EASTERN RESOURCES LIMITED — Interim / Quarterly Report 2011

Mar 8, 2011

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HALF YEAR FINANCIAL REPORT 31 DECEMBER 2010

CONTENTS

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Directors' Report ......................................................... 1 Consolidated Statement of Comprehensive Income ... 3 Consolidated Statement of Financial Position ............. 4 Consolidated Statement of Changes in Equity ............ 5 Consolidated Statement of Cash Flows ...................... 6 Notes to the Financial Statements .............................. 7 Directors’ Declaration ................................................ 11 Independent Review Report ...................................... 12 Auditor’s Independence Declaration ......................... 14

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DIRECTORS’ REPORT

Your directors submit their report for Eastern Iron Limited for the half year ended 31 December 2010.

DIRECTORS

The names of the Company’s directors in office during the half year and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated.

Glenn Goodacre Non-Executive Chairman Greg De Ross Managing Director Peter Buckley Non-Executive Director Wendy Corbett Non-Executive Director Greg Jones Non-Executive Director Stephen Gemell Non-Executive Director

REVIEW AND RESULTS OF OPERATIONS

FINANCIAL RESULTS

The net results of operations after applicable income tax expense for the half year was a loss of $495,235 (2009 - $160,176).

CENTRAL QUEENSLAND IRON PROJECT

Eastern Iron has acquired interests in two advanced projects in Central Queensland, Hawkwood and Eulogie, which have potential for the extraction of magnetite iron ore. Both projects are well serviced by established infrastructure and accessible from the major export port of Gladstone. The company is currently assessing the potential for staged or parallel development of both projects producing a high value high iron magnetite concentrate exported through Gladstone.

HAWKWOOD IRON ORE JOINT VENTURE –

QUEENSLAND (EFE earning 80%)

The Hawkwood iron-vanadium project is located in Central Queensland approximately 180 kilometres from the port of Gladstone, Australia’s third largest coal export port. Eastern Iron has completed a low level airborne magnetic survey and a follow up preliminary drilling campaign consisting of 19 reverse circulation drill holes for 1,848m. Within the area tested by drilling Eastern Iron identified an exploration target tonnage of 300-400Mt[1] . Further drilling will be undertaken over the next two quarters to define a resource.

Metallurgical Testwork

Two metre composite samples from the reverse circulation drill holes were tested by grind size and Davis Tube analysis (DTR).

Potential exploration target tonnages and grades in this report are conceptual in nature as there has been insufficient exploration to define a Mineral Resource and that it is uncertain if further exploration will result in the determination of a Mineral Resource. Tonnages and grades are not to be quoted outside this context.

Davis Tube Analysis

Two metre composite chip samples from drilled intervals of ferrigabbro in several holes were ground to 75 micron and concentrates produced by DTR. The concentrates were then analysed by Fusion XRF. Averaged results from drilled intervals are as follows:

Drillhole HRC003, 26-74m, (48m):

Fe %	V %	TiO2 %	SiO2 %	Al2O3 %	P %	S %	DTR %
63.58	0.39	2.86	1.20	1.93	0.00	1.57	17

Drillhole HRC006, 74m-92m (18m):

Fe %	V %	TiO2 %	SiO2 %	Al2O3 %	P %	S %	DTR %
66.33	0.48	3.12	1.00	2.23	0.00	0.036	20

Drillhole HRC018, 69m-90m (31m):

Fe %	V %	TiO2 %	SiO2 %	Al2O3 %	P %	S %	DTR %
67.1	0.48	2.09	1.69	1.00	0.00	0.20	15

These results are preliminary in that they are representative of only a limited number drilled intercepts. However, they are encouraging in having produced high grade concentrates of 64 to 67% Fe with low levels of the impurities normally associated with titaniferous magnetite ores. A concentrate of these specifications compares favourably with other normally traded iron products.

As reported in earlier mineralogical studies titanium mainly exists as a separate (ilmenite) phase which reports to the tailings and whilst no attempt has been made to produce an ilmenite product this represents an opportunity to derive further value from the ore during production.

Mass recovery to concentrate is 15-20%. The result from HRC018 is lower than would have been expected based on the Fe head assay and may have been affected by the deep oxidation in this hole which was noted during drilling. This has the effect of partially converting magnetite to non-magnetic haematite.

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DIRECTORS’ REPORT

EULOGIE MAGNETITE PROJECT (EFE – 100%)

Late in 2010 Eastern Iron announced that it had reached agreement with RMM Capital to purchase a 100% interest in the Eulogie magnetite project and associated tenement. This project represents a valuable addition to the overall strategy to develop an iron ore export operation in Central Queensland as it is even better placed with respect to proximity to vital transport infrastructure of roads, rail and the Gladstone Port.

The Eulogie project is located 23 kilometres south of Mount Morgan in Central Queensland, close to bulk tonnage infrastructure including sealed roads and the main Moura – Gladstone railway line, which is part of the Central Queensland coal network leading to the expanding deepwater export port of Gladstone.

Iron-bearing magnetite with accessory titanium and vanadium is concentrated within shallow dipping (30-40 degrees), gabbroic layers (ferrigabbro) up to 100 metres thick within a layered igneous complex. The geology and nature of the ferrigabbro layers is almost identical to that at Hawkwood, Eastern Irons other Central Queensland iron project located some 220 kilometres to the south.

In 1989 Thiess Contractors Pty Ltd examined the project as a possible source of iron ore for a proposed steel plant located in Gladstone. A pre-feasibility study was completed and included 30 reverse circulation and cored drill holes. Based on the limited drilling Thiess estimated a resource, which was not reported under the guidelines of the JORC code. Theiss identified potential upside to this estimate beyond the areas tested by drilling.

Thiess also completed some preliminary magnetic separation testwork which at a relatively coarse final grind size of 100 micron produced high grade iron ore concentrate samples containing 58-64% Fe, 2-5% TiO2 and significantly, an average 0.87% V2O5, a valuable additive to high quality steels.

Eastern Iron believes that it may be possible, based on the existing drill coverage, to prepare a resource estimate that can be reported in accordance with the 2004 JORC Code as well as investigating the exploration upside within areas untested by Theiss.

NSW IRON ORE PROJECT

On the 3[rd] of November 2010 Eastern Iron shareholders approved all of the arrangements pursuant to which Eastern Iron farmed out 13 of the 17 NSW Iron tenements to 3E Steel Pty Ltd. 3E is able to earn up to a 77.5% interest in the tenements.

The JV agreement also required 3E Steel Pty Ltd to lodge an amount of $600,000 in a co-signed account which represents the funding for the first years minimum expenditure commitment. This has been completed and the agreement is now unconditional and 3E have commenced work on the approved program and budget.

The remaining four NSW Iron tenements are now owned 49% by Eastern Iron Limited and 51% by PlatSearch NL, on a prorata contributing basis.

FORWARD PROGRAM

Eastern Iron is committed to a program to assess the potential for development of the Hawkwood and Eulogie iron projects. This includes producing resource estimates for both Eulogie and Hawkwood and completion of a scoping level study for a potential development by the end of the September quarter 2011. This program includes:

• A short diamond drilling program to provide structural information and drillcore for metallurgical sampling in February and March 2010.

• Compilation of data from previous drilling at Eulogie to determine if this is sufficient for a JORC compliant resource.

• Sampling of drill core held in storage by the Queensland Government from drilling conducted at Eulogie in 1988.

• Metallurgical testwork on the Eulogie core samples in March/April 2011

• Further resource (RC) drilling at Eulogie and Hawkwood, May-July 2011

• Carry out preliminary studies into transport options, product marketing, mining and processing for input into a scoping level study to be completed by October 2011.

At the Auburn tenement, Eastern Iron will undertake a preliminary program to determine if features evident from the regional magnetic survey represent ferrigabbro layers within the layered intrusive.

DIVIDENDS

No dividends were paid or proposed during the period.

SUBSEQUENT EVENTS

The directors are not aware of any significant changes in the state of affairs of the Company occurring since the end of the half year 31 December 2010.

AUDITOR’S INDEPENDENCE DECLARATION

A copy of the Auditor’s Independence Declaration to the Directors as required under section 307C of the Corporations Act 2001 is set out on page 14.

Signed at Sydney this 8[th] day of March 2011 in accordance with a resolution of the directors.

Glenn Goodacre Chairman

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

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For the half year ended 31 December 2010

For the half year ended 31 December 2010
	31 Dec 2010 31 Dec 2009
Note	$ $
REVENUE 4 ASX and ASIC fees Contract administration services Directors fees Employee costs Exploration expenditure written off Legal fees Marketing costs Recruitment costs Rent Share based payments Share registry costs Other expenses from ordinary activities LOSS BEFORE INCOME TAX EXPENSE Income tax expense LOSS AFTER INCOME TAX EXPENSE NET LOSS ATTRIBUTABLE TO MEMBERS OF EASTERN IRON LIMITED OTHER COMPREHENSIVE INCOME OTHER COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX TOTAL COMPREHENSIVE INCOME FOR THE PERIOD TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO MEMBERS OF EASTERN IRON LIMITED Basic loss per share (cents per share) 8 Diluted loss per share (cents per share) 8	68,190 61,704 (21,366) (13,150) (77,530) (87,369) (64,954) (39,771) (115,907) (1,934) (23,306) (2,025) (14,437) (3,315) (15,059) (54) - (22,253) (9,840) (12,500) (149,935) - (15,721) (5,548) (55,370) (33,961)
	(495,235) (160,176) - -
	(495,235) (160,176)
	(495,235) (160,176)
	- -
	- -
	- -
	(495,235) (160,176)
	(0.86) (0.35) (0.86) (0.35)

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

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For the half year ended 31 December 2010

	31 Dec 2010 30 Jun 2010
Note	$ $
ASSETS Current Assets Cash and cash equivalents 5 Receivables Total Current Assets Non-Current Assets Tenement security deposits 7 Plant and equipment Deferred exploration and evaluation expenditure 6 Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Provisions Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 9 Accumulated losses Reserves TOTAL EQUITY	3,974,957 2,679,433 37,275 51,428
	4,012,232 2,730,861
	122,500 120,000 39,931 30,086 2,254,322 1,861,682
	2,416,753 2,011,768
	6,428,985 4,742,629
	110,326 73,606 7,035 6,789
	117,361 80,395
	117,361 80,395
	6,311,624 4,662,234
	7,552,016 5,557,326 (1,561,852) (1,066,617) 321,460 171,525
	6,311,624 4,662,234

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

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For the half year ended 31 December 2010

	Note	Contributed Equity $ Accumulated Losses $ Reserves $ Total Equity $
AT 1 JULY 2010 Loss for the period Other comprehensive income Total comprehensive income/(loss) for the period Transactions with owners in their capacity as owners: Issue of share capital, net of transaction costs Cost of share based payments taken directly to equity AT 31 DECEMBER 2010		5,557,326 (1,066,617) 171,525 4,662,234 - (495,235) - (495,235) - - - -
		- (495,235) - (495,235) 1,994,690 - - 1,994,690 - - 149,935 149,935
		7,552,016 (1,561,852) 321,460 6,311,624

	Note	Contributed Equity $ Accumulated Losses $ Reserves $ Total Equity $
AT 1 JULY 2009 Loss for the period Other comprehensive income Total comprehensive income/(loss) for the period Transactions with owners in their capacity as owners: Issue of share capital, net of transaction costs Cost of share based payments taken directly to equity AT 31 DECEMBER 2009		5,106,570 (473,281) 114,565 4,747,854 - (160,176) - (160,176) - - - -
		- (160,176) - (160,176) - - - - - - - -
		5,106,570 (633,457) 114,565 4,587,678

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CONSOLIDATED STATEMENT OF CASH FLOWS

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For the half year ended 31 December 2010

For the half year ended 31 December 2010
		31 Dec 2010 31 Dec 2009
	Note	$ $
CASH FLOWS FROM OPERATING ACTIVITIES Payment to suppliers and employees Interest received Rental income NET CASH FLOWS (USED IN) OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Purchase of motor vehicle and fixed assets Expenditure on mining interests (exploration) NET CASH FLOWS (USED IN) INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares NET CASH FLOWS FROM FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH HELD Add opening cash brought forward CLOSING CASH CARRED FORWARD		(359,025) (203,841) 70,344 55,711 - 1,536
		(288,681) (146,594)
		(1,003) (30) (409,482) (369,947)
		(410,485) (369,977)
		1,994,690 -
		1,994,690 -
		1,295,524 (516,571) 2,679,433 3,306,689
	5	3,974,957 2,790,118

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NOTES TO THE FINANCIAL STATEMENTS

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For the half year ended 31 December 2010

1. CORPORATE INFORMATION

The financial report of Eastern Iron Limited (the Company) for the half year ended 31 December 2010 was authorised for issue in accordance with a resolution of the directors on 8 March 2011. Eastern Iron Limited is a company incorporated in Australia and limited by shares which are publicly traded on the Australian Securities Exchange using the ASX code EFE.

The nature of the operations and principal activities of the Company are described in Note 3.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The half year financial report should be read in conjunction with the Annual Financial Report of EFE as at 30 June 2010.

It is also recommended that the half year financial report be considered together with any public announcements made by EFE during the half year ended 31 December 2010 in accordance with the continuous disclosure obligations arising under the Corporations Act 2001 .

Basis of Preparation

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

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

Significant Accounting Policies

The half year consolidated financial statements have been prepared using the same accounting policies as used in the annual financial statements for the year ended 30 June 2010.

Management has reviewed and assessed the new accounting standards effective 1 July 2010 and these have been deemed to be not applicable to the Group.

Basis of Consolidation

The half year consolidated financial statements comprise the financial statements of Eastern Iron Limited and its subsidiaries (the Group). The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All inter-company balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. The subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. The Group includes Eastern Iron Limited and its wholly owned subsidiaries.

3. FINANCIAL REPORT BY SEGMENT

The operating segment identified by management is as follows:

• (a) Exploration projects funded directly by Eastern Iron Limited (“Exploration”)

Regarding the Exploration segment, the Chief Operating Decision Maker (the Board of directors) receives information on the exploration expenditure incurred. This information is disclosed in Note 6 of the half year financial report. No segment revenues are disclosed as each exploration tenement is not at a stage where revenues have been earned. Furthermore, no segment costs are disclosed as all segment expenditure is capitalised, with the exception of expenditure written off which is disclosed in Note 6 of the half year financial report.

Financial information about each of these tenements is reported to the Managing Director on an ongoing basis.

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NOTES TO THE FINANCIAL STATEMENTS

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For the half year ended 31 December 2010

Corporate office activities are not allocated to operating segments as they are not considered part of the core operations of any segment and comprise of the following:

• Interest revenue;

• Corporate costs;

• Depreciation and amortisation of non-project specific property, plant and equipment.

The Group’s accounting policy for reporting segments is consistent with that disclosed in Note 2.

4. REVENUE FROM ORDINARY ACTIVITIES Interest received Rental income 5. CASH AND CASH EQUIVALENTS Cash at bank Money market securities – bank deposits 6. DEFERRRED EXPLORATION AND EVALUATION EXPENDITURE Costs brought forward Costs incurred during the period Mining tenements acquired Expenditure written off during the period Costs carried forward	31 Dec 2010 31 Dec 2009
	$ $
	68,190 61,350 - 354
	68,190 61,704
	31 Dec 2010 31 Dec 2009
	$ $
	660,191 37,751 3,314,766 2,641,682
	3,974,957 2,679,433
	31 Dec 2010 31 Dec 2009
	$ $
	1,861,682 1,429,648 415,946 440,857 - - (23,306) (8,823)
	2,254,322 1,861,682

7. CONTINGENT ASSETS AND LIABILITIES

The Company has provided guarantees totalling $122,500 in respect of exploration tenements in NSW and QLD. These guarantees in respect of mining tenements are secured against deposits with Industry and Investment NSW and DEEDI in QLD. The Company does not expect to incur any material liability in respect of the guarantees.

8. EARNINGS PER SHARE

Basic loss per share (cents per share) 0.86 cents (2009 – 0.35 cents).

Diluted loss per share (cents per share) 0.86 cents (2009 – 0.35 cents).

Weighted average number of ordinary shares on issue used in the calculation of basic and diluted loss per share is 57,743,370 (2009 – 46,000,000).

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NOTES TO THE FINANCIAL STATEMENTS

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For the half year ended 31 December 2010

Loss used in calculating basic and diluted loss per share	31 Dec 2010 31 Dec 2009
	$ $
	495,235 160,176

The number of potential ordinary shares that are not dilutive, by reason of the loss result, and not included in determining diluted EPS are 8,050,000.

Conversion, call, subscription or issue after 31 December 2010

Since the end of the financial half year there have been no other conversions to, call of, or subscriptions for ordinary shares or issues of potential ordinary shares since the reporting date and before the completion of these financial statements.

9. CONTRIBUTED EQUITY Share capital 65,267,419 fully paid ordinary shares (30 June 2010:48,685,000) (a) Fully paid ordinary shares carry one vote per share and carry the right to dividends. Share capital applications 40,000 (30 June 2010: nil) Options on Issue 5,000,000 (30 June 2010: 5,000,000) (b) Share issue costs	31 Dec 2010 31 Dec 2009 $ $ 7,842,180 5,852,290 4,800 - 5 (299,964) (299,964) 7,552,016 5,557,326
	Number $
(a) Movements in ordinary shares on issue At 1 January 2010 Shares issued (i) At 30 June 2010 Shares issued (ii) At 31 December 2010	46,000,000 5,530,090 2,685,000 322,200
	48,685,000 5,852,290
	16,582,419 1,989,890
	65,267,419 7,842,180

(i) The Company issued 2,685,000 fully paid ordinary shares in June 2010 on the exercise of 2,685,000 options at a price of $0.12.

(ii) The Company issued 16,582,419 fully paid ordinary shares from Oct to Dec 2010 on the exercise of 16,582,419 options at a price of $0.12.

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NOTES TO THE FINANCIAL STATEMENTS

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For the half year ended 31 December 2010

For the half year ended 31 December 2010
	Number $
(b) Movements in options on issue At 1 January 2010 Options issued (i) Exercise of options (ii) At 30 June 2010 Options issued (iii) Exercise of options (iv) Options expired (v) At 31 December 2010	32,270,011 5,000 1,200,000 - (2,685,000) -
	30,785,011 5,000
	1,850,000 - (16,582,419) - (8,002,592) -
	8,050,000 5,000

• (i) In March 2010, the Company issued 1,200,000 options with an exercise price of $0.18 and expiry date of 9 March 2015.

• (ii) The Company issued 2,685,000 fully paid ordinary shares in June 2010 on the exercise of 2,685,000 options at a price of $0.12.

• (iii) The Company issued 150,000 options to a consultant in September 2010 and 1,700,000 options were issued to Directors after shareholder approval at the Company’s AGM in November 2010. The options were issued with an exercise price of $0.20 and expiry date of 23 November 2013.

• (iv) The Company issued 16,582,419 fully paid ordinary shares in Oct to Dec 2010 on the exercise of 16,582,419 options at a price of $0.12.

• (v) 8,002,592 options expired on 19 December 2010.

10. SUBSEQUENT EVENTS

No material event has occurred subsequent to 31 December 2010 requiring disclosure in, or amendment to, these financial statements.

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DIRECTORS’ DECLARATION

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In accordance with a resolution of the directors of Eastern Iron Limited, I state that:

In the opinion of the Directors:

• (a) the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001 , including:

• (i) give a true and fair view of the consolidated entity’s financial position as at 31 December 2010 and of its performance for the half year ended on that date; and

• (ii) complying with Australian Accounting Standards AASB 134 “Interim Financial Reporting” and the Corporations Regulations 2001; and

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

On behalf of the Board

Glenn Goodacre Chairman

Sydney, 8 March 2011

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INDEPENDENT REVIEW REPORT

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INDEPENDENT REVIEW REPORT

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AUDITOR’S INDEPENDENCE DECLARATION

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CORPORATE DIRECTORY

EASTERN IRON LIMITED

ABN 70 126 678 037

DIRECTORS

Glenn Goodacre Non-Executive Chairman Greg De Ross Managing Director Peter Buckley Non-Executive Director Wendy Corbett Non-Executive Director Greg Jones Non-Executive Director Stephen Gemell Non-Executive Director

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SHARE REGISTRY

Registries Limited Level 7, 207 Kent Street, Sydney, NSW 2000 GPO Box 3993 Sydney, NSW 2001 Telephone: +61 2 9290 9600 Facsimile: +61 2 9279 0664

AUDITORS

Barnes Dowell James

COMPANY SECRETARY

Michelle Lilley

REGISTERED AND ADMINISTRATION OFFICE

Suite 3, Level 1, 80 Chandos Street St Leonards, NSW 2065

PO Box 956, Crows Nest, NSW 1585 Telephone: 02 9906 7551 Facsimile: 02 9906 5233 Website: www.easterniron.com.au E-mail: info@easterniron.com.au

BANKERS

Commonwealth Bank of Australia Bank West Macquarie Bank Suncorp-Metway Ltd

STOCK EXCHANGE LISTING

Listed on Australian Securities Exchange Limited ASX Code: EFE