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ELEMENTOS LIMITED AND CONTROLLED ENTITIES

ABN 49 138 468 756

CONSOLIDATED FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2011

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ELEMENTOS LIMITED ABN 49 138 468 756

DIRECTORS’ REPORT

Your directors submit their report, together with the financial statements of the consolidated Group, being the Company and its controlled entities, for the year ended 30 June 2011.

Directors

The directors of the Company at any time during or since the end of the financial year are listed below. During the year there were nine meetings of the full board of directors. The meetings attended by each director were:

Directors	Board	Board	Audit Committee	Audit Committee	Remuneration Committee	Remuneration Committee
	Meetings	Attend	Meetings	Attend	Meetings	Attend
A. A. McLellan C. Nolan N. F. Stuart M.D. McCauley(appointed 8/10/10) J.D. Calaway(appointed 18/1/11)	9 9 9 8 6	9 9 7 8 6	2 - 2 2 -	2 - 2 2 -	1 - 1 1 -	1 - 1 1 -

The directors have been in office since the start of the financial year to the date of this report unless otherwise indicated.

Company Secretary

Paul Crawford held the position of Company Secretary at the end of the financial year. Mr Crawford is a CPA and holds accounting, company secretarial and business law qualifications. He has been Company Secretary of the Company since its incorporation.

Principal Activities

The principal activity of the Elementos Group during the course of the year was mineral exploration in Australia and Argentina. During the year, activities focused on asset assessment and acquisition, formulation of a corporate development strategy, and funding. There was no change in the principal activity during the year.

Review of Operations

During the year the Company has been actively pursuing its exploration and development activities. A $7.2 million private placement and rights issue to fund the Company’s on-going exploration and drilling programs, and a proposed new project acquisition program was completed.

During the reporting period, exploration and assessment work was undertaken on the Company’s portfolio of exploration assets. Gold and copper targets are the priority focus of the Elementos Group, which has interests in a portfolio of four exploration properties in three mineral provinces in two countries, Argentina and Australia. The tenements are located in world class mineral provinces, with developed infrastructure nearby, and attractive investment environments.

ELEMENTOS LIMITED ABN 49 138 468 756

DIRECTORS’ REPORT

In Argentina, the Company’s projects are located in San Juan Province, in the Andean foothills, at relatively low altitudes with well-established infrastructure.

San Juan Province is one of the most attractive destinations for mining and exploration in Argentina due to its suitable geology and mineral prospectivity, strongly pro-mining policies and rapidly developing infrastructure. The region hosts a number of significant mining operations including Veladero, Gualcamayo and Casposo, and advanced stage development projects including Pascua-Lama, Los Azules and El Pachon.

At Manantiales , the Company has carried out the following advanced exploration activities:

4,974 metres of diamond drilling in two separate drilling programs. Drilling has intersected a high-grade gold-silver zone at the Manantial prospect;
Diamond drilling is on-going to test Manantial, Manantial Norte, Julieta Norte and La Puerta targets; and
IP geophysics and surface exploration programs continue to delineate new targets including the two kilometre long Manantial Este target.

At Santo Domingo , the Company has continued its active exploration program, including:

Two significant new targets identified, including the Divisoria gold-copper porphyry system, and the Yvette high-grade gold and silver polymetallic veins;
Systematic exploration programs have been completed prior to a planned geophysics and drilling program; and
Santo Domingo mineralised environment proving very extensive, with a number of distinct mineralised styles and structures, in a large area only partially explored.

In Australia, the Company is focused on the Mt lsa lnlier in Queensland and the New England Fold Belt in northern New South Wales. The Mt Isa lnlier is one of the most significant gold and base metal producing districts worldwide, host to many world class copper/gold and lead/silver/zinc ore bodies, including Mt Isa, Hilton, George Fischer, Cannington and Ernest Henry. Recent major discoveries include Merlin and Rocklands, which illustrate the continued potential of the district. The district has established mining, transportation and processing infrastructure in close proximity to the major regional centres of Cloncurry and Mt Isa.

At Millenium , exploration and development advancements include:

Five additional exploration permits lodged over the prospective Corella fault structure, now totalling 248 square kilometres;
Soil sampling program completed on the Mining Leases: copper, cobalt and other geochemical anomalies have been identified in the soils, extending the apparent footprint of known mineralisation northwards by 1,500 metres;
Strongly anomalous rare earth elements and yttrium identified in check assays from the 2010 rock chip sampling program; and

ELEMENTOS LIMITED ABN 49 138 468 756

DIRECTORS’ REPORT

Drilling being planned to test the soil anomaly identified in soil sampling program.

The New England Fold Belt is an emerging minerals province, which, in the past, has been a significant production area for gold, tin and base metals. Although relatively unexplored, the area is receiving increased attention through the application of new geological theory and exploration techniques.

At the Northern New South Wales tenement areas , the Company has commenced an active exploration program at Cathedral Rocks, including:

Geological mapping and sampling program completed at School Gully Creek, Yarronah and Styx River prospects;
Geochemical signatures appear to confirm the potential for intrusive related gold style mineralisation; and
Visible gold identified in sheeted quartz veins at Styx River.

Financial Position & Operating Results

The Group’s operating loss for the financial year, after applicable income tax was $3,174,516 (2010: $813,332). Exploration and evaluation expenditure during the year totalled $2,921,400 (2010: $1,640,211).

During the year the Company issued a total of 28,383,525 shares (see note 11 in financial statements). At 30 June 2011 the Group’s net assets totalled $12,382,554 (2010: $8,032,224) which included cash assets of $9,316,719 (2010: $6,567,437).

The directors believe the Group is currently in a strong and stable financial position to support its planned activities.

Information on Directors

The board has a strong combination of technical, managerial and capital markets experience. Expertise and experience includes operating and mineral exploration in Australia and Argentina. The names and qualifications of the current directors are summarised as follows:

A. Anthony McLellan

Non-executive Chairman

Mr McLellan has over fifty years business experience in Australia and overseas as Chief Executive Officer of major international companies, including the predecessor of Barrick Gold. Mr McLellan has experience in range of industries and been instrumental in the acquisition, operation, and divestment of a number of major Australian resources companies.

Mr McLellan is active in the not-for-profit world as a director of the Menzies Research Centre and Chairman of the Australian Christian Lobby.

Directorships held in other ASX listed companies in the last three years: Norton Gold Fields Limited (Non-executive Director and Chairman to June 2010), Bemax Resources Ltd (Non-executive Chairman to July 2008) and Allomak Limited (Nonexecutive Director and Chairman to February 2009).

ELEMENTOS LIMITED ABN 49 138 468 756

DIRECTORS’ REPORT

Corey Nolan

Managing Director

Mr Nolan has nearly twenty years of diverse experience in the resources sector. This has included experience in mining operations, global resource evaluation, and the financing and development of new opportunities in Australia, South Africa, Asia and South America.

Mr Nolan is a qualified mineral economist. He has held specialist roles as an equities analyst in the mining and natural resources sector of stock broking firms Morgan Stanley and Wilson HTM.

Before joining Elementos, Mr Nolan worked as business development executive with ASX listed coal exploration and development company, Aviva Corporation Limited, where he undertook commercial development of Aviva's integrated energy portfolio and identified acquisition opportunities in Australia and Africa.

Directorships held in other ASX listed companies in the last three years: Nil.

Neil F. Stuart

Non-executive Director

Mr Stuart is an exploration geologist with over forty years experience in the minerals industry. He is a Fellow of The Australasian Institute of Mining and Metallurgy, a Member of The Australian Institute of Geoscientists and a number of other professional organisations.

Mr Stuart’s experience includes a diverse range of commodities across several countries, but heavily focused on project acquisition and delineation in Australia, Mexico and Argentina. Mr Stuart was a founding director of Oroplata Limited, Orocobre Limited and Elementos Limited, all of which specialise in exploration in Argentina. Mr Stuart is also a director of several other ASX listed junior exploration companies.

Directorships held in other ASX listed companies in the last three years : Orocobre Limited, Bowen Energy Limited, Axiom Mining Limited and OGL Resources Limited.

Mark D. McCauley

Non-executive Director

Mr McCauley was appointed a director of Elementos Limited in October 2010. Mr McCauley is currently the Managing Director of RMM Capital, a Queensland based private equity firm specialising in resource investments.

Prior to this, Mr McCauley was the Chief Financial Officer and Company Secretary of Felix Resources Limited, a highly-successful coal company.

Mr McCauley recently acted as Chief Executive Officer of Norton Gold Fields Limited for eight months, undertaking a successful management and strategic overhaul of the Company. Mr McCauley has also served in operations and

ELEMENTOS LIMITED ABN 49 138 468 756

DIRECTORS’ REPORT

strategic roles at several coal mining operations, in Mt Isa and at the Alumbrera copper-gold mine in Argentina.

Mr McCauley holds an Honours Degree in Engineering (majoring in Mining) from the University of Queensland and a Masters in Business Administration from Bond University. Mr McCauley is also a graduate of the Advanced Management Programme at Harvard Business School, and a member of the Australian Institute of Company Directors. In addition, Mr McCauley holds a First Class Underground Mine Manager’s Certificate.

Directorships held in other ASX listed companies in the last three years : Norton Gold Fields Limited to September 2010 and Monto Minerals Limited to June 2009.

James D. Calaway

Non-executive Director

Mr Calaway was appointed a director in January 2011. Mr Calaway is a respected business and civic leader in Houston, Texas. He has considerable experience and success in building young companies into successful commercial enterprises. Mr Calaway and his family have played major roles in the development of both public and private companies in the United States, including companies engaged in oil and gas exploration and production, and commercial wind-farm development.

Mr Calaway currently serves as Chairman of the Board of ASX-and-TSX listed Orocobre Limited, developer of the Olaroz Lithium/Potash project in Argentina; DataCert Inc, the global leader in legal operations management; and Open Spirit Corporation, a software company in the geological and geophysical software industry. Mr Calaway also serves as a director on several other U.S. corporate boards. Mr Calaway is a graduate of the Universities of Texas and Oxford.

Directorships in other ASX listed companies in the last three years : Orocobre Limited.

The relevant interest of each director held directly or indirectly in shares and options issued by the Company at the date of this report is as follows:-

Directors	Shares	Options
A A McLellan	-	2,000,000
C Nolan	146,786	2,500,000
N F Stuart	2,367,185	1,000,000
M D McCauley	-	500,000
J D Calaway	11,937,291	1,000,000

Remuneration Report (Audited)

This report details the nature and amount of remuneration for each director and other key executive personnel.

ELEMENTOS LIMITED ABN 49 138 468 756

DIRECTORS’ REPORT

The Company’s remuneration policy seeks to align director and executive objectives with those of shareholders and business, while at the same time, recognising the early development stage of the Company and the criticality of funds being utilised to achieve development objectives. The board believes the current policy has been appropriate and effective in achieving a balance of these objectives.

The remuneration structure for executives is based on a number of factors, including length of service, particular experience of the individual concerned, and overall performance of the Group.

The Company’s policy for determining the nature and amount of remuneration of board members and key executives is as follows.

The remuneration policy, setting the terms and conditions for the executives was developed and approved by the Remuneration Committee acting on behalf of the non-executive directors. The executives receive payments provided for under an employment agreement, which may include cash, superannuation, short-term incentives and equity based performance remuneration.

Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. Individuals may elect to salary sacrifice part of their fees as increased payments towards superannuation. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting and is not linked to the performance of the Company. However, to align directors’ interests with shareholder interests, directors are encouraged to hold equity interests in the Company. The maximum aggregate amount of fees that can be paid to non-executive directors approved by shareholders is currently $250,000. One-third, by number, of non-executive directors retire by rotation at the Company’s Annual General Meeting.

The Company’s remuneration policy provides for long-term incentives to be offered through an employee share option plan. Options have been granted under this plan during the year and in the prior financial year to align directors’, executives’, employees’ and shareholders’ interests. The Company does not remunerate any key management personnel with securities that are not performance based.

The board of directors is responsible for determining and reviewing the Company’s remuneration policy, remuneration levels and performance of both executive and non-executive directors. In accordance with the board’s governance policies, the remuneration committee has been established to carry out this function. Independent external advice will be sought when required.

The board is presently reassessing the Remuneration Policy to ensure it incorporates appropriate elements given the Group’s status and planned activities. Through this review process, the directors aim to provide clearer and more manageable performance criteria for remuneration incentives including the issue of employee and executive options, while also securing greater loyalty from key employees and executives, reducing administration costs and the regulatory burden on the Company.

ELEMENTOS LIMITED ABN 49 138 468 756

DIRECTORS’ REPORT

Performance-Based Remuneration (Audited)

Performance-based remuneration includes both short-term and long-term incentives and is designed to reward key management personnel for reaching or exceeding specific objectives or as recognition for strong individual performance. Short-term incentives are available to eligible staff of the Group and are comprised of cash bonuses, determined on a discretionary basis by the chief executive officer and the board.

Long-term incentives are comprised of share options, which are granted from timeto-time to encourage sustained strong performance in the realisation of strategic outcomes and growth in shareholder value.

The exercise price of the options is determined after taking into account the underlying share price performance in the period leading up to the date of grant and if applicable, performance conditions attached to the share options. Subject to specific vesting conditions, each option is convertible into one ordinary share.

Employment Details of Key Management Personnel (Audited)

The key management personnel of Elementos Limited are the directors as listed previously, the Company Secretary (Mr P Crawford) and the Chief Financial Officer (Ms L Scott, appointed 21 March 2011). The remuneration of each director and key officer of the Group during the year was as follows:

Year Ended 30 June 2011

Key Management Personnel	Short Term Benefits	Short Term Benefits	Short Term Benefits	Equity Settled Options	Post Employment Super- annuation	Total
	Salary & Fees	Bonuses	Non-Cash Benefits
A A McLellan C Nolan N F Stuart M D McCauley J D Calaway L Scott P A Crawford	$68,500 $207,308 $35,000 $29,247 $18,172 $51,161 $54,613	- $25,000 - - - - -	- - - - - - -	$177,179 $221,474 $88,590 $93,900 $186,000 - -	$6,165 $18,658 $3,150 $2,632 - $4,604 -	$251,844 $472,440 $126,740 $125,779 $204,172 $55,765 $54,613
	$464,001	$25,000	-	$767,143	$35,209	$1,291,353

The short term bonus was paid on the basis of achievement of particular performance criteria in the previous financial year.

During the current year, all equity settled options granted as remuneration have been fully expensed, up to their maturity date, as performance conditions attached to the options were met. The values of the options expensed were determined in accordance with Australian Accounting Standards, and were not cash remuneration.

Options create an opportunity for a person to acquire equity in the company. Options are issued as a long-term remuneration incentive designed to reward Elementos personnel for performance, align their interests with shareholders’ and

ELEMENTOS LIMITED ABN 49 138 468 756

DIRECTORS’ REPORT

the creation of shareholder value, and encourage retention of personnel who are critical to the performance of the Group.

Year Ended 30 June 2010

	Year Ended 30	Year Ended 30	June 2010
Key Management Personnel	Short Term Benefits		Equity Settled Options	Post Employment Superannuation	Total
	Salary & Fees	Non-Cash Benefits
A A McLellan C Nolan N F Stuart M D McCauley J D Calaway L Scott P A Crawford	$40,416 $92,500 $15,000 - - - $28,050	- - - - - - -	$22,821 $28,526 $11,410 - - - -	$3,638 $8,325 $1,350 - - - -	$66,875 $129,351 $27,760 - - - $28,050
	$175,966	-	$62,757	$13,313	$252,036

Following are employment details of persons who were key management personnel of the Group during the financial year:

Key Management Personnel	Position Held at 30 June 2011 and Change During Year	Contract Details	Proportion of Remuneration:	Proportion of Remuneration:	Proportion of Remuneration:	Total
			Related to Performance		Not Related to Performance
A A McLellan	Non-executive Chairman No change	No fixed term, termination as provided by Corporations Act	Cash Based	Equity Based	Salary and Wages	100%
			0.0%	70.4%	29.6%
C Nolan	Managing Director No change	No fixed term, 3 months notice to terminate	5.3%	46.9%	47.8%	100%
N F Stuart	Non-executive Director No change	No fixed term, termination as provided by Corporations Act	0.0%	69.9%	30.1%	100%
M D McCauley	Non-executive Director Appointed 8/10/10	No fixed term, termination as provided by Corporations Act	0.0%	74.7%	25.3%	100%
J D Calaway	Non-executive Director Appointed 18/01/11	No fixed term, termination as provided by Corporations Act	0.0%	91.1%	8.9%	100%
L Scott	Chief Financial Officer Appointed 21/03/11	No fixed term, 4 weeks’ notice to terminate	0.0%	0.0%	100%	100%
P A Crawford	Company Secretary No change	No fixed term, termination by either party on notice	0.0%	0.0%	100%	100%

ELEMENTOS LIMITED ABN 49 138 468 756

DIRECTORS’ REPORT

Options Granted as Remuneration (Audited)

Remuneration options granted during the current and prior years are summarised below.

All options granted in the 2010 financial year vested during the current year when the Elementos Limited share price closed above $0.30 on 20 December 2010 (50% of the options granted) and above $0.35 on 17 January 2011 (remaining 50%).

All options were granted for nil consideration. Options granted do not convey dividend or voting rights and each option converts into one ordinary share in the Company.

Year Ended 30 June 2011

Key Management Personnel				Value at Grant Date	Value at Grant Date	Terms & Conditions	Terms & Conditions	of Grant
	No. Vested	Granted Number	Grant Date	Per Option	Total	Exercise price	First Exercise Date	Last Exercise Date
M McCauley J Calaway	1,000,000 -	1,000,000 1,000,000	30/11/10 28/03/11	9.4 cents 18.6 cents	$93,900 $186,000	25 cents 35 cents	30/11/10 On Vest	29/11/15 18/01/17

Year Ended 30 June 2010

Key Management Personnel				Value at Grant Date	Value at Grant Date	Terms & Conditions	Terms & Conditions	of Grant
	No. Vested	Granted Number	Grant Date	Per Option	Total	Exercise price	First Exercise Date	Last Exercise Date
A McLellan C Nolan N Stuart	2,000,000(i) 2,500,000(i) 1,000,000(i)	2,000,000 2,500,000 1,000,000	23/10/09 2310/09 23/10/09	10 cents 10 cents 10 cents	$200,000 $250,000 $100,000	25 cents 25 cents 25 cents	On vest On vest On vest	23/10/15 23/10/15 23/10/15

(i) subject to ASX restriction on exercise.

During the current year Mr McCauley exercised 500,000 of his options. The value of the options exercised was $47,000 and the proceeds received $116,830. Mr McCauley’s options vested when the Elementos Limited share price closed at or above $0.30 (50% of the options granted) and at or above $0.35 (remaining 50%).

Mr Calaway’s options vest when the Elementos Limited share price closes at or above $0.40 (50% of the options granted) and at or above $0.45 (remaining 50%).

The values of the options granted as remuneration shown in the Remuneration Report were determined in accordance with Australian Accounting Standards.

The grant of the options to the directors is intended to act as a strong incentive to align the interests of the directors’ with the Company's strategic plan focusing on seeking improved performance, the growth of the Company and better returns for shareholders.

Key management personnel are prohibited from entering into hedge arrangements on unvested options. No options lapsed or were forfeited during the

ELEMENTOS LIMITED ABN 49 138 468 756

DIRECTORS’ REPORT

year. There have not been any alterations to the terms and conditions of any options since grant date.

Employment Contract of Executives (Audited)

The contract for service between the Company and the managing director was executed in December 2009. It does not provide for a fixed term of employment but provides for annual review of the compensation value. Total remuneration value (excluding statutory entitlements, short term and equity incentives) is $200,000 per annum. The Company may terminate the managing director's contract without cause by giving 3 months’ notice.

The contract for service between the Company and the chief financial officer was executed in March 2011. It does not provide for a fixed term of employment but provides for annual review of the compensation value. Total remuneration value (excluding statutory entitlements, short term and equity incentives) is $183,000 per annum. The Company may terminate the chief financial officer’s contract without cause by giving 4 weeks’ notice.

In the case of serious misconduct the Company can terminate employment of any executive at any time. The terms of this agreement are not expected to change in the immediate future.

The terms of appointment of the non-executive directors provide for the payment of fixed directors’ fees and consulting fees for services provided in addition to their commitment as directors.

Company Performance, Shareholder Wealth and Director and Executive Remuneration (Audited)

As outlined above, the Company’s remuneration policy seeks to align directors’ and executives’ objectives with shareholders and business, whilst recognising the developmental stage of the Company.

The following table shows some key performance data of the Company since incorporation in 2009, together with the share price at the end of the respective financial years.

years.
	2011	2010
Exploration expenditure ($) Exploration tenements (no.) Net assets ($) Share Price at Year-end ($) Dividends Paid($)	2,921,400 25 12,382,554 0.225 NIL	1,640,211 21 8,032,224 0.130 NIL

Dividends

No dividend has been proposed or paid since the start of the financial year.

ELEMENTOS LIMITED ABN 49 138 468 756

DIRECTORS’ REPORT

Significant Changes in State of Affairs

The following significant changes in the state of affairs of the Company have occurred during the financial year:

a. On 7 September 2010 the Company granted 1,300,000 options to employees
under the Company’s Employee & Officers Share Option Plan;
b. On 18 January and 28 March 2011, the Company issued a total of 13,900,000
shares at $0.26 each, as a placement to sophisticated investors;
c. On 3 March 2011, the Company issued a total of 13,883,525 shares at $0.26
each pursuant to a rights issue to shareholders;
d. During the year the Company issued a total of 600,000 shares pursuant to the
exercise of options;
e. During the year, the Company granted 2,000,000 options to directors; and
f. During the year, the Company also established Elementos Chile Ltda (a wholly owned subsidiary) in preparation for expanding exploration activity into Chile.

There have been no further significant changes in the state of affairs of the Company during the year.

Options

At the date of this report, the unissued ordinary shares of the Company under options are as follows:

s are as follows:
Grant Date	Expiry Date	Exercise Price	No. Under Option
23 October 2009	23 October 2015	$0.233(i)	5,500,000
17 December 2009	17 December 2013	$0.300	1,500,000
7 September 2010	7 September 2015	$0.233(i)	1,200,000
30 November 2010	29 November 2015	$0.233(i)	500,000
28 March 2011	18 January 2017	$0.333(i)	1,000,000

(i) The Trust Deeds relating to the grant of these options provides for a reduction in the option exercise price where the Company undertakes a pro-rata issue of securities. The Company completed a 1 for 4.48 rights issue in March 2011. The reduction in exercise price is calculated in accordance with the formula provided in the ASX Listing Rules.

There have been no unissued shares or interests under option of any controlled entity within the economic entity during or since reporting date. Option holders do not have any rights to participate in any share issue or other interests in the Company or any other entity.

Ordinary shares of the Company issued during the year following the exercise of the options were:

ELEMENTOS LIMITED ABN 49 138 468 756

DIRECTORS’ REPORT

Option Grant Date	Exercise Price	Shares Issued
7 September 2010	$0.250	100,000
30 November 2010	$0.234	500,000

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

No further options have been exercised to the date of this report.

Subsequent Events, Future Developments, Prospects and Business Strategies

The directors intend that the Company continue to carry out an active exploration program on its Australian and Argentine tenements as detailed in the Company’s various public announcements. Directors will also continue to review external opportunities which may arise with a view to acquisition, farm-in or corporate investment.

No matters or circumstances have arisen since the end of the year which significantly affected or may significantly affect the operations of the Elementos Group, the results of those operations, or the state of affairs of the Group in future financial years.

Environmental Issues

The Group is subject to significant environmental regulation under the law of the Commonwealth or a State or Territory of Australia. The Group is also subject to environmental regulation in relation to its exploration activities in Argentina.

The directors monitor the Group’s compliance with environmental obligations. The directors are not aware of any compliance breach arising during the year and up to the date of this report.

Corporate Governance

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Elementos Limited support and, where practicable or appropriate, have adhered to the ASX Principles of Corporate Governance. The Company’s corporate governance statement is contained within this annual report.

ELEMENTOS LIMITED ABN 49 138 468 756

DIRECTORS’ REPORT

Indemnifying Directors and Auditors

The Company has entered into a Deed with each of the directors whereby the Company has agreed to provide certain indemnities to each director to the extent permitted by the Corporations Act and to use its best endeavours to obtain and maintain directors’ and officers’ indemnity insurance, subject to such insurance being available at reasonable commercial terms.

The economic entity has paid premiums to insure each of the directors of the Company against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The contracts include a prohibition on disclosure of the premium paid and nature of the liabilities covered under the policy.

The Company has not given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums in respect of any person who is or has been an auditor of the Company or a related entity during the year and up to the date of this report.

Proceedings on Behalf of the Company

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year.

Non-Audit Services

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

(a) all non-audit services are reviewed and approved by the audit committee to ensure they do not adversely affect the integrity and objectivity of the auditor; and
(b) the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

The following fees were paid or payable to the auditors for non-audit services provided during the financial year:

Paid to lead auditor for due diligence services $1,500

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ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011

Note	Year Ended Period Ended 30 June 2011 30 June 2010 $ $
Revenue 2 Less expenses: Corporate and administrative Exploration and evaluation expenditure Loss before income tax expense Income tax expense 4 Loss for the period attributable to members of the parent entity 3 Other comprehensive income Foreign currency translation gain/(loss) Income tax relating to components of other comprehensive income Other comprehensive income for the period net of tax Total comprehensive loss attributable to members of the parent entity Basic earnings per share (cents per share) 14 Dividends per share	312,948 169,660 (3,104,521) (836,043) (382,943) (146,949)
	(3,174,516) (813,332) - -
	(3,174,516) (813,332) (599,983) 52,973 - -
	(599,983) 52,973
	(3,774,499) (760,359)
	(4.97) (2.38)
	- -

The accompanying notes form part of these financial statements.

ELEMENTOS LIMITED and CONTROLLED ENTITIES

ABN 49 138 468 756

CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 JUNE 2011

Note 30 June 2011 30 June 2010

	$ $
CURRENT ASSETS Cash and cash equivalents 5 Trade and other receivables 6 Other 7 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Exploration and evaluation asset 8 Property, plant and equipment 9 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 10 TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 11 Reserves 12 Accumulated losses TOTAL EQUITY	9,316,709 6,567,437 217,995 46,754 5,728 66,918
	9,540,432 6,681,109
	3,662,498 1,544,751 35,244 40,165
	3,697,742 1,584,916
	13,238,174 8,266,025
	855,630 233,801
	855,630 233,801
	855,630 233,801
	12,382,544 8,032,224
	15,919,925 8,600,139 450,467 245,417 (3,987,848) (813,332)
	12,382,544 8,032,224

The accompanying notes form part of these financial statements.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

Note Share Capital Accumulated Losses Option Reserve Foreign Currency Translation Reserve Total $ $ $ $ $	Note Share Capital Accumulated Losses Option Reserve Foreign Currency Translation Reserve Total $ $ $ $ $
Opening Balance Loss for the period Other comprehensive income for the period 12 Total comprehensive loss Shares issued during the period 11 Transaction costs 11 Equity settled compensation 11 Share options exercised 11 Balance at 30 June 2010 Loss for the period Other comprehensive income for the period 12 Total comprehensive loss Shares issued during the period 11 Transaction costs 11 Equity settled compensation 11 Share options exercised 11 Balance at 30 June 2011	- - - - - - (813,332) - - (813,332) - - - 52,973 52,973
	- (813,332) - 52,973 (760,359) 9,500,001 - - - 9,500,001 (899,862) - - - (899,862) - - 192,444 - 192,444 - - - - -
	8,600,139 (813,332) 192,444 52,973 8,032,224
	- (3,174,516) - - (3,174,516) - - - (599,983) (599,983)
	- (3,174,516) - (599,983) (3,774,499) 7,365,547 - - - 7,365,547 (99,781) - - - (99,781) - - 859,053 - 859,053 54,020 - (54,020) - -
	15,919,925 (3,987,848) 997,477 (547,010) 12,382,544

The accompanying notes form part of these financial statements.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2011

Note	Year Ended Period Ended 30 June 2011 30 June 2010 $ $
CASH FLOWS FROM OPERATING ACTIVITIES Payments due to suppliers and employees on credit terms Interest received Net cash provided by (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Exploration expenditure 8 Purchase of property, plant and equipment 9 Net cash provided by (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares 11 Costs associated with share issue 11 Net cash provided by (used in) financing activities Net increase in cash held Cash at beginning of period Effect of exchange rates on cash holdings in foreign currencies Cash at end of year 5 The accompanying notes form part of these financial statements.	(2,196,783) (796,491) 312,948 169,660
	(1,883,835) (626,831)
	(2,640,954) (493,262) (11,583) (43,886)
	(2,652,537) (537,148)
	7,365,547 8,250,001 (99,781) (520,175)
	7,265,766 7,729,826
	2,729,394 6,565,847 6,567,437 - 19,878 1,590
	9,316,709 6,567,437

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The financial report covers the economic entity of Elementos Limited and Controlled Entities. Elementos Limited is a public Company, incorporated and domiciled in Australia. The financial report has been prepared on an accruals basis and is based on historical cost modified by the measurement at fair value of selected non-current assets, financial assets and liabilities. The financial report was authorised for the issue on 5 September 2011 by the directors of the Company.

Separate financial statements for Elementos Limited as an individual entity are no longer presented following a change to the Corporations Act 2001. However, financial information required for Elementos Limited as an individual entity is included in note 24.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated.

The Company was incorporated on 23 July 2009. Consequently, comparative amounts in the financial statements cover the period from incorporation.

Principles of Consolidation

A controlled entity is any entity Elementos Limited has the ability and right to govern the financial and operating policies of, so as to obtain benefits from its activities. A list of controlled entities is shown in note 17(c).

All inter-Company balances and transactions between entities in the economic entity, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those policies applied by the parent entity.

Where controlled entities have entered or left the economic entity during the period, their operating results have been included/excluded from the date control was obtained or until the date control ceased.

Income Tax

The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income).

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the period as well unused tax losses.

Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

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

Exploration and Evaluation Assets

Exploration and evaluation expenditure incurred is recognised as exploration and evaluation assets, measured on the cost basis and classified as an intangible asset. The expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that rights of tenure are current and either they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full against profit in the period in which the decision to abandon the area is made.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Recoverability of the carrying amount of the exploration and evaluation assets is dependent on the successful development and commercial exploitation or alternatively sale of the respective areas of interest.

Restoration Costs

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

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

The economic entity currently has no obligation for any restoration costs in relation to discontinued operations, nor is it currently liable for any future restoration costs in relation to current areas of interest. Consequently, no provision for restoration has been deemed necessary.

Impairment of Assets

At each reporting date, the economic entity reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the statement of comprehensive income.

Financial Instruments

Recognition and Initial Measurement

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets.

Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity is no longer has any significant continuing involvement in the risks and benefits associated with the asset.

Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

Classification and subsequent measurement

Financial instruments are subsequently measured at either of fair value, amortised cost using the effective interest rate method, or cost.

Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties.

Amortised cost is calculated as:

(a) the amount at which the financial asset or financial liability is measured at initial recognition;

(b) less principal repayments;

(c) plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and

(d) less any reduction for impairment.

The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss.

The economic entity does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated as such or that are not classified in any of the other categories. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments.

Financial liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost.

Impairment

At each reporting date, the economic entity assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the statement of comprehensive income.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of less than 3 months.

Issued Capital

Ordinary shares are classified as equity. Transaction costs (net of tax where the deduction can be utilised) arising on the issue of ordinary shares are recognised in equity as a reduction of the share proceeds received.

Equity Settled Compensation

The economic entity makes equity-settled share-based payments to directors, employees and other parties for services provided or the acquisition of exploration assets. The fair value of the equity is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using a binomial lattice pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

Issued capital also includes amounts received from the exercise of options and the transfer from Options Reserve of any balance relating to the options exercised.

Where the fair market value of services rendered by other parties can be reliably determined, this is used to measure the equity-settled payment.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

Revenue

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

Employee Benefits

Provision is made for the economic entity's liability for employee benefits arising from services rendered by employees to balance date. Employee benefits expected to be settled within 1 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 1 year have been measured at the present value of the estimated future cash outflows to be made for those benefits. Contributions are made by the entity to employee superannuation funds and are charged as expenses when incurred.

Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST (or overseas VAT), except where the amount of GST incurred is not recoverable. In these circumstances the GST (or overseas VAT) is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.

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

Foreign Currency Transactions and Balances

Functional and presentation currency:

The economic entity’s financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.

Transaction and balances:

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

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

Exchange differences arising on the translation of non-monetary items are recognised as other comprehensive income in the statement of comprehensive income.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

Group Companies

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

assets and liabilities are translated at period-end exchange rates prevailing at that reporting date;
income and expenses are translated at average exchange rates for the period; and
retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred to the economic entity’s foreign currency translation reserve in the statement of financial position.

Earnings per Share (EPS)

Basic earnings per share is calculated by dividing the loss attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period adjusted for any bonus elements in ordinary shares issued during the period.

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

Critical Accounting Estimates and Judgements

The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the economic entity.

The economic entity makes estimates and judgements in applying the accounting policies. Critical judgements in respect of accounting policies relate to the exploration and evaluation assets, whereby exploration and evaluation expenditure is capitalised in certain circumstances, primarily where activities in the area of interest have not yet reached a stage which permits reasonable assessment of economically recoverable reserves. Otherwise expenditure is expensed.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

New Accounting Standards for Application in Future Periods

The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods and which the Group has decided not to early adopt. A discussion of those Standards and Interpretations likely to be relevant to the Group and their impact is as follows:

AASB 9: Financial Instruments (December 2010) (applicable for annual reporting periods commencing on or after 1 January 2013).

This Standard is applicable retrospectively and includes revised requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements for financial instruments. The Group has not yet determined any potential impact on the financial statements.

The key changes made to accounting requirements include:

simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value;
simplifying the requirements for embedded derivatives;
removing the tainting rules associated with held-to-maturity assets;
removing the requirements to separate and fair value embedded derivatives for financial assets carried at amortised cost;
allowing an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument;
requiring financial assets to be reclassified where there is a change in an entity’s business model as they are initially classified based on: (a) the objective of the entity’s business model for managing the financial assets; and (b) the characteristics of the contractual cash flows; and
requiring an entity that chooses to measure a financial liability at fair value to present the portion of the change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, except when that would create an accounting mismatch. If such a mismatch would be created or enlarged, the entity is required to present all changes in fair value (including the effects of changes in the credit risk of the liability) in profit or loss.

AASB 2009–12: Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052] (applicable for annual reporting periods commencing on or after 1 January 2011).

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

This Standard makes a number of editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRSs by the IASB. The Standard also amends AASB 8 to require entities to exercise judgment in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. The amendments are not expected to impact the Group.

AASB 2009–14: Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement [AASB Interpretation 14] (applicable for annual reporting periods commencing on or after 1 January 2011).

This Standard amends Interpretation 14 to address unintended consequences that can arise from the previous accounting requirements when an entity prepays future contributions into a defined benefit pension plan.

This Standard is not expected to impact the Group.

AASB 2010–4: Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, AASB 7, AASB 101 & AASB 134 and Interpretation 13] (applicable for annual reporting periods commencing on or after 1 January 2011).

This Standard details numerous non-urgent but necessary changes to Accounting Standards arising from the IASB’s annual improvements project. Key changes include: - clarifying the application of AASB 108 prior to an entity’s first Australian-AccountingStandards financial statements;

adding an explicit statement to AASB 7 that qualitative disclosures should be made in the context of the quantitative disclosures to better enable users to evaluate an entity’s exposure to risks arising from financial instruments;
amending AASB 101 to the effect that disaggregation of changes in each component of equity arising from transactions recognised in other comprehensive income is required to be presented, but is permitted to be presented in the statement of changes in equity or in the notes;
adding a number of examples to the list of events or transactions that require disclosure under AASB 134; and
making sundry editorial amendments to various Standards and Interpretations.

This Standard is not expected to impact the Group.

AASB 2010–5: Amendments to Australian Accounting Standards [AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042] (applicable for annual reporting periods beginning on or after 1 January 2011).

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

This Standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRSs by the IASB. However, these editorial amendments have no major impact on the requirements of the respective amended pronouncements.

AASB 2010–6: Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets [AASB 1 & AASB 7] (applicable for annual reporting periods beginning on or after 1 July 2011).

This Standard adds and amends disclosure requirements about transfers of financial assets, especially those in respect of the nature of the financial assets involved and the risks associated with them. Accordingly, this Standard makes amendments to AASB 1: First-time Adoption of Australian Accounting Standards and AASB 7: Financial Instruments: Disclosures, establishing additional disclosure requirements in relation to transfers of financial assets.

This Standard is not expected to impact the Group.

AASB 2010–7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 127] (applies to periods beginning on or after 1 January 2013).

This Standard makes amendments to a range of Australian Accounting Standards and Interpretations as a consequence of the issuance of AASB 9: Financial Instruments in December 2010. Accordingly, these amendments will only apply when the entity adopts AASB 9.

As noted above, the Group has not yet determined any potential impact on the financial statements from adopting AASB 9.

AASB 2010–8: Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets [AASB 112] (applies to periods beginning on or after 1 January 2012).

This Standard makes amendments to AASB 112: Income Taxes.

The amendments brought in by this Standard introduce a more practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model under AASB 140: Investment Property.

Under the current AASB 112, the measurement of deferred tax liabilities and deferred tax assets depends on whether an entity expects to recover an asset by using it or by selling it. The amendments introduce a presumption that an investment property is recovered entirely through sale. This presumption is rebutted if the investment property is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale.

The amendments brought in by this Standard also incorporate Interpretation 121 into AASB 112.

The amendments are not expected to impact the Group.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 2: REVENUE & OTHER INCOME Revenue from operating activities: Interest received from other persons	Year Ended 30 June 2011 Period Ended 30 June 2010 $ $
	312,948 169,660

NOTE 3: EXPENSES

Included in expenses are the following items:

Exploration and evaluation expenditure comprises: Expenditure expensed during the year Capitalised expenditure written off Depreciation and Amortisation Foreign currency translation gain Employee benefits expense comprises: Short term benefits Contributions to defined contribution plans Equity settled option amortisation Less capitalised as exploration expenditure	280,446 146,949 102,497 -
	382,943 146,949
	15,995 3,728 - (1,293)
	1,293,393 407,518 55,976 22,521 859,053 62,757 (380,585) (127,411)
	1,827,837 365,385

NOTE 4: INCOME TAX EXPENSE

The prima facie tax on the operating loss is reconciled to income tax expense as follows:

Adjust for tax effect of: Non-deductible amounts Weighted average effective tax rate Income tax expense/(benefit) attributable to entity Prima facie tax payable/(benefit) on loss from ordinary activities before income tax at 30% (2010: 30%) Tax losses and temporary differences not brought to account	(952,355) (244,000) 463,471 19,358 488,884 224,642
	- -
	0.00% 0.00%

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 4: INCOME TAX EXPENSE (CONT) Tax losses Net unbooked deferred tax asset Deferred tax assets and liabilities not brought to account, the net benefit of which will only be realised if the conditions for deductibility set out in note 1 occur: Temporary differences (comprising exploration expenditure, provisions and other items)	30 June 2011 30 June 2010 $ $
	(146,209) (511,996) 778,143 333,300
	631,934 (178,696)

The Group has unconfirmed carry forward losses of approximately $2,000,000 in Australia and $650,000 in foreign losses.

As set out in note 1, the availability of these losses is dependent upon compliance with income tax legislation in Australia and Argentina.

Last year's tax losses have been adjusted by approximately $400,000 to reflect a reassessment of amounts deductible under foreign jurisdiction.

NOTE 5: CASH AND CASH EQUIVALENTS

Cash at bank and on hand Short term deposits NOTE 6: TRADE AND OTHER RECEIVABLES Current: Other receivables	890,282 527,437 8,426,427 6,040,000
	9,316,709 6,567,437
	217,995 46,754

There are no balances within trade and other receivables that contain assets that are impaired or are past due. It is expected these balances will be received when due. Impaired assets are provided for in full. There are no balances with terms that have been renegotiated, but which would otherwise be past due or impaired.

These amounts are non-interest bearing & generally on 30 day terms. No collateral is held over receivables.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

30	June	2011	30	June	2010
	$			$

NOTE 6: TRADE AND OTHER RECEIVABLES (CONT)

Credit and Foreign Exchange Risk:

The economic entity has no significant concentration of credit risk with respect to a single counter party. The class of assets described as Trade and Other Receivables is considered to be the main source of credit risk related to the economic entity. A major portion of the receivables are not denominated in Australian dollars - see note 21.

NOTE 7: OTHER ASSETS

Current: Prepayments NOTE 8: EXPLORATION AND EVALUATION ASSET Exploration and evaluation phase - at cost Opening balance - at cost Capitalised exploration expenditure Expenditure written off for year Foreign currency translation movement Carrying amount at the end of period Exploration and evaluation expenditure carried forward in respect of areas of interest are: Movement in exploration and evaluation asset:	5,728 66,918
	3,662,498 1,544,751
	1,544,751 - 2,640,954 1,493,262 (102,497) - (420,710) 51,489
	3,662,498 1,544,751

Recoverability of the carrying amount of exploration assets is dependent on the successful exploration and development of projects or alternatively through the sale of the areas of interest.

NOTE 9: PLANT AND EQUIPMENT

Plant and equipment At cost Accumulated depreciation Total plant and equipment	54,985 43,893 (19,741) (3,728)
	35,244 40,165

ELEMENTOS LIMITED and CONTROLLED ENTITIES

ABN 49 138 468 756

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2011

NOTE 9: PLANT AND EQUIPMENT (CONT) Balance at the beginning of year Additions Disposals Depreciation expense Foreign currency translation movement Carrying amount at the end of year NOTE 10: TRADE AND OTHER PAYABLES Current: Trade payables and accrued expenses (a) Short term employee benefits Total payables (unsecured) Reconciliation of the carrying amounts for property, plant and equipment is set out below:	30 June 2011 30 June 2010 $ $
	40,165 - 11,583 43,886 - - (15,995) (3,728) (509) 7
	35,244 40,165
	821,070 212,294 34,560 21,507
	855,630 233,801

(a) Includes $12,335 (2010: $30,000) payable to related parties.

The average credit period on purchases of goods and services is 30 days. No interest is paid on trade payables. Trade payables and accruals are the only financial liabilities shown at amortised cost.

A major portion of the payables are not denominated in Australian Dollars - see note 21.

NOTE 11: ISSUED CAPITAL

Fully paid ordinary shares Ordinary shares Balance at the beginning of the reporting period Shares issued during the period: 18 January 2011 (a) 25 January 2011 (b) 3 March 2011 (c) 18 March 2011 (d) 28 March 2011 (e) Balance at reporting date	15,919,925 8,600,139
	No. No.
	54,000,001 - 54,000,001 8,100,000 - 100,000 - 13,883,525 - 500,000 - 5,800,000 -
	82,383,526 54,000,001

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 11: ISSUED CAPITAL (CONT)

(a) Issued at 26.0 cents each, pursuant to a private offering

(b) Issued at 25.0 cents each, pursuant to the exercise of options

(d) Issued at 23.4 cents each, pursuant to the exercise of options (e) Issued at 26.0 cents each, pursuant to a private offering

Options Unlisted Share Options Balance at the beginning of the reporting period Options issued during the period: Issued to directors (f) Issued to staff (g) Exercised by directors Exercised by staff Balance at reporting date Issued to Martin Place Securities Limited for IPO	No. of Options No. of Options 9,700,000 7,000,000
	7,000,000 - 2,000,000 5,500,000 - 1,500,000 1,300,000 - (500,000) - (100,000) -
	9,700,000 7,000,000

(f) Issued to directors pursuant to shareholder approval

(g) Issued to staff pursuant to the Employee Share Option Plan

Other details of the options granted are: Number of options granted Date of grant and vesting of options Option expiry date The fair value of share options and assumptions for the period ended 30 June 2011: Fair value at grant date Share price Exercise price Expected volatility Option life Expected dividends Risk-free interest rate Target share price	Director Options Director Options Staff Options
	1,000,000 1,000,000 1,300,000 30/11/2010 28/03/2011 7/09/2011 30/11/2010 18/01/2017 7/09/2015 9.4 cents 18.6 cents 7.0 cents 20.0 cents 33.0 cents 17.0 cents 25.0 cents 35.0 cents 25.0 cents 65% 74% 65% 5 years 5.8 years 5 years nil nil nil 5.25% 5.75% 5.25% 30/35 cents 40/45 cents 30/35 cents

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 11: ISSUED CAPITAL (CONT)

The weighted average fair value of options granted in the period was 11.24 cents. The fair values of options were calculated using a binomial lattice pricing model. Volatility was based on historical share price as it is assumed this is indicative of future movements.

The amount of the expense during the period in relation to options is $859,053. This amount has been credited to the Option Reserve. The fair value of the options granted is deemed to represent the value of services received over the vesting period.

Capital Management

Exploration companies such as Elementos Limited are funded almost exclusively by share capital. The Group has no debt. The Group's capital comprises its share capital supported by financial assets.

Management controls the capital of the Group to ensure it can fund its operations and continue as a going concern. Capital management policy is to fund its exploration activities by way of equity. No dividend will be paid while the Group is in exploration stage. There are no externally imposed capital requirements.

There have been no changes to the capital management policies during the period.

NOTE 12: RESERVES Foreign currency translation reserve (debit balance) The foreign currency translation reserve records exchange differences arising on translation of a foreign controlled subsidiary. Options reserve (credit balance)	30 June 2011 30 June 2010 $ $
	547,010 52,973
	997,477 192,444

The options reserve records amounts recognised on valuation of share options granted for services provided.

ELEMENTOS LIMITED and CONTROLLED ENTITIES

ABN 49 138 468 756

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

NOTE 13: CASH FLOW INFORMATION Loss from ordinary activities after income tax Non-cash flows in loss from ordinary activities: Depreciation Options expense Exploration expenditure written off Changes in assets and liabilities: (Increase)/Decrease in receivables (Increase)/Decrease in prepayments (Decrease)/Increase in payables Cash flows from operations Reconciliation of Cash Flow from Operations with Loss after Income Tax:	30 June 2011 30 June 2010 $ $
	(3,174,516) (813,332) 15,995 3,728 859,053 62,757 102,497 - (171,241) (46,513) 61,190 (66,189) 423,187 232,718
	(1,883,835) (626,831)

NOTE 13: CASH FLOW INFORMATION
Loss from ordinary activities after income tax
Non-cash flows in loss from ordinary activities:
Depreciation
Options expense
Exploration expenditure written off
Changes in assets and liabilities:
(Increase)/Decrease in receivables
(Increase)/Decrease in prepayments
(Decrease)/Increase in payables
Cash flows from operations
Reconciliation of Cash Flow from Operations with Loss
after Income Tax:

30 June 2011
30 June 2010
$
$

(3,174,516)
(813,332)
15,995
3,728
859,053
62,757
102,497
-
(171,241)
(46,513)
61,190
(66,189)
423,187
232,718

(1,883,835)
(626,831)

Non-Cash Financing and Investing Activities

Equity Issues:

In the previous period, the Company issued 21,000,000 shares representing consideration of $1,250,000 for acquistion of exploration assets and services, and 1,500,000 options representing consideration of $129,687 for services relating to the IPO.

NOTE 14: EARNINGS PER SHARE

Net loss used in the calculation of basic & diluted EPS Weighted average number of ordinary shares outstanding during the period used in the calculation of basic EPS	(3,174,516) (813,332)
	63,822,575 34,181,288

Options are considered potential ordinary shares. Options issued are not presently dilutive and were not included in the determination of diluted earnings per share for the period.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

30	June	2011	30	June	2010
	$			$

NOTE 15: COMMITMENTS

Exploration Commitments

The economic entity must meet minimum expenditure commitments in relation to option agreements over exploration tenements and to maintain those tenements in good standing.

The following commitments exist at balance date but have not been brought to account. If the relevant option to acquire a mineral tenement is relinquished the expenditure commitment also ceases.

vant option to acquire a mineral tenement is relinquished the ses.	expenditure commitment also
Not later than 1 year Later than 1 year but not later than 5 years Total commitment	226,266 577,629 2,043,002 3,602,921
	2,269,268 4,355,049

NOTE 16: CONTINGENT LIABILITIES

There were no contingent liabilities at the end of the reporting period.

NOTE 17: RELATED PARTY TRANSACTIONS

The economic entity undertakes transactions with related parties in the normal course of business. Transactions between related parties are on normal commercial terms and conditions, no more favourable than those available to other parties unless otherwise stated.

Related party transactions in the period were:

(a) The Company is a party to an office services arrangement with Orocobre Limited (a Company of which Mr Calaway is a Director and Mr Crawford a Company Secretary). A total of $195,211 (2010: $38,993) was paid under the arrangement and the balance outstanding at year end is $10,172 (2010: $36,561). The arrangement covers occupancy, accounting and administration services.

In the 2010 financial year, the Company entered into a series of transactions relating to a demerger between Orocobre Limited and Elementos Limited - refer 2010 financial statements for details.

(b) During the year the Company entered into transactions with key management personnel as follows:

M. McCauley

Appointed as Non-executive Director effective 8 October 2010. Conditions of appointment as a Director, together with remuneration and resignation procedures are commensurate with normal commercial practices.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 17: RELATED PARTY TRANSACTIONS (CONT)

J. Calaway

Appointed as Non-executive Director effective 18 January 2011. Conditions of appointment as a Director, together with remuneration and resignation procedures are commensurate with normal commercial practices.

Other Key Management Personnel:

Messrs A McLellan, N Stuart, C Nolan and P Crawford continued in their roles as Directors and Company Secretary of the Company.

Details of key management personnel compensation and equity interests are set out in note 20.

Mr Stuart also has a separate consultancy agreement with the Company to provide services as requested by the Company subject to a maximum remuneration of $25,000 pa. No costs were incurred under this agreement during the reporting period (2010: $nil).

Mr Crawford is the principal of a corporate consultancy firm he established in 2001, offering a range of commercial and corporate governance services to the Company. Conditions of appointment, remuneration, and resignation procedures are commensurate with normal commercial practices. Professional fees for the provision of these services for the year totalled $54,613 (2010: $28,050). At balance date $2,571 was owing.

Elementos Chile Ltda, 100% owned, incorporated in Chile. The Company was dormant during the period.

Other controlled entities within the Elementos Group are:

Element Minerals Pty Ltd, 100% owned, incorporated in Australia; and
Elementos Minerales SA, 100% owned, incorporated in Argentina.
(d) During the year a Company that is a related party of Mr M McCauley's acquired 4,230,770 shares in the Company pursuant to a private placement at 26 cents per share, as approved by Shareholders.

NOTE 18: SHARE BASED PAYMENTS

(a) The following share-based payment arrangements existed at 30 June 2011:

(i) On 7 September 2010 1,300,000 share options were issued to staff under the Elementos Limited Employee Share Option Plan, to take up ordinary shares at an exercise price of 25 cents. Vesting conditions of the options were 50% when the share price reached 30 cents and 50% when the share price reached 35 cents. These options are exercisable on or before 7 September 2015. The options hold no voting or dividend rights and are not transferable.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 18: SHARE BASED PAYMENTS (CONT)

(ii) On 30 November 2010 1,000,000 share options were issued to Mark McCauley, under the Directors' Share Option Plan, to take up ordinary shares at an exercise price of 23.4 cents. Vesting conditions of the options were 50% when the share price reached 30 cents and 50% when the share price reached 35 cents. These options are exercisable on or before 30 November 2015. The options hold no voting or dividend rights and are not transferable.

(iii) On 28 March 2011 1,000,000 share options were issued to James Calaway, under the Directors' Share Option Plan, to take up ordinary shares at an exercise price of 35 cents. Vesting conditions of the options were 50% when the share price reached 40 cents and 50% when the share price reached 45 cents. These options are exercisable on or before 18 January 2017. The options hold no voting or dividend rights and are not transferable.

(iv) On 23 October 2009, 5,500,000 share options were issued to directors, under the director's share option plan, to take up ordinary shares at an exercise price of 25 cents. Vesting conditions of the options were 50% when the share price reached 30 cents and 50% when the share price reached 35 cents. These options are exercisable on or before 23 October 2015. The options hold no voting or dividend rights and are not transferable. The options are held in escrow until 23 December 2011.

(v) On 17 December 2009, 1,500,000 share options were issued to Martin Place Securities Pty Ltd, as part of the IPO, to take up ordinary shares at an exercise price of 30 cents. Vesting conditions were admittance of the Company to the ASX. These options are exercisable on or before 17 December 2013. The options hold no voting or dividend rights and are not transferable.

(b) At reporting date, the options granted to key management personnel under the Share Option Plans are:

Plans are:
Granted 23 October 2009 Granted 30 November 2010 Granted 28 March 2011	Options
	5,500,000 500,000 1,000,000
	7,000,000

ELEMENTOS LIMITED and CONTROLLED ENTITIES

ABN 49 138 468 756

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

NOTE 18: SHARE BASED PAYMENTS (CONT)

(c) All options granted are over ordinary shares in Elementos Limited, which confer a right of one ordinary share per option. The options hold no voting or dividend rights and are not transferrable. These options are summarised as:

Outstanding at the beginning of the year Granted Forfeited Exercised Expired Outstanding at year-end Exercisable and vested at year-end	Number of Options Weighted Average Exercise Price Number of Options Weighted Average Exercise Price No $ No $ 7,000,000 0.261 - - 3,300,000 0.283 7,000,000 0.261 - - - - (600,000) 0.238 - - - - - - 2011 2010
	9,700,000 0.268 7,000,000 0.261
	8,700,000 0.258 1,500,000 0.300

Of the 8,700,000 options exercisable at 30 June 2011, 5,500,000 are subject to escrow restrictions by the ASX.

The options outstanding at 30 June 2011 had a weighted average exercise price of 26.8 cents and a weighted average remaining contractual life of 4.15 years. At the date of exercise, the weighted average share price of options exercised during the year were 34.64 cents. The exercise price of options outstanding at year end ranges from 23.4 cents to 35 cents. The weighted average fair value of options granted during the year was 28.3 cents (2010: 26.1 cents). Refer to Note 11 regarding assessment of fair value of options granted during the year.

NOTE 19: AUDITORS' REMUNERATION Remuneration of the auditor of the parent entity: - auditing or reviewing the financial report - other services (due diligence) Remuneration of other auditors of subsidiaries: - auditing or reviewing the financial report - other services	30 June 2011 30 June 2010 $ $
	24,400 21,500 1,500 2,000
	25,900 23,500
	6,451 - - -
	6,451 -

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 20: KEY MANAGEMENT PERSONNEL COMPENSATION & EQUITY

The names of key management personnel of the entity who have held office during the financial year are:

(a) Key Management Person

Position

Mr. A McLellan Chairman - Non-executive Mr. C Nolan Managing Director - Executive Mr. N Stuart Director - Non-executive Mr. M McCauley Director - Non-executive Mr. J Calaway Director - Non-executive Ms. L Scott Chief Financial Officer Mr. P Crawford Company Secretary

30 June 2011 30 June 2010

	30 June 2011 30 June 2010
ey Management Personnel Compensation Short-term employee benefits Post-employment benefits Share-based payments	$ $
	489,001 175,966 35,209 13,313 767,143 62,757
	1,291,353 252,036

(b) Key Management Personnel Compensation

Detailed disclosures on compensation for key management personnel are set out in the Remuneration Report included in the Directors' Report.

(c) Number of shares held by Key Management Personnel (i)

Number of shares held	by Key Management Personnel (i)
2011 Mr. A McLellan Mr. C Nolan Mr. N Stuart Mr. M McCauley Mr. J Calaway Ms. L Scott Mr. P Crawford Total	Opening Balance Compen- sation (ii) Options Exercised Purchased / (Sold) Balance 30 June 2011
	- - - - - 120,000 - 26,786 146,786 1,935,222 - - 431,963 2,367,185 - - 500,000 (500,000) - - - - 11,937,291 11,937,291 - 75,000 75,000 24,000 - - 930,421 954,421
	2,079,222 - 500,000 12,901,461 15,480,683

(i) Represents shares held directly, indirectly or beneficially.

(ii) The Company does not issue shares as a form of remuneration.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 20: KEY MANAGEMENT PERSONNEL COMPENSATION & EQUITY (CONT)

(d) Number of options held by Key Management Personnel (i)

2010
Mr. A McLellan
Mr. C Nolan
Mr. N Stuart
Mr. M McCauley
Mr. J Calaway
Ms. L Scott
Mr. P Crawford
Total

Opening
Balance
Compen-
sation (e)
Options
Acquired
Options
Expired/(Exer
cised)
Balance
30 June
2011
Total Vested
Total
Exercisable
2,000,000
-
-
-
2,000,000
2,000,000
2,000,000
(ii)
2,500,000
-
-
-
2,500,000
2,500,000
2,500,000
(ii)
1,000,000
-
-
-
1,000,000
1,000,000
1,000,000
(ii)
-
1,000,000
-
(500,000)
500,000
500,000
500,000
-
1,000,000
-
-
1,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,500,000
2,000,000
-
(500,000)
7,000,000
6,000,000
6,000,000

(i) Represents options held directly, indirectly or beneficially.

(ii) In escrow due to ASX regulations.

(e) Compensation Options

Details of options provided as compensation for key management personnel are set out in the Remuneration Report

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 21: FINANCIAL INSTRUMENTS

(a) Financial Risk Management Policies

The Elementos Group's financial instruments comprises cash balances, receivables and payables. The main purpose of these financial instruments is to provide finance for Group operations.

Treasury Risk Management

Key executives of the Company meet on a regular basis to analyse exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts.

The board of directors has overall responsibility for the establishment and oversight of the Group's risk management framework. Management is responsible for developing and monitoring the risk management policies and reports to the board.

Financial Risks

The main risks the Group is exposed to through its financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. These risks are managed through monitoring of forecast cash flows, interest rates, economic conditions and ensuring adequate funds are available.

Interest Rate Risk

The economic entity's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rates, arises in relation to the economic entity's bank balances.

This risk is managed through the use of variable rate bank accounts.

Liquidity Risk

Liquidity risk is the risk that the economic entity will not be able meet its financial obligations as they fall due. This risk is managed by ensuring, to the extent possible, that there is sufficient liquidity to meet liabilities when due, without incurring unacceptable losses or risking damage to the economic entity's reputation.

The economic entity's activities are funded from equity sources.

Credit Risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is their carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements.

Credit risk arises from exposures to deposits with financial institutions and sundry receivables. Credit risk is managed and reviewed regularly by key executives. The key executives monitor credit risk by actively assessing the rating quality and liquidity of counter parties:

only banks and financial institutions with an ‘A’ rating are utilised; and
all other entities are rated for credit worthiness taking into account their size, market position and financial standing.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 21: FINANCIAL INSTRUMENTS (CONT)

The carrying amount of financial assets recorded in the financial statements represent the economic entity's maximum exposure to credit risk.

At 30 June 2011, there was no concentration of credit risk, other than bank balances and on geographical basis with most financial assets in Australia.

Foreign Currency Risk

The economic entity is exposed to fluctuations in foreign currencies arising from the purchase of goods and services in currencies other that the economic entity's measurement currency. Financial assets and liabilities exist for the economic entity's Argentine operations, and thus there is exposure to the Argentine Peso. As this risk is minor, it is not hedged. At reporting date, the net foreign currency risk (stated in $AUD) was $26,854.

(b) Financial Instrument Composition and Contractual Maturity Analysis

Financial assets: Within 6 months - cash & cash equivalents (i) - receivables (ii) Financial liabilities: Within 6 months - payables (ii) Net inflow	30 June 2011 30 June 2010 $ $
	9,316,709 6,567,437 217,995 46,754
	9,534,704 6,614,191 (855,630) (233,801)
	8,679,074 6,380,390

(i) Floating interest rates, with weighted average effective interest rate 5.61%, with an average maturity of 95 days.

(ii) Non-interest bearing, at amortised cost.

(c) Net Fair Values

No financial assets or liabilities are readily traded on organised markets in a standardised form.

Financial assets where the carrying amount exceeds net fair values have not been written down, as the economic entity intends to hold these assets to maturity.

The aggregate net fair values and carrying amounts of financial assets and liabilities are disclosed in the statement of financial position and notes to the financial statements. Fair values are materially in line with carrying values.

(d) Sensitivity Analysis

The Company has performed sensitivity analysis relating to its exposure to interest rate risk. At year end, the effect on profit and equity as a result of a 1% change in the interest rate, with all other variables remaining constant would be +/- $93,167 (2010: +/-$65,674).

The group has performed sensitivity analysis relating to its exposure to foreign exchange risk. At year end, the effect on profit and equity as a result of a 10% change in the Argentine Peso, with all other variables remaining constant would be +/-$2,685 (2010: +/-$16,654).

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 22: SEGMENT REPORTING

The economic entity operates internationally, in the mineral exploration industry with a focus on copper and gold. The economic entity undertakes exploration activity in Australia and Argentina.

The economic entity has one reportable segment, being its exploration activity.

In determining operating segments, the entity has had regard to the information and reports the chief operating decision maker uses to make strategic decisions regarding resources. The chief executive officer is considered to be the chief operating decision maker and is empowered by the Board of Directors to allocate resources and assess the performance of the economic entity. The chief executive officer assesses and reviews the business using a total exploration activity approach.

Geographical Information

REVENUE Segment revenue - Interest ASSETS Segment assets LIABILITIES Segment liabilities	Australia Argentina Economic Entity $ $ $ 312,948 - 312,948 9,076,369 4,161,805 13,238,174 228,591 627,039 855,630 Year Ended 30 June 2011	Australia Argentina Economic Entity $ $ $ 169,660 - 169,660 Period Ended 30 June 2010
		6,679,267 1,586,758 8,266,025
		161,792 72,009 233,801

Segment accounting policies are consistent with the economic entity's policies.

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 23: SUBSEQUENT EVENTS

NOTE 24: PARENT ENTITY INFORMATION

The following information relates to the parent entity, Elementos Limited at 30 June 2011. This information has been prepared using consistent accounting policies as presented in note 1.

Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Contributed equity Reserves Accumulated losses Total equity Loss for the period Other comprehensive income for the period Total comprehensive income for the period	30 June 2011 30 June 2010 $ $
	8,874,990 8,292,366 4,919,642 54,260
	13,794,632 8,346,626
	227,311 161,792 - -
	227,311 161,792
	15,919,925 8,600,139 997,477 192,444 (3,350,081) (607,749)
	13,567,321 8,184,834
	(2,742,332) (607,749) - -
	(2,742,332) (607,749)

The Company has no contingent liabilities, nor has it entered into any guarantees in relation to the debts of its subsidiaries.

The Company has not entered into any contractual commitments for the acquisition of property, plant and equipment.

The Company and its Australian 100% owned controlled entities have formed a tax consolidated group.

Members of the Group entered into a tax sharing arrangement in order to allocate income tax expenses to the wholly owned controlled entities. The agreement provides for the allocation of income tax liabilities between the entities in proportion to their contribution to the Group's taxable income. The head entity of the tax consolidated Group is Elementos Ltd.

NOTE 25: COMPANY DETAILS

The registered office and principal place of business is:

Level 1, 349 Coronation Drive

Milton, Queensland 4064, Australia

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ELEMENTOS LIMITED ABN 49 138 468 756

CORPORATE GOVERNANCE STATEMENT

ASX Corporate Governance Principles and Recommendations

Elementos Limited (“Elementos” or the “Company”) is committed to implementing sound corporate governance practices. In order to set appropriate corporate governance standards, the Company has used the reporting recommendations set out by the Australian Securities Exchange (ASX) Corporate Governance Council’s Corporate Governance Principles and Recommendations (ASX Principles and Recommendations). These have been categorised into eight core principles.

While seeking to implement sound corporate governance practices, the Company recognises that not all the recommendations are applicable to the Company due to its current size, the nature of its operations and stage of development. Where the Company has not fully adopted the relevant recommendation, the reasons are set out below.

PRINCIPLE 1 - LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT

Pursuant to Principle 1, the Company has established the functions reserved to the board and established the functions delegated to the managing director. The board’s role is to govern the Company rather than to manage it, representing the interests of all shareholders. In governing the Company, the directors are required to act in the best interests of the Company as a whole. It is the role of the managing director to manage the Company in accordance with the direction and delegations of the board and it is the responsibility of the board to oversee the activities of the managing director in carrying out these delegated duties.

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

The Company has developed a Statement of matters reserved for the board which sets out the role and responsibilities of the board, a summary of which is as follows:

provide leadership to the Company;
oversee the development and implementation of an appropriate strategy;
oversee planning activities including the development and approval of strategic plans, annual corporate budgets and long-term budgets including operating budgets, capital expenditure budgets and cash flow forecasts;
review the progress and performance of the Company in meeting these plans and corporate objectives, including reporting the outcome of such reviews on at least an annual basis;
ensure corporate accountability to the shareholders, primarily through effective shareholder communications;
oversee the control and accountability systems to ensure the Company is progressing towards the goals set by the board and in line with the Company’s purpose, the agreed corporate strategy, legislative requirements and community expectations;
ensure that robust and effective risk management, compliance and control systems (including legal compliance) are in place and operating effectively;
appoint the managing director and review the delegation to, and performance of, the Company’s senior executives; and
make all decisions outside the scope of powers delegated to senior management.

In general, the board is responsible for, and has the authority to determine, all matters relating to the policies, practices, management and operations of the Company. It is required to do all things that may be necessary to be done in order to carry out the objectives of the Company, which includes supervising the Company’s framework of control and accountability systems to enable risk to be assessed and managed.

ELEMENTOS LIMITED ABN 49 138 468 756

CORPORATE GOVERNANCE STATEMENT

The board must convene regular meetings with such frequency sufficient to discharge its responsibilities appropriately.

The board has delegated powers to the managing director necessary to carry out the business of the Company effectively and efficiently.

Newly appointed directors are to be provided with formal appointment letters setting out the key terms and conditions regarding their appointment. Similarly, senior executives (including the managing director) are provided with formal appointment letters making clear their responsibilities, remuneration, appointment term, and entitlements on termination.

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

The remuneration structure for executive officers is based on a number of factors, including length of service, particular experience of the individual concerned, and overall performance of Elementos.

Senior executives’ performance is reviewed against a range of quantitative and qualitative measures and past performance of Elementos as well as of the individual, and market practice with respect to comparable positions are taken into account.

The non-executive directors are responsible for regularly evaluating the managing director’s performance. This evaluation is based on the Company’s business performance and whether strategic objectives are being achieved. The managing director reviews other executives’ and staff performance. Performance pay components of executives’ packages are dependent on the outcome of the evaluations. The results of the managing director’s annual performance reviews of senior executives and staff are reported to the board for information.

1.3 Reporting on Principle 1

Details of the functions reserved for the board and delegated to the managing director are outlined in the Company’s Board Governance Protocols, and available on the Company’s website at www.elementos.com.au.

PRINCIPLE 2 - STRUCTURE THE BOARD TO ADD VALUE

Pursuant to Principle 2 the board should be of a size, composition and have the level of commitment to adequately discharge its responsibilities and duties. To add value to the Company, given the size and operations of the Company, the board has been formed so that it has effective composition, size and commitment to adequately discharge its responsibilities and duties.

The Elementos board is comprised of five directors (as at the date of this Annual Report) that have wide-ranging experience in the mineral exploration and mining sector and a diverse skill set which is detailed in the Directors’ Report in this Annual Report along with details of the directors, period of office, their qualifications and experience.

2.1 A majority of the board should be independent directors

The Company has a majority of independent directors as three out of five directors are independent. As at the date of this report, the board comprises one Executive Director, Mr Corey Nolan, who is the Managing Director and is not independent because he is employed in an executive capacity. There are four Non-executive Directors: Mr A. Anthony McLellan (Chairman), Mr Neil Stuart, Mr Mark McCauley and Mr James Calaway. The Non-executive Directors, with the exception of Mr James Callaway, meet the criteria for independence proposed by the ASX Principles and Recommendations.

ELEMENTOS LIMITED ABN 49 138 468 756

CORPORATE GOVERNANCE STATEMENT

While determining the independent status of directors, the board has considered whether the director:

holds less than five percent of the voting shares of the Company (in conjunction with their associates); or is an officer of the Company, or otherwise associated directly with a shareholder of more than five percent of the voting shares of the Company;
has within the last three years, been employed in an executive capacity by the Company or another group member;
has within the last three years been a principal of a material professional adviser or a material consultant to the Company or another group member, or an employee materially associated with the service provided. In this context, the relationship with the professional adviser or consultant shall be deemed to be material if payments from the Company exceed 10% of the Company’s annual expenditure to all professionals and consultants or exceed 10% of the recipient’s annual revenue for advisory or consultancy services;
is a material supplier or customer of the Company or another group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer. In this context, the relationship with the supplier or customer shall be deemed to be material if annual payments to or from that supplier or customer exceed 10% of the annual consolidated gross revenue of either the Company or that supplier or customer; and,
has a material contractual relationship with the Company or other group member other than as a director of the Company.

2.2 The chairperson should be an independent director

The Company complies with this recommendation as the Chairman, Mr McLellan is independent.

2.3 The roles of the Chairperson and Chief Executive Officer should not be exercised by the same person

The Managing Director, Mr Corey Nolan, is for all practical purposes the Chief Executive Officer of Elementos and as mentioned above, Mr A. Anthony McLellan is the Chairman of the Board. This makes Elementos compliant with this recommendation.

2.4 The board should establish a nomination committee

Elementos has not establised a nomination committee as the role of the nomination committee has been undertaken by the board. The size and nature of the Company’s activities do not justify the establishment of a separate committee at this time. The board regularly reviews the composition, skill base and effectiveness of the board and its members.

Candidates for the board will be considered and selected by reference to a number of factors which include, but are not limited to, their relevant experience and achievements, independence and ability to meet the board’s expectation as set out in the Board Governance Protocols. Directors will be initially appointed by the full board, subject to election by shareholders at the next general meeting. Directors are required to retire and be subject to re-election by shareholders at least once every three years.

2.5 Companies should disclose the process for evaluating the performance of the board, its

committees and individual directors

The board considers the evaluation of its directors and senior executive performance as fundamental to establishing a culture of performance and accountability. The chairman undertakes a review of the board and individual director’s performance at least once a year at a meeting of the board. The board evaluated its performance and the directors’ individual performance in relation to goals set at the time of the board’s annual strategic planning session.

ELEMENTOS LIMITED ABN 49 138 468 756

CORPORATE GOVERNANCE STATEMENT

The chairman provides each non-executive director with confidential feedback on his or her performance. The board does not endorse the re-appointment of a director who is not performing the role satisfactorily.

Induction and Education

New directors will undergo an induction process in which they will be given a full briefing on the Company. Where possible, this will include meetings with key executives, a tour of the premises, an induction package and presentations. Information conveyed to new directors will include:

details of the roles and responsibilities of directors;
formal policies on director appointment;
outline of all relevant legal requirements including:
Corporations Act;
Tax Office requirements; and
other major statutory bodies;
a copy of the Board Governance Protocols;
guidelines on board processes;
details of past, recent and likely future developments relating to the board, including anticipated regulatory changes;
background information on and contact information for key people in the organisation including an outline of their roles and capabilities;
an analysis of the Company including:
core competencies of the Company;
an industry background briefing;
a recent competitor analysis;
details of past financial performance;
current financial structure; and
any other important operating information;
a synopsis of the current strategic direction of the Company including a copy of the current strategic plan and annual budget;
a copy of the Constitution of the Company; and
Director’s Deed of Indemnity and Right of Access to Documents, if applicable.

In order to achieve continuing improvement in board performance, all directors are encouraged to undergo continual professional development.

Access to information and Independent Professional Advice

Each director has the right of access to all Company information and to the Company’s executives. Further, the board collectively and each director, subject to the approval of the chairman, has the right to seek independent professional advice from a suitably qualified advisor, at the Company’s expense, to assist them to carry out their responsibilities. A copy of this advice is to be made available to all other members of the board.

2.6 Reporting on Principle 2

The board assesses the necessary competencies of the board, reviews board succession plans, and develops policies and processes for evaluation of the board and the nomination, appointment and re-election of directors. These responsibilties, as set out in the Board Governance Protocols, are carried out by the board rather than a seprate nomination committee.

The Company's Constitution provides that directors are subject to retirement by rotation, by order of length of appointment. Retiring directors are eligible for re-election by shareholders at the annual general meeting of the Company.

ELEMENTOS LIMITED ABN 49 138 468 756

CORPORATE GOVERNANCE STATEMENT

PRINCIPLE 3 - PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING

Principle 3 is to actively promote ethical and responsible decision-making.

3.1 Companies should establish a code of conduct and disclose the code or a summary of the code

The Company acknowledges that the community expects businesses to be aware of their wider social obligations and to promote practices to maintain confidence in the Company’s integrity. The Elementos board requires high standards of conduct and responsibility from directors, senior executives and employees at all times. As part of its commitment to recognising the expectations of their stakeholders, the Company has established a Code of Ethics and Conduct for Directors and employees within its Board Governance Protocols to guide compliance with legal and other obligations to stakeholders, which include employees, clients, customers, government authorities, creditors and the community. Directors are required to adhere to industry standards in conduct and dealings and promote a culture of honesty, fairness and ethical behaviour into its internal compliance policy and procedures as well as dealing with stakeholders.

The board also requires the Company’s employees and consultants, to have similar high standards who are expected to adhere to industry standards in their conduct and dealings, including trading in securities. The Elementos board has built the promotion of a culture of honesty, fairness and ethical behaviour into its internal compliance policy and procedures.

A copy of the Code of Ethics and Conduct is given to contractors and relevant personnel, including directors and each individual is accountable for such compliance. Any breach of applicable laws, accepted ethical commercial practices or other aspects of the Code of Ethics and Conduct will result in disciplinary action.

Depending on the severity of the breach, such disciplinary action may include reprimand, formal warning, demotion or termination of employment/engagement (as the case may be). Similar disciplinary action may be taken against any manager who directly approves of such action or has knowledge of the action and does not take appropriate remedial action.

Breach of applicable laws or regulations may also result in prosecution by the appropriate authorities.

The Company will not pay, directly or indirectly, any penalties imposed on personnel as a result of a breach of law or regulation.

Personnel are expected to report any instances of suspected non-compliance and investigate reports of unethical practices. These instances will be investigated fairly. Individuals who report suspected non-compliance in good faith will be appropriately protected.

3.2 Companies should establish a securities trading policy and disclose the policy or a summary of the policy

The Company has adopted a formal Securities Trading Policy. A copy of the Policy is incorpoprated in the Board Governance Protocols manual available on the website of the Company.

Directors, officers and employees are prohibited from directly or indirectly (a) buying, selling or otherwise trading in the Company’s shares, if they possess material, price sensitive information which is not generally available; or, (b) where buying or selling those shares in some way infringes the law against insider trading.

ELEMENTOS LIMITED ABN 49 138 468 756

CORPORATE GOVERNANCE STATEMENT

3.3 Reporting on Principle 3

The Code of Ethics and Conduct is available on the Compoany’s website. The Securities Trading Policies, incorporated in the Board Governance Protocols manual, is also available on the Company’s website under Corporate Governance.

PRINCIPLE 4 - SAFEGUARD INTEGRITY IN FINANCIAL REPORTING

Principle 4 is to have a structure of review and authorisation in place which independently verifies and safeguards the integrity of the Company’s financial reports. The compilation and timely disclosure of accurate and true and fair information about the Company’s financial position and performance is vital for the integrity of the market in the Company’s securities.

Elementos has established a structure of reporting and oversight to achieve these objectives.

4.1 The board should establish an audit committee

Elementos has established an Audit & Risk Management Committee comprised of independent Non-executive Directors, with Mark McCauley as independent Chairman of the Committee.

4. 2 The structure of the audit committee

The Audit & Risk Management Committee consists of at least two and no more than three independent directors.

4.3 The audit committee has a formal charter

The Audit Committee’s Charter is available on the Company’s website under Corporate Governance.

4.4 Reporting on Principle 4

The Audit & Risk Management Committee is required to report its findings and recommendations to the board after each Committee meeting, and to cirulate minutes of its meetings to all board members. The members of the Audit & Risk Management Committee and their attendance at Committee meetings is set out in the Directors’ Report section of this Annual Report.

PRINCIPLE 5 - MAKE TIMELY AND BALANCED DISCLOSURE

Pursuant to Principle 5 listed companies should make timely and balanced disclosure to the ASX of all material information concerning the Company.

The Elementos board has adopted a policy and rules to ensure the Company complies with its obligations under the ASX Listing Rules on continuous disclosure and ensures accountability at a senior executive level for that compliance. The board has designated the managing director as the person responsible for overseeing and co-ordinating disclosure of information to the ASX as well as communicating with the ASX.

In accordance with the ASX Listing Rules, the Company immediately notifies the ASX of information:

concerning the Company that a reasonable person would expect to have a material effect on the price or value of the Company’s shares; and
that would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose the Company’s shares.

Such matters are advised to the ASX immediately they are identified as being material. Upon confirmation of receipt from the ASX, the Company posts all information disclosed in accordance with this policy on its website under the Investors section and then Announcements.

ELEMENTOS LIMITED ABN 49 138 468 756

CORPORATE GOVERNANCE STATEMENT

Elementos has established Contiuous Disclosure Policies.

5.2 Reporting on Principle 5

A summary of the Company’s policy for media contact and external communications is outlined in the Board Governance Protocols manual.

In addition, the Company’s Continuous Disclosure Policies are incorporated in the Board Governance Protocols, which is available on the Company’s website under Corporate Governance.

PRINCIPLE 6 - RESPECT THE RIGHTS OF SHAREHOLDERS

Pursuant to Principle 6 companies should design a communications policy to promote effective communication with shareholders.

6.1 Communications policy

The Elementos board respects the rights of its shareholders, and to facilitate the effective exercise of those rights it has adopted a policy on communication with shareholders, and implemented a set of processes to ensure timely and effective communication with shareholders and the wider investment community. The Company is committed to:

communicating effectively with shareholders through releases to the market via ASX, the Company’s website, information mailed to shareholders, and the general meetings of the Company;
giving shareholders ready access to balanced and understandable information about the Company and its corporate proposals;
making it easy for shareholders to participate in general meetings of the Company and ask questions regarding the conduct of audit and about the functioning of the Company generally; and
making it possible for shareholders to receive communication by electronic means.

6.2 Reporting on Principle 6

A summary of the Company’s policy for media contact and external communications is outlined in the Board Governance Protocols manual, available on the Company’s website under Corporate Governance.

PRINCIPLE 7 - RECOGNISE AND MANAGE RISK

Principle 7 provides that companies should establish a sound system of risk oversight and effective management and internal control.

7.1 Risk Management and Internal Control System

The primary objectives of the risk management and internal control system at the Company are to ensure:

all major sources of potential, opportunity for and harm to the Company (both existing and potential) are identified, analysed and treated appropriately;
business decisions throughout the Company appropriately balance the risk and reward trade off;
regulatory compliance and integrity in reporting is achieved; and
the board, senior executives and investors understand the risk profile of the Company.

ELEMENTOS LIMITED ABN 49 138 468 756

CORPORATE GOVERNANCE STATEMENT

The system covers:

operations risk;
financial reporting; and
compliance.

Any matters of significance to the Company or materially relevant to its assets, liabilities or profits are signed off by the board after discussion and evaluation of submissions made by the managing director or other party.

Some of the Company's key assets are located outside Australia. Control over the operations is exercised by the managing director. Specific control measures have been implemented to manage the distribution of funds in Argentina in relation to activities undertaken there.

Identifying Significant Business Risks

The board regularly monitors the operational and financial performance of the Company's activities. The Audit & Risk Management Committee, monitors and receives advice on areas of operation and financial risk and considers strategies for appropriate risk management. All operational and financial strategies adopted are aimed at improving the value of the Company. However, the directors recognise that mineral exploration and evaluation is inherently risky.

7.2 Report on risk management and internal control system

The board has required the managing director to design and implement the risk management and internal control systems to manage the Company’s material business risks. As required by the board, the managing director has reported to the board that the Company’s material business risks have been managed effectively.

The managing director reviews risk in response to changing business conditions and regulations. Regular reviews of risk and a regular update of the risk profile is undertaken by the board. This normally occurs in conjunction with the strategic planning process. The Audit and Risk Management Committee oversees the internal company review process that analyses and provides an appraisal of the adequacy and effectiveness of the Company’s risk management and internal control system. The internal review processes are independent of the auditor.

7.3 Attestation by chief executive officer (or equivalent) and chief financial officer (or equivalent)

The managing director and the chief financial officer provide a written assurance that the risk management system is effective, efficient and accurately reflected in the Company’s financial statements and 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
the Company’s risk management and internal control system is operating effectively in all material respects in relation to financial reporting risks.

7.4 Reporting on Principle 7

The Company’s risk management, internal compliance, and control system policies that have been established to manage material business risks are discussed with the Audit & Risk Management Committee, senior executives, management and other employees. The Company envisages disclosing a summary of these policies on its website in future.

ELEMENTOS LIMITED ABN 49 138 468 756

CORPORATE GOVERNANCE STATEMENT

PRINCIPLE 8 - REMUNERATE FAIRLY AND RESPONSIBLY

Principle 8 provides that companies should ensure the level and composition of remuneration is sufficient and reasonable and that its relationship to corporate and individual performance is defined. Elementos is committed to remunerating its directors and officers in a manner that is market competitive, consistent with best practice, and in the interests of shareholders.

8.1 The board should establish a remuneration committee

Elementos has established a Remuneration Committee, and the Committee’s Charter is available on the Company’s website under Corporate Governance. The Commitee is comprised of independent Non-executive Directors, with Mark McCauley as independent Chairman of the Remuneration Committee.

The members of the Remuneration Committee and their attendance at Committee meetings are set out in the Directors’ Report section of this Annual Report.

8.2 Structure of Non-executive and Executive Director Remuneration

The remuneration structure for executives, including the managing director, is based on a number of factors, including length of service, particular experience of the individual concerned, and overall performance of the Company. The remuneration policy, setting the terms and conditions for the managing director was developed and approved by non-executive directors. The managing director, and other senior executives receive a base salary, superannuation, short-term incentives and equity based performance remuneration. Superannuation payments consist of the 9% superannuation guarantee contribution. Individuals may elect to salary sacrifice part of their salary to increased payments towards superannuation. No other form of retirement benefit is paid.

The board’s policy is to remunerate non-executive directors at market rates for comparable companies, having regard to the time commitment and responsibilities. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders, and is not linked to the performance of the Company. However, to align directors’ interests with shareholder interests, directors are encouraged to hold equity interests in the Company. The maximum aggregate amount of fees that can be paid to non-executive directors approved by shareholders is currently $250,000.

The Company’s remuneration policy provides for long-term incentives through participation in the Company’s Employee and Officers Share Option Plan. Any equity based remuneration proposed to be granted to the managing director will only be granted with shareholder approval.

The Company has prohibited the entering into transactions in associated products which limit the economic risk of participating in unvested entitlements under any equity-based remuneration.

8.3 Reporting on Principle 8

Details of the Company’s remuneration policy are outlined in the Remuneration Report section of the Directors’ Report.

ELEMENTOS LIMITED ABN 49 138 468 756

ASX INFORMATION

Following is additional information required by the Australian Securities Exchange Limited and not disclosed elsewhere in this report.

1. Shareholding:

The following information is provided as at 28 September 2011.

Distribution of Shareholders Number

Category Number (Size of Holding)	Ordinary Shares (Number)
1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over	58 119 128 398 134
	837

The number of shareholdings held in less than marketable parcels is 40.

Twenty Largest Holders - Ordinary Shares:

	Shareholder	Number of Shares Held	% of Total Issued Capital
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20	ANDES INVESTORS LLC BELMONT PARK INVESTMENT PTY LTD JP MORGAN NOMINEES AUSTRALIA LIMITED LITHIUM INVESTORS LLC HINTON FAMILY HOLDINGS PTY LTD MR IAN LINDSAY CAMPBELL MR DENIS GRENVILLE HINTON & MRS ROSLYN SUSANNA HINTON PANORAMA RIDGE PTY LTD CITICORP NOMINEES PTY LIMITED FAIRGROUND PTY LTD THOSNUNN PTY LTD RICHARD SEVILLE & ASSOCIATES PTY LTD SEVILLE SUPER FUND A/C> MR RICHARD GEOFFREY AUSTIN & MRS PAMELA MARGARET AUSTIN OROCOBRE LIMITED RICHARD SEVILLE & ASSOCIATES PTY LTD SEVILLE SUPER FUND A/C> MR DAVID CREIGHTON GELLATLY MR YI WENG & MS NING LI ABSOLUTE INVESTMENT FUNDS SPC SEG PORTFOLIO A/C> CPS CONTROL SYSTEMS PTY LIMITED CAMPBELL S/FUND A/C> ANGORA LANE PTY LTD S/FUND A/C>	9,908,035 4,230,770 3,708,785 2,029,256 1,910,938 1,651,790 1,575,442 1,569,230 1,525,701 1,364,082 1,350,000 1,253,250 1,223,214 1,223,214 1,193,177 984,769 917,131 900,000 882,479 811,574	12.027 5.135 4.502 2.463 2.320 2.005 1.912 1.905 1.852 1.656 1.639 1.521 1.485 1.485 1.448 1.195 1.113 1.092 1.071 0.985

ELEMENTOS LIMITED ABN 49 138 468 756

ASX INFORMATION

Unlisted Equity Securities:

The following unlisted securities were on issue as at 28 September 2011.

Security	Number	No. of Holders
Options exercisable at 23.3 cents on or before 23 October 2015 Options exercisable at 30 cents on or before 17 December 2013 Options exercisable at 23.3 cents on or before 7 September 2015 Options exercisable at 23.3 cents on or before 30 November 2015 Options exercisable at 33.3 cents on or before 18 January 2017	5,500,000 1,500,000 1,200,000 500,000 1,000,000	3 1 3 1 1

The substantial shareholders listed in the Company’s register as at 28 September 2011 are:

Shareholder	Number of Shares Held
Andes Investors LLC Belmont Park Investments Pty Ltd	9,908,035 4,230,770

Voting Rights:

Each ordinary share is entitled to one vote when a poll is called. Otherwise each member present at a meeting has one vote on a show of hands.

There are no voting rights attaching to the Options, but voting rights as detailed above will attach to the ordinary shares issued when the Options are exercised.

2. Registers of securities are held at the following address:

Boardroom Pty Ltd Level 7 207 Kent Street Sydney NSW 2000 Australia Tel: 1300 737 760

ELEMENTOS LIMITED ABN 49 138 468 756

ASX INFORMATION

3. Stock Exchange Listing

Quotation has been granted for all the ordinary shares of the Company on all Member Exchanges of the Australian Stock Exchange Limited, other than those classified as restricted securities and detailed below.

4. Restricted Securities

The Company has issued the following restricted securities:

Security	Number of Restricted Securities	Date of Cessation of Restriction
Ordinary Shares Unlisted Options	6,289,548 5,500,000	23 December 2011 23 December 2011

5. Use of Cash and Convertible Assets

During the year, the Company has used cash and assets readily convertible to cash in a manner consistent with its business activities. The Company is involved in mineral exploration in Australia and Argentina.

ELEMENTOS LIMITED ABN 49 138 468 756

ASX INFORMATION

6. Schedule of Tenements

6. Schedule of	Tenements
Tenement Name	Tenement Number	Area (Hectares)	Interest Held By Elementos	Location of Tenements
Santo Domingo Manantiales Millenium Cathedral Rocks	1124-493-G-07 1124-094-G-09 1124-133-G-09 1124-454-G-09 1124-643-G-10 1124-368-G-06(i) 1124-385-G-06(i) 1124-494-G-07(i) 1124-495-G-07(i) 1124-496-G-07(i) 1124-497-G-07(i) 1124-498-G-07(i) 1124-499-G-07(i) 1124-500-G-07(i) 1124-265-G-08(i) 1124-336-G-08(i) 1124-633-G-10(i) 1124-022-G-11(i) 1124-131-O-09(i) 1124-132-O-09(i) 520-120-M-97 520-121-M-97 520-122-M-97 ML 2512 ML 2761 ML 2762 ML 7506 ML 7507 EPM 18402(ii) EPM 18773(ii) EPM 18793(ii) EPM 18982(ii) EPM 19014(ii) EPM 19036(ii) EL 7066 ELA 4386(ii) ELA 4387(ii)	ARGENTINA 497 511 1458 500 1940 2158 4995 900 1338 900 900 900 900 900 2616 368 1179 1500 4953 9203 3126 3069 3062 AUSTRALIA 4 20 16 50 45 5146 3859 2251 4184 6111 3216 14760 30000 30000	Nil - earning Nil - earning Nil - earning Nil - earning Nil - earning Nil – earning Nil – earning Nil – earning Nil – earning Nil – earning Nil – earning Nil – earning Nil – earning Nil – earning Nil – earning Nil – earning Nil – earning Nil – earning Nil – earning Nil – earning Nil - earning Nil - earning Nil - earning Nil - earning Nil - earning Nil - earning Nil - earning Nil - earning Nil – earning Nil - earning Nil - earning Nil – earning Nil - earning Nil – earning Nil – earning Nil – earning Nil – earning	San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan San Juan Queensland Queensland Queensland Queensland Queensland Queensland Queensland Queensland Queensland Queensland Queensland New South Wales New South Wales New South Wales

(i) Cateos in process of being granted/transferred

(ii) Application in progress

AI assistant

ELEMENTOS LIMITED — Annual Report 2011

64837_rns_2011-10-16_cdcd7244-bb6c-4c07-8234-a8f4af37c104.pdf

ELEMENTOS LIMITED AND CONTROLLED ENTITIES

Directors

Company Secretary

Principal Activities

Review of Operations

Financial Position & Operating Results

Information on Directors

A. Anthony McLellan

Corey Nolan

Managing Director

Neil F. Stuart

Non-executive Director

Mark D. McCauley

Non-executive Director

James D. Calaway

Remuneration Report (Audited)

Performance-Based Remuneration (Audited)

Employment Details of Key Management Personnel (Audited)

Year Ended 30 June 2011

DIRECTORS’ REPORT

Year Ended 30 June 2010

Options Granted as Remuneration (Audited)

Employment Contract of Executives (Audited)

Company Performance, Shareholder Wealth and Director and Executive Remuneration (Audited)

Dividends

Significant Changes in State of Affairs

Options

DIRECTORS’ REPORT

Subsequent Events, Future Developments, Prospects and Business Strategies

Environmental Issues

Corporate Governance

Indemnifying Directors and Auditors

Proceedings on Behalf of the Company

Non-Audit Services

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011

ABN 49 138 468 756

CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 JUNE 2011

Note 30 June 2011 30 June 2010

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2011

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

Income Tax

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

Exploration and Evaluation Assets

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

Restoration Costs

Impairment of Assets

Financial Instruments

Recognition and Initial Measurement

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

Derecognition

Classification and subsequent measurement

Loans and receivables

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

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

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

Available-for-sale financial assets

Financial liabilities

Impairment

Cash and Cash Equivalents

Issued Capital

Equity Settled Compensation

ELEMENTOS LIMITED and CONTROLLED ENTITIES ABN 49 138 468 756

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT)

Revenue

Employee Benefits

ELEMENTOS LIMITED Annual Report 2011