EASTERN RESOURCES LIMITED — Interim / Quarterly Report 2012

Mar 12, 2012

==> picture [117 x 71] intentionally omitted <==

ABN 70 126 678 037

==> picture [426 x 479] intentionally omitted <==

HALF YEAR FINANCIAL REPORT 31 DECEMBER 2011

Table of Contents

==> picture [84 x 51] intentionally omitted <==

==> picture [488 x 8] intentionally omitted <==

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 Consolidated Financial Statements ............................................................................................................ 7 Directors’ Declaration ................................................................................................................................................... 11 Independent Auditor’s Review Report .......................................................................................................................... 12 Auditor’s Independence Declaration ............................................................................................................................ 14 Corporate Directory ...................................................................................................................................................... 15

==> picture [392 x 298] intentionally omitted <==

Directors’ Report

==> picture [84 x 51] intentionally omitted <==

==> picture [488 x 9] intentionally omitted <==

Your directors submit their report for Eastern Iron Limited for the half year ended 31 December 2011.

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 Wendy Corbett Non-Executive Director Greg Jones Non-Executive Director Stephen Gemell Non-Executive Director Ivo Polovineo 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 $479,099 (2010: $495,235).

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. During the latter part of 2011 the Company completed a program of resource drilling but has yet to announce a resource estimate.

EULOGIE MAGNETITE PROJECT

(EFE – 100%)

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.

A resource drilling program was carried out consisting of 3,369m of reverse circulation drilling for 34 drill holes. The drilling was targeted at the northern part of the ferrigabbro units and tested around 30% of their mapped extent. A resource estimate was prepared at a lower cutoff of 10% Fe and 10% DTR by consultants Hellman & Schofield in accordance with the JORC Code. The estimate is summarised in the table below:

	Tonnes (Mt)
		DTR	Fe%	**TiO2% **	V%
Indicated	154	12.8	14.0	3.0	0.095
Inferred	311	13.2	14.3	3.1	0.098
Total	465	13.1	14.2	3.0	0.097

Metallurgical Testwork

Metallurgical testwork was undertaken on samples from Eulogie which demonstrated that coarse cobbing of ground ore at 100% passing 500 micron can reject around 75% of the mass to a non-magnetic tailings fraction with no loss of iron recovery. Grinding of the magnetic at a final grind of 100% passing 150 micron produced a product as follows:

	Assays (%)	Assays (%)	Assays (%)	Assays (%)	Assays (%)	Assays (%)	Assays (%)
	Fe	SiO2	Al2O	3 TiO2	S	P	V
Magnetics	61.45	1.44	3.29	6.81	0.62	-0.001	0.57

Producing an acceptable product at this coarse grind size leaves open the potential to produce either a blast furnace sinter feed or grinding finer for a pellet feed.

Development Studies

The Company has obtained various technical data and reports prepared for the original prefeasibility study completed by Thiess in 1989. The data has been combined with more recent studies completed by Eastern Iron to complete a concept development study with updated capital and operating cost estimates.

1

Directors’ Report

==> picture [83 x 51] intentionally omitted <==

==> picture [488 x 8] intentionally omitted <==

This study will form the basis for a decision on progressing the project to a feasibility study and is expected to be completed In the March quarter 2012

NOWA NOWA IRON PROJECT

Late in 2011 Eastern Iron announced that it had secured an option to acquire a 100% interest in the Nowa Nowa iron project.

The project area is located north of the township of Nowa Nowa in eastern Victoria, some 270km east of Melbourne. The project is well serviced with respect to infrastructure including a rail link from Melbourne to the major regional centre of Bairnsdale, 50km via sealed road from Nowa Nowa.

Eastern Iron is investigating the potential to develop the iron deposits at Nowa Nowa primarily as a source of feed for steel making operations. The deposits lend themselves to a number of potential development routes including DSO magnetite where untreated ore is exported with possibly further processing closer to the end user. Other possibilities include coarse crushing and dry magnetic separation at site to produce an upgraded product; or finer grinding to produce a high iron product suitable as a blast furnace feed or with finer grinding product suitable for coal washing applications.

NSW IRON ORE PROJECT

(EFE 100%, 3E Pty Ltd may earn 77.5%)

Joint venture partners 3E Steel Pty Ltd have completed drilling of additional palaeochannel areas within the joint venture tenements near Cobar in central western NSW. The objective of this drilling will be to substantially increase the current total resource. 3E have also approved a program of beneficiation testwork at a major Chinese University to be completed over the next six months.

• Complete a maiden resource estimate for the Five Mile Deposit.

• Receive the results of a transport options study for a potential development at Nowa Nowa.

• Initiate a large diameter core drilling program to collect sample for further more detailed metallurgical testing.

Principal activities

The principal activity of the Group is the exploration for and delineation of iron ore, precious and base metals resources in the Australia/Asia Pacific region and the development of those resources into economic, cash flow generating mines.

Dividends

No dividends were paid or proposed during the period.

Significant events after the balance date

There were, at the date of this report, no matters or circumstances which have arisen since 31 December 2011 that have significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.

In February 2012 Eastern Iron exercised its option to acquire a 100% interest in the Nowa Nowa Iron Project located in eastern Victoria. Under the terms of the option agreement Eastern Iron paid $100,000 in cash, issued one million shares and will pay a 1% royalty on production.

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.

FORWARD PROGRAM

Over the coming period the company will focus on the following:

• Queensland Iron Project.

• The completion of the concept development study for Eulogie.

• Progress discussions with potential joint venture partners for the Queensland Iron Project.

Signed at Sydney this 13[th] day of March 2012 in accordance with a resolution of the directors.

==> picture [54 x 59] intentionally omitted <==

Glenn Goodacre Chairman

• Complete evaluation of the drilling results from Hawkwood and produce a resource estimate.

• Nowa Nowa.

• Complete the preliminary metallurgical testwork program.

2

Consolidated Statement of Comprehensive Income

For the half year ended 31 December 2011

==> picture [83 x 51] intentionally omitted <==

==> picture [494 x 9] intentionally omitted <==

	31 Dec 2011 $ 31 Dec 2010 $
Note
Revenue 4 ASX and ASIC fees Audit fee Contract administration services Directors fees Employee costs (net of costs recharged to exploration projects) Exploration expenditure written off Marketing costs Rent R&D concession expense Share based payments Travel and accommodation costs Other expenses from ordinary activities Loss before income tax expense Income tax expense Loss after income tax expense 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 Earnings per share Basic loss per share (cents per share) 8 Diluted loss per share (cents per share) 8	108,712 68,190 (26,713) (21,366) (7,000) (7,400) (86,566) (77,530) (100,734) (64,954) (110,667) (115,907) (30,431) (23,306) (14,669) (15,059) (11,670) (9,840) (18,433) - (106,095) (149,935) (16,567) (3,507) (58,266) (74,621)
	(479,099) (495,235) - -
	(479,099) (495,235)
	- -
	- -
	(479,099) (495,235)
	(0.71) (0.86) (0.71) (0.86)

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

3

Consolidated Statement of Financial Position

==> picture [84 x 50] intentionally omitted <==

As at 31 December 2011

==> picture [488 x 9] intentionally omitted <==

	31 Dec 2011 $ 30 Jun 2011 $
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 10 Total equity	1,837,377 3,618,543 29,985 84,694
	1,867,362 3,703,237
	118,350 105,850 37,419 37,897 4,036,723 2,458,669
	4,192,492 2,602,416
	6,059,854 6,305,653
	95,724 418,519 18,892 18,892
	114,616 437,411
	114,616 437,411
	5,945,238 5,868,242
	8,002,017 7,552,017 (2,491,454) (2,012,355) 434,675 328,580
	5,945,238 5,868,242

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

4

Consolidated Statement of Changes in Equity

==> picture [84 x 51] intentionally omitted <==

For the half year ended 31 December 2011

==> picture [488 x 8] intentionally omitted <==

		Contributed	Accumulated
		equity $	losses $	Reserves	Total equity $
	Note
				$
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) (495,235) -	171,525	4,662,234 (495,235) -
		-		-
		-		-
					(495,235) 1,994,690 149,935
		- (495,235)		-
		1,994,690 -		-
		- -		149,935
		7,552,016	(1,561,852)	321,460	6,311,624
		Contributed equity	Accumulated losses $
				Reserves	Total equity $
	Note	$		$
At 1 July 2011 Loss for the period Other comprehensive income		7,552,017	(2,012,355) (479,099) -	328,580	5,868,242 (479,099) -
		-		-
		-		-
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 2011					(479,099) 450,000 106,095
		- (479,099)		-
	9	450,000 -		-
	10	- -		106,095
		8,002,017	(2,491,454)	434,675	5,945,238

The Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

5

Consolidated Statement of Cash Flows

==> picture [83 x 51] intentionally omitted <==

For the half year ended 31 December 2011

==> picture [488 x 8] intentionally omitted <==

		31 Dec 2011 $ 31 Dec 2010 $
	Note
Cash flows from operating activities Payment to suppliers and employees Interest received Consulting fee income Net cash flows (used in) operating activities Cash flows from investing activities Purchase of fixed assets Expenditure on mining interests (exploration) Tenement security deposits 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 carried forward		(558,890) (359,025) 107,081 70,344 26,664 -
		(425,145) (288,681)
		(7,462) (1,003) (1,338,559) (409,482) (10,000) -
		(1,356,021) (410,485)
		- 1,994,690
		- 1,994,690
		(1,781,166) 1,295,524 3,618,543 2,679,433
	5	1,837,377 3,974,957

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

6

Notes to the Consolidated Financial Statements

==> picture [84 x 51] intentionally omitted <==

For the half year ended 31 December 2011

==> picture [487 x 9] intentionally omitted <==

1. Corporate information

The financial report of Eastern Iron Limited (the Company) for the half year ended 31 December 2011 was authorised for issue in accordance with a resolution of the directors on 13 March 2012. 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 the Directors Report.

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 2011.

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 2011 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 2011.

Management has reviewed and assessed the new accounting standards effective 1 July 2011 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.

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:

7

Notes to the Consolidated Financial Statements

==> picture [84 x 51] intentionally omitted <==

For the half year ended 31 December 2011

==> picture [487 x 9] intentionally omitted <==

 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

. Revenue
Interest received Consulting fee income	31 Dec 2011 $ 31 Dec 2010 $
	78,715 68,190 29,997 -
	108,712 68,190

5. Cash and cash equivalents

. Cash and cash equivalents
Cash at bank Money market securities – bank deposits	31 Dec 2011 $ 30 Jun 2011 $
	241,561 221,792 1,595,816 3,396,751
	1,837,377 3,618,543

6. Deferred exploration and evaluation expenditure

Costs brought forward Costs incurred during the period Expenditure written off during the period Purchase of tenements Gain on transfer of tenements Loss on transfer of tenements Costs carried forward		31 Dec 2011 $ 30 Jun 2011 $
		2,458,669 2,254,322 1,158,485 646,736 (30,431) (179,897) 450,000 - - 23,280 - (285,772)
	(i)
	(ii)
	(ii)
		4,036,723 2,458,669

(i) In August 2011 the Company issued 2,500,000 fully paid ordinary shares as consideration for the acquisition of the Eulogie Park Project at a deemed value of $450,000.

(ii) The gain and loss on transfer of tenements relates to the Eastern Iron and PlatSearch NL Joint Venture restructure approved by shareholders at the Company’s EGM in November 2010. The net loss of $262k relates to the write down of previously capitalised exploration expenditure on those tenements where the Company’s interest reduced from 80% to 49%.

7. Contingent assets and liabilities

The Company has provided guarantees totalling $117,500 in respect of exploration tenements in NSW and Queensland. These guarantees in respect of exploration tenements are secured against deposits with NSW Minerals and Energy, DERM Queensland and Commonwealth Bank. Rugby Mining has been reimbursed $850 by the Company for Eastern Iron’s share of the security deposit on EPM 17099 in Queensland. The Company does not expect to incur any material liability in respect of the guarantees.

8

Notes to the Consolidated Financial Statements

==> picture [84 x 51] intentionally omitted <==

For the half year ended 31 December 2011

==> picture [487 x 9] intentionally omitted <==

8. Earnings per share

8. Earnings per share
	31 Dec 2011	31 Dec 2010
	$	$
Net profit/(loss) used in calculating basic and diluted gain/(loss) per share	(479,099)	(495,235)
	Number	Number
Weighted average number of ordinary shares outstanding during the year used in calculation of basic EPS 67,115,638
		57,743,370
Centsper share		Centsper share
Basic earnings(loss) per share (0.71)		(0.86)
Diluted earnings(loss) per share (0.71)		(0.86)

The number of potential ordinary shares that are not dilutive, by reason of the loss result, and not included in determining diluted EPS are 9,700,000.

Conversion, call, subscription or issue after 31 December 2011

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

9. Contributed equity
Share capital 67,807,419 fully paid ordinary shares (30 June 2011:65,307,419) Fully paid ordinary shares carry one vote per share and carry the right to dividends. Options on Issue 5,000,000 (30 June 2011: 5,000,000) Share issue costs	31 Dec 2011 $ 30 Jun 2011 $
	8,296,980 7,846,980 5,000 5,000 (299,963) (299,963)
	8,002,017 7,552,017
	Number $
Movements in ordinary shares on issue At 1 January 2011 Shares issued At 30 June 2011 Shares issued (i) At 31 December 2011	65,307,419 7,846,980 - -
	65,307,419 7,846,980
	2,500,000 450,000
	67,807,419 8,296,980

(i) The Company issued 2,500,000 fully paid ordinary shares in August 2011 as consideration for the purchase of Eulogie Park (Note: 6).

9

Notes to the Consolidated Financial Statements

==> picture [84 x 51] intentionally omitted <==

For the half year ended 31 December 2011

==> picture [487 x 9] intentionally omitted <==

	Number $
Movements in options on issue At 1 January 2011 Options issued At 30 June 2011 Options issued At 31 December 2011	5,000,000 5,000 - - 5,000,000 5,000 - - 5,000,000 5,000

An additional 4,700,000 options are on issue under Share based payments (Note: 10).

10. Reserves (share based payments)

10. Reserves (share based payments)
	Number $
Movements in share based payments At 1 January 2011 Options vested (i) At 30 June 2011 Options issued (ii) At 31 December 2011	3,050,000 321,460 - 7,120
	3,050,000 328,580
	1,650,000 106,095
	4,700,000 434,675

(i) An accounting entry of $7,120 was recorded to reflect the value of options issued in 2010 and vested in this period

(ii) 1,650,000 options were issued to Directors and approved by shareholders at the Company’s AGM held in November 2011. The options were issued with an exercise price of $0.18 and expiry date of 23 November 2013.

11. Events after the balance sheet date

There were, at the date of this report, no matters or circumstances which have arisen since 31 December 2011 that have significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.

In February 2012 Eastern Iron exercised its option to acquire a 100% interest in the Nowa Nowa Iron Project located in eastern Victoria. Under the terms of the option agreement Eastern Iron paid $100,000 in cash, issued one million shares and will pay a 1% royalty on production.

10

Directors’ Declaration

==> picture [84 x 51] intentionally omitted <==

==> picture [487 x 9] intentionally omitted <==

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 2011 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, 13 March 2012

11

Independent Auditor’s Review Report

==> picture [83 x 51] intentionally omitted <==

==> picture [488 x 9] intentionally omitted <==

==> picture [473 x 637] intentionally omitted <==

12

Independent Auditor’s Review Report

==> picture [83 x 51] intentionally omitted <==

==> picture [488 x 9] intentionally omitted <==

==> picture [474 x 637] intentionally omitted <==

13

Auditor’s Independence Declaration

==> picture [84 x 51] intentionally omitted <==

==> picture [488 x 9] intentionally omitted <==

==> picture [475 x 637] intentionally omitted <==

14

Corporate Directory

==> picture [84 x 51] intentionally omitted <==

==> picture [488 x 9] intentionally omitted <==

Eastern Iron Limited

Share Registry

ABN 70 126 678 037

Directors

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

Boardroom Pty Limited GPO Box 3993 Sydney, NSW 2001 Telephone: +61 2 9290 9600 Facsimile: +61 2 9279 0664 Website: www.boardroomlimited.com.au

Auditors

BDJ Partners

Company Secretary

Michelle Lilley

Registered and Administration Office

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

15