EMU NL — Annual Report 2008

Sep 29, 2008

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NL

ABN: 50 127 291 927

ANNUAL REPORT FINANCIAL PERIOD ENDED 30 JUNE 2008

CONTENTS

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Corporate Directory	3
Review of Operations	4
Directors’ Report	11
Auditor’s Independence Declaration	17
Corporate Governance Statement	18
Income Statement	22
Balance Sheet	23
Statement of Changes in Equity	24
Cash Flow Statement	25
Notes to and forming part of the Financial Statements	26
Directors’ Declaration	40
Independent Audit Report	41
Tenement Schedule	43
Other Information	44

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CORPORATE DIRECTORY

DIRECTORS

PETER THOMAS Non-Executive Chairman

GEORGE SAKALIDIS Managing Director

ROGER THOMSON Executive Director

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FOR INFORMATION ON THE COMPANY CONTACT

PRINCIPAL & REGISTERED OFFICE

2[nd] Floor

35 Outram Street, West Perth WA 6005 Telephone (08) 9226 4266 Facsimile (08) 9485 2840

SOLICITORS TO THE COMPANY

COMPANY SECRETARY

Robert Lewis

REGISTERED OFFICE

2[nd] Floor 35 Outram Street, West Perth WA 6005 Telephone (08) 9226 4266 Facsimile (08) 9485 2840

WEBSITE www.emunickel.com.au

FOR SHAREHOLDER INFORMATION CONTACT

SHARE REGISTRY

Security Transfer Registrars Pty Ltd 770 Canning Highway, Applecross WA 6153 Telephone (08) 9315 2333 Facsimile (08) 9315 2233

Smyth & Thomas 10 Walker Avenue, West Perth WA 6005

BANKERS

Bank of Western Australia Ltd Hay Street, West Perth WA 6005

AUDITORS

Somes & Cooke Chartered Accountants Level 1, 1304 Hay Street, West Perth WA 6005

STOCK EXCHANGE Australian Securities Exchange

COMPANY CODE

EMU (Fully paid shares)

ISSUED CAPITAL

59,828,940 fully paid ordinary shares

10,000,000 options to acquire fully paid ordinary shares exercisable at $0.50 by 27 February 2013

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REVIEW OF OPERATIONS

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PROJECT SUMMARIES

Emu Nickel was incorporated to explore a package of 28 exploration licences covering 1,827sq km situated in the Yilgarn Craton, one of the world’s most fertile nickel provinces. The locations of the projects are shown in Figure 1. Under the terms of a joint venture with Image Resources, may earn an 80% interest in Image’s interest in the tenement package by expenditure of $2 million by February 2010. Emu Nickel may then elect to earn a further 20% of image’s interest by expenditure of an additional $1million by February 2011 (in which case Image retains a 1% gross royalty interest in respect to production which Emu Nickel is entitled). Joint ventures with Xstrata Nickel subsidiary Jubilee Mines and with Mincor Resources provide access to demonstrated expertise in exploration and development of nickel sulphide resources.

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Figure 1 Location Map

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REVIEW OF OPERATIONS

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EMU LAKE ( Emu Earning 33⅓%)

Emu Nickel has the right to earn a 33⅓% interest on the Emu Lake project from Image Resources where Xstrata Nickel is required to sole fund $3.25 million between mid 2007 and late 2010 at the rate of at least $1million per year in order to maintain its 66⅔% interest.

The project area covers a 10km strike of komatiitic ultramafic rocks with demonstrated potential for highgrade nickel sulphide mineralisation. At the Binti Gossan Zone drilling has identified nickel sulphide mineralisation over a 500m strike length on an ultramafic contact. Previous exploration has resulted in ten high-grade drill intersections have been made at grades of between 3%-10% Ni with best intersections of 2m at 6.2% Ni, 1.8% Cu and 2.2g/t PGE (platinum group elements) from 336m and 2m at 2.0% Ni, 1.0% Cu and 4.2g/t PGE from 343.5m in drill hole ELD15.

Interpretation of the drill intersections indicates the presence of two plunging high-grade shoots within a broad sulphide contact zone. It is a characteristic of komatiite hosted nickel sulphide deposits to have a long down-plunge dimension as demonstrated by the high-grade nickel sulphide shoots at the Silver Swan nickel mine which have been drilled to more than 1500m below surface.

By comparison, the sulphide shoots at Emu Lake have been drilled to depths of about only 350m below surface and remain open at depth, suggesting considerable potential for depth extensions to this high-grade mineralisation. Significantly, the intersections made to date are interpreted to be hosted by flanking facies ultramafics, with changes to the geology at depth indicating potential for development of the more prospective channel facies ultramafics where thicker nickel sulphide accumulations could be expected to occur.

During the year seven diamond drill holes were completed as summarised in Table 1.

	Table 1 Binti Gossan Zone Drill Intersections	Table 1 Binti Gossan Zone Drill Intersections	Table 1 Binti Gossan Zone Drill Intersections	Table 1 Binti Gossan Zone Drill Intersections	Table 1 Binti Gossan Zone Drill Intersections
Hole Number	Collar Coordinates (local)		From m	To m	Interval m	Grade
	E	N				Ni%	Cu%
ELD27	50440	48500	480.89	482.52	1.63	1.62	0.97
	including		481.65	482.52	0.87	2.45	1.73
			485.90	488.40	2.50	1.11	0.07
ELD28	50300	48450				nsr	nsr
ELD29*	50441	48500	551.05	551.55	0.50	3.76	0.23
ELD30	50422	48450	513.00	513.44	0.44	1.33	0.07
ELD31A	50353	48392				na	na
ELD32	50424	48449	557.21	559.03	1.82	1.94	0.14
	including		557.21	557.41	0.20	4.42	0.03
			558.16	559.03	0.87	2.21	0.16
ELD37	50450	48550	465.08	465.50	0.42	1.37	0.89
			466.56	467.38	0.82	1.13	0.07
			476.83	477.00	0.17	3.84	0.91
			478.43	478.58	0.15	2.37	0.03

Holes drilled on grid azimuth approx 270°, dip -60° unless otherwise shown * dip -67° nsr – no significant result na – assays not yet available

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REVIEW OF OPERATIONS

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The drilling confirmed the presence of nickel sulphide mineralisation on the basal ultramafic contact in five out of seven holes as shown in the longitudinal projection in Figure 2 and the cross section in Figure 3. Platinum and palladium assays have yet to be received.

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Figure 2 Binti Gossan Zone-Longitudinal Projection

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REVIEW OF OPERATIONS

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Figure 3 Binti Gossan Zone Section 48525N

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REVIEW OF OPERATIONS

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Massive nickel sulphide stringer and disseminated mineralisation occur over a distance of 200m in the lower sulphide zone on the ultramafic contact, open down plunge. Within the lower sulphide zone a coincident central axis of off-hole EM conductors remains to be tested. These aligned EM conductors could reflect central high grade core to the sulphide zone. It is significant that a large area immediately south of both the upper and lower sulphide zones remains undrilled between 300m and 600m below surface, where these zones are open down plunge.

A total of 13 drill intersections ranging in grade from 3% Ni to 16% Ni have now been made in the upper and lower sulphide zones, confirming the potential for high grade nickel sulphide shoots.

KAMBALDA WEST (Emu earning 30%)

A 1,266 line-km Versatile Time Domain Electromagnetic (VTEM) was flown by Mincor Resources over several target areas within the Kambalda West Joint Venture tenements in December 2007. Emu’s analysis of the results of this extensive survey has identified 10 strong VTEM anomalies each with characteristics consistent with the presence of a significant sulphide source. VTEM is an airborne electromagnetic technique recently introduced into Australia, which can detect a highly conductive body such as massive sulphides down to two hundred metres in depth.

Emu considers that two of the 10 anomalies are very strong and the remaining 8 anomalies are strong. The location of the anomalies is shown in Figure 4. In all cases the VTEM anomalies occur on or adjacent to interpreted ultramafic contact zones indicated by aeromagnetic anomalies and would be in a favourable setting for Kambalda-style nickel sulphides if at the basal contact of the unit. In some cases, komatiites (a favourable ultramafic host rock) are known to occur nearby as evidenced from previous mapping and drilling.

Significantly, historic drill intersections grading up to 4% Nickel in sulphides have been reported at the nearby Queen Victoria Rocks prospect confirming the nickel potential of this underexplored district where very little previous exploration has been reported on the Joint Venture tenements. Mincor is planning to field validate each VTEM anomaly in the near future. Once all the necessary permitting has been completed, a reconnaissance drilling program will be undertaken with the aim of assessing the significance of the VTEM anomalies and determining regional stratigraphy.

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REVIEW OF OPERATIONS

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Figure 4 Kambalda West JV VTEM Anomalies

Field verification and reconnaissance of the VTEM anomalies has been carried out. All of the anomalies inspected are under soil or alluvium cover, have not been drilled previously and are considered to be high quality exploration targets. Drillings of these priority nickel targets is anticipated to start in SeptemberOctober 2008.

Emu Nickel has the right to earn a 100% interest in the Kambalda West tenements where Mincor Resources may in turn earn up to a 70% interest (diluting Emu to 30%) by expenditure of $1.5 million by mid 2012.

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REVIEW OF OPERATIONS

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KOOLYANOBBING (Emu earning up to 100%)

Soil sampling has been carried out over a cumulative 5km strike length of an interpreted ultramaphic contact along one margin of the Koolyanobbing tenements, following-up geochemical anomalies from previous widespaced sampling (ASX release 22 July 2008). The geochemical survey defined a 1km-long nickel anomaly with coincident anomalous copper values. A programme of airborne EM surveying (VTEM) of the interpreted ultramafic contact is being planned in order to follow-up these encouraging results and search the contact zone for evidence of sulphide conductors. The VTEM survey is anticipated to be carried out in the September quarter. Nickel sulphide-bearing ultramafics occur some 20km northwest along strike from this anomaly, adding to the prospectivity of this area.

In addition, the follow-up sampling outlined a coherent gold anomaly about 1,500m in length and situated 6km southeast along strike from the nickel-copper anomaly. The gold anomaly coincides with an interpreted shear zone evident form aeromagnetic data. Field checking of this promising anomaly is in progress and it is anticipated that, subject to the necessary permitting, a programme of RAB drilling will commence in the September quarter.

WOONGARING (Emu earning up to 100%)

Aircore drilling over several nickel and gold targets in the Woongaring greenstone belt intersected sediments, mafic and ultramafic rocks and banded iron formation, frequently intruded by granite. Elevated nickel values encountered in the drilling appear to be related to lateritic enrichment. Further drilling of previously intersected nickel targets has recently been completed with sample analysis in progress.

DINGO DAM, BEETLE LAKE AND BRONZITE (Emu earning up to 100%)

776 line km of VTEM air bore EM surveys were flown over aeromagnetic targets on these three properties. The surveys were designed to test for nickel sulphide conductors associated with interpreted ultramafic rocks. The results indicate that the surveys were effective over between 50% and 75% of the area surveyed because of conductive overburden obscuring bedrock responses in some areas. Weak VTEM anomalies coincident with interpreted ultramafic rocks at Bronzite and Beetle Lake are currently being soil sampled.

The information in this report that relates to exploration results is based on information compiled or reviewed by Roger Thomson BSc, ARSM, MAusIMM, who is a Member of the Australian Institute of Geoscientists. Roger Thomson is a consultant to Emu Nickel NL. Roger Thomson has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 edition of the ‘Australasian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Roger Thomson consents to the inclusion of this information in the form and context in which it appears in this report.

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DIRECTORS’ REPORT

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Your directors present their report on the Company for the period from incorporation on 29 August 2007 and ended 30 June 2008.

DIRECTORS

The following persons were directors of Emu Nickel NL (“ Emu Nickel ”) since its incorporation on 29 August 2007 and up to the date of this report:

Peter Thomas George Sakalidis Roger Thomson

PRINCIPAL ACTIVITIES

The principal activities of the Company during the period were the exploration of mineral tenements in Western Australia.

RESULTS FROM OPERATIONS

During the period the Company recorded an operating loss of $350,107.

DIVIDENDS

No amounts have been paid or declared by way of dividend by the Company since its incorporation and the Directors do not recommend the payment of any dividend.

REVIEW OF OPERATIONS

A review of operations is covered elsewhere in this Annual Report.

EARNINGS PER SHARE

Basic Loss per share for the financial period was 0.9736 cents. Diluted Loss per share is not significantly different from Basic Loss per Share.

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

The Company was incorporated on 29 August 2007 as Emu Nickel Pty Ltd and listed on the ASX 27 February 2008 as Emu Nickel NL.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL PERIOD

No material matters have occurred subsequent to the end of the financial period which require reporting on other than the matters as reported to ASX.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

Likely developments in the operations of the Company and the expected results of those operations in future financial years have not been included in this report as the directors believe, on reasonable grounds, that the inclusion of such information would be likely to result in unreasonable prejudice to the Company.

ENVIRONMENTAL ISSUES

The Company carries out operations in Western Australia which are subject to environmental regulations under both Commonwealth and State legislation in relation to its exploration activities.

The Company has formal procedures in place to ensure regulations are adhered to. During or since the financial period there have been no known significant breaches of these regulations.

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DIRECTORS’ REPORT

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INFORMATION ON DIRECTORS AND COMPANY SECRETARIES

Peter Thomas (Appointed on incorporation) Chairman

Mr Thomas, a commercial solicitor with specialist expertise within the resource sector, is and has been a director of various listed companies. He is non-executive chairman of ASX listed Image Resources NL (since 19 April 2002), Meteoric Resources NL (since the company was incorporated on 13 February 2004), Magnetic Resources NL (since the company was incorporated on 23 August 2006) and this Company since its incorporation on 29 August 2007. He was non-executive chairman of Sandfire Resources NL from June 2003 to December 2006.

Mr Thomas has a relevant interest in 406,242 ordinary fully paid shares.

George Sakalidis (Appointed on incorporation)

Managing Director

Mr Sakalidis is an exploration geophysicist with over twenty-five years industry experience, during which time his career has included extensive gold, diamond, base metals and mineral sands exploration. Mr Sakalidis has been involved in a number of significant mineral discoveries, including the Three Rivers and Rose gold deposits in Western Australia and the tenement applications over the Silver Swan nickel deposit. He was also instrumental in the design of the magnetic surveys and exploration drilling program that led to the discovery of the large mineral sands resources at Magnetic Minerals Limited's Dongara Project. He is managing director of ASX listed Image Resources NL (director since 13 May 1994, managing director since 13 June 2007), managing director of Magnetic Resources NL (since the company was incorporated on 23 August 2006), executive director of Meteoric Resources NL (since the company was incorporated on 13 February 2004) and managing director of this Company since its incorporation on 29 August 2007.

Mr Sakalidis has a relevant interest in 3,504,051 ordinary fully paid shares and 2,000,000 options to acquire fully paid ordinary shares.

Roger Thomson (Appointed on incorporation) Executive Director

Mr Thomson is a geologist with more than 30 years experience in mineral exploration, mining geology and management in Australia, Africa, South America and Southeast Asia. He has held the positions of General Manager Exploration with Delta Gold Ltd and Sons of Gwalia Ltd and has been responsible for, or closely associated with, making economic discoveries of gold and tantalum in Australia. Mr Thomson successfully managed the exploration programme that led to the discovery of the multi-million ounce Sunrise gold deposit near Laverton in Western Australia. He is an Associate of the Royal School of Mines, a Member of the Australasian Institute of Mining and Metallurgy and a Member the Australian Institute of Geoscientists. Mr Thomson is a director of (ASX listed companies) He is executive director of ASX listed Image Resources NL (since 19 April 2002), managing director of Meteoric Resources NL (since the company was incorporated on 13 February 2004), Magnetic Resources NL (since the company was incorporated on 23 August 2006) and executive director of this Company’s incorporation on 29 August 2007. He is also a non-executive director of AIM listed Mariana Resources Limited.

Mr Thomson has a relevant interest in 865,693 ordinary fully paid shares and 2,000,000 options to acquire fully paid ordinary shares.

Robert Lewis

Company Secretary

Mr Lewis is a Fellow Chartered Accountant and has extensive business consulting, IT and project management experience.

AUDIT COMMITTEE

At the date of this report the Company does not have a separately constituted Audit Committee as all matters normally considered by an audit committee will be dealt with by the full board.

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DIRECTORS’ REPORT

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NON AUDIT SERVICES

Non audit services provided by the auditor comprised attendances to the preparation of an independent accountants report for inclusion in the IPO prospectus.

MEETINGS OF DIRECTORS

During the first financial period ended 30 June 2008, there were eight meetings of directors, all of which were attended by all the directors except for two meetings not attended by Roger Thomson while he was overseas.

REMUNERATION REPORT

The Company’s policy for determining the nature and amount of emoluments of key management personnel is set out below:

Key Management Personnel Remuneration and Incentive Policies

The Remuneration Committee (“ Committee ”) is to make decisions with respect to appropriate remuneration and incentive policies for executive directors and senior executives which:

• motivates executive directors and senior executives to pursue long term growth and success of the Company within an appropriate control framework;

• aligns the interests of key leadership with the long-term interests of the Company’s shareholders.

Executive Remuneration Packages

The Committee is to ensure that:

• executive remuneration packages involve a balance between fixed and incentive pay, reflecting short and long term performance objectives appropriate to the Company’s circumstances and objectives;

• recommendations are made to the board with respect to the quantum of any bonuses to be paid to executives.

Non-Executive Directors

The Committee is to ensure that:

• fees paid to non-executive directors are within the aggregate amount approved by shareholders (currently $150,000) and make recommendations to the board with respect to the need for increases to this aggregate amount at the Company’s annual general meeting;

• non-executive directors are remunerated by way of fees (in the form of cash and /or superannuation benefits);

• non-executive directors are not provided with retirement benefits other than statutory superannuation entitlements; and

• non-executive directors are not entitled to participate in equity-based remuneration schemes designed for executives without due consideration and appropriate disclosure to the Company’s shareholders.

To the extent that the Company adopts a different remuneration structure for its non-executive directors, the committee shall document its reasons for the purpose of disclosure to stakeholders.

Incentive Plans and Benefits Programs

The Committee is to:

• review and make recommendations concerning long-term incentive compensation plans, including the use of share options and other equity-based plans. Except as otherwise delegated by the board, the Committee will act on behalf of the board to administer equitybased and employee benefit plans, and as such will discharge any responsibilities under

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DIRECTORS’ REPORT

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those plans, including making and authorising grants, in accordance with the terms of those plans; and

• continually review and, if necessary, improve any existing benefit programs established for employees.

Retirement and Superannuation Payments

Prescribed benefits were provided by the Company to all directors by way of superannuation contributions to complying superannuation funds during the year. These benefits were paid in accordance with the statutory superannuation contribution guarantee requirements.

Guaranteed Rate Increases

There are no guaranteed rate increases fixed in the key management personnel’s contracts.

Key Management Personnel Remuneration

	Period ended 30 June 2008
Key Management Person	Cash Directors Fees and Contractual Payments	Post Employment Superannuation	Non-cash Benefits Equity	Total
Peter Thomas Non-Executive Chairman	$16,666	$1,500	$4,000	$22,166
George Sakalidis and associated entity Executive Managing Director	$36,916	$1,500	$4,000	$42,416
Roger Thomson and associated entity Executive Director	$35,701	$1,500	$4,000	$41,201
Robert Lewis Company Secretary	$1,314	-	-	$1,314
Total	$90,597	$4,500	$12,000	$107,097

Consultant Agreements

Two separate (but similar) agreements have been executed between the Company and nominated associated entities of Messrs Sakalidis and Thomson.

These are effective as from 1 March 2008 and major provisions of the agreements are set out as follows:

Contracted entity	Term of agreements	Rate	Review period	Increase
Leeman Pty Ltd (G Sakalidis)	1 year from 1 March 2008	$135.00 per hour	Annually on 1 July	Discretionary by Board
Regor Consulting Pty Ltd (RM Thomson)	1 year from 1 March 2008	$135.00 per hour	Annually on 1 uly

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DIRECTORS’ REPORT

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EMPLOYEES

Aside from directors (all of whom were, for tax purposes treated as employees), the Company had no noncasual employees at 30 June 2008.

DIRECTORS’ INTERESTS

The relevant interest of each director in the shares and options over such instruments issued by the Company as notified by the directors to the Australian Securities Exchange in accordance with Section 205G(1) of the Corporations Act 2001, at the date of this report is as follows:

	Fully Paid Ordinary Shares	Options over Fully Paid Ordinary Shares Expiring 27.2.2013
Peter Thomas	406,242	-
George Sakalidis	3,324,051	2,000,000
Roger Thomson	865,693	2,000,000

SHARE OPTIONS GRANTED TO DIRECTORS AND OFFICERS

Since the Company’s incorporation, the following options were granted for no consideration over unissued ordinary shares:

Peter Thomas	2,000,000 options exercisable at$0.50 on or before 27.2.2013
George Sakalidis	2,000,000 options exercisable at$0.50 on or before 27.2.2013
Roger Thomson	2,000,000 options exercisable at$0.50 on or before 27.2.2013
Held in trust for issue to a director yet to be appointed	2,000,000 options exercisable at $0.50 on or before 27.2.2013

These options were independently assessed on 6 September 2007 to have a value at the time of their grant of between $0.001 and $0.003 each.

CORPORATE STRUCTURE

Emu Nickel NL is a no liability company incorporated and domiciled in Australia.

INDEMNIFICATION & INSURANCE OF DIRECTORS AND OFFICERS

The Company has entered into agreements indemnifying, to the extent permitted by law, all the directors and officers of the Company against all losses or liabilities incurred by each director and officer in their capacity as directors and officers of the Company.

OPTIONS

As at the date of this report, there are 10,000,000 unquoted options over un-issued ordinary fully paid shares in the Company, exercisable at $0.50 per option on or before 27 February 2013. These options were issued to directors and consultants during the period and are held in escrow until 27 February 2010.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to 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 part of those proceedings.

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DIRECTORS’ REPORT

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AUDITOR’S INDEPENDENCE DECLARATION

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out in this annual report.

Signed in accordance with a resolution of the directors

GEORGE SAKALIDIS

Director Perth 30 September 2008

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AUDITOR’S INDEPENDENCE DECLARATION

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Emu Nickel NL

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Emu Nickel NL.

As lead audit partner for the audit of the financial statements of Emu Nickel NL for the period ended 30 June 2008, I declare that to the best of my knowledge and belief, there have been no contraventions of:

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

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

Yours sincerely

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SOMES and COOKE

K. C. Somes

30 September 2008 1304 Hay Street West Perth WA 6005

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CORPORATE GOVERNANCE STATEMENT

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IF NOT WHY NOT EXCEPTION REPORT TO CORPORATE GOVERNANCE PRINCIPLES AND RECOMMENDATIONS

Except to the extent stated below, during the financial year ended 30 June 2008, Emu Nickel NL complied with each of the recommendations ( Recommendations ) in the ASX Corporate Governance Council’s second edition (August 2007 as revised in June 2008) of the Corporate Governance Principles and Recommendations.

This report does not address the Company’s compliance or otherwise with the Recommendations for any period it was not listed on the ASX.

1. LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT

Companies should establish and disclose the respective roles and responsibilities of board and management.

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

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

• 1.3 Companies should provide the information indicated in the Guide to reporting on Principle 1.

2. STRUCTURE THE BOARD TO ADD VALUE

Companies should have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties.

• 2.1 A majority of the board should be independent directors.

“If not, why not”:

The Company does not comply – it has 3 man board 2 of which clearly serve as executives. As to the other director, refer the “If not, why not” response to Recommendation 2.2.

The Company has a small close knit team which has a positive interactive working history.

Given all the circumstances attendant upon the Company including its objectives, the nature and extent of its actual and proposed operations, its capital base and other resources, the costs associated with a board comprised of more than the minimum number and the need for a board comprised of persons with a blend of traits, skills, experience, expertise, entrepreneurialism, innovation, tenacity, vision and dedication in order to enliven the prospects of creating value for shareholders, this recommendation is thought by the board to be neither appropriate nor achievable.

• 2.2 The Chair should be an independent director.

“If not, why not”:

See the “If not, why not” response to Recommendation 2.1. The Chair considers himself to be an independent director as he is not part of the management team and he regards himself as being free of any relationship that could materially interfere with the independent exercise of his judgement. However he acknowledges that it might well be perceived that the provision by him of legal services to the Company, his shareholding in the Company and his remuneration as a

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CORPORATE GOVERNANCE STATEMENT

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director compromise or materially interfere with his independent exercise of judgement and ability to act in an entirely disinterested manner in all things.

• 2.3 The roles of the Chair and chief executive officer (or equivalent) should not be exercised by the same individual.

• 2.4 The board should establish a Nomination Committee.

“If not, why not”:

The Company has a small board which does not perceive that any gains are to be derived through the operation of a formal committee structure. The board will deal with nomination issues on an ad hoc unstructured basis.

• 2.5 Companies should disclose the process for evaluating the performance of the board, its committees and individual directors.

• 2.6 Companies should provide the information indicated in Guide to Reporting on Principle 2 .

In compliance with that recommendation, the Company declares that independent directors have the right to seek independent professional advice in the furtherance of their duties as directors at the Company’s expense. Written approval must be obtained from the chair prior to incurring any expense on behalf of the Company.

“If not, why not”:

The Guide requires the information to appear in the corporate governance statement in the annual report – the Company does not include the required information in the corporate governance statement in the annual report to the extent that information appears elsewhere in the annual report as to do so would be duplicate that information (for no benefit that the board can perceive).

3. PROMOTE ETHICAL AND RESPONSIBLE DECISION- MAKING

Companies should 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 as to the:

• 3.1.1 practices necessary to maintain confidence in the Company’s integrity;

• 3.1.2 practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders;

• 3.1.3 responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

• 3.2 Companies should establish a policy concerning trading in Company securities by directors, senior executives and employees and disclose the policy or a summary of that policy.

• 3.3 Companies should provide the information indicated in the Guide to reporting on Principle 3.

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CORPORATE GOVERNANCE STATEMENT

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4. SAFEGUARD INTEGRITY IN FINANCIAL REPORTING

Companies should have a structure to independently verify and safeguard the integrity of their financial reporting.

• 4.1 The board should establish an Audit Committee.

• 4.2 The Audit Committee should be structured so that it:

• 4.2.1 consists only of non-executive directors;

• 4.2.2 consists of a majority of independent directors;

• 4.2.3 is Chaired by an independent Chair, who is not Chair of the board;

• 4.2.4 has at least three members.

• 4.3 The Audit Committee should have a formal charter.

• 4.4 Companies should provide the information indicated in Guide to reporting on Principle 4.

“If not, why not”:

The Company has a policy regarding the formation, composition, role, powers and responsibilities of an audit committee although it has not yet established such a committee.

The Company is small, has a small board with a tight management structure, relies on equity capital for funding and in all the circumstances of the Company the board does not perceive that any gains are to be derived through the operation of a formal committee structure.

5. MAKE TIMELY AND BALANCED DISCLOSURE

Companies should promote timely and balanced disclosure of all material matters concerning the Company.

• 5.1 Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.

• 5.2 Companies should provide the information indicated in the Guide to reporting on Principle 5.

6. RESPECT THE RIGHTS OF SHAREHOLDERS

Companies should respect the rights of shareholders and facilitate the effective exercise of those rights.

• 6.1 Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy.

• 6.2 Companies should provide the information indicated in the Guide to reporting on Principle 6.

• 20 -

CORPORATE GOVERNANCE STATEMENT

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7. RECOGNISE AND MANAGE RISK

• Companies should establish a sound system of risk oversight and management and internal control.

• 7.1 Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies.

• 7.2 The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks.

• 7.3 The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

• 7.4 Companies should provide the information indicated in Guide to reporting on Principle 7.

“If not, why not”:

Management has not reported to the board as to the effectiveness of the Company’s management of its material business risks as the board has not required this of it.

Whilst the board recognises the benefit of the discipline of documenting such matters, the board has deployed its scare resources to other endeavours in priority to the preparation of a written report on the matter of risk given the Company has strict procedures in place and the board has 2 out of 3 executive directors so they are well versed in the day to day affairs of the Company and know what measures are in place.

8. REMUNERATE FAIRLY AND RESPONSIBLY

Companies should ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to performance is clear.

• 8.1

• The board should establish a Remuneration Committee.

• 8.2 Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives.

• 8.3 Companies should provide the information indicated in Guide to reporting on Principle 8.

“If not, why not”:

The Company has a policy regarding the formation, composition, role, and responsibilities of a remuneration committee although it has not yet established such a committee as, since listing on ASX, no matter has arisen for a remuneration committee to consider .

• 21 -

INCOME STATEMENT For the year ended 30 June 2008

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Notes Revenue from ordinary activities 2 Revenue/(loss) from non-ordinary activities Borrowing expenses Depreciation expense 2 Exploration expenses written-off 2 Share based payments 2 Other expenses from ordinary activities 2 (Loss) from ordinary activities before related income tax expense Income tax expense 3 (Loss) from ordinary activities after related income tax expense Net (loss) attributable to members of Emu Nickel NL Basic (loss) per share - cents per share 6 Diluted (loss) per share - cents per share 6		2008 ($) 244,436 - - (5,212) (426,190) (20,000) (143,141)
		(350,107) -
		(350,107)
		(350,107)
		(0.9736)
		(0.9736)

The accompanying notes form part of these financial statements.

• 22 -

BALANCE SHEET As at 30 June 2008

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Notes Current Assets Cash assets 7 Receivables 8 Prepayments 9 Non-Current Assets Plant, equipment, motor vehicles 10 Mineral interests 11 Other financial assets 12 TOTAL ASSETS Current Liabilities Payables 13 NET ASSETS Equity 14 Contributed equity Reserves Accumulated losses TOTAL EQUITY	2008 ($) 8,343,223 136,097 41,573
	8,520,893 71,951 - 10,000
	81,951
	8,602,844
	117,022
	8,485,822
	8,815,929 20,000 (350,107)
	8,485,822

The accompanying notes form part of these financial statements.

• 23 -

STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2008

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Company incorporated 29.8.2007 Shares issued during the period Share based payments IPO and share issuance expenses Loss for period Balance at 30.6.2008	Share Capital ($) Employee Benefit Reserve(1) ($) Accumulated Losses ($) Total ($) 10,003,476 10,003,476 20,000 20,000 (1,187,547) (1,187,547) (350,107) (350,107)
	8,815,929 20,000 (350,107) 8,485,822

Note (1)

Equity remuneration represents options shares granted during the year as approved at the general meeting held 9 October 2007 of shareholders of the then parent company, Image Resources NL. These equities were valued by an independent risk and assurance consultant for the purposes of obtaining approval prior to the implementation of an Initial Public Offering.

The accompanying notes form part of these financial statements.

• 24 -

CASH FLOW STATEMENT For the year ended 30 June 2008

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Notes CASH FLOWS FROM OPERATING ACTIVITIES Cash payments to suppliers and contractors Interest received Net cash (used in) operating activities 15 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of plant, equipment, motor vehicle Payments for exploration and evaluation Purchase of investments Net cash (used in) / provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from new issues of shares Share issue expenses Net cash provided by financing activities Net (decrease) / increase in cash held Cash at the beginning of the financial period Cash at the end of the financial period 7	2008 ($) (203,789,) 244,436
	40,647
	(77,163) (426,190) (10,000)
	(513,353)
	10,003,476 (1,187,547)
	8,815,929
	8,343,223 -
	8,343,223

The accompanying notes form part of these financial statements.

• 25 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2008

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NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

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

The following is a summary of the material accounting policies adopted by the Company in the preparation of the financial report.

Basis of Preparation

The accounting policies set out below have been consistently applied to all periods presented, unless otherwise stated.

Reporting Basis and Conventions

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

Going Concern

The directors have prepared the financial statements of the Company on a going concern basis. In arriving at this position, the directors have considered the following pertinent matters:

• (a) cash on hand at the date of this report is approximately $8,191,300;

• (b) current cash resources are considered adequate to fund the entity’s immediate operating and exploration activities.

In the directors’ opinion, the Company is able to continue as a going concern and therefore realise its assets and extinguish its liabilities in the normal course of business at the amounts stated in the financial report.

Accounting Policies

(a) Revenue

Interest revenue is recognised on a proportional basis taking into account interest rates applicable to the financial asset. All revenue is stated net of the amount of goods and services tax (GST).

(b) Employee Benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by non-casual employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. There is no liability to Long Service Leave entitlements.

(c) Exploration and Evaluation Expenditure

All exploration and evaluation expenditure is expensed to profit and loss as incurred. The effect of this write-off is to increase the loss incurred from ordinary activities as disclosed in the Income Statement and to decrease the carrying values in the Balance Sheet.

(d) Acquisition of Assets

The cost method is used for all acquisitions of assets regardless of whether shares or other assets are acquired. Cost is determined as the fair value of assets given up at the date of acquisition plus costs incidental to the acquisition.

Costs relating to the acquisition of new areas of interest are classified as either exploration and evaluation expenditure or mine properties based on the stage of development reached at the date of acquisition.

• 26 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2008

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(e) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST except where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable. Receivables and payables in the balance sheet are shown inclusive of GST.

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

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 flows.

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

(f) Income Tax

The charge for current income tax expense is based on the profit for the period adjusted for any nonassessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. 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 is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred tax assets are recognized to the extent that it is probable that future tax profits will be available against which deductible temporary differences 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.

(g) 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 three months or less.

(h) Impairment of Assets

At each reporting date, the company 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 income statement.

(i) Earnings per Share

• (i) Basic Earnings per Share – Basic earnings per share is determined by dividing the loss from ordinary activities after related income tax expense by the weighted average number of ordinary shares outstanding during the financial period.

• 27 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2008

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• (ii) Diluted Earnings per Share – Diluted EPS is calculated as net loss attributable to members, adjusted for:

• costs of servicing equity (other than dividends);

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

• other discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares.

(j) Non-current Assets

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

Items of plant, equipment and motor vehicles are recorded at cost, being the fair value of consideration provided plus incidental costs. This cost is written off over its expected economic life, adjusted for any salvage value, if applicable. Estimates of remaining useful lives range between 3 and 5 years.

Non-current assets are not carried at an amount greater than their recoverable amount and where carrying values exceed this recoverable amount, assets are written down. In determining recoverable amount the expected net cash flows have not been discounted.

(k) Financial Instruments

Financial Assets: Security deposits are recognised at their fair value. Other receivables are carried at nominal amount due less any provision for doubtful debts. An estimate of doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred. Sundry debtors and other receivables are non-interest bearing and have repayment terms between 30 and 90 days.

Financial Liabilities: Liabilities for trade creditors and other accruals are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Company. Trade creditors are normally settled on 30 day terms.

Available-for-sale Financial Assets: Available-for-sale financial assets include any financial assets not included in the above categories and are initially measured at cost being the fair value of the consideration and including acquisition charges associated with the investment. Unrealised gains and losses arising from changes in the fair value of the investment are taken directly to equity.

(l) Interests in Joint Venture

Interest in joint venture operations are brought to account by including in the respective classifications, the share of individual assets employed, liabilities and expenses incurred and revenue from the sale of joint venture output. Interest in joint venture operations are brought to account by including assets and liabilities in their respective classifications using the cost method.

(m) Contributed Equity

Ordinary share capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

(n) Share-based Payments

Share-based compensation benefits provided to directors are approved in general meeting by members. Share-based benefits provided to non-directors are approved by the Board of Directors and form part of that employee’s remuneration package.

In respect of share options granted, the fair value is recognised as an employee benefit expense with a corresponding increase in equity. The theoretical fair value of the options is calculated at the date of grant by an independent risk and assurance consultant taking into account the terms and conditions upon which the options were granted, using a range of open form (basic and binomial), Monte Carlo simulation and a closed form compound option model using the Geske (1979) equation. The model has been adjusted for the effects of non-transferability, exercise restrictions and behavioural considerations.

• 28 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2008

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Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital.

(o) Comparative Figures

The Company was incorporated on 29 August 2007 and these financial statements cover the period from incorporation to 30 June 2008. As these are the Companies first financial statements, there are no comparatives.

Critical Accounting Estimates and Judgements

The directors evaluate estimates and judgements 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 from within the Company.

Key Estimates - Impairment

The Company assesses impairment at each reporting date by evaluating conditions specific to the Company that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined.

Change in Accounting Policy

The following Australian Accounting Standards were either issued or amended during the period with an application date as shown below. They have not been adopted in preparation of the financial statements at reporting date.

AASB	Standards Affected	Outline of	Application	Application
Amendment		Amendment	Date of	Date for
			Standard	Company
AASB 2007-3: Amendments to Australian		The disclosure	1.1.2009	1.7.2009
Accounting Standards		requirements of
	AASB 5: Non-current Assets Held	AASB 114:
	for Sale and Discontinued	Segment Reporting
	AASB 6:Exploration for and Evaluation of Minerals	have been replaced due to the issuing of AASB 8: Operating
	AASB 102: Inventories	Segments in
	AASB 107:Cash Flow Statements	February 2007.
		These amendments
	AASB 119: Employee Benefits	will involve changes
	AASB 127: Consolidated and	to segment
	Separate Financial Statements	reporting
	AASB 134: Interim Financial	disclosures within
	Reporting AASB 136: Impairment of Assets	the financial report. However, it is anticipated there will
	AASB 1023: General Insurance	be no direct impact
	Contracts	on recognition and
	AASB 1038: Life Insurance	measurement
	Contracts	criteria amounts
		included in the
		financial report
AASB 8 Operating Segments		As above	1.1.2009	1.7.2009
	AASB 114: Segment Reporting

• 29 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2008

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Change in Accounting Policy (Continued)

AASB 2007-6 Amendments to Australian Accounting Standards

AASB1: First time adoption of AIFRS AASB 101: Presentation of Financial Statements AASB 107: Cash Flow Statements AASB 111: Construction Contracts AASB 116: Property, Plant and Equipment AASB 138: Intangible Assets

The revised AASB 1.1.2009 1.7.2009 123: Borrowing Costs issued in June 2007 has removed the option to expense all borrowing costs. This amendment will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. However, there will be no direct impact to the amounts included in the financial statements as they already capitalise borrowing costs related to qualifying assets.

AASB 123 Borrowing Costs

AASB 123: Borrowing Costs

AASB 2007-8 Amendments to Australian Accounting Standards

AASB 101: Presentation of Financial Statements

As above 1.1.2009 1.7.2009 The revised AASB 1.1.2009 1.7.2009 101: Presentation of Financial Statements issued in September 2007 requires the presentation of a statement of comprehensive income.

• 30 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2008

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NOTE 2 OPERATING LOSS Operating loss before income tax includes: Revenue from ordinary activities Interest received Expenses Depreciation Exploration costs written-off Share based payments Occupancy costs Filing and ASX Fees Corporate and management Other expenses from ordinary activities NOTE 3 INCOME TAX The amount of income tax provided for in the accounts differs from the amount prima facie payable on the operating loss. The difference is reconciled as follows: (Loss) from ordinary activities before income tax Prima facie tax benefit attributable to loss from ordinary activities before income tax at 30% Add: Tax effect of Non-allowable items - Other Tax losses not brought to account as deferred tax benefit Income tax attributable to operating loss	2008 ($) 244,436
	244,436
	(5,212)
	(426,190)
	(20,000)
	16,000 4,589 69,743 52,809
	(143,141)
	2008 ($) (350,107)
	(105,032) 17,247 87,785
	-

Unbooked deferred tax benefits

The Company has accumulated tax losses of $292,615.

The potential deferred tax benefit of these losses ($87,785) will only be realised if:

• (i) the Company derives future assessable income of a nature and of an amount sufficient to enable the benefit from the losses and deductions to be released;

• (ii) the Company continues to comply with the conditions for deductibility imposed by the law; and

• (iii) no changes in tax legislation adversely affect the Company in realising the benefit from the deductions for the losses.

• 31 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2008

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NOTE 4 KEY MANAGEMENT PERSONNEL COMPENSATION

Names and positions held of key management personnel in office at any time during the financial year are:

ar are:
Key Management Person	Position
Peter S Thomas	Non-Executive Chairman
George Sakalidis	ManagingDirector
Roger M Thomson	Executive Director

Key management personnel remuneration has been included in the Remuneration Report section of the Directors Report.

Options held by Key Management Personnel –

The number of options over fully paid ordinary shares in the Company held during the financial period by each director (or their personally related entities) are set out below:

Name	Balance at the start of the period	Granted during the period	Exercised during the period	Other changes during the period	Balance at the end of the period	Vested exercisable at the end of theperiod
Peter S Thomas	-	2,000,000	-	(2,000,000)	-	-
George Sakalidis	-	2,000,000	-	-	2,000,000	2,000,000
Roger M Thomson	-	2,000,000	-	-	2,000,000	2,000,000

These are the only options granted, vested, exercised or sold during the period.

Shareholdings held by Key Management Personnel –

The number of fully paid ordinary shares in the company held during the financial period by each director (or their respective personally-related entities), are set out below:

Name	Balance at the start of theperiod	Shares movements	Balance at the end of theperiod
Peter S Thomas	-	406,242	406,242
George Sakalidis	-	3,264,051	3,264,051
Roger M Thomson	-	865,693	865,693

Related Entity Transactions -

Information on related entity transactions is disclosed in Note 22.

NOTE 5 AUDITORS REMUNERATION Amounts received or due and receivable by the auditors of the Company for: Auditing and reviewing the financial report Other services – preparation of Independent Accountants Report for inclusion in IPO Prospectus	2008 ($) 7,000 6,000
	13,000

• 32 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2008

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NOTE 6 EARNINGS PER SHARE The following reflects the income and share data used in the calculation of basic and diluted earnings per share Net (loss) Adjustments: Nil Earnings used in calculating basic and diluted earnings per share Earnings used in calculating basic and diluted earnings per share Weighted average number of ordinary shares used in calculating basic earnings per share Effect of dilutive securities: Contributing shares Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share Weighted average number of ordinary shares used in calculating basic earnings per share Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share	(346,087) 44,198,908 - 44,198,908	2008 ($) (330,107) - (330,107)
		(1,022,806)
		43,818,346 -
		43,818,346
		35,959,281
		35,959,281

The Company had 10,000,000 options over fully paid ordinary shares on issue at balance date. These options are considered to be potential ordinary shares. However, they are not considered to be dilutive in this period and accordingly have not been included in the determination of diluted earnings per share.

There have been no significant conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares since the reporting date and before the completion of this financial report.

NOTE 7 CASH ASSETS Cash at bank Deposits at call NOTE 8 CURRENT RECEIVABLES Other receivables NOTE 9 OTHER CURRENT ASSETS Prepayments	2008 ($) 8,326 8,334,897
	8,343,223
	2008 ($) 136,097
	2008 ($) 41,573

• 33 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2008

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NOTE 10 PLANT, EQUIPMENT, MOTOR VEHICLES Plant, equipment, motor vehicles Less: Accumulated depreciation Reconciliations of the carrying amounts of plant and equipment at the beginning and end of the current and previous financial years. Plant, equipment, motor vehicles Carrying amount at beginning of period Additions Disposals Depreciation expense Total plant, equipment, motor vehicles at end of period NOTE 11 MINERAL INTERESTS Exploration Expenditure Areas of interest in exploration and evaluation phases Opening balance Net Expenditure incurred during the period Tenements disposed of during the period Expenditure written off Closing balance NOTE 12 OTHER FINANCIAL ASSETS Non-Current Securities in listed corporations NOTE 13 CURRENT PAYABLES Trade creditors and accruals	2008 ($) 77,163 (5,212)
	71,951
	- 77,163 - (5,212)
	71,951
	2008 ($) - (426,190) - (426,190)
	-
	2008 ($) 10,000
	10,000
	2008 ($) 117,022

• 34 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2008

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NOTE 14 EQUITY Contributed Equity – Ordinary Shares Receipt from subscriber shares issued on incorporation Consolidation of 3,000 subscriber shares into 1 fully paid ordinary share Bonus issue of fully paid ordinary shares to shareholders of Image Resources NL Issue of IPO shares at $0.50 IPO expenses Closing balance: Total Contributed Equity Reserves Share based payments Closing balance: Options The Company had the following options over un-issued fully paid ordinary shares Options exercisable at $0.50 on or before 27.2.2013 – fully vested Total Options	2008	2008
	No. 3,000 (3,000) 1 39,822,046 20,006,893	$ 30 - - - 10,003,446 (1,187,547)
	59,828,940	8,815,929
	10,000,000	8,815,929
		20,000
		20,000
	10,000,000

Terms and condition of contributed equity

Ordinary Fully Paid Shares

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

At a general meeting every shareholder present in person or by proxy, representative or attorney has: a) on a

show of hands, one vote; and b) on a poll, one vote for each fully paid share held and in respect of a partly paid share, a fraction of a vote equivalent to the proportion which the amount paid up bears to the total issue price.

• 35 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2008

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NOTE 15 CASH FLOW INFORMATION Reconciliation of operating loss after income tax with funds used in operating activities Operating (loss) after income tax Depreciation and amortisation Exploration expenditure written off Share based payments Changes in operating assets and liabilities: (Increase) / Decrease in receivables (Increase) / Decrease in prepayments Increase / (Decrease) in payables	2008 ($) (350,107) 5,212 426,190 20,000 (136,097) (41,573) 117,022
	40,647

NOTE 16 TENEMENT EXPENDITURES AND LEASING COMMITMENTS

The Company has entered into certain obligations to perform minimum exploration work on tenements held or joint ventured into. These obligations vary from time to time in accordance with contracts signed. Tenement rentals and minimum expenditure obligations which may be varied or deferred on application are expected to be met in the normal course of business.

The minimum statutory expenditure requirement on the granted tenements for the next twelve months amounts to $641,667. Of this amount, $311,000 is expected to be met by JV participants as a result of various joint ventures entered into.

NOTE 17 SEGMENTS

The Company operates only in one business, being the exploration for minerals.

Geographically, the Company's activities are conducted mainly within Western Australia.

NOTE 18 JOINT VENTURES

The Company has interests in the following exploration unincorporated joint ventures:

Name of Project % Interest Image Resources NL (“ Image ”) Earning 80% in Image’s interests (this includes Images interest in the Emu Lake JV, Kambalda West JV and Ward Springs JV), with a right to increase earning to 100% interest

NOTE 19 TENEMENT ACCESS

The interests of holders of freehold land encroached by the Tenements are given special recognition by the Mining Act (WA). As a general proposition, a tenement holder must obtain the consent of the owner of freehold before conducting operations on the freehold land. There can be no assurance that the Company will secure rights to access those portions of the Tenements encroaching freehold land but, importantly, the grant of freehold extinguished native title so wherever the Tenements encroach freehold the Company is in the position of not having to abide by the Native Title Act albeit aboriginal heritage matters still be of concern.

• 36 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2008

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NOTE 20 SUPERANNUATION COMMITMENTS

Superannuation contributions are made to at least satisfy the statutory Superannuation Contribution Guarantee Act and in satisfaction of any salary sacrifice requests. All contributions were made to accumulation type funds selected by the employee and accordingly actuarial assessments were not required.

NOTE 21 EVENTS SUBSEQUENT TO REPORTING DATE

No material matters have occurred subsequent to the end of the financial period which require reporting on other than the matters referred to in the directors' report or as reported to ASX.

NOTE 22 RELATED PARTY AND RELATED ENTITY TRANSACTIONS

• (a) Other transactions with related parties, directors and director-related parties and entities

• Peter S Thomas invoiced $821 for legal services provided to the Company during the financial period.

• Total amounts owing to directors or their associated entities (excluding GST) at 30 June 2008 was $65,111.

• (b) Emu Nickel has entered into a Joint Venture Agreement with Image whereby Image has agreed to farm out various interests in its tenements. It was agreed that Emu Nickel commit to expend an amount of no less than $1 million within one year of the listing date (being 27 February 2008) before it may withdraw from the joint venture agreement. It was also agreed that Emu Nickel may expend a further $1 million within the period of 24 months of the listing date to earn an 80% interest in Image’s interests. In the event of Emu Nickel earning an 80% interest, it may then elect to earn the remaining 20% interest in the tenements by expending a further $1 million on agreed expenditure prior to the expiration of 3 years from the listing date.

Emu Nickel entered into a Listing Support Agreement with Image whereby a fee equal to 6% of the funds raised under the IPO would be paid to Image in consideration of Image using, without obligation, reasonable efforts to support Emu Nickel in its endeavours to raise up to $20 million and to be admitted to the official lists of the ASX. This was paid after the company was listed on the ASX 27 February 2008.

Emu Nickel has entered into a Serviced Offices Agreement with Image whereby Image agreed to provide the Company with serviced offices and one-half of the time of one secretary at $4,000 per month commencing on the Listing Date, terminable at will by either party on one month’s notice.

Emu Nickel has engaged George Sakalidis and Roger Thomson (via their respective nominated associated entities) to provide certain services to the Company. Details of the terms of these agreements are included elsewhere in this report.

NOTE 23 CONTINGENT LIABILITIES

Native Title

The Company has been notified of a number of native title claims impacting its tenements.

The Company is not in a position to assess the likely effect of any native title claim impacting the Company.

The existence of native title and the policy of the West Australian state government in particular represent, as a general proposition, a serious threat to explorers and miners, not only in terms of delaying the grant of tenements and the progression of exploration development and mining operations, but also in terms of costs arising consequent upon dealing with aboriginal interest groups, claims for native title and the like.

• 37 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2008

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NOTE 24 FINANCIAL INSTRUMENTS DISCLOSURE

(a) Financial Risk Management Policies

The Company’s financial instruments consist of deposits with banks, accounts receivable and payable.

Risk management policies are approved and reviewed by the board on a regular basis. This mainly includes monitoring future cash flow requirements. The use of hedging derivative instruments is not contemplated at this stage of the Company’s development.

Financial Risk Exposure and Management

The main risk the Company is exposed to through its financial instruments is liquidity risk.

Liquidity Risk

The Company manages liquidity risk by monitoring forecast cash flows.

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 the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements.

There is no material amounts of collateral held as security at balance date.

There credit risk for counterparties included in trade and other receivables at balance date is detailed below.

Receivables GST Refundable	2008 $ 136,096
	136,096

(b) Financial Instruments

The Company holds no derivative instruments, forward exchange contracts and interest rate swaps.

Financial Instrument composition and maturity analysis

The table below reflects the undiscounted contractual settlement terms for financial instruments.

2008 Weighted Average Effective Interest Rate % Financial Assets Cash and cash equivalents Other Receivables Held for sale investments Total Financial Assets 7.96% Financial Liabilities Payables	Floating Interest Rate Non Interest Bearing Total 8,334,897 8,326 8,343,223 - 136,096 136,096 - 10,000 10,000
	8,334,897 154,422 8,489,319
	- 117,022 117,022

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2008

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NOTE 24 FINANCIAL INSTRUMENTS DISCLOSURE (Continued)

Financial Instrument composition and maturity analysis (Continued)

inancial Instrument composition and maturity analysis (Continued)
Trade and other payables are expected to be paid as follows: Less than 6 months	2008 $ 117,022
	117,022

(c) Net Fair Values

The net fair value for financial assets and liabilities approximates their carrying value.

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

(d) Sensitivity Analysis – Interest rate risk

The Company has performed a sensitivity analysis relating to its exposure to interest rate risk at balance date. The sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in this risk.

As at balance date, the effect on loss and equity as a result of changes in the interest rate, with all other variables remaining constant would be as follows:

ariables	remaining constant would be as follows:
		2008
		$
Change	in loss – increase/(decrease):
-	Increase in interest rate by 2%	(166,698)
-	Decrease in interest rate by 2%	166,698
Change	in equity – increase/(decrease):
-	Increase in interest rate by 2%	166,698
-	Decrease in interest rate by 2%	(166,698)

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DIRECTORS’ DECLARATION

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The directors of the Company declare that:

1. the accompanying financial report and notes are in accordance with the Corporations Act 2001 and;

2. (a) comply with Accounting Standards and the Corporations Act 2001; and

3. (b) give a true and fair view of the financial position as at 30 June 2008 and performance for the period ended on that date of the Company.

4. the Chief Executive Officer has declared that:

5. (a) the financial records of the company for the financial period have been properly maintained in accordance with section 286 of the Corporations Act 2001;

6. (b) the financial statements and the notes for the financial period comply with Accounting Standards; and

7. (c) the financial statements and notes for the financial period give a true and fair view;

8. in the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors:

George Sakalidis DIRECTOR

PERTH

Dated this 30th day of September2008.

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INDEPENDENT AUDIT REPORT TO THE MEMBERS OF EMU NICKEL NL

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INDEPENDENT AUDITOR’S REPORT

To the members of Emu Nickel NL

Report on the Financial Report

We have audited the accompanying financial report of Emu Nickel NL, which comprises the balance sheet as at 30 June 2008, and the income statement, statement of changes in equity and cash flow statement for the period ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration.

Directors’ Responsibility for the Financial Report

The directors of Emu Nickel NL are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (Including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statement and notes, complies with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

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

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

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INDEPENDENT AUDIT REPORT TO THE MEMBERS OF EMU NICKEL NL

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 .

Auditors Opinion

In our opinion the financial report of Emu Nickel NL is in accordance with the Corporations Act 2001 , including:

• a) giving a true and fair view of Emu Nickel NL’s financial position as at 30 June 2008 and of its performance for the period ended on that date ; and

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

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 13 to 15 of the Directors’ Report for the period ended 30 June 2008. The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditors Opinion

In our opinion, the Remuneration Report of Emu Nickel NL for the period ended 30 June 2008, complies with section 300A Corporations Act 2001.

Kevin Somes

Date: 30 September 2008

Somes and Cooke 1304 Hay Street West Perth WA 6005

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TENEMENT SCHEDULE

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Tenement	Nature of Interest	Project	Equity (%)
E15/0883	Application	Woolgangie South	100
E15/0884	Application	Yilmia1	100
E15/0885	Application	VictoriaRocks	100
E15/0886	Application	BurraRock	100
E15/0887	Application	BanksRock	100
E15/0888	Application	CaveHill West	100
E15/0889	Application	CaveHill	100
E15/0890	Application	Yilmia2	100
E15/0958	Granted	DingoDam	100
E15/1070	Application	Bullabulling	100
E15/1071	Application	Tramway	100
E29/0703	Application	Depot Spring	100
E30/0287	Granted	Ward Springs	90
E30/0310	Granted	GnammaHole	100
E37/0787	Granted	LookoutWell	100
E63/0977	Application	Taylor Rock	100
E63/0978	Application	Sunday Soak	100
E63/1098	Granted	BeetleLake	100
E63/1099	Granted	Bronzite	100
E77/1144	Granted	Woongaring	100
E77/1172	Granted	Woongaring	100
E77/1179	Granted	Woongaring	100
E77/1212	Application	Koolyanobbing	100
E77/1266	Application	Woongaring	100
E77/1288	Application	Boodarding	100
P77/3950	Application	Koolyanobbing	100
P77/3951	Application	Koolyanobbing	100

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OTHER INFORMATION

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The following information was applicable as at 24 September 2008.

Share and Option holding

Category(Size of Holding) 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total	Fully Paid Ordinary Shares Options 27.2.2013 581 833 337 573 3 67 8
	2,391 11

The number of shareholdings held in less than marketable parcels is 1,491.

There are no listed options.

Substantial shareholders:

The names of the substantial shareholders listed in the Company's register as at 24 September 2008:

Shareholder Name	Number of Shares	% of Issued Share Capital
Fortis Clearing Nominees Pty Ltd	3,888,188	6.50
Frederick D L Ribton	3,410,002	5.70
George Sakalidis	3,300,051	5.52
JP Morgan Nominees Australia Ltd	3,002,812	5.02

Twenty largest fully paid shareholders:

Shareholder Name 1. Fortis Clearing Nominees Pty Ltd 2. Frederick D L Ribton 3. George Sakalidis 4. JP Morgan Nominees Australia Ltd 5. Invia Custodian Pty Ltd 6. Wit Team Enterprises Limited 7. Image Resources NL 8. Cairnglen Investments Pty Ltd 9. Roger M Thomson 10. National Nominees Ltd 11. Brispot Nominees Pty Ltd 12. Auto Management Pty Ltd 13. Peter W and Maureen J Taylor 14. HSBC Custody Nominees Aust Ltd 15. Citicorp Nominees Pty Ltd 16. Gilpin Park Pty Ltd 17. ANZ Nominees Ltd 18. Jove Management Pty Ltd 19. Florin Mining Investment Co Ltd 20. Tulla Capital Management Pty Ltd Total	Number of Shares 3,888,188 3,410,002 3,300,051 3,002,812 2,546,669 1,992,300 1,692,650 954,604 865,693 817,400 663,950 655,962 607,000 599,740 527,063 512,321 500,000 482,892 426,000 400,000 27,845,297	% of Issued Share Capital 6.50 5.70 5.52 5.02 4.26 3.33 2.83 1.60 1.45 1.37 1.11 1.10 1.01 1.0 0.88 0.86 0.84 0.81 0.71 0.67
		46.57

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OTHER INFORMATION

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Twenty largest option-holders – All options are unquoted:

Optionholder Name 1. George Sakalidis 2. Roger Thomson 3. Ian Baron 4. Emu Nickel NL (held in trust) 5. TPT Nominees Pty Ltd 6. Earle McIntosh 7. Martin and LM Angel (Angel Family A/c) 8. Bulow Pty Ltd (Super Fund A/c) 9. Alex Romanoff 10. Barrington Dance 11. Jean P Dance Total	Number of Options Expiring 27.2.2013 % Held 2,000,000 20.00 2,000,000 20.00 2,000,000 20.00 2,000,000 20.00 600,000 6.00 500,000 5.00 500,000 5.00 200,000 2.00 100,000 1.00 50,000 0.50 50,000 0.50
	10,000,000 100.00%

There is a total of 59,828,939 fully paid ordinary shares on issue, all of which are listed on Australian Securities Exchange Limited (ASX).

Of the shares and options on issue, the following are subject to escrow provisions until 27 February 2010:

Fully paid ordinary shares	4,459,063
Options to acquire fully paid ordinary shares	10,000,000

Buy-Back Plans

The Company does not have any current on-market buy-back plans.

Voting Rights

The voting rights attaching to ordinary shares are governed by the Constitution. On a show of hands every person present who is a Member or representative of a member shall have one vote and on a poll, every member present in person or by proxy or by attorney or duly authorised representative shall have one vote for each share held. None of the options have any voting rights.

Use of Funds

Since admission to the official lists of ASX, the Company has used its cash and assets in a form readily convertible to cash in a way that was consistent with its business objectives.

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