portfolio Analysis and Design – Non-Executive Chairman

Mr Bellman is a Director of Arturus Capital Limited and has extensive experience in technology and related areas of banking and finance. Mr Bellman has held senior executive roles with technology vendors covering solutions in retail, wholesale and funds management sectors. Mr Bellman also has public company board experience as a former Director of Admerex Limited and Australian Power and Gas Company Limited.

Mr Bellman resigned as a director on 2 November 2009.

Paul Black , Non-Executive Director

Mr Paul Black is a resident of the United States of America and resides in Corpus Christi, Texas.

Mr Black has a B.Sc. in Petroleum Engineering from the University of Texas at Austin. He co-founded BNP Petroleum, a company investing in oil and gas projects, and is currently Chairman and CEO. Prior to founding BNP, Mr Black was employed by Tana Oil & Gas Corporation as a Petroleum Engineer.

Mr Black resigned as a director on 31 July 2009.

Interests in the shares and options of the company and related bodies corporate

As at the date of this report, the interests of the Directors in the shares and options of Modena Resources Limited were:

	Number of	Number of Options
	Ordinary Shares	over Ordinary Shares
A Hamilton	25,000	-
C Willis	-	-
J Row	-	-
T Izelaar	-	-

COMPANY SECRETARY

Jay Stephenson, MBA, FCPA, CMA, FCIS, MAICD

Appointed 5 July 2010 - Over 20 years professional experience in business development including approximately 16 years as Director, Chief Financial Officer and Company Secretary on various listed and unlisted entities.

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Modena Resources Limited

DIRECTORS REPORT

CORPORATE INFORMATION

Corporate Structure

Modena Resources Limited is a limited liability company that is incorporate and domiciled in Australia. Modena Resources Limited has prepared a consolidated financial report incorporating the entities that it controlled during the financial year as follows:

Modena Resources Limited - parent entity Murviel Trading SA - 100% owned controlled entity Blackgate Resources LLC - 100% owned controlled entity Modena Operating LLC - 100% owned controlled entity

Nature of Operations and Principal Activities

The principal continuing activities during the year of entities within the consolidated entity was petroleum exploration.

OPERATING AND FINANCIAL REVIEW

Review Of Operations

Corporate

During the year, the Company raised capital and issued securities as outlined under the heading ‘Financing and Investing Activities’.

Operating Results

Consolidated loss after income tax for the financial year was $8,346,561 (2009: Loss $13,598,608). The loss for the year includes the write down and impairment of oil and gas interests of $1,392,971 and the loss on sale of oil and gas production properties of $4,439,893.

Financial Position

At 30 June 2010, the Consolidated Group had:

• cash reserves of $621,512; and

• net assets of $24,095,295.

Financing and Investing Activities

The Company issued the following securities during the year:

• In July 2009, the company issued 10,000,000 ordinary fully paid shares at an issue price of 7 cents each, raising gross proceeds of $700,000;

• In January 2010, the company issued 5,855,352 ordinary fully paid shares at an issue price of 5 cents in satisfaction of outstanding convertible note interest;

• In February 2010, the company issued 9,000,000 ordinary fully paid shares at an issue price of 4 cents each, raising gross proceeds of $360,000;

• In May 2010, the company issued 331,112,500 ordinary fully paid shares at an issue price of 4 cents each, raising gross proceeds of $13,244,500;

• In May 2010, the company issued 371,401,455 ordinary fully paid shares at an issue price of 5 cents as part consideration for the acquisition of Blackgate Resources LLC; and

• The company issued 3,326,507 ordinary fully paid shares on the conversion of unsecured convertible notes with a face value of $155,000.

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Modena Resources Limited

DIRECTORS REPORT

Dividends

No dividends were paid during the year and no recommendation is made as to dividends.

Project Review

Blackgate Resources LLC

During the year, the Company executed an Agreement (“Agreement”) with various parties to acquire 100% of issued capital of Blackgate Resources LLC (“Blackgate”) a company duly incorporated in the state of Texas, USA.

Blackgate’s primary asset is a priority secured and unsecured Debt position with BNP Petroleum Corporation, a company incorporated in Texas, USA which was the subject of Chapter 11 (Bankruptcy) proceedings in the USA. BNP Petroleum held production assets both oil and gas onshore in the USA.

The Company initiated operations after the purchase from the US Bankruptcy Court on June 28, 2010. Over the time period between acceptance of the assets formerly known as BNP Petroleum Corporation and BNP Oil & Gas Properties, Ltd., Company staff re-established physical operations and management functions. The Company was primarily focused on post-acquisition activities and integration during the reporting period.

The physical assets acquired are exclusively natural gas assets and are located in the prolific gas field zones of coastal Texas. The Company acquired 24 wells and worked to re-establish or increase oil and gas production on the private land and State of Texas tract leases. Natural gas production is targeted for 1900 mcfpd by the 30[th] September and 6,900 mcfpd by the 31[st] December 2010.

The key activities from acquisition to financial year-end consisted of:

1. Assessed operational status of all wells and activities

2. Repaired and or maintained access roads, tank batteries, and dispatch yard

3. Reactivated wells

4. Established offices in the field (Corpus Christi) and management (Houston)

5. Developed working relationships with governmental agencies (US National Park Services, Texas Railroad Commission, and State of Texas General Land Office).

6. Established engineering best practices and review procedures

7. Verified and rehabilitated monitoring equipment

8. Engaged private landowners and stakeholders regarding current operations and future plans

9. Filed required regulatory permits and filings

10. Reactivated flow meters and reestablished sales and marketing nomination proceedings with transportation of gas passing through the Houston Pipeline system.

Production/Operations

Reestablished the A4 well with an initial production of 120 mcf per month.

1. Mid Frio #1 – ordered sand separator and blow down tanks. Production equipment cleaned out and serviced with coil tubing. Swabbed unit awaiting coil tubing.

4. Mid Frio Unit #2 – prepared for nitrogen work.

5. La Playa SL 938 #2 – worked a wireline and ran sinker bar.

6. S. Sprint Gas Unit #2 – Hauled off water and put well back on production. Well-flowed at 190 – 200 mcfd into compressor. Concluded current facilities are adequate for current operation.

7. Dunn-McCampbell #11A – Hauled off water in preparation to restore production. The well had 2300# SITP (pressure). Well produced initially at +/- 85 mcf. Ordered compressor from Exterran.

8. Dunn-McCampbell #A-4 - Hauled off water, cleaned up facilities and restored to production of +/- 150 mcfd into compressor.

9. Dunn-Peach #7T – accessed for uphole recompletion.

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Modena Resources Limited

DIRECTORS REPORT

1. Dunn-Peach #6 – Evaluated for recompletion or salt water disposal.

2. Dunn-Peach #4 ST2 – No significant activity.

3. La Playa SL 938 #1 – with the well previously making 300 mcfd attempted gas lift, however, this failed to establish tubing / casing communication. Reevalution of well capabilities uphole underway.

4. Dunn–Peach # 1 –re-initiate the permitting process to establish as a salt water disposal well.

5. ST 999 #1 (Manzano Prospect) – no activity.

6. Dunn – McCampbell #A-6 – Wellbore has been plugged, but tree and surface pad are intact.

7. Dunn–McCampbell #A-8 – evaluating options. This pad is valuable for future drilling.

8. Sullivan City Field – evaluated for reestablishment of production. There are four wells in close proximity. The Rivera #1 and #2 are collocated with the central tank battery. The Saenz #1 and #2 are close to each other and only a short distance away.

Bullseye Prospect

During the year, the Company completed the sale of its 9% working interest in the Bullseye Prospect, including the existing wells and associated facilities, to Golden Gate Petroleum Limited ( GGP ). GGP has also acquired the Company’s10% working interest in the Wilson Prospect.

The consideration payable for the sale was A$300,000 in cash and the issue of 16,000,000 listed ordinary fully paid shares in Golden Gate Petroleum Limited.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Significant changes in the state of affairs of the consolidated entity during the financial year are detailed under the heading ‘Operating and Financial Review’ of this Report.

In the opinion of the Directors, there were no other significant changes in the state of affairs of the consolidated entity that occurred during the financial year under review not otherwise disclosed in this report or in the financial report.

EVENTS SUBSEQUENT TO BALANCE DATE

No matters or circumstances have arisen, since the end of the financial year, which significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in subsequent financial years, other than:

• (a) the Company has issued 49,116,805 ordinary fully paid shares on the conversion of unsecured convertible notes with a face value of $840,000; and

• (b) entered into an agreement with Truestone Capital Specialist Investments Limited, a London based specialist financier to provide a $10,000,000 working capital facility to the company, subject to completion of formal agreements and completion of due diligence. The term of the proposed facility is 24 months with an option for extension by mutual agreement for a further 12 months. The facility drawdown is solely at the election of the Company and subject to a formal drawdown process.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

The consolidated entity will continue to pursue its principal activity of exploration and evaluation, particularly in respect to the Projects as more particularly outlined under the heading ‘Operating and Financial Review’ of this Report. The company will also continue to pursue other potential investment opportunities to enhance shareholder value.

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Modena Resources Limited

DIRECTORS REPORT

MEETINGS OF DIRECTORS

The numbers of meetings of Directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director were as follows:

	Board of	Directors
	Number eligible	Number
	to attend	attended
A Hamilton	5	5
C Willis	9	9
J Row	4	4
T Izelaar	4	4
D Sutherland	5	5
D Jendry	1	1
W Bellman	4	4
P Black	-	-

REMUNERATION REPORT (AUDITED)

This report details the nature and amount of remuneration for each Director and Executive of Modena Resources Limited. The information provided in the remuneration report includes remuneration disclosures that are audited as required by section 308(3C) of the Corporations Act 2001.

For the purposes of this report Key Management Personnel of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the group, directly or indirectly, including any Director (whether Executive or otherwise) of the parent company, and includes five executives in the parent group receiving the highest remuneration.

For the purposes of this report the term “Executive” includes those key management personnel who are not Directors of the parent company.

Remuneration Committee

The full Board carries out the role and responsibilities of the Remuneration Committee and is responsible for determining and reviewing the compensation arrangements for the Directors themselves, the Managing Director and any Executives.

Executive remuneration is reviewed annually having regard to individual and business performance, relevant comparative remuneration and internal and independent external advice.

A. Remuneration policy

The board policy is to remunerate Directors at market rates for time, commitment and responsibilities. The board determines payments to the 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 Directors’ fees that can be paid is subject to approval by shareholders in general meeting, from time to time. Fees for Non-Executive Directors are not linked to the performance of the consolidated entity. However, to align Directors’ interests with shareholders interests, the Directors are encouraged to hold shares in the company.

The Company’s aim is to remunerate at a level that will attract and retain high-calibre Directors and employees. Company officers and Directors are remunerated to a level consistent with the size of the Company.

The Executive Directors and full time Executives receive a superannuation guarantee contribution required by the government, which is currently 9%, and do not receive any other retirement benefits. Some individuals, however, may choose to sacrifice part of their salary to increase payments towards superannuation.

All remuneration paid to Directors and Executives is valued at the cost to the Company and expensed.

The Board believes that it has implemented suitable practices and procedures that are appropriate for an organisation of this size and maturity.

The Company did not pay any performance-based component of remuneration during the year.

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Modena Resources Limited

DIRECTORS REPORT

B. Remuneration structure

In accordance with best practice corporate governance, the structure of Non-Executive Director and Executive compensation is separate and distinct.

Non-Executive Director Compensation

Objective

The Board seeks to set aggregate compensation at a level that provides the Company with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.

Structure

The Constitution and the ASX Listing Rules specify that the aggregate compensation of Non-Executive Directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the Directors as agreed. The latest determination approved by shareholders was an aggregate compensation of $150,000 per year.

The amount of aggregate compensation sought to be approved by shareholders and the manner in which it is apportioned amongst Directors is reviewed annually. The Board considers advice from external consultants as well as the fees paid to Non-Executive Directors of comparable companies when undertaking the annual review process. Non-Executive Directors’ remuneration may include an incentive portion consisting of options, as considered appropriate by the Board, which may be subject to Shareholder approval in accordance with ASX listing rules.

Separate from their duties as Directors, the Non-Executive Directors undertake work for the Company directly related to the evaluation and implementation of various business opportunities, including oil and gas exploration/evaluation and new business ventures, for which they receive a daily rate. These payments are made pursuant to individual agreement with the non-executive Directors and are not taken into account when determining their aggregate remuneration levels.

Executive Compensation

Objective

The entity aims to reward executives with a level and mix of compensation commensurate with their position and responsibilities within the entity so as to:

• reward executives for Company and individual performance against targets set by appropriate benchmarks;

• align the interests of Executives with those of shareholders;

• link rewards with the strategic goals and performance of the Company; and

• ensure total compensation is competitive by market standards.

Structure

In determining the level and make-up of Executive remuneration, the Board negotiates a remuneration to reflect the market salary for a position and individual of comparable responsibility and experience. Due to the limited size of the Company and of its operations and financial affairs, the use of a separate remuneration committee is not considered appropriate. Remuneration is regularly compared with the external market by participation in industry salary surveys and during recruitment activities generally. If required, the Board may engage an external consultant to provide independent advice in the form of a written report detailing market levels of remuneration for comparable Executive roles.

Remuneration consists of a fixed remuneration and a long term incentive portion as considered appropriate.

Compensation may consist of the following key elements:

• Fixed Compensation;

• Variable Compensation;

• Short Term Incentive (STI); and

• Long Term Incentive (LTI).

Fixed Remuneration

The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. Fixed remuneration is reviewed annually by the Board having regard to the Company and individual performance, relevant comparable remuneration in the mining exploration sector and external advice.

The fixed remuneration is a base salary or monthly consulting fee.

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Modena Resources Limited

DIRECTORS REPORT

Variable Pay — Long Term Incentives

The objective of long term incentives is to reward Directors/Executives in a manner which aligns this element of remuneration with the creation of shareholder wealth. The incentive portion is payable based upon attainment of objectives related to the Director’s/Executive’s job responsibilities. The objectives vary, but all are targeted to relate directly to the Company’s business and financial performance and thus to shareholder value.

Long term incentives (LTI’s) granted to Directors/ Executives are delivered in the form of options.

LTI grants to Executives are delivered in the form of employee share options. These options are issued at an exercise price determined by the Board at the time of issue. The employee share options generally vest over a selected period.

The objective of the granting options is to reward Executives in a manner which aligns the element of remuneration with the creation of shareholder wealth. As such LTI’s are made to Executives who are able to influence the generation of shareholder wealth and thus have an impact on the Company’s performance.

The level of LTI granted is, in turn, dependent on the Company’s recent share price performance, the seniority of the Executive, and the responsibilities the Executive assumes in the Company.

Typically, the grant of LTIs occurs at the commencement of employment or in the event that the individual receives a promotion and, as such, is not subsequently affected by the individual’s performance over time.

No options have been issued in the current year.

C. Employment contracts of Directors and senior Executives

The employment arrangements of the Directors and key management personnel are not formalised in contracts of employment.

D. Details of remuneration for year

Directors

The following persons were Directors of Modena Resources Limited during the financial year:

Anthony Hamilton Chairman (non-executive) – appointed 2 November 2009 Craig Willis Director (executive) James Row Director (non-executive) – appointed 26 March 2010 Tony Izelaar Director (non-executive) – appointed 13 April 2010 David Sutherland Director (non-executive) – resigned 13 April 2010 Douglas Jendry Director (non-executive) – appointed 13 January 2010; resigned 2 February 2010 Wayne Bellman Chairman (non-executive) – resigned 2 November 2009 Paul Black Director (non-executive) –resigned 31 July 2009

Executives

The following persons were Executives of Modena Resources Limited during the financial year:

Jay Stephenson Company Secretary – appointed 5 July 2010 James Story Company Secretary – resigned 6 November 2009 Linton Scott Company Secretary – resigned 5 July 2010

There were no other persons that fulfilled the role of a key management person, other than those disclosed as Executive Directors.

The above are among the five highest remunerated executives as required to be disclosed under the Corporations Act 2001.

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Modena Resources Limited

DIRECTORS REPORT

Remuneration

Details of the remuneration of each Director and named Executive officer of the company, including their personally-related entities, during the year was as follows:

	Year	Short Term Benefits	Post Employment	Share Based Payments
		Salary and fees $	Superannuation $	Options $	Total $	Remuneration consisting of options during the year %
Directors
A Hamilton Appointed 2/11/2009	2010 2009	202,585 -	- -	- -	202,585 -	- -
C Willis	2010 2009	250,000 280,000	22,500 22,500	- -	272,500 302,500	- -
J Row Appointed 26/3/2010	2010 2009	15,000 -	- -	- -	15,000 -	- -
T Izelaar Appointed 13/4/2010	2010 2009	- -	- -	- -	- -	- -
D Sutherland Resigned 13/04/2010	2010 2009	58,234 -	- -	- -	58,234 -	- -
D Jendry Appointed 13/1/2010 Resigned 2/2/2010	2010 2009	2,700 -	- -	- -	2,700 -	- -
W Bellman Resigned 2/11/2009	2010 2009	16,667 21,102	1,500 1,899	- -	18,167 23,001	- -
N Bassett Resigned 30/01/2009	2010 2009	- 52,000	- -	- -	- 52,000	- -
P Hampshire Passed away27/10/2008	2010 2009	- 50,000	- -	- -	- 50,000	- -
P Black Appointed 29/04/2009	2010 2009	- -	- -	- -	- -	- -
Executives
J Story Resigned 6/11/2009	2010 2009	- -	- -	- -	- -	- -
L Scott	2010 2009	15,000 30,000	- -	- -	15,000 30,000	- -
Total	2010 2009	560,186 433,102	24,000 24,399	- -	584,186 457,501

There were no performance related payments made during the year. Performance hurdles are not attached to remuneration options, however the Board determines appropriate vesting periods to provide rewards over a period of time to key management personnel.

E. Compensation options to key management personnel

No options were granted as equity compensation benefits to Directors and Executives during the year.

F. Shares issued to key management personnel on exercise of compensation options

No shares were issued to Directors and Executives on exercise of compensation options during the year.

End of Audited Remuneration Report.

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Modena Resources Limited

DIRECTORS REPORT

INSURANCE OF OFFICERS

The Company has in place an insurance policy insuring Directors and Officers of the Company against any liability arising from a claim brought by a third party against the Company or its Directors and officers, and against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in their capacity as a Director or officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company.

In accordance with a confidentiality clause under the insurance policy, the amount of the premium paid to the insurers has not been disclosed. This is permitted under Section 300(9) of the Corporations Act 2001.

SHARE OPTIONS

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

Date of Expiry Exercise Price Number under Option 31 December 2013 $0.06 317,556,250

317,556,250 options were granted during the financial year. 68,423,722 options were cancelled and 5,000 options were exercised raising $1,000 during the financial year.

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

ENVIRONMENTAL REGULATIONS

There have been no recorded incidents of non-compliance with any applicable international, national or local declarations, treaties, conventions or regulations associated with environmental issues during the reporting period. There have not been any known significant breaches of any environmental regulations during the year under review and up until the date of this report.

The Directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 which requires entities to report annual greenhouse gas emissions and energy use. For the first measurement period 1 July 2008 to 30 June 2009 the directors have assessed that there are no current reporting requirements, but may be required to do so in the future.

CORPORATE GOVERNANCE

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Modena Resources Limited support and have adhered to the principles of corporate governance and have established a set of policies and manuals for the purpose of managing corporate governance. The Company’s detailed corporate governance policy statement is contained in the section headed ‘Corporate Governance Statement’ of the annual report.

AUDITOR’S INDEPENDENCE AND NON-AUDIT SERVICES

The auditor’s independence declaration for the year ended 30 June 2010, as required under section 307C of the Corporations Act 2001, has been received and is included within the financial report.

Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in Note 4 to the financial statements. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

The directors are of the opinion that the services do not compromise the auditor’s independence as all non-audit services have been reviewed to ensure that they do not impact the integrity and objectivity of the auditor and none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board.

Signed in accordance with a resolution of directors.

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A Hamilton ChairmanPerth, 30 September 2010

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Modena Resources Limited

38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia

Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au

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30 September 2010

The Board of Directors Modena Resources Limited Suite B 150 Hay Street SUBIACO, WA 6008

Dear Sirs

DECLARATION OF INDEPENDENCE BY PETER TOLL TO THE DIRECTORS OF MODENA RESOURCES LIMITED

As lead auditor of Modena Resources Limited for the year ended 30 June 2010, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

• the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

• any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Modena Resources Limited and the entities it controlled during the period.

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Peter Toll Director

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BDO Audit (WA) Pty Ltd Perth, Western Australia

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

CORPORATE GOVERNANCE STATEMENT

The Board of Directors of Modena Resources Limited is responsible for the corporate governance of the Company. The Board guides and monitors the business and affairs of Modena Resources Limited on behalf of the shareholders by whom they are elected and to whom they are accountable. This statement reports on Modena Resources Limited’s key governance principles and practices.

1. COMPLIANCE WITH BEST PRACTICE RECOMMENDATIONS

The Company, as a listed entity, must comply with the Corporations Act 2001 and the Australian Securities Exchange Limited (ASX) Listing Rules. The ASX Listing Rules require the Company to report on the extent to which it has followed the Corporate Governance Recommendations published by the ASX Corporate Governance Council (ASXCGC). Where a recommendation has not been followed, that fact is disclosed, together with the reasons for the departure.

The table below summaries the Company’s compliance with the Corporate Governance Council’s Recommendations:

Principle #	ASX Corporate Governance Council Recommendations	Reference	Comply
Principle 1	Lay solid foundations for management and oversight
1.1	Establish the functions reserved to the board and those delegated to senior executives and disclose those functions.	2(a)	Yes
1.2	Disclose the process for evaluating the performance of senior executives.	2(h), 3(b), Remuneration Report	Yes
1.3	Provide the information indicated in the Guide to reporting on principle 1.	2(a), 2(h), 3(b), Remuneration Report	Yes
Principle 2	Structure the board to add value
2.1	A majorityof the board should be independent directors.	2(e)	No
2.2	The chair should be an independent director.	2(c),2(e)	No
2.3	The roles of chair and chief executive officer should not be exercised bythe same individual.	2(b), 2(c)	No
2.4	The Board should establish a nomination committee.	2(d)	No
2.5	Disclose the process for evaluating the performance of the board, its committees and individual directors.	2(h)	Yes
2.6	Provide the information indicated in the Guide to reporting on principle 2.	2(b), 2(c), 2(d), 2(e), 2(h)	Yes
Principle 3	Promote ethical and responsible decision-making
3.1	Establish a code of conduct and disclose the code or a summaryas to:	4(a)	Yes
	• the practices necessary to maintain confidence in the company’s integrity;
	• the practices necessary to take into account the company’s legal obligations and the reasonable expectations of its stakeholders; and
	• the responsibility and accountability of individuals for reporting and investigatingreports of unethicalpractices.
3.2	Establish a policy concerning trading in company securities by directors, senior executives and employees and disclose the policy or a summary.	4(b)	Yes
3.3	Provide the information indicated in the Guide to reporting on principle 3.	4(a), 4(b)	Yes
Principle 4	Safeguard integrity in financial reporting
4.1	The Board should establish an audit committee.	3(a)	Yes
4.2	The audit committee should be structured so that it:	3(a)	No
	• consists onlyof non-executive directors;
	• consists of a majorityof independent directors;
	• is chaired by an independent chair, who is not chair of the Board; and
	• has at least three members.

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CORPORATE GOVERNANCE STATEMENT

Principle #	ASX Corporate Governance Council Recommendations	Reference	Comply
4.3	The audit committee should have a formal charter	3(a)	Yes
4.4	Provide the information indicated in the Guide to reporting on principle 4.	3(a)	Yes
Principle 5	Make timely and balanced disclosure
5.1	Establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at senior executive level for that compliance and disclose those policies or a summaryof thosepolicies.	5(a), 5(b)	Yes
5.2	Provide the information indicated in the Guide to reporting on principle 5.	5(a), 5(b)	Yes
Principle 6	Respect the rights of shareholders
6.1	Design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose thepolicyor a summaryof thatpolicy.	5(a), 5(b)	Yes
6.2	Provide the information indicated in the Guide to reporting on principle 6.	5(a), 5(b)	Yes
Principle 7	Recognise and manage risk
7.1	Establish policies for the oversight and management of material business risks and disclose a summaryof thosepolicies.	6(a)	Yes
7.2	The Board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks.	6(a), 6(b), 6(d)	Yes
7.3	The Board should disclose whether it had received assurance from the chief executive officer and the chief financial officer 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 reportingrisks.	6(c)	Yes
7.4	Provide the information indicated in the Guide to reporting on principle 7.	6(a), 6(b), 6(c), 6(d)	Yes
Principle 8	Remunerate fairly and responsibly
8.1	The Board should establish a remuneration committee.	3(b)	No
8.2	Clearly distinguish the structure on non-executive directors’ remuneration from that of executive directors and senior executives.	3(b), Remuneration Report	Yes
8.3	Provide the information indicated in the Guide to reporting on principle 8.	3(b),	Yes

2. THE BOARD OF DIRECTORS

2(a) Roles and Responsibilities of the Board

The Board is accountable to the shareholders and investors for the overall performance of the Company and takes responsibility for monitoring the Company’s business and affairs and setting its strategic direction, establishing and overseeing the Company’s financial position.

The Board is responsible for:

• Appointing, evaluating, rewarding and if necessary the removal of the Chief Executive Officer ("CEO") 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;

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CORPORATE GOVERNANCE STATEMENT

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

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

• Satisfying itself that the financial statements of the Company fairly and accurately set out the financial position and financial performance of the Company 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.

• Approving and monitoring financial and other reporting;

• Assuring itself that appropriate audit arrangements are in place;

• Ensuring that the Company acts legally and responsibly on all matters and assuring itself that the Company has adopted a Code of Conduct and that the Company practice is consistent with that Code; and other policies; and

• Reporting to and advising shareholders.

Other than as specifically reserved to the Board, responsibility for the day-to-day management of the Company’s business activities is delegated to the Chief Executive Officer and Executive Management.

2(b) Board Composition

The Directors determine the composition of the Board employing the following principles:

• the Board, in accordance with the Company’s constitution must comprise a minimum of three Directors;

• the roles of the Chairman of the Board and of the Chief Executive Officer should be exercised by different individuals;

• the majority of the Board should comprise Directors who are non-executive;

• the Board should represent a broad range of qualifications, experience and expertise considered of benefit to the Company; and

• the Board must be structured in such a way that it has a proper understanding of, and competency in, the current and emerging issues facing the Company, and can effectively review management’s decisions.

The Board currently does not and has not throughout the year comprised a majority of independent directors. The Board is currently comprised of two non-executive Directors and two executive-directors. Given the size and scale of the Company’s operations during the year, the Board did not consider it essential to appoint further non-executive directors simply to comply with the Corporate Governance Council’s Recommendations.

The skills, experience, expertise, qualifications and terms of office of each director in office at the date of the annual report is included in the Directors’ Report.

The Chair is not independent and the role of Chair and chief executive officer are exercised by the same person. Given the size and scale of the Company’s operations during the year, the Board did not consider it essential to appoint an independent Chair simply in order to comply with the Corporate Governance Council’s Recommendations. The Board considers that, at this stage of the Company’s development, the executive role carried out by the Chairman is in the best interests of the Company.

The Company’s constitution requires one-third of the Directors (or the next lowest whole number) to retire by rotation at each Annual General Meeting (AGM). The Directors to retire at each AGM are those who have been longest in office since their last election. Where Directors have served for equal periods, they may agree amongst themselves or determine by lot who will retire. A Director must retire in any event at the third AGM since he or she was last elected or re-elected. Retiring Directors may offer themselves for re-election.

A Director appointed as an additional or casual Director by the Board will hold office until the next AGM when they may be re-elected.

The Chief Executive Officer is not subject to retirement by rotation and, along with any Director appointed as an additional or casual Director, is not to be taken into account in determining the number of Directors required to retire by rotation.

2(c) Chairman and Chief Executive Officer

The Chairman is responsible for:

• leadership of the Board;

• the efficient organisation and conduct of the Board’s functions;

• the promotion of constructive and respectful relations between Board members and between the Board and management;

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CORPORATE GOVERNANCE STATEMENT

• contributing to the briefing of Directors in relation to issues arising at Board meetings;

• facilitating the effective contribution of all Board members; and

• committing the time necessary to effectively discharge the role of the Chairman.

The current Chair is not independent. The role of Chair and chief executive officer are exercised by the same person. Given the size and scale of the Company’s operations during the year, the Board did not consider it essential to appoint an independent Chair simply in order to comply with the Corporate Governance Council’s Recommendations. The Board had considered this matter and decided that the non-compliance did not affect the operation of the Company.

• The Chief Executive Officer is responsible for:

• implementing the Company’s strategies and policies; and

• the day-to-day management of the Company’s business activities

The Board specifies that the roles of the Chairman and the Chief Executive Officer are separate roles to be undertaken by separate people.

Due to the nature of the company’s current activities it does not currently have a chief executive officer and this role is effectively undertaken by the Chairman. The Board considers that, at this stage of the Company’s development, the executive role carried out by the Chairman is in the best interests of the Company. The Board will monitor the need to separate these roles as the company’s circumstances change.

2(d) Nomination Committee

The Company does not comply with ASX Recommendation 2.4. The Company is not of a relevant size to consider formation of a nomination committee to deal with the selection and appointment of new Directors and as such a nomination committee has not been formed.

Nominations of new Directors are considered by the full Board in accordance with the Company’s “Selection of New Directors Policy”.

2(e) Independent Directors

The Company recognises that independent Directors are important in assuring shareholders that the Board is properly fulfilling its role and is diligent in holding senior management accountable for its performance. The Board assesses each of the directors against specific criteria to decide whether they are in a position to exercise independent judgment.

Directors of Modena Resources Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent judgement.

In making this assessment, the Board considers all relevant facts and circumstances. Relationships that the Board will take into consideration when assessing independence are whether a Director:

• is a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company;

• is employed, or has previously been employed in an executive capacity by the Company or another Company member, and there has not been a period of at least three years between ceasing such employment and serving on the Board;

• has within the last three years been a principal of a material professional advisor or a material consultant to the Company or another Company member, or an employee materially associated with the service provided;

• is a material supplier or customer of the Company or other Company member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; or

• has a material contractual relationship with the Company or another Company member other than as a Director.

The Board is currently comprised of two independent non-executive Directors.

In accordance with the definition of independence above, and the materiality thresholds set, the following Directors of Modena Resources Limited are considered to be independent:

Name Position

James Row Non-Executive Director Tony Izelaar Non-Executive Director

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Modena Resources Limited

CORPORATE GOVERNANCE STATEMENT

The following persons were directors of Modena Resources Limited during the financial year:

Anthony Hamilton	Director (Executive) – appointed 2 November 2009
Craig Willis	Director (Executive)
James Row	Director (Non-Executive) – appointed 26 March 2010
Tony Izelaar	Director (Non-Executive) – appointed 13 April 2010
David Sutherland	Director (Non-Executive) – resigned 13 April 2010
Douglas Jendry	Director (Non-Executive) – appointed 13 January 2010; resigned 2 February 2010
Wayne Bellman	Director (Non-Executive) – resigned 2 November 2009
Paul Black	Director (Non-Executive) – resigned 31 July 2009

In recognition of the importance of independent views and the Board’s role in supervising the activities of management the Chairman must be a Non-Executive Director.

2(f) Avoidance of conflicts of interest by a Director

In order to ensure that any interests of a Director in a particular matter to be considered by the Board are known by each Director, each Director is required by the Company to disclose any relationships, duties or interests held that may give rise to a potential conflict. Directors are required to adhere strictly to constraints on their participation and voting in relation to any matters in which they may have an interest.

2(g) Board access to information and independent advice

Directors are able to access members of the management team at any time to request relevant information.

There are procedures in place, agreed by the Board, to enable Directors, in furtherance of their duties, to seek independent professional advice at the company’s expense.

2(h) Review of Board performance

The performance of the Board is reviewed regularly by the Chairman. The Chairman conducts performance evaluations which involve an assessment of each Board member’s performance against specific and measurable qualitative and quantitative performance criteria. The performance criteria against which directors and executives are assessed is aligned with the financial and non-financial objectives of Modena Resources Limited. Directors whose performance is consistently unsatisfactory may be asked to retire.

3. BOARD COMMITTEES

3(a) Audit Committee

Given the size and scale of the Company’s operations the full Board undertakes the role of the Audit Committee. The Audit Committee does not comply with ASX Recommendation 4.2 as the Chair of the Board is Chair of the Audit Committee and the Audit Committee does not comprise only Non-Executive Directors. The role and responsibilities of the Audit Committee are summarised below.

The Audit Committee is responsible for reviewing the integrity of the Company’s financial reporting and overseeing the independence of the external auditors. The Board sets aside time to deal with issues and responsibilities usually delegated to the Audit Committee to ensure the integrity of the financial statements of the Company and the independence of the auditor.

The Board reviews the audited annual and half-year financial statements and any reports which accompany published financial statements and recommends their approval to the members. The Board also reviews annually the appointment of the external auditor, their independence and their fees.

The Board is also responsible for establishing policies on risk oversight and management. The Company has not formed a separate Risk Management Committee due to the size and scale of its operations.

External Auditors

The Company’s policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs. It is BDO Kendalls Audit and Assurance (WA) Pty Ltd’s policy to rotate engagement Directors on listed companies at least every five years.

An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in the notes to the financial statements in the Annual Report.

There is no indemnity provided by the company to the auditor in respect of any potential liability to third parties.

The external auditor is requested to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and preparation and content of the audit report.

Details of non-audit services provided by the auditors during the year are disclosed in note 4.

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Modena Resources Limited

CORPORATE GOVERNANCE STATEMENT

3(b) Remuneration Committee

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

The Board has not established a separate Remuneration Committee due to the size and scale of its operations. This does not comply with Recommendation 8.1 however the Board as a whole takes responsibility for such issues.

The responsibilities include setting policies for senior officers remuneration, setting the terms and conditions for the CEO, reviewing and making recommendations to the Board on the Company’s incentive schemes and superannuation arrangements, reviewing the remuneration of both executive and non-executive directors and undertaking reviews of the CEO’s performance.

The Company has structured the remuneration of its senior executive, where applicable, such that it comprises a fixed salary, statutory superannuation and participation in the Company’s employee share option plan. The Company believes that by remunerating senior executives in this manner it rewards them for performance and aligns their interests with those of shareholders and increases the Company’s performance.

Non-executive directors are paid their fees out of the maximum aggregate amount approved by shareholders for nonexecutive director remuneration. The Company does not adhere to Recommendation 8.2 Box 8.2 ‘Non-executive directors should not receive options or bonus payments’. The Company may, in the future, granted options to non-executive directors. The Board is of the view that options (for both executive and non-executive directors) are a cost effective benefit for small companies such as Modena Resources Limited that seek to conserve cash reserves. They also provide an incentive that ultimately benefits both shareholders and the optionholders, as optionholders will only benefit if the market value of the underlying shares exceeds the option strike price. Ultimately, shareholders will make that determination.

The remuneration received by directors and executives in the current period is contained in the “Remuneration Report” within the Directors’ Report of the Annual Report.

4. ETHICAL AND RESPONSIBLE DECISION MAKING

4(a) Code of Ethics and Conduct

The Board endeavours to ensure that the Directors, officers and employees of the Company act with integrity and observe the highest standards of behaviour and business ethics in relation to their corporate activities. The “Code of Conduct” sets out the principles, practices, and standards of personal behaviour the Company expects people to adopt in their daily business activities.

All Directors, officers and employees are required to comply with the Code of Conduct. Senior managers are expected to ensure that employees, contractors, consultants, agents and partners under their supervision are aware of the Company’s expectations as set out in the Code of Conduct.

All Directors, officers and employees are expected to:

• comply with the law;

• act in the best interests of the Company;

• be responsible and accountable for their actions; and

• observe the ethical principles of fairness, honesty and truthfulness, including prompt disclosure of potential conflicts.

4(b) Policy concerning trading in Company securities

The Company’s “Dealings in Company Shares and Options Policy” applies to all Directors, officers and employees. This policy sets out the restrictions on dealing in securities by people who work for, or are associated with the Company and is intended to assist in maintaining market confidence in the integrity of dealings in the Company’s securities. The policy stipulates that the only appropriate time for a Director, officer or employee to deal in the Company’s securities is when they are not in possession of price sensitive information that is not generally available to the market.

As a matter of practice, Company shares may only be dealt with by Directors and officers of the Company under the following guidelines:

• No trading is permitted in the period of 14 days preceding release of each quarterly report, half-yearly report and annual financial report of the Company or for a period of 2 trading days after the release of such report;

• Guidelines are to be considered complementary to and not replace the various sections of the Corporations Act 2001 dealing with insider trading; and

• Prior approval of the Chairman, or in his absence, the approval of two directors is required prior to any trading being undertaken.

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Modena Resources Limited

CORPORATE GOVERNANCE STATEMENT

5. TIMELY AND BALANCED DISCLOSURE

5(a) Shareholder communication

The Company believes that all shareholders should have equal and timely access to material information about the Company including its financial situation, performance, ownership and governance. The Company’s “ASX Disclosure Policy” encourages effective communication with its shareholders by requiring that Company announcements:

• be factual and subject to internal vetting and authorisation before issue;

• be made in a timely manner;

• not omit material information;

• be expressed in a clear and objective manner to allow investors to assess the impact of the information when making investment decisions;

• be in compliance with ASX Listing Rules continuous disclosure requirements; and

• be placed on the Company’s website promptly following release.

Shareholders are encouraged to participate in general meetings. Copies of addresses by the Chairman or Chief Executive Officer are disclosed to the market and posted on the Company’s website. The Company’s external auditor attends the Company’s annual general meeting to answer shareholder questions about the conduct of the audit, the preparation and content of the audit report, the accounting policies adopted by the Company and the independence of the auditor in relation to the conduct of the audit.

5(b) Continuous disclosure policy

The Company is committed to ensuring that shareholders and the market are provided with full and timely information and that all stakeholders have equal opportunities to receive externally available information issued by the Company. The Company’s “ASX Disclosure Policy” described in 5(a) reinforces the Company’s commitment to continuous disclosure and outline management’s accountabilities and the processes to be followed for ensuring compliance.

The policy also contains guidelines on information that may be price sensitive. The Company Secretary has been nominated as the person responsible for communications with the ASX. This role includes responsibility for ensuring compliance with the continuous disclosure requirements with the ASX Listing Rules and overseeing and coordinating information disclosure to the ASX.

6. RECOGNISING AND MANAGING RISK

The Board is responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. The Company’s policies are designed to ensure strategic, operational, legal, reputation and financial risks are identified, assessed, effectively and efficiently managed and monitored to enable achievement of the Company’s business objectives. A written policy in relation to risk oversight and management has been established (“Risk Management and Internal Control Policy”). Considerable importance is placed on maintaining a strong control environment. There is an organisation structure with clearly drawn responsibilities.

6(a) Board oversight of the risk management system

The Board is responsible for approving and overseeing the risk management system. The Board reviews, at least annually, the effectiveness of the implementation of the risk management controls and procedures.

The principle aim of the system of internal control is the management of business risks, with a view to enhancing the value of shareholders' investments and safeguarding assets. Although no system of internal control can provide absolute assurance that the business risks will be fully mitigated, the internal control systems have been designed to meet the Company's specific needs and the risks to which it is exposed.

Annually, 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.

The Board is also responsible for identifying and monitoring areas of significant business risk. Internal control measures currently adopted by the Board include:

• at least quarterly reporting to the Board in respect of operations and the Company’s financial position, with a comparison of actual results against budget; and

• regular reports to the Board by appropriate members of the management team and/or independent advisers, outlining the nature of particular risks and highlighting measures which are either in place or can be adopted to manage or mitigate those risks.

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CORPORATE GOVERNANCE STATEMENT

6(b) Risk management roles and responsibilities

The Board is responsible for approving and reviewing the Company’s risk management strategy and policy. Executive management is responsible for implementing the Board approved risk management strategy and developing policies, controls, processes and procedures to identify and manage risks in all of the Company’s activities.

The Board is responsible for satisfying itself that management has developed and implemented a sound system of risk management and internal control.

6(c) Chief Executive Officer and Chief Financial Officer Certification

The Chief Executive Officer and Chief Financial Officer, or equivalent, provide to the Board written certification that in all material respects:

• The Company’s financial statements present a true and fair view of the Company’s financial condition and operational results and are in accordance with relevant accounting standards;

• The statement given to the Board on the integrity of the Company’s financial statements is founded on a sound system of risk management and internal compliance and controls which implements the policies adopted by the Board; and

• The Company’s risk management an internal compliance and control system is operating efficiently and effectively in all material respects.

6(d) Internal review and risk evaluation

Assurance is provided to the Board by executive management on the adequacy and effectiveness of management controls for risk on a regular basis.

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Modena Resources Limited

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2010

Revenue from sales Cost of sales Gross profit (loss) Interest received Profit on sale of financial assets Exploration and evaluation expenditure Impairment of capitalised exploration and evaluation Loss on sale of oil and gas production properties Impairment of receivables Depreciation and impairment Directors fees and benefits expense Administration, consulting and other expenses Interest and finance costs Loss on sale of available for sale assets Loss before income tax expense Income tax expense Net loss for year Other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive income attributable to members of the Modena Resources Limited Loss per Share: Basic and diluted loss per share	Note	Consolidated 2010 $ 2009 $
	2(a) 2(b) 2(c) 3 5	335,095 819,200 (268,026) (862,397)
		67,069 (43,197) 38,693 11,505 174,584 - (1,392,971) (6,203,211) - (4,000,000) (4,439,893) - - (672,035) (5,459) (5,888) (545,186) (427,501) (1,562,248) (730,243) (681,150) (1,470,701) - (57,337)
		(8,346,561) (13,598,608) - -
		(8,346,561) (13,598,608) - -
		- -
		(8,346,561) (13,598,608)
		Cents Cents (3.97) (17.5)

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

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Modena Resources Limited

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2010

ASSETS Current Assets Cash and cash equivalents Trade and other receivables Financial assets at fair value through profit and loss Total Current Assets Non-Current Assets Property, plant and equipment Deferred exploration and evaluation Oil and gas properties Total Non-Current Assets Total Assets LIABILITIES Current Liabilities Trade and other payables Borrowings Total Current Liabilities Non-Current Liabilities Borrowings Total Non-Current Liabilities Total Liabilities Net Assets EQUITY Issued capital Reserves Accumulated losses Total Equity	Note	Consolidated 2010 $ 2009 $
	6 7 8 9 10 11 12 13 13 14 15	621,512 133,140 1,743,313 117,471 70,000 21,833
		2,434,825 272,444
		246,707 35,352 28,060,488 398,587 - 5,644,088
		28,307,195 6,078,027
		30,742,020 6,350,471
		1,099,620 897,489 5,547,105 4,562,105
		6,646,725 5,459,594
		- 1,140,000
		- 1,140,000
		6,646,725 6,599,594
		24,095,295 (249,123)
		48,162,388 15,671,409 864,910 664,910 (24,932,003) (16,585,442)
		24,095,295 (249,123)

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

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Modena Resources Limited

STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2010

Consolidated Balance at 1 July 2008 Net loss for the year Total comprehensive loss for the year Transactions with equity holders: Securities issued during the year Transaction costs Balance at 30 June 2009 Net loss for the year Total comprehensive loss for the year Securities issued during the year Transaction costs Balance at 30 June 2010	Issued Capital $ Accumulated Losses $ Option Issue Reserve $ Total $ 12,646,090 (2,986,834) - 9,659,256 - (13,598,608) - (13,598,608)
	- (13,598,608) - (13,598,608) 3,092,537 - 664,910 3,757,447 (67,218) - - (67,218)
	15,671,409 (16,585,442) 664,910 (249,123) - (8,346,561) - (8,346,561)
	- (8,346,561) - (8,346,561) 33,323,341 - 200,000 33,523,341 (832,362) - - (832,362)
	48,162,388 (24,932,003) 864,910 24,095,295

The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.

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Modena Resources Limited

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2010

Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Net cash (used in) operating activities Cash flows from investing activities Purchase of available-for-sale financial assets Proceeds on sale of available-for-sale financial assets Payment of refundable option fee Payment of rental bond Purchase of property, plant & equipment Proceeds on sale of oil and gas production properties Acquisition of oil and gas properties Payments on exploration interests Net cash (used in) investing activities Cash flows from financing activities Proceeds from issue of securities Payment of share issue costs Proceeds from borrowings Repayment of borrowings Net cash provided by financing activities Net (decrease) increase in cash held Cash at beginning of the financial year Effect of exchange rate changes Cash at end of the financial year	Note	Consolidated 2010 $ 2009 $
	6(i) 6	Inflows/ (Outflows) Inflows/ (Outflows)
		- 637,354 (2,174,169) (1,133,569) 38,693 11,431 (507,324) (281,448)
		(2,642,800) (766,232)
		- (32,215) 622,417 76,100 (1,507,514) - (30,624) - (216,814) - 300,000 - (9,118,750) - (477,483) (5,827,324)
		(10,428,768) (5,783,439)
		14,384,500 1,828,106 (800,862) (56,533) - 4,720,000 - (30,000)
		13,583,638 6,461,573
		512,070 (88,098) 133,140 221,238 (23,698) -
		621,512 133,140

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

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Modena Resources Limited

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

1. Summary of Significant Accounting Policies

(a) Basis of Preparation

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

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

Modena Resources Limited (the parent) is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in the Directors’ Report.

Financial statement presentation

The Group has applied the revised AASB 101 Presentation of Financial Statements , which became effective as of 1 January 2009. The revised standard requires the separate presentation of the statement of comprehensive income and a statement of changes in equity. All non-owner changes in equity must now be presented in the statement of comprehensive income. As a consequence, the group had to change the presentation of its financial statements. Comparative information has been re-presented so that it is also in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

Reporting Basis and Conventions including Going Concern

The financial report has been prepared on the basis of accounting principles applicable to a going concern, which assumes the commercial realisation of the future potential of the Company’s and consolidated entity’s assets and the discharge of their liabilities in the normal course of business.

Notwithstanding the fact that the company has a working capital deficit of $4,211,900, the directors are of the opinion that the company is a going concern for the following reasons. Subsequent to balance date, the Company has:

• (a) issued 49,116,805 ordinary fully paid shares on the conversion of unsecured convertible notes with a face value of $840,000, thereby reducing liabilities by the same amount; and

• (b) entered into an agreement with Truestone Capital Specialist Investments Limited, a London based specialist financier to provide a $10,000,000 working capital facility to the company The term of the proposed facility is 24 months with an option for extension by mutual agreement for a further 12 months. The facility is an equity drawdown facility and is solely at the election of the Company and subject to a formal drawdown process

The Board considers that the Company is a going concern and recognises that additional funding is required to ensure that the Company can continue to fund its and the consolidated entity’s operations and further develop their petroleum exploration and evaluation assets during the twelve month period from the date of this financial report. Such additional funding, as occurred during the year ended 30 June 2010, can be derived from either one or a combination of the following:

• The placement of securities under ASX Listing Rule 7.1 or otherwise;

• An excluded offer pursuant to the Corporations Act 2001; or

• • The sale of assets.

Accordingly, the Directors believe that subject to prevailing equity market conditions, the Company will obtain sufficient funding to enable it and the consolidated entity to continue as going concerns and that it is appropriate to adopt that basis of accounting in the preparation of the financial report. Should the company be unable to obtain sufficient funding as outlined above, there is significant uncertainty whether or not the entity will be able to continue as a going concern.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or to the amounts or classification of liabilities that might be necessary should the Company and the consolidated entity not be able to continue as going concerns.

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

Separate financial statements for Modena Resources Limited are no longer required as a consequence of the changes to the Corporations Act 2001. Financial information for Modena Resources Limited is included in note 21.

26

Modena Resources Limited

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

1. Summary of Significant Accounting Policies (Cont.)

(b) Adoption of new and revised standards

In the year ended 30 June 2010, the Group has reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period.

It has been determined by the Group that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change is necessary to Group accounting policies.

The Group has also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2010. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to Group accounting policies.

The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 30 June 2010, but have not been applied in preparing this financial report: There is no material impact in relation to adopting these standards.

Set out below is a summary of issued accounting standards, relevant to the Consolidated Entity, which are not yet effective and a description of their expected effect on the Group’s financial statements(if any).

AASB 2009-5 Amendments to Australian Accounting Standards – Presentation of Financial Statements [AASB 101]

(effective 1 January 2010)

In May 2009 the AASB issued an amendment to AASB 101 Presentation of Financial Statements, which clarifies that terms of a liability that could, at the option of the counterparty, result in the liability being settled by the issue of equity instruments, do not affect its classification. This means that unless the terms of such liabilities require a transfer of cash or other assets within 12 months, they do not necessarily have to be classified as current liabilities. Initial adoption of this amendment will have no impact as the consolidated entity does not have any current liabilities where the counterparty has the option to have the liabilities settled by the issue of equity instruments.

AASB 2009-5 Amendments to Australian Accounting Standards – Statement of Cash Flows [AASB 107] (effective 1 January 2010)

In May 2009 the AASB issued an amendment to AASB 107 Statement of Cash Flows, which clarifies that only expenditures that result in a recognised asset in the statement of financial position are eligible for classification as cash flows from investing activities. Initial adoption of this amendment will have no impact as the entity only recognises cash flows from investing activities for expenditures that result in a recognised asset in the statement of financial position.

AASB 2009-5 Amendments to Australian Accounting Standards – Impairment of Assets [AASB 136] (effective 1 January 2010)

In May 2009 the AASB issued an amendment to AASB 136 Impairment of Assets, which clarifies that CGUs to which goodwill is allocated cannot be larger than an operating segment as defined in AASB 8 Operating Segments before aggregation. There will be no impact as these requirements are only required to be applied prospectively to goodwill impairment calculations for periods commencing on or after 1 July 2010.

AASB 2010-3 Amendments to Australian Accounting Standards – Business Combinations [AASB 3] (effective 1 July 2010)

In June 2010 the AASB issued an amendment to AASB 3 Business Combinations , which Confirms that any balances of contingent consideration that relate to acquisitions under the superseded AASB 3 must be accounted for under the superseded standard, i.e. not via profit or loss. There will be no impact on initial adoption as adjustments to contingent consideration on acquisitions prior to 1 July 2009 have been accounted for in accordance with the superseded AASB 3.

AASB 2010-4 Amendments to Australian Accounting Standards – Financial Instruments: Disclosures [AASB 7] (effective 1 January 2011)

In June 2010 the AASB issued an amendment to AASB 7 Financial Instruments: Disclosures , which deletes various disclosures relating to credit risk, renegotiated loans and receivables and the fair value of collateral held. There will be no impact on initial adoption to amounts recognised in the financial statement as the amendments result in fewer disclosures only.

27

Modena Resources Limited

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

1. Summary of Significant Accounting Policies (Cont.)

(b) Adoption of new and revised standards (Cont.)

AASB 2010-4 Amendments to Australian Accounting Standards – Presentation of Financial Statements [AASB 101] (effective 1 January 2011)

In June 2010 the AASB issued an amendment to AASB 101 Presentation of Financial Statements , which allows that a detailed reconciliation of each item of other comprehensive income may be included in the statement of changes in equity or in the notes to the financial statements. There will be no impact on initial adoption of this amendment as a detailed reconciliation of each item of other comprehensive income has always been included in the statement of changes in equity.

AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-Settled Share-based Payment Transactions [AASB 2]

(effective from 1 January 2010)

The amendments made by the AASB to AASB 2 confirm that an entity receiving goods or services in a group share based payment arrangement must recognise an expense for those goods or services regardless if which entity in the group settles the transaction or whether the transaction is settled in shares or cash. They also clarify how the group share-based payment arrangement should be measured, that is, whether it is measured as an equity- or cash-settled transaction. The group will apply these amendments retrospectively for the financial reporting period commencing on 1 July 2010. There will be no impact on the group’s financial statements.

AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issues [AASB 132] (effective from 1 February 2010)

In October 2009 the AASB issued an amendment to AASB 132 Financial Instruments: Presentation , which addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment must be applied retrospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors . The group will apply the amended standard from 1 July 2010. As the performance rights issue made by the group is denominated in the groups functional currency (AUD), the amendment will not have any effect on the group’s financial statements.

Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective from 1 January 2011)

In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures . It is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities and clarifies and simplifies the definition of a related party. The group will apply the amended standards from 1 July 2011. When the amendments are applied, the group and the parent will need to disclose any transaction between its subsidiaries. However, it has yet to put systems in place to capture the necessary information. It is therefore not possible to disclose the financial impact, if any, of the amendment on the related party disclosures.

AASB Interpretation 19 Extinguishing financial liabilities with equity instruments and AASB 2009-13 Amendments to Australian Accounting Standards arising from Interpretation 19

(effective from 1 July 2010)

AASB Interpretation 19 clarifies the accounting when an entity renegotiates the terms of its debt with the results that the liability is extinguished by the debtor issuing its own equity instrument to the creditor (debt for equity swap). It requires a gain or loss to be recognised in profit or loss which measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued. The group will apply the interpretation from 1 July 2010. It is not expected to have any impact on the group’s financial statements since it is only retrospectively applied from the beginning of the earliest period presented (1 July 2009) and the group has not entered into any debt for equity swaps since that date.

AASB 9 (issued December 2009) - Financial Instruments (Effective from 1 January 2013)

This amends the requirements for classification and measurement of financial asset. Due to the recent release of these amendments and that adoption is only mandatory for the 30 June 2014 year end, the entity has not yet made an assessment of the impact of these amendments.

28

Modena Resources Limited

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

1. Summary of Significant Accounting Policies (Cont.)

(c) Statement of Compliance

The financial report was authorised for issue on 30 September 2010.

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

(d) Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Company. The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the Consolidated Entity, being Modena Resources Limited (“Company” or “Parent Entity”) and its subsidiaries as defined in AASB 127: Consolidated and Separate Financial Statements. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements.

The consolidated financial statements include the information and results of each subsidiary from the date on which the Company obtains control and until such time as the Company ceases to control such entity. Acquisitions of entities are accounted for using the acquisition method of accounting.

In preparing the consolidated financial statements, all inter-company balances and transactions, income and expenses and profit and losses resulting from intra-group transactions are eliminated in full.

Non-controlling interests' in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income and statement of financial position respectively. Total comprehensive income is attributable to the owners of Modena Resources Limited and non-controlling interests even if this results in the non-controlling interests having a debit balance.

Transactions eliminated on consolidation

All intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

Unrealised gains arising from transactions with associates and jointly controlled entities are eliminated to the extent of the consolidated entity’s interest in the entity with adjustments made to the ‘Investment in Associates’ and ‘Share of Associates Net Profit’ accounts.

Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Gains and losses are recognised as the contributed assets are consumed or sold by the associate or, if not consumed or sold by the associate, when the consolidated entity’s interest in such entity is disposed of.

Changes in ownership interests

The group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interest in the subsidiary. Any differences between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Modena Resources Limited.

When the group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

If the ownership in a jointly controlled entity or an associate is reduced, but join control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss, where appropriate.

Changes in accounting policy

The group has changed its accounting policy for transactions with non-controlling interests and the accounting for loss of control, joint control or significant influence from 1 July 2009 when a revised AASB 127 consolidated and Separate Financial Statements became operative.

29

Modena Resources Limited

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

1. Summary of Significant Accounting Policies (Cont.)

(d) Basis of consolidation (continued)

Previously transactions with non-controlling interests were treated as transactions with parties external to the group. Disposals therefore resulted in gains or losses in profit or loss and purchases resulted in the recognition of goodwill. On disposal or partial disposal, a proportionate interest in reserves attributable to the subsidiary were reclassified to profit or loss or directly to retained earnings.

Previously when the group ceased to have control, joint control or significant influence over an entity, the carrying amount of the investment at the date of control, joint control or significant influence ceased became its cost for the purposes of subsequently accounting for the retained interests as associates, jointly controlled entity or financial assets.

The group has applied the new accounting policy retrospectively to transactions occurring on or after 1 July 2009. As a consequence, no adjustments were necessary to any of the amounts previously recognised in the financial statements.

Details of the controlled entities is contained in Note 21. The controlled entities have a June financial year end.

(e) Business combinations

The acquisition method of accounting is used to account for all business combinations. Consideration is measured at the fair value of the assets transferred, liabilities incurred and equity interests issued by the group on acquisition date. Consideration also includes the acquisition date fair values of any contingent consideration arrangements, any pre-existing equity interests in the acquiree and share-based payment awards of the acquiree that are required to be replaced in a business combination. The acquisition date is the date on which the group obtains control of the acquiree. Where equity instruments are issued as part of the consideration, the value of the equity instruments is their published market price at the acquisition date unless, in rare circumstances it can be demonstrated that the published price at acquisition date is not fair value and that other evidence and valuation methods provide a more reliable measure of fair value.

Identifiable assets acquired and liabilities and contingent liabilities assumed in business combinations are, with limited exceptions, initially measured at their fair values at acquisition date. Goodwill represents the excess of the consideration transferred and the amount of the non-controlling interest in the acquiree over fair value of the identifiable net assets acquired. If the consideration and non-controlling interest of the acquiree is less than the fair value of the net identifiable assets acquired, the difference is recognised in profit or loss as a bargain purchase price, but only after a reassessment of the identification and measurement of the net assets acquired.

For each business combination, the group measures non-controlling interests at either fair value or at the non-controlling interest's proportionate share of the acquiree's identifiable net assets.

Acquisition-related costs are expensed when incurred. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Where the group obtains control of a subsidiary that was previously accounted for as an equity accounted investment in associate or jointly controlled entity, the group remeasures its previously held equity interest in the acquiree at its acquisition date fair value and the resulting gain or loss is recognised in profit or loss.

Assets and liabilities from business combinations involving entities or businesses under common control are accounted for at the carrying amounts recognised in the group's controlling shareholder's consolidated financial statements.

The group adopted AASB 3 Business Combinations (2008) and AASB 127 Consolidated and Separate Financial Statements (2008) for business combinations occurring on or after 1 July 2009. All business combinations occurring on or after 1 July 2009 have been accounted for using the acquisition method. The change in accounting policy has been applied prospectively so no retrospective adjustments have been made to business combinations that occurred prior to 1 July 2009 in these financial statements. However, there are some significant changes to the way business combinations are accounted for from 1 July 2009.

Major changes include:

• Contingent consideration classified as debt is remeasured through profit or loss instead of adjusting the purchase consideration (goodwill).

• Acquisition-related costs are expensed immediately, rather than being included as part of the purchase consideration. Non-controlling interests can be measured on an acquisition by acquisition basis at either fair value or at the noncontrolling interest's proportionate share of the acquiree's identifiable net assets.

• If the group recognises deferred tax assets after the initial accounting is complete, there will be no adjustment to goodwill and this will result in increased profits in the period when these deferred tax assets are recognised.

30

Modena Resources Limited

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

1. Summary of Significant Accounting Policies (Cont.)

(f) Income Tax

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

Deferred income tax liabilities are recognised for all taxable temporary differences:

• except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, expect where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

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

• except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

Unrecognised deferred income tax assets are reassessed at each Statement of Financial Position date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

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

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

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

(g) Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in AUD, which is Modena Resources Limited’s functional and presentation currency.

Transactions and balances

Transactions in foreign currency are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at balance date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

Financial statements of foreign operations

The assets and liabilities of foreign operations are translated to Australian dollars at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Australian dollars at rates approximating to the foreign rates of exchange ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised directly in a separate component of equity.

31

Modena Resources Limited

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

1. Summary of Significant Accounting Policies (Cont.)

(h) Cash and cash equivalents

Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as described above, net of outstanding bank overdrafts.

(i) Impairment of financial assets

The company assesses at each Statement of Financial Position date whether a financial asset or group of financial assets is impaired.

(i) Financial assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through use of an allowance account.

The amount of the loss is recognised in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

(ii) Available-for-sale investments

If there is objective evidence that an available-for-sale investment is impaired, an amount comprising the difference between its cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to the Statement of Comprehensive Income. Reversals of impairment losses for equity instruments classified as available-for-sale are not recognised in profit.

(j) Property, Plant and equipment

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

Plant and equipment

Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of 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 value 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.

32

Modena Resources Limited

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

1. Summary of Significant Accounting Policies (Cont.)

Depreciation

The depreciable amount of all fixed assets is depreciated on a straight-line basis over their useful lives to the consolidated group commencing from the time the asset is held ready for use.

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

Class of Fixed Asset Depreciation Rate Plant and equipment 15 – 30%

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each Statement of Financial Position 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.

(k) Exploration and evaluation expenditure

Exploration and evaluation expenditure in relation to each separate area of interest are recognised as an exploration and evaluation asset in the year in which they are incurred where the following conditions are satisfied:

• (i) the rights to tenure of the area of interest are current; and

• (ii) at least one of the following conditions is also met:

• (a) The exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale; or

• (b) Exploration and evaluation activities in the area 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 relation to, the area of interest are continuing.

The costs of drilling exploration wells are initially capitalised pending the results of the well. Costs are expensed where the well does not result in the successful discovery of economically recoverable hydrocarbons. Areas of interest may be recognised at either the field or the well level, depending on the nature of the project. Subsequent to the recognition of an area of interest, all further costs relating to an area or interest are capitalised.

Each potential or recognised area of interest is reviewed half yearly to determine whether economic quantities of reserves have been found or whether further exploration work is underway or planned to support the continued carry forward of capitalised costs. Upon approval for the commercial development of an area of interest, accumulated expenditure for the area of interest is transferred to oil and gas properties.

The recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective area of interest.

The carrying value of capitalised exploration and evaluation expenditure is assessed for impairment at the cash-generating unit level whenever the facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. An impairment exists when the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. Any impairment losses are recognised in the Statement of Comprehensive Income.

(l) Oil and gas properties

Oil and gas properties include construction, installation or completion of infrastructure facilities such as pipelines and platforms, transferred exploration and evaluation costs, and the cost of development wells, 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 costs are charged to the Statement of Comprehensive Income during the financial period in which they are incurred.

Oil and gas properties are amortised over the expected useful lives of the asset.

33

Modena Resources Limited

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

(m) Financial assets

Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, or available-for-sale investments, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus directly attributable transactions costs. The company determines the classification of its financial assets after initial recognition.

All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the company commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the marketplace.

(i) Financial assets at fair value through profit or loss Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments held for trading are recognised in profit or loss.

(ii) Trade and other receivables Trade receivables, which generally have 30-90 day terms, are recognised initially at fair value and subsequently at amortised cost less an allowance for any uncollectible amounts. An allowance for doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts and is recognised in a separate account. Bad debts are written off when identified.

Fair value

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

(n) Trade and other payables

Trade payables and other payables are recognised initially at fair value and subsequently carried at amortised costs and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services.

(o) Interest bearing loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent nonconvertible bond. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the conversion option. This is recognised and included in shareholders’ equity, net of income tax effects.

Borrowings are removed from the Statement of Financial Position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or expenses.

Gains and losses are recognised in profit or loss when the liabilities are derecognised.

34

Modena Resources Limited

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

1. Summary of Significant Accounting Policies (Cont.)

(p) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate assets but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Statement of Comprehensive Income net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability.

When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

(q) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in income in the period in which they are incurred.

(r) Employee benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. 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.

(s) Issued capital

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.

(t) Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:

• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and

• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(u) Revenue recognition

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

Sales Revenue

Sales revenue is recognised when the significant risks and rewards of ownership have passed to the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered passed to the buyer at the time of delivery of goods to the customer. Delivery of product is by pipeline and under well specific contracts that define transfer point of ownership. The nominated transfer point has appropriate meter equipment installed. Product pricing is dependant upon product quality and delivery volume rates, and base price marked to an appropriate commodity market benchmark.

Interest

Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset.

35

Modena Resources Limited

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

1. Summary of Significant Accounting Policies (Cont.)

(v) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

• when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• receivables and payables, which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position.

Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(w) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board or Directors.

Change in accounting policy

The Group has adopted AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB 114 Segment Reporting . AASB 8 requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes. In addition, the segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision makers.

The Board of Directors review internal management reports on a monthly basis that is consistent with the information provided in the statement of comprehensive income, statement of financial position and statement of cash flows. As a result no reconciliation is required, because the information as presented is used by the Board to make strategic decisions.

(x) Significant Accounting Estimates and Judgments

Significant accounting judgments

In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements.

Exploration and evaluation assets

The Group’s accounting policy for exploration and evaluation expenditure is set out at Note 1(k). The application of this policy necessarily requires management to make certain estimates and assumptions as to future events and circumstances. Any such estimates and assumptions may change as new information becomes available. If, after having capitalised expenditure under the policy, it is concluded that the expenditures are unlikely to be recovered by future exploitation or sale, then the relevant capitalised amount will be written off to the Statement of Comprehensive Income.

Functional currency

The functional currency for each entity in the Group is the currency of the primary economic environment in which it operates. Where the indicators for determining functional currency are mixed, the Directors have used judgement to determine which currency most faithfully presents the economic effects of the underlying transactions. The Directors have determined that the functional currency of Modena Resources Limited is the Australian Dollar. Had they determined that the functional currency was USD this may have impacted the carrying amount of the assets on the Statement of Financial Position, with a corresponding change to equity and the profit and loss for the year.

Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

36

Modena Resources Limited

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

1. Summary of Significant Accounting Policies (Cont.)

(x) Significant Accounting Estimates and Judgments (Cont.)

Impairment of assets

In determining the recoverable amount of assets, in the absence of quoted market prices, estimations are made regarding the present value of future cash flows using asset-specific discount rates and the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

Provisional accounting of business combination

On initial recognition, the assets and liabilities of the acquired business are included in the consolidated statement of financial position at their fair values. In measuring fair value of exploration projects, management considers generally accepted technical valuation methodologies and comparable transactions in determining the fair value. Exploration and evaluation expenditure assets (refer note 10 and 19) have been recognised provisionally at reporting date as the determination of the fair values is incomplete. Once completed this may result in adjustments to the fair values attributed to these assets including potential classification adjustments between infrastructure, Exploration and Oil and Gas Properties.

37

Modena Resources Limited

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

2. Revenue and Expenses (a) Revenue Royalty revenue Other revenue Interest received – other corporations Profit on sale of financial assets (b) Cost of sales Operating costs Amortisation - Depletion (c) Administration costs Corporate consulting fees Audit fee ASX & registry fees Legal fees Travel & accommodation Other expenses	Consolidated 2010 $ 2009 $
	335,095 819,200 38,693 11,505 174,584 -
	548,372 830,705
	223,476 280,823 44,550 581,574
	268,026 862,397
	524,018 253,520 46,068 54,520 105,893 68,584 48,856 143,239 354,918 36,305 482,495 174,075
	1,562,248 730,243

3. Income Tax Expense

(a) Income Tax Expense

The income tax expense for the year differs from the prima facie tax as follows:

Loss before income tax Prima facie income tax (benefit) @ 30% Tax effect of non-deductible items Deferred tax assets not brought to account Total income tax expense (b) Deferred Tax Assets Deferred tax assets not brought to account arising from tax losses, the benefits of which will only be realised if the conditions for deductibility set out in Note 1(f) occur:	(8,346,561) (13,598,608)
	(2,503,968) (4,079,582) 2,458,644 1,895,739 45,324 2,183,844
	- -
	237,722 192,397

There are no franking credits available to the Group.

Net deferred tax assets have not been brought to account as it is not probable within the immediate future that tax profits will be available against which deductible temporary differences and tax losses can be utilised.

38

Modena Resources Limited

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

4. Auditors Remuneration Amounts, received or due and receivable by BDO Audit (WA) Pty Ltd for: - audit and review of financial reports - Tax compliance services 5.Earnings per Share (EPS) Basic loss per share The loss and weighted average number of ordinary shares used in the calculation of basic earnings per share is as follows: Earnings – Net loss for year Weighted average number of ordinary shares used in the calculation of basic EPS 6. Cash and Cash Equivalents Cash at bank and on hand Cash at bank earns interest at floating rates based on daily bank deposit rates. The Group’s and the parent entity’s exposure to interest rate risk is discussed in Note 23. (i) Reconciliation of loss for the year to net cash flows used in operating activities: Loss for the year Depreciation and impairment Amortisation of production assets Exploration expenditure written off Impairment of receivables Equity settled share based payment (Profit) Loss on sale of available-for-sale assets Foreign exchange loss Changes in assets and liabilities Receivables Payables Net cash flows (used in) operating activities	Consolidated 2010 $ 2009 $
	39,733 29,720 6,335 24,800
	46,068 54,520
	Cents Cents (3.97) (17.5)
	(8,346,561) (13,598,608)
	No. 210,408,150 No. 77,551,741 621,512 133,140
	(8,346,561) (13,598,608) 5,459 5,888 44,550 581,574 5,562,812 10,203,211 - 672,035 292,768 1,050,000 (174,584) 57,337 23,698 - 32,296 (182,805) (83,238) 445,136
	2,642,800 (766,232)

39

Modena Resources Limited

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

6. Cash and Cash Equivalents (Cont.)

(ii) Non-cash financing and investing activities

During the year:

• (a) Convertible Notes with a face value of $155,000 were converted to 3,326,507 ordinary fully paid shares, pursuant to the conversion terms of the Notes;

• (b) The company issued 5,855,352 ordinary fully paid at an issue price of 5 cents each in satisfaction of accrued interest of $292,768 on convertible note and loan facilities; and

• (c) The company issued 371,401,455 ordinary fully paid shares at an issue price of 5 cents each as part consideration for the acquisition of Blackgate Resources LLC.

During the previous financial year:

• (d) Convertible Notes with a face value of $879,342 were converted to 5,812,817 ordinary fully paid shares, pursuant to the conversion terms of the Notes; and

• (e) The company issued 10,000,000 ordinary fully paid shares at an issue price of 10.5 cents each as consideration for the provision of a convertible note facility.

7. Trade and other receivables Current Trade receivables Rental bond GST and other taxes recoverable Other receivables Amount owing by other entity Allowance for impairment of receivable Short-term loan	Consolidated 2010 $ 2009 $
	- 95,956 30,624 - 48,170 13,765 157,005 7,750 672,035 672,035 (672,035) (672,035) 1,507,514 -
	1,743,313 117,471

Terms and conditions relating to the above financial instruments:

• Other receivables are non-interest bearing and generally repayable within 30 days.

• Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value.

• The amount owing by other entity is an advance to assist with the acquisition of an oil rig, upon which no interest is charged and the advance is repayable on demand. The fair value approximates the carrying value of the receivable. An allowance for impairment loss is recognised when there is objective evidence that the loan receivable is impaired.

• Information about the Group’s exposure to credit risk, foreign currency and interest rate risk in relation to trade and other receivables is provided in Note 23.

• The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivable mentioned above. Refer to Note 23 for more information on the risk management policy of the Group and the credit quality of the entity’s trade receivables.

Ageing of past due but not impaired:

60 – 90 days 90 – 120 days 120 + days	157,005 - - - 1,507,514 -
	1,664,519 -

40

Modena Resources Limited

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

7. Trade and other receivables (continued)

In determining the recoverability of a trade receivable, the Group considers any changes in the credit quality of the trade receivable from the date credit was initially granted up to the balance date. The directors believe that there is no further credit provision required in excess of the allowance for impairment.

8. Available for sale financial assets

Current

Listed shares – at fair value

70,000 21,833

Listed shares are readily saleable with no fixed terms. All shares held in listed companies are valued at their fair value. There would be no material capital gains tax payable if these assets were sold at the reporting date.

9. Property, Plant and Equipment

Plant and equipment – at cost Accumulated depreciation Total written down amount Reconciliation: At 1 July, net of accumulated depreciation Additions Depreciation charge and impairment At 30 June, net of accumulated depreciation	258,940 42,126 (12,233) (6,774)
	246,707 35,352
	246,707 35,352
	35,352 41,240 216,814 - (5,459) (5,888)
	246,707 35,352

10. Deferred exploration expenditure

Exploration and evaluation – at cost Reconciliation: Expenditure brought forward Oil and gas properties acquired from acquisition of controlled entity Expenditure incurred during year Expenditure written off Transferred to production Allowance for impairment * Expenditure carried forward	28,060,488 398,587
	398,587 11,849,989 27,943,692 - 725,068 4,710,253 (608,272) - (5,958,444) (398,587) (10,203,211)
	28,060,488 398,587

• Allowance for impairment includes write offs incurred with respect to drilling and prospect costs. The write offs were as a result of lack of exploration success and the directors ongoing analysis of the economic viability of the projects.

The ultimate recoupment of the exploration and evaluation expenditure carried forward is dependent on the successful development and commercial exploitation or, alternatively, sale of the relevant areas of interest, at amounts at least equal to book value.

These assets have been recognised provisionally at reporting date as accounting is incomplete relating to fair value adjustments and potential classification adjustments between infrastructure, exploration properties and oil & gas production properties.

41

Modena Resources Limited

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

11. Oil and gas properties Oil and gas properties – at cost Accumulated amortisation Reconciliation: Carrying amount at beginning Transferred from exploration Additions Proceeds on disposal Loss on disposal transferred to the Statement of Comprehensive Income (i) Amortisation Allowance for impairment Carrying amount at end	Consolidated 2010 $ 2009 $
	- 6,225,662 - (581,574)
	- 5,644,088
	5,644,088 - - 5,958,444 22,467 267,218 (796,000) - (4,439,893) - (44,550) (581,574) (386,112)
	- 5,644,088

During the year, the Company completed the sale of its 9% working interest in the Bullseye Prospect, including the existing wells and associated facilities, to Golden Gate Petroleum Limited (GGP). GGP has also acquired the Company’s10% working interest in the Wilson Prospect.

The consideration payable for the sale was A$300,000 in cash and the issue of 16,000,000 listed ordinary fully paid shares in Golden Gate Petroleum Limited with a value of $0.035 per share at date of sale.

12. Trade and Other Payables Current Trade payables and accruals Interest payable – other corporations	973,461 649,858 126,159 247,631
	1,099,620 897,489

Terms and conditions relating to the above financial instruments:

• Trade creditors are non-interest bearing and are normally settled between 30 to 90 days.

• Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.

• • Information about the Group’s and the parent entity’s exposure to foreign exchange risk is provided in Note 23.

13. Borrowings

Current Convertible Notes – Secured Convertible Notes – Unsecured (i) Loan - Unsecured Non-Current Convertible Notes – Unsecured (i)	- 2,500,000 4,547,105 1,062,105 1,000,000 1,000,000
	5,547,105 4,562,105
	- 1,140,000

Risk exposures

Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in Note 23.

42

Modena Resources Limited

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

13. Borrowings (Cont.)

(i) Convertible Notes – Unsecured

At balance date the company had unsecured convertible notes outstanding with a face value of $4,547,105. The principle terms of these convertible notes are as follows:

Number:	1,304,014	1,244,444	2,942,857	10,000,000
Face value:	$457,105	$560,000	$1,030,000	$2,500,000
Redemption date:	31/01/2011	28/02/2011	30/09/2010	29/01/2011
Conversion rights:	Convertible, in whole or part, by either the Noteholder or the Company at any time from the date of issue and prior to the Redemption date.	Convertible, in whole or part, by either the Noteholder or the Company at any time from the date of issue and prior to the Redemption date.	Convertible, in whole or part, by the Noteholder at any time from the date of issue and prior to the redemption date; and by the Company where the closing price of the Company’s shares is 35 cents or greater for 5 consecutive trading days.	Convertible, in whole or in part, by the Noteholder at any time from the date of issue and prior to the Redemption Date.
Conversion price:	The lesser of 35 cents or 85% of 5 day average market price.	The lesser of 45 cents or 85% of 5 day average market price.	The lesser of 35 cents or 85% of 5 day average market price.	The lesser of 25 cents or 80% of the 30 day weighted average market price
Interest rate:	10.5%	12.5%	10%	12%

The carrying amount of the Group’s non-current borrowings, represented by unsecured convertible notes, approximates their fair value.

Risk exposures

Information about the Group’s exposure to interest rate and foreign currency changes is provided in Note 23.

43

Modena Resources Limited

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

14. Issued Capital (a)Issued and paid up capital Ordinary shares fully paid (b) Movement in ordinary shares on issue At 1 July 2008 Issue on conversion of convertible notes Issue on exercise of options Issue for cash – 17 October 2008 Issue for cash – 23 December 2008 Issue in satisfaction of facility fee Entitlement issue – 29 April 2009 Expenses of issue At 1 July 2009 Issue on conversion of convertible notes Issue on exercise of options Issue for cash – 21 July 2009 Issue in satisfaction of convertible note interest Issue for cash – 8 February 2010 Issue for cash – 4 May 2010 Issue on acquisition of Blackgate Resources LLC – 5 May 2010 Issue for cash – 24 May 2010 Expenses of issue At 30 June 2010	Consolidated 2010 $ 2009 $
	48,162,388 15,671,409
	Number $ 66,491,056 12,646,090 5,812,817 879,342 4,100 820 2,583,333 697,500 1,300,000 351,000 10,000,000 1,050,000 1,626,791 113,875 - (67,218)
	87,818,097 15,671,409 3,326,507 155,000 5,000 1,000 10,000,000 700,000 5,855,352 292,768 9,000,000 360,000 220,737,500 8,829,500 371,401,455 18,570,073 110,375,000 4,415,000 - (832,362)
	818,518,911 48,162,388

(c) Share Options

At the end of the year, the following options over unissued ordinary shares were outstanding:

• 317,556,250 listed options expiring 31 December 2013 at an exercise price of 6 cents each

317,556,250 options expiring 31 December 2013 at an exercise price of 6 cents each were issued during the year. 68,423,722 options were cancelled and 5,000 options were exercised.

(d) Terms and conditions of issued capital

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.

Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

(e) Capital Management Risk

Information about the Group’s capital risk management practices are provided in Note 23.

44

Modena Resources Limited

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

15. Reserves Option reserve Nature and purpose of reserve The option issue reserve is used to accumulate amounts received on the issue of options and records items recognised as expenses on share based payments. Movements in reserve Opening balance 1 July Issue of options for cash Closing balance 30 June	Consolidated 2010 $ 2009 $
	864,910 664,910
	664,910 - 200,000 664,910
	864,910 664,910

16. Contingencies

There are no contingent liabilities or contingent assets of the Group at balance date.

17. Interests in Joint Venture Operations

At 30 June 2010 the Group was a participant in the following joint ventures:

		Working Interest
	2010		2009
Bullseye Prospect
Location: Iberia Parish, South Louisiana, USA	-		9%
Wilson Prospect
Location: Padre Island, Texas, USA	-		10%
South Lost Hills Properties
Location: Kern County, California, USA	-		10%
Armstrong Properties
Location: Kenedy County, Texas, USA	-		25%
Manzano Prospect
Location: Kleberg County, Texas, USA	-		12.5%

The joint ventures are not separate legal entities. They are contractual arrangements between the participants for the sharing of costs and output and do not in themselves generate revenues and profit.

In order to maintain its percentage working interest in the freehold and leasehold interest in petroleum licenses, the Group has certain obligations to meet its share of joint venture costs. These commitments may be varied as a result of renegotiations, relinquishments, farm-outs or sales. All joint venture interests were relinquished during the year.

45

Modena Resources Limited

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

18. Financial Reporting by Segments

The Group has applied AASB 8 Operating Segments from 1 July 2009. AASB 8 requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes. The Board as a whole will regularly review the identified segments in order to allocate resources to the segment and to assess its performance.

Following adoption of AASB 8, the identification of the Group’s reportable segments has not changed. During the year, the Group considers that it has only operated in one segment, being the oil and gas sector in the United States of America.

Accordingly, under the ‘management approach’ outlined only one operating segment has been identified and no further disclosure is required in the notes to the consolidated financial statements

(i) Segment performance

Year ended 30 June 2010 Revenue Sales revenue Total segment revenue Segment net loss before tax Reconciliation of segment result to net loss before tax Amounts not included in segment result but reviewed by the - Unallocated items - Interest revenue - Profit on sale of non-current assets - Depreciation expense - Directors fees and benefits expense - Interest anf finance costs - Administration, management and other expenses Net loss before tax Year ended 30 June 2009 Revenue Sales revenue Total segment revenue Segment net loss before tax Reconciliation of segment result to net loss before tax - Unallocated items - Interest revenue - Loss on available for sale assets - Impairment expense - Depreciation expense - Directors fees and benefits expense - Interest and finance costs - Administration, management and other expenses Net loss before tax	United States of America (Oil & Gas Prospects) 335,095
	335,095
	(5,765,795)
	38,693 174,584 (5,459) (545,186) (681,150) (1,562,248)
	(8,346,561)
	United States of America (Oil & Gas Prospects) 819,200
	819,200
	(10,246,408)
	11,505 (57,337) (672,035) (5,888) (427,501) (1,470,701) (730,243)
	(13,598,608)

46

Modena Resources Limited

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

(ii) Segment assets

As at 30 June 2010 Segment assets Segment asset increases/(decreases) for the year - Exploration and evaluation Reconciliation of segment assets to total assets Other assets Total assets from continuing operations As at 30 June 2009 Segment assets Segment asset increases/(decreases) for the year - Exploration and evaluation Reconciliation of segment assets to total assets Other assets Total assets from continuing operations

United States of America (Oil & Gas Prospects) 28,060,488 22,017,813 2,681,532 30,742,020 6,042,675 - 307,796 6,350,471

19. Business Combination

During the financial year, the Company acquired 100% of the voting shares of Blackgate Resources LLC.

The total cost of the combination was $27,943,692 and comprised cash and the issue of equity instruments. The Group issued 371,401,455 ordinary fully paid shares with a fair value of $0.05 each. The fair value of the identifiable assets and liabilities of Blackgate Resources LLC as at the date of acquisition are:

Cash and cash equivalents Petroleum interests, exploration and evaluation expenditure Fair value of identifiable net assets Cost of the combination: Cash Securities issued, at fair value Costs associated with the acquisition Total cost of the combination The cash inflow (outflow) on acquisition is as follows: Net cash acquired with subsidiary Cash paid Net cash inflow (outflow)	Fair value recognised on acquisition $ - 27,943,692
	27,943,692
	9,000,547 18,570,073 373,072
	27,943,692
	- 9,373,619
	9,373,619

From the date of acquisition Blackgate Resources LLC has contributed $Nil to the net loss of the Group.

These assets have been recognised provisionally at reporting date as accounting is incomplete relating to fair value adjustments and potential classification adjustments between infrastructure, exploration properties and oil & gas production properties.

There is no contingent consideration payable in respect to the acquisition.

There were no acquisitions or disposals of business combinations during the previous financial year.

47

Modena Resources Limited

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

20. Related Party Disclosures

(a) Subsidiaries

The consolidated financial statements include the financial statements of Modena Resources Limited and the subsidiaries as listed in the following table.

County of Incorporation % Equity Interest 2010 2009 % % Murviel Trading SA – at cost Bahamas 100 100 Blackgate Resources LLC USA 100 - Modena Operating LLC USA 100 -	Investment at cost 2010 2009 $ $ 4,000,000 4,000,000 27,943,692 - - -
	31,943,692 4,000,000

(b) Parent entity

Modena Resources Limited is the ultimate Australian parent entity and ultimate parent of the Group.

(c) Key management personnel

Disclosures relating to key management personnel are set out in Note 22.

21. Parent Entity Disclosures

(a) Summary financial information

Financial Position

Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued capital Reserves Accumulated losses Total equity Financial Performance Loss for the year Other comprehensive income Total comprehensive income	Parent 2010 $ 2009 $
	927,311 272,444 29,814,709 6,078,027
	30,742,020 6,350,471
	6,646,725 5,459,594 - 1,140,000
	6,646,725 6,599,594
	48,162,388 15,671,409 864,910 664,910 (24,932,003) (16,585,442)
	24,095,295 (249,123)
	Parent (8,346,561) (13,598,608) - -
	(8,346,561) (13,598,608)

b) Guarantees

Modena Resources Limited has not entered into any guarantees in relation to the debts of its subsidiaries.

48

Modena Resources Limited

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

c) Other Commitments and Contingencies

Modena Resources Limited has no commitments to acquire property, plant and equipment, and has no contingent liabilities.

22. Key Management Personnel Disclosures

(a) Compensation of Key Management Personnel

Short-Term employee benefits Post Employment benefits Other Long-Term benefits Termination benefits Share-based payment Total compensation		Consolidated 2010 2009 $ $ 560,186 403,102 24,000 24,399 - - - - - -
		584,186 427,501

(b) Option holdings of Key Management Personnel

There were no options held by key management personnel during the current or previous financial year.

(c) Shareholdings of Key Management Personnel

	Balance	Granted as	Acquired	Disposed	Net Change	Balance
	01/07/09	Remuneration			Other#	30/06/10
Directors
A Hamilton –appointed 2/11/2009	-	-	25,000	-	-	25,000
C Willis	-	-	-	-	-	-
J Row –appointed 26/3/2010	-	-	-	-	-	-
T Izelaar –appointed 13/4/2010	-	-	-	-	-	-
D Sutherland –resigned 13/4/2010	-	-	-	-	-	-
D Jendry –resigned 2/2/2010	-	-	-	-	-	-
W Bellman –resigned 2/11/2009	900,000	-	-	-	(900,000)	-
P Black –resigned 2/11/2009	-	-	-	-	-	-
L Scott	-	-	-	-	-	-
J Story –resigned 6/11/2009	-	-	-	-	-	-
	Balance	Granted as	Acquired	Disposed	Net Change	Balance
	01/07/08	Remuneration			Other#	30/06/09
Directors
W Bellman –appointed 30/1/2009	-	-	-	-	900,000	900,000
C Willis	-	-	-	-	-
P Hampshire –resigned 27/10/2008	60,000	-	-	-	(60,000)	-
D Sutherland –appointed 12/2/2009	-	-	-	-	-	-
N Bassett –resigned 30/1/2009	-	-	-	-	-	-
P Black –appointed 29/4/2009	-	-	-	-	-	-
L Scott	-	-	-	-	-	-
J Story –appointed 26/5/2009	-	-	-	-	-	-

Includes shares held at date of appointment or resignation.

All equity transactions with key management personnel have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length.

49

Modena Resources Limited

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

22. Key Management Personnel Disclosures (Cont.)

(d) Loans with Key Management Personnel

There were no loans to key management personnel or their related entities during the financial year.

23. Financial Risk Management

The Group’s principal financial instruments comprise receivables, payables, cash and short-term deposits, borrowings and convertible notes. The Group manages its exposure to key financial risks in accordance with the Group’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets while protecting future financial security.

The main risks arising from the Group’s financial instruments are interest rate risk, credit risk, liquidity risk and foreign currency risk. The Group does not speculate in the trading of derivative instruments. The Group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rates and assessments of market forecasts for interest rates. Ageing analysis of and monitoring of receivables are undertaken to manage credit risk, liquidity risk is monitored through the development of future rolling cash flow forecasts.

The Board reviews and agrees policies for managing each of these risks as summarised below.

Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and agrees policies for managing each of the risks identified below, including for interest rate risk, credit allowances and cash flow forecast projections.

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset and financial liability are disclosed in Note 1 to the financial statements.

Risk Exposures and Responses

Interest rate risk

The Group’s exposure to risks of changes in market interest rates relates primarily to the Group’s cash balances. The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative financing positions and the mix of fixed and variable interest rates. As the Group has no variable rate interest bearing borrowings its exposure to interest rate movements is limited to the amount of interest income it can potentially earn on surplus cash deposits. The following sensitivity analysis is based on the interest rate risk exposures in existence at the Statement of Financial Position date.

At balance date, the Group had the following financial assets exposed to variable interest rates that are not designated in cash flow hedges:

Financial Assets Cash and cash equivalents (interest-bearing accounts) Net exposure	Consolidated 2010 $ 2009 $
	621,512 133,140
	621,512 133,140

The following sensitivity analysis is based on the interest rate risk exposures in existence at the Statement of Financial Position date. The 1.0% sensitivity is based on reasonably possible changes, over a financial year, using an observed range of historical LIBOR movements over the last 3 years.

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Modena Resources Limited

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

23. Financial Risk Management (Cont.)

At 30 June 2010, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity relating to financial assets of the Group would have been affected as follows:

	2010	2009
	$	$
Judgements of reasonably possible movements:
Post tax profit – higher / (lower)
+ 1.0%	6,215	1,331
- 1.0%	(6,215)	(1,331)
It is not expected that interest rates will decrease in the foreseeable future.

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’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 Group manages liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash flows.

The Group anticipates a need to raise additional capital in the next 12 months to meet forecasted operational activities. The decision on how the Group will raise future capital will depend on market conditions existing at that time.

Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

The Group has no access to credit standby facilities or arrangements for further funding or borrowings in place.

The financial liabilities the Group had at reporting date were trade payables incurred in the normal course of the business. These were non interest bearing and were due within the normal 30-60 days terms of creditor payments.

Maturities of financial liabilities

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Consolidated	Less than 6 months 6-12 months Between 1-2 years Between 2-5 years Over 5 years Total contractual cash flows Carrying amount (assets)/ liabilities $ $ $ $ $ $ $
As at 30 June 2010 Trade and other payables Financial liabilities - Fixed rate As at 30 June 2009 Trade and other payables Financial liabilities - Fixed rate	1,099,620 - - - - 1,099,620 1,099,620 - 5,547,105 - - - 5,547,105 5,547,105
	1,099,620 5,547,105 - - - 6,646,725 6,646,725
	897,489 - - - - 897,489 897,489 - 4,562,105 1,140,000 - - 5,702,105 5,702,105
	897,489 4,562,105 1,140,000 - - 6,599,594 6,599,594

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Modena Resources Limited

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

23. Financial Risk Management (Cont.)

Credit risk

Credit risk arises from the financial assets of the Group, which comprise deposits with banks and trade and other receivables. The Group’s exposure to credit risk arises from potential default of the counter party, with the maximum exposure equal to the carrying amount of these instruments. The carrying amount of financial assets included in the Statement of Financial Position represents the Group’s maximum exposure to credit risk in relation to those assets.

The Group does not hold any credit derivatives to offset its credit exposure.

The Group trades only with recognised, credit worthy third parties and as such collateral is not requested nor is it the Group’s policy to securities it trade and other receivables.

Receivable balances are monitored on an ongoing basis with the result that the Group does not have a significant exposure to bad debts.

There are no significant concentrations of credit risk within the Group.

The Group credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings or past history:

	2010	2009
Cash and cash equivalents
AA	621,512	133,140

Capital Management Risk

Management controls the capital of the Group in order to maximise the return to shareholders and ensure that the group can fund its operations and continue as a going concern.

Management effectively manages the group’s capital by assessing the group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of expenditure and debt levels and share and option issues.

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

Foreign Currency Risk

As a result of the Group’s farm-in operations in the United States of America, the Group’s operations can be affected by movements in the US$/A$ exchange rates. The Group does not hedge this exposure. This risk arises from transactions and recognised assets and liabilities denominated in a currency that is not the Group’s functional currency.

The Group manages its foreign exchange risk by constantly reviewing its exposure to commitments payable in foreign currency and ensuring appropriate cash balances are maintained in Australian Dollars, to meet current operational commitments.

Management believes the balance date risk exposures are representative of the risk exposure inherent in financial instruments. The Group exposure to the foreign currency risk is considered immaterial at 30 June 2010 and 30 June 2009.

Fair Value

The methods of estimating fair value are outlined in the relevant notes to the financial statements. All financial assets and liabilities recognised in the Statement of Financial Position, whether they are carried at cost or fair value, are recognised at amounts that represent a reasonable approximation of fair values unless other wise stated in the applicable notes.

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Modena Resources Limited

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

24. Events Subsequent to Year End

There are no matters or circumstances that have arisen since 30 June 2010 that have or may significantly affect the operations, results, or state of affairs of the consolidated entity in future financial years, other than:

• (a) the Company has issued 49,116,805 ordinary fully paid shares on the conversion of unsecured convertible notes with a face value of $840,000; and

• (b) the Company entered into an agreement with Truestone Capital Specialist Investments Limited on 23 September 2010, a London based specialist financier to provide a $10,000,000 working capital facility to the company via an equity drawdown arrangement. The term of the proposed facility is 24 months with an option for extension by mutual agreement for a further 12 months. The facility drawdown is solely at the election of the Company and subject to a formal drawdown process.

25. Commitments

The Group has no commitments as at 30 June 2010.

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Modena Resources Limited

DIRECTORS' DECLARATION

In the opinion of the directors:

• a) The financial statements, notes and additional disclosures included in the directors’ report designated as audited, are in accordance with the Corporations Act 2001, including:

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

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

• b) the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board; and

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

• d) The remuneration disclosures included in the Director’s Report (as part of the Remuneration Report) for the year ended 30 June 2010, comply with section 300A of the Corporations Act 2001.

This declaration has been made after receiving the declarations required to be made to the directors in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2010.

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

On behalf of the Board

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Anthony Hamilton Director

Perth, 30 September 2010

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Modena Resources Limited

Tel: +8 6382 4600 38 Station Street Fax: +8 6382 4601 Subiaco, WA 6008 www.bdo.com.au PO Box 700 West Perth WA 6872 Australia

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MODENA RESOURCES LIMITED

Report on the Financial Report

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

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1(a), 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. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

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

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

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 would be in the same terms if it had been given to the directors at the time this audit report was made.

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

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Auditor’s Opinion

In our opinion:

• (a) the financial report of Modena Resources Limited is in accordance with the Corporations Act 2001 , including:

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

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

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

Material Uncertainty Regarding Continuation as a Going Concern

Without qualifying our opinion, we draw attention to Note 1 in the financial report which indicates that the group incurred a net loss of $8,346,561 during the year ended 30 June 2010. This condition, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty which may cast significant doubt about the group’s ability to continue as a going concern.

Report on the Remuneration Report

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

Auditor’s Opinion

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

BDO Audit (WA) Pty Ltd

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Peter Toll Director

Signed in Perth, Western Australia Dated this 30[th] day of September 2010

STOCK EXCHANGE INFORMATION

HOLDINGS AS AT 28 SEPTEMBER 2010

Number of Securities Held 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total Number of Holders Number of holders of less than a marketable parcel Percentage of the 20 largest holders Substantial Shareholders The company has been notified of the following substantial shareholdings: APAC Resources Capital Limited Arturus Capital Limited	FULLY PAID SHARES No. of Holders OPTIONS 31 December 2013 No. of Holders 10 94 117 300 420 - - - 37 248 941 285 346 57.95% 69.20% Number 155,000,000 107,020,000

Voting Rights

The Constitution of the company makes the following provision for voting at general meetings:

On a show of hands, every ordinary shareholder present in person, or by proxy, attorney or representative has one vote. On a poll, every shareholder present in person, or by proxy, attorney or representative has one vote for any share held by the shareholder.

20 Largest Holders of Securities as at 28 September 2010:

Fully Paid Ordinary Shares

1. APAC Resources Capital Limited 2. 3P Limited 3. Arturus Capital Limited 4. Ajava Holdings Pty Ltd 5. Arturus Energy LLC 6. Etrade Australia Nominees Pty Ltd 7. Arturus Capital Limited 8. Taycol Nominees Pty Ltd 9. Zero Nominees Pty Ltd 10. Celtic Capital Pty Ltd 11. Bell Potter Nominees Ltd 12. Paul Gabriel Sharbanee 13. Azur Capital Group Limited 14. Acclaim Exploration NL 15. Alimold Pty Ltd 16. Chesser Investments Pty Ltd 17. Mitchell Grass Holdings Pty Ltd 18. Renford Consultants Limited 19. Paul Bernard Bastion& Belinda Louise Bastion 20. Bearded Rooster Nominees Pty Ltd

No. % 155,000,000 17.86 105,177,932 12.12 76,720,000 8.84 40,300,000 4.64 20,000,000 2.31 10,525,873 1.21 10,000,000 1.15 9,925,000 1.14 8,500,000 0.98 7,750,000 0.89 6,777,190 0.78 6,603,889 0.76 6,010,000 0.69 6,000,000 0.69 6,000,000 0.69 6,000,000 0.69 6,000,000 0.69 5,485,125 2.63 5,000,000 0.58 5,000,000 0.58

502,775,009 59.92

Modena Resources Limited

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STOCK EXCHANGE INFORMATION

Options 31 December 2013

ptions 31 December 2013
1. Ajava Holdings Pty Ltd 2. APAC Resources Capital Limited 3. Azur Capital Group Limited 4. Bell Potter Nominees Ltd 5. Group Seventy Three Super Fund Pty Ltd 6. Nefco Nominees Pty Ltd 7. Taycol Nominees Pty Ltd 8. Jason Peterson & Lisa Peterson 9. Alimold Pty Ltd 10. Dejul Trading Pty Ltd 11. Kathleen Mary Eddington 12. AMH Custodian Pty Ltd 13. Mousetrap Nominees Pty Ltd 14. Octifil Pty Ltd 15. Wobbly Investments Pty Ltd 16. Cunnigham Peterson Sharbanee Securities Pty Ltd 17. Goffacan Pty Ltd 18. Fitzroy Trading Australia Pty Ltd 19. MCCM Pty Ltd 20. Mansion House Securities (F/E) Limited	No. % 45,000,000 14.17 25,000,000 7.87 25,000,000 7.87 19,500,000 6.14 15,250,000 4.80 12,400,000 3.90 10,962,500 3.45 10,000,000 3.15 9,884,000 3.11 8,000,000 2.52 7,500,000 2.36 6,500,000 2.05 4,750,000 1.50 4,625,000 1.46 3,322,500 1.05 3,000,000 0.94 2,335,000 0.74 2,292,500 0.72 2,250,000 0.71 2,187,500 0.69
	219,759,000 69.20

Restricted Securities

There are no restricted securities on issue as at the date of this report:

On-market Buy-back

Currently there is no on-market buy-back of the Company’s securities.

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Modena Resources Limited