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NL

ABN: 50 127 291 927

ANNUAL REPORT FINANCIAL YEAR ENDED 30 JUNE 2010

CONTENTS
Corporate Directory	3
Review of Operations	4
Directors’ Report	13
Auditor’s Independence Declaration	20
Corporate Governance Statement	21
Statement of Comprehensive Income	27
Statement of Financial Position	28
Statement of Changes in Equity	29
Statement of Cash Flows	30
Notes to and forming part of the Financial Statements	31
Directors’ Declaration	49
Independent Audit Report	50
Tenement Schedule	52
Other Information	53

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

16 Ord Street, West Perth WA 6005 Telephone (08) 9226 4266 Facsimile (08) 9485 2840

SOLICITORS TO THE COMPANY

COMPANY SECRETARY Rudolf Tieleman

REGISTERED OFFICE

2[nd] Floor 16 Ord 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 27.2.2013

1,830,000 options to acquire fully paid ordinary shares exercisable at $0.27 by 22.12.2014

REVIEW OF OPERATIONS

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PROJECT SUMMARIES

Emu Nickel has maintained its focus on a package of exploration licences situated in the Yilgarn Craton of Western Australia, one of the world’s most fertile nickel provinces. During the year significant and encouraging progress was made, particularly at the Emu Lake nickel project, also at the Kambalda West nickel project and at Windy Knob where Emu is exploring for high-value base metal sulphides adjacent to Silver Swan Group’s Austin base metal-gold discovery.

Under the terms of a joint venture with Image Resources NL ( Image ), Emu has earned an 80% interest in Image’s interest in the Emu Lake, Kambalda West, Koolyanobbing, Dingo Dam, Beetle Lake and Bronzite nickel prospects. In the event that Emu earns all of Image’s interest, Image retains a 1% gross royalty in respect of production to which Emu is entitled.

During the year Emu was granted a package of exploration licences prospective for gold in the Salmon Gums area. A location map of Emu’s projects is shown in Figure 1.

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Figure 1 Location Map

REVIEW OF OPERATIONS

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EMU LAKE (Emu 26⅔ %, earning 33⅓%)

Emu has earned 80% of Image’s 33⅓% interest and has elected to proceed to earn the remainder of this interest. The balance of 66⅔% is held by Xstrata Nickel Australia

This nickel project covers a 10km strike length of komatiite ultramafic rocks with demonstrated potential for high-grade nickel sulphide mineralisation. At the Binti Gossan Zone drilling has identified nickel sulphide over a 500m strike length on or near an ultramafic contact with ten high grade drill intersections at grades of between 3%-10% Ni.

A ten-hole diamond drilling programme at the Binti Gossan Zone intersected nickel sulphides in several holes as shown in Table 1 and Figure 2.

Table 1

Binti Gossan Drill Results

Hole Number	AMG East	AMG North	Azimuth	Dip	From (m)	To (m)	Interval (m)	Ni %	Cu %
ELD023	399843	6647980	267	-60	292.79	293.07	0.28	5.35	0.40
ELD033	397223	6649871	360	-75				NSA	NSA
ELD034	399703	6648219	229	-60				NSA	NSA
ELD035	399597	6648667	229	-60	528.97	529.19	0.22	1.84	0.74
					540.55	542.00	1.45	0.76	0.16
ELD036	399564	6648402	229	-60	320.56	322.14	1.58	3.70	1.33
	Including				320.73	321.71	0.98	5.40	1.44
ELD039	399702	6647302	49	-60				NSA	NSA
ELD040	397179	6649842	360	-75				NSA	NSA
ELD041A	399796.8	6648307.5	226	-62				NSA	NSA
ELD042A	400097.3	6647704.5	229	-55	132.00	132.44	0.44	0.78	0.15
	And				282.28	282.49	0.21	6.23	0.39
	And				345.00	348.00	3.00	0.57	0.04
	And				393.43	395.00	1.57	1.17	0.41
	Including				393.43	393.88	0.45	2.70	0.11
		And			427.00	429.00	2.00	0.57	0.02
ELD044	401998.0	6645780.0	229	-60				NSA	NSA

NSA- no significant assays . Pt and Pd assays pending. ELD043 was not completed.

REVIEW OF OPERATIONS

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Figure 2 Binti Gossan Longitudinal Section (looking west)

Drill hole ELD 035 (0.22m @ 1.84% Ni from 528.92m and 1.45m @ 0.76% Ni from 540.55m) indicates that the Binti Gossan sulphides remain open to the north at depth. ELD 036 (1.58m @ 3.70% Ni and 1.33% Cu from 320.56m) indicates continuity of mineralisation between the upper and central lodes of the sulphide zones outlined to date. Significantly, the intersection in ELD 023 (0.28m @ 5.35 % Ni from 292.79m) is located about 300m south of the Binti Gossan sulphides and represents a potential new mineralised position below which there is no drilling.

In addition, very encouraging intersections in ELD 042A (0.21m @ 6.32% Ni and 0.39% Cu from 282.28m and 1.57m @ 1.17% Ni and 0.41% Cu from 393.43m, including 0.45m @ 2.67% Ni and 0.11% Cu from 393.43m), targeted at a fixed loop EM anomaly, confirmed the presence of new nickel sulphide occurrences about 1km south of Binti Gossan. It is significant these massive sulphide intersections occur at a similar stratigraphic position to mineralisation intersected in ELD 023 some 300m to the north. A cross section showing ELD 042A is shown in Figure 3.

REVIEW OF OPERATIONS

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Figure 3

Cross Section ELD 042A

Fixed loop EM (FLEM) surveys were carried out over an aggregate 6km strike length at Binti Gossan and its southern extension, together with downhole EM (DHEM) surveys in the completed drill holes. Three main target areas were identified by the FLEM surveys, the Binti Gossan Zone itself and conductors some 1km and 4km to the south as shown in Figure 4.

REVIEW OF OPERATIONS

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Figure 4

Fixed loop EM targets (black) on Aeromagnetics (TMI)

DHEM surveys in ELD 039 and ELD 042A detected a large, distinct conductor interpreted from the DHEM and FLEM to have a strike length of up to 500m as shown in Figure 5. It appears that the high grade nickel sulphides intersected in ELD 042A coincide with the margin of a large 500m strong conductor, which remains open to the south.

REVIEW OF OPERATIONS

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Figure 5

DHEM Conductors (red polygons) on Aeromagnetic Background

Further FLEM surveys have been completed to infill gaps in the previous survey coverage and to identify targets for diamond drilling. Results of these surveys are being processed and interpreted. Emu Nickel is most encouraged by this large EM conductor which is associated with nickel sulphides and which is largely untested. Diamond drilling of this highly prospective target remains a priority.

WINDY KNOB (Emu 51%)

During the year Emu earned a 51% interest in a joint venture with Aspire Mining Limited (formerly Windy Knob Resources Limited) at the Windy Knob copper-zinc-gold project situated 55km south of Meekatharra, WA. The joint venture tenements are strategically located around and in part along strike from a volcanogenic massive sulphide (VMS) discovery at Austin by Silver Swan Group, as shown in Figure 6. The joint venture area is also considered to have potential for uranium and possibly iron ore.

REVIEW OF OPERATIONS

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Figure 6 Windy Knob Geology

Silver Swan Group has reported significant massive sulphide drill intersections and an initial resource estimate on mineralisation associated with highly altered footwall felsic volcanic rocks and hanging wall banded iron formations and amphibolites with a sulphide assemblage similar to the Golden Grove base metal mine. It is also reported that the Austin mineralisation is closely associated with a distinct magnetic anomaly probably related to chlorite-magnetite alteration. Importantly, this discovery is situated close to the Emu Nickel-Aspire Mining tenement boundary and appears to be plunging towards this boundary indicating that this VMS system may extend into the joint venture tenement at depth.

One of Emu Nickel’s main targets, Defiance, is situated 2km north east of Austin and comprises a series of aeromagnetic anomalies covering a zone 1km in length where a historical drill hole was reported to intersect anomalous zinc values (drill hole QAC 21; 30m @ 0.25% Zn from 36m). During the year three drill traverses were completed across Defiance. Six holes on the central traverse intersected anomalous copper or zinc values over a significant width of 80m, as shown in Figure 7.

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REVIEW OF OPERATIONS

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Figure 7 Defiance Drill Cross Section

Drill hole WKAC 04 terminated in a banded silica-magnetite rock containing 0.13% Cu, 897ppm Zn and 17ppb gold, coinciding with the top of a magnetic target defined from aeromagnetic data. Drill hole WKAC 76 returned a best intercept of 4m at 0.31% Cu from 80m. On the northern of the three Defiance drill traverses, about 230m north east of the central traverse, drill hole WKA 26 intersected 1m at 2.35g/t gold from 72m and adjacent hole WKA 25 (40m south east) intersected 3m at 56ppb gold from 72m, indicating a gold anomalous zone in this area.

Following these encouraging results ground magnetic and fixed loop EM surveys were completed at Defiance to define targets for deeper drilling. A 5-hole 1,250m RC drilling programme has commenced, to test Defiance and two other target areas at Austin South and E4, as shown in Figure 8. Emu was successful in obtaining a state government grant of $47,000 towards the cost of this drilling.

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REVIEW OF OPERATIONS

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Figure 8 Windy Knob Aeromagnetic Image & Drill Targets

KAMBALDA WEST (Emu earning 30%)

Emu has the right to earn a 100% of Image’s interest in a package of exploration licences west of Kambalda, where Mincor Resources may in turn earn a 70% interest (diluting Emu to 30%). During the year a 103-hole, 2493m RAB drilling programme was completed over several coincident magnetic and VTEM anomalies situated to the west and south west of the Queen Victoria Rocks nickel sulphide occurrences. The drilling confirmed the presence of greenstone sequences intruded by granitic rocks, possibly similar to the setting of the Forrestania nickel district.

Fixed loop ground EM (FLEM) surveys were carried over one strong VTEM anomaly and four less pronounced VTEM anomalies nearby. A strong discrete FLEM conductor was identified at the main VTEM anomaly and FLEM conductors were also detected at the other four VTEM anomalies, providing attractive targets for drilling. A 5-hole RC drilling programme has recently been completed over these geophysical targets, with assessment of results in progress.

SALMON GUMS (Emu 100%)

During the year Emu was granted five exploration licences totalling 1,250 sq km in the Salmon Gums area about 100km south of Norseman. The tenements are situated on the Yilgarn Craton - Fraser Range Mobile Belt collision zone. This extensive structural corridor, termed the Tropicana Belt, is some 500km in length and is considered to be an emerging gold province. Significant discoveries include the +5Moz Tropicana gold deposit.

The Emu tenements abut gold prospects held by Triton Gold on which Triton has reported several extensive gold anomalies and anomalous gold in recent bedrock drilling. Preliminary geochemical sampling and shallow drilling on the Emu tenements has identified several gold anomalous areas worthy of follow up.

OTHER PROSPECTS (Emu 100%)

During the year Emu applied for two exploration licences at Nallan and Murchison Downs south of Meekatharra. The areas are considered to be prospective for calcrete-hosted uranium mineralisation.

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 director of 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 year ended 30 June 2010.

DIRECTORS

The following persons were directors of Emu Nickel NL (“ Emu Nickel ”) during the whole of the year and up to the date of this report:

Peter Thomas George Sakalidis Roger Thomson

PRINCIPAL ACTIVITIES

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

RESULTS FROM OPERATIONS

During the year, the Company recorded an operating loss of $1,453,470 (2009 – Net Loss - $1,070,818).

The foregoing figure includes $100,650 (2009: $Nil) in respect of “share based payments”. This is not a cash outlay. It is brought to book by virtue of a requirement at law. Net of this figure, the operating loss was $1,352,820 (2009: $1,070,818).

DIVIDENDS

No amounts have been paid or declared by way of dividend by the Company since the end of the previous financial year 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 year was 2.4294 cents (2009 – 1.7898 cents).

FINANCIAL POSITION

The Company’s cash position as at 30 June 2010 was $6,017,934, a reduction from the 2009 cash balance which was $7,283,855. The cash position is adequate to fund committed exploration expenditure.

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

There have been no significant changes in the state of affairs of the Company during the financial period.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

No material matters have occurred subsequent to the end of the financial year 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 Australia which are subject to environmental regulations under both Commonwealth and State legislation in relation to those exploration activities.

The Company has no formal procedures in place to ensure regulations are adhered to. During or since the financial year 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 SECRETARY

Peter Thomas (Appointed on incorporation)

Chairman

Mr Thomas, a commercial solicitor specialising in the resource sector, is and has been a director of various listed companies. He is non-executive chairman of 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, Magnetic Resources NL (since its incorporation on 29 August 2007), all four of whom are ASX listed. Within the last three years, he was a nonexecutive director of GoldLink IncomePlus Limited for a period from 4 April 2008 to 18 June 2008.

Mr Thomas has a relevant interest in 406,242 ordinary fully paid shares and 400,000 options to acquire fully paid ordinary 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 Image Resources NL (director since 13 May 1994, managing director since 13 June 2007), managing director of Magnetic Resources NL (since that company was incorporated on 23 August 2006), executive director of Meteoric Resources NL (since that company was incorporated on 13 February 2004) and managing director of this company, Magnetic Resources NL (since its incorporation on 29 August 2007), all four of whom are ASX listed. He is also non-executive chairman of Imperium Resources NL (appointed 23 June 2008).

Mr Sakalidis has a relevant interest in 4,563,497 ordinary fully paid shares and 2,550,000 options to acquire fully paid ordinary shares.

Roger Thomson (Appointed on incorporation) Executive Director

Mr Thomson is a geologist with more than 35 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 an executive director of Image Resources NL (since 19 April 2002), managing director of Meteoric Resources NL (since that company was incorporated on 13 February 2004), executive director of Magnetic Resources NL (since that company was incorporated on 23 August 2006) and executive director of this company, Emu Nickel NL (since its incorporation on 29 August 2007), all four of whom are ASX listed. He was a non-executive director of Mariana Resources Limited for a period from 20 February 2006 to 28 November 2008.

Mr Thomson has a relevant interest in 865,693 ordinary fully paid shares and 2,450,000 options to acquire fully paid ordinary shares.

Rudolf Tieleman – Appointed 22 June 2009

Company Secretary

Mr Tieleman is an accountant with over 20 years experience in public practice. He has extensive knowledge in matters relating to the operation and administration of listed mining companies in Australia.

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DIRECTORS’ REPORT

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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.

MEETINGS OF DIRECTORS

During the year ended 30 June 2010, there were eight meetings of directors, all of which were attended by all the directors.

REMUNERATION REPORT (Audited)

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

Key Management Person	Position
Peter S Thomas	Non-Executive Chairman
George Sakalidis	ManagingDirector
Roger M Thomson	Executive Director
Rudolf Tieleman	CompanySecretary

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 ”) makes decisions with respect to appropriate and competitive remuneration and incentive policies (including basis for paying and the quantum of any bonuses), for key management personnel and others as considered appropriate to be singled out for special attention, which:

motivates them to contribute to the growth and success of the Company within an appropriate control framework; and
aligns the interests of key leadership with the interests of the Company’s shareholders;
are paid within the any limits imposed by the Constitution and make recommendations to the Board with respect to the need for increases to any such amount at the Company’s annual general meeting;
in the case of directors, only permits participation in equity-based remuneration schemes after appropriate disclosure to, due consideration by and with the approval of the Company’s shareholders.

The committee is to ensure that recommendations are made to the Board with respect to the above.

Non-Executive Directors

The committee is to ensure that non-executive directors are not provided with retirement benefits other than statutory superannuation entitlements.
To the extent that the Company adopts a remuneration structure for its non-executive directors other than in the form of cash and superannuation, 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 equity-based plans. Except as otherwise delegated by the Board, the committee will act on behalf of the Board to administer equity-based and employee benefit plans, and as such will discharge any responsibilities under those plans, including making and authorising grants, in accordance with the terms of those plans;
ensure that, where practicable, incentive plans are designed around appropriate and realistic performance targets that measure relative performance and provide remuneration when they are achieved; and
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DIRECTORS’ REPORT

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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.

Constitutional Provisions as to Directors Fees

The Constitution contains the following provisions in respect of directors’ fee.

87. REMUNERATION OF MANAGING DIRECTORS AND EXECUTIVE DIRECTORS

87.1. Subject to the provisions of any contract between the Company and a Managing Director or an Executive Director the remuneration of a Managing Director or an Executive Director is fixed from time to time by the Directors and may be by way of fixed salary or participation in profits of the Company or of any other company in which the Company is interested or by any or all of those modes but may not be by way of commission on or percentage of operating revenue of the Company.
87.2. Unless otherwise determined by the Company in general meeting this remuneration may be in addition to any remuneration which he or she receives as a Director.

88. PAYMENT OF FEES

88.1. The Directors may be paid out of the funds of the Company as remuneration for their ordinary services as Directors such sum as has been or may from time to time be determined by the Company in general meeting. Pending determination in general meeting the amount shall be $250,000 per annum.
88.2. The remuneration must be by a fixed sum and not by a commission on or percentage of operating revenue of the Company or (except in the case of a Managing Director or Executive Director) its profits.
88.3. The sum so fixed must be divided among the Directors in such proportion and manner as they agree from time to time or, in default of agreement, equally.
88.4. The remuneration of each Director for his or her ordinary services is deemed to accrue from day to day and is apportionable accordingly.

90. PAYMENT FOR EXTRA SERVICES

90.1. Any Director who being willing is called upon to perform extra services or to make any special exertions or to undertake any executive or other work for the Company beyond his or her ordinary duties or to go or reside abroad or otherwise away from home for any of the purposes of the Company may, subject to the Law, be remunerated either by a fixed sum or a salary as determined by the Directors and this remuneration shall be in addition to his or her share in the remuneration provided by rule 88 unless otherwise agreed.
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DIRECTORS’ REPORT

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Key Management Personnel Remuneration

Year ended 30 June 2010

Year ended 30 June 2010	Year ended 30 June 2010	Year ended 30 June 2010	Year ended 30 June 2010	Year ended 30 June 2010	Year ended 30 June 2010
Key Management Person	Cash Directors Fees and Contractual Payments	Post Employment Superannuation	Total Cash and Cash Equivalent Benefits	Non-cash Benefits Equity Options (1)	Total
Peter Thomas Non-Executive Chairman	50,000	4,500	54,500	22,000	76,500
George Sakalidis Executive Managing Director	82,625	4,500	87,125	30,250	117,375
Roger Thomson Executive Director	96,440	4,500	100,940	24,750	125,690
Rudolf Tieleman Company Secretary	39,045	-	39,045	11,000	50,045
Total	268,110	13,500	281,610	88,000	369,610

Note (1) Equity remuneration represents share options granted during the year as approved at the general meeting of shareholders held 30 November 2009. These options have been valued in accordance with International Financial Reporting Standards which specifies that an option-pricing model be applied to employees’ or directors’ stock options to estimate their fair value as at their grant date. The independent valuer used a range of open form models (Basic and Binomial).

Year ended 30 June 2009

Year ended 30 June 2009	Year ended 30 June 2009	Year ended 30 June 2009	Year ended 30 June 2009	Year ended 30 June 2009	Year ended 30 June 2009
Key Management Person	Cash Directors Fees and Contractual Payments	Post Employment Superannuation	Total Cash and Cash Equivalent Benefits	Non-cash Benefits Equity Options	Total
Peter Thomas Non-Executive Chairman	50,000	4,500	54,500	-	54,500
George Sakalidis Executive Managing Director	98,735	4,500	103,235	-	103,235
Roger Thomson Executive Director	101,570	4,500	106,070	-	106,070
Rudolf Tieleman Company Secretary (Period from appointment being22.6.2009)	2,687	-	2,687	-	2,687
Robert Lewis Company Secretary (Period to resignation being 22.6.2009)	3,852	-	3,852	-	3,852
Total	256,844	13,500	270,344	-	270,344

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DIRECTORS’ REPORT

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Consultant Agreements

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

The major provisions of the agreements are set out as follows:

Contracted entity	Term of agreement	Rate	Review period	Increase
Leeman Pty Ltd (G Sakalidis)	Annually from 1 January 2010	$155.00 per hour	Annually on 1 July	Discretionary by Board
Regor Consulting Pty Ltd (RM Thomson)	Annually from 1 March 2008	$135.00 per hour	Annually on 1 July

Guaranteed Rate Increases

There are no guaranteed rate increases fixed in the contracts of any of the key management personnel.

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	Options over Fully Paid Ordinary Shares Expiring 22.12.2014
Peter Thomas	406,242	-	400,000
George Sakalidis	4,563,497	2,000,000	550,000
Roger Thomson	865,693	2,000,000	450,000

SHARE OPTIONS GRANTED TO DIRECTORS AND OFFICERS

During the financial year, shareholders at the Annual General Meeting held on 30.11.2009 approved the grant of options to the Directors for no consideration. These options over unissued ordinary shares were granted at 1.5 times the market price current on the date of issue and are exercisable at $0.27 each on or before 22.12.2014.

No options have been issued since the end of the financial year.

END OF AUDITED SECTION.

EMPLOYEES

Aside from directors (all of whom were, for tax purposes treated as employees), the Company had no noncasual employees at 30 June 2010.

CORPORATE STRUCTURE

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

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DIRECTORS’ REPORT

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ACCESS TO INDEPENDENT ADVICE

Each director has the right, so long as he is acting reasonably in the interests of the Company and in the discharge of his duties as a director, to seek independent professional advice and recover the reasonable costs thereof from the Company.

The advice shall only be sought after consultation about the matter with the chairman (where it is reasonable that the chairman be consulted) or, if it is the chairman that wishes to seek the advice or it is unreasonable that he be consulted, another director (if that be reasonable).

The advice is to be made immediately available to all board members other than to a director against whom privilege is claimed.

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. During the year an amount of $13,210 (2009: $18,410) was incurred in insurance premiums for this purpose.

OPTIONS

As at the date of this report, there are the following options over un-issued ordinary shares in the Company:

Unquoted:

(a) 10,000,000 exercisable at $0.50 per option on or before 27 February 2013;
(b) 1,830,000 exercisable at $0.27 per option on or before 22 December 2014.

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.

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

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GEORGE SAKALIDIS

Managing Director Perth 28 September 2010

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AUDITOR’S INDEPENDENCE DECLARATION

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Auditors Independence Declaration

As lead auditor for the audit of Emu Nickel NL for the year ended 30 June 2010, declare under Section 307C of the Corporations Act 2001 , that to the best of my knowledge and belief, there have been:

no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review
no contraventions of any applicable code of professional conduct in relation to the review.

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Somes and Cooke

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Kevin Somes

1304 Hay Street West Perth WA 6005 Date: 29 September 2010

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CORPORATE GOVERNANCE STATEMENT

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Preamble

This statement is provided in compliance with 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.

Reference is to be made to this Statement or the Directors’ Report for the information required by the Recommendations to appear in an Annual Report.

Except to the extent indicated in the “if not, why not” exception report appearing below, the Company has resolved that for so long as it is admitted to the official lists of the ASX, it shall abide by the ASX Recommendations.

Due to the exigencies and vagaries of commercial life and changing circumstances, there will, no doubt, be occasions when, especially because of the size of the Company and the composition of its Board, that it can be expected to depart from the policies and charters which it has adopted. These policies have been adopted on the basis that, in the circumstances of the Company, they reflect what is considered to reflect a reasonable aspiration. It is not expected that these guidelines will be slavishly adhered to. Their object is to focus attention upon the issues they address and provoke thought about and awareness of those issues and the pitfalls that one could otherwise fall into inadvertently. The important thing is to develop a culture conducive only to good and appropriate conduct and practices.

Honesty and integrity must be the overriding and guiding principle in all things- substance must prevail over form and lip service. The Company intends that adherence to these policies be a condition of each contract of employment or service.

The Board encourages all key management personnel, other employees, contractors and other stakeholders to monitor compliance with this Corporate Governance manual and periodically, by liaising with the Board, management and staff; especially in relation to observable departures from the intent of hereof and with and any ideas or suggestions for improvement. Suggestions for improvements or amendments can be made at any time by providing a written note to the chairman.

If not why not exception report

Except to the extent stated below, during the financial year ended 30 June 2010, the Company complied with each of The Recommendations (set out below). Exceptions are stated in italics following an “If not, why not”: heading.

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 .
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CORPORATE GOVERNANCE STATEMENT

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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 has a three person board. Two of the directors (namely, Messrs G Sakalidis and RM Thomson) serve as executives and are not considered to be independent directors. As to the other director (namely, PS Thomas), see 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 inappropriate.

2.2. The chair should be an independent director.

“If not, why not”:

The chair, namely Mr PS Thomas, holds securities in the Company (directors are encouraged to own the same), provides legal services to it and contributes to the development of its corporate strategy and promotion.

The chair considers himself to be an independent director as he is neither part of nor expected to be a part of the day to day management team. The chair regards himself as being free of any relationship that could materially interfere with his independent exercise of judgement and ability to act in an entirely disinterested manner in all things.

The remaining directors consider Mr Thomas to be an independent director for the same reasons. Go to the Company’s website to view a copy of its formal policies for further details regarding independence.

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.

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CORPORATE GOVERNANCE STATEMENT

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

“If not, why not”:

No formal performance evaluation has been conducted because of the size of the Company and the fact that the directors (of which there are only three) work as a close knit team and each is cognisant of what the others are doing and constantly encouraging the others to secure better outcome for shareholders.

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

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.

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.
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CORPORATE GOVERNANCE STATEMENT

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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.

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.
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CORPORATE GOVERNANCE STATEMENT

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7.4. Companies should provide the information indicated in the 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 scarce 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 two 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 the 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 .

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CORPORATE GOVERNANCE STATEMENT

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ADDITIONAL INFORMATION

The following information is required by the Recommendations to appear in this Statement.

The board has agreed on the following guidelines for assessing the materiality of matters:

1. MATERIALITY – QUANTITATIVE

1.1. Statement of Financial Position items:

Statement of Financial Position items are material if they have a value of more than 5% of proforma net assets.

1.2. Profit And Loss items:

Profit and loss items are material if they will have an impact on the current year operating result of 10% or more.

2. MATERIALITY – QUALITATIVE

Items are also material if:

2.1. they are of a character that enlivens the obligation to disclose under either ASX Listing Rule 3.1 or the continuous disclosure obligations arising in terms of the Corporations Act;
2.2. they impact on the reputation of the Company;
2.3. they involve a breach of legislation;
2.4. they are outside the ordinary course of business;
2.5. they could affect the Company’s rights to its assets;
2.6. if accumulated they would trigger the quantitative tests;
2.7. they involve a contingent liability that would have a probable effect of 5% or more on Statement of Financial Position or profit and loss items; or
2.8. they will have an effect on operations which is likely to result in an increase or decrease in net income or dividend distribution of more than 10%.

3. MATERIAL CONTRACTS

Contracts will be considered material if:

3.1. they are outside the ordinary course of business;
3.2. they contain exceptionally onerous provisions in the opinion of the Board;
3.3. they impact on income or distribution in excess of the quantitative tests;
3.4. there is a likelihood that either party will default, and the default may trigger any of the quantitative tests;
3.5. they are essential to the activities of the Company and cannot be replaced, or cannot be replaced without an increase in cost of such a quantum, triggering any of the quantitative tests;
3.6. they contain or trigger change of control provisions;
3.7. they are between or for the benefit of related parties; or
3.8. they otherwise trigger the quantitative tests.
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STATEMENT OF COMPREHENSIVE INCOME	STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2010
	Notes	2010	2009
		($)	($)
Revenue:
Sales and provision of services		-	-
Other income	3	387,053	494,871
Expenses:
Depreciation expense	11	(19,511)	(18,971)
Exploration and tenement expenses written
off	12	(1,183,917)	(1,072,511)
Impairment of available for sale financial
assets		(32,250)	-
Share based payments	22	(100,650)	-
Other expenses	3	(504,195)	(474,207)
(Loss) before income tax expense		(1,453,470)	(1,070,818)
Income tax expense	4	-	-
(Loss) from continuing operations		(1,453,470)	(1,070,818)
Other comprehensive income:
Net (loss) on revaluation of financial assets		(1,000)	-
Income tax relating to other comprehensive
income		-	-
Other comprehensive income for the
year, net of tax		(1,000)	-
Total comprehensive income for the
year		(1,000)	(1,070,818)
Total (Loss) and Comprehensive income
for year attributable to Members of the
Company		(1,454,470)	(1,070,818)
Basic (loss) per share (cents per share)	7	(2.4294)	(1.7898)
Diluted (loss) per share (cents per share)	7	(2.4294)	(1.7898)
The accompanying notes form part of these financial statements.

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STATEMENT OF FINANCIAL POSITION
As at 30 June 2010
	Notes	2010	2009
		($)	($)
Current Assets
Cash and cash equivalents	8	6,017,935	7,283,855
Receivables	9	25,610	143,939
Prepayments	10	11,547	6,225
Total Current Assets		6,055,092	7,434,019
Non-Current Assets
Plant, equipment, motor vehicles	11	53,060	69,196
Mineral interests	12	-	-
Other financial assets	13	40,950	16,000
Total Non-Current Assets		94,010	85,196

TOTAL ASSETS		6,149,102	7,519,215
Current Liabilities
Payables	14	86,551	103,122
Provisions	15	366	88
Total Current Liabilities		86,917	103,210

TOTAL LIABILITIES		86,917	103,210

NET ASSETS		6,062,185	7,416,005
Equity	16
Contributed equity		8,815,929	8,815,929
Reserves		120,650	21,000
Accumulated losses		(2,874,394)	(1,420,924)
TOTAL EQUITY		6,062,185	7,416,005

The accompanying notes form part of these financial statements.

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STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2010

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Balance at 1.7.2008 Operating (loss) for the year Other comprehensive income Balance at 30.6.2009 Balance at 1.7.2009 Operating (loss) for the year Other comprehensive income Share based payments Balance at 30.6.2010	Share Capital (Net of Costs) ($) Employee Benefit Reserve ($) Available for Sale Asset Reserve $ Accumulated Losses ($) Total ($) 8,815,929 20,000 - (350,107) 8,485,823 - - - (1,070,818) (1,070,818) - - 1,000 - 1,000
	8,815,929 20,000 1,000 (1,420,924) 7,416,005
	8,815,929 20,000 1,000 (1,420,924) 7,416,005 - - - (1,453,470) (1,453,470) - - (1,000) - (1,000) - 100,650 - - 100,650
	8,815,929 120,650 - (2,874,394) 6,062,185

The accompanying notes form part of these financial statements.

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STATEMENT OF CASH FLOWS
For the year ended 30 June 2010
	Notes	2010	2009
		($)	($)
CASH FLOWS FROM OPERATING
ACTIVITIES
Payments to suppliers and contractors		(358,022)	(460,513)
Interest received		305,020	494,871
Net cash provided by (used in) operating
activities	17	(53,002)	34,358
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of plant, equipment		(3,375)	(16,216)
Payments for exploration and evaluation		(1,196,234)	(1,008,444)
Payments for new prospects		(19,013)	(64,067)
Purchase of investments		(63,200)	(5,000)
Proceeds from sale of investments		68,904	-
Net cash provided by/(used in) investing
activities		(1,212,918)	(1,093,727)
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		(1,265,920)	(1,059,368)
Cash at the beginning of the financial year		7,283,855	8,343,223
Cash at the end of the financial year	8	6,017,935	7,283,855

The accompanying notes form part of these financial statements.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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This financial report includes the financial statements and notes of the Company.

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

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. 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 and have been consistently applied unless otherwise stated. The financial statements of the company also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

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 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.

Financial Statement presentation

The group has applied the revised AASB 101 Presentation of Financial Statements which became effective on 1 January 2009. The revised standard requires the separate presentation of a statement of comprehensive income and a statement of changes in equity. All non-owner changes in equity must now be presented in the statement of comprehensive income. As a consequence, the group had to change the presentation of its financial statements. Comparative information has been re-presented so that it is also in conformity with the revised standard.

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 current liability for long service leave entitlements.

(c) Exploration and Evaluation Expenditure

All exploration and evaluation expenditure is expensed to Statement of Comprehensive Income as incurred. The effect of this write-off is to increase the loss incurred from continuing operations as disclosed in the Statement of Comprehensive Income and to decrease the carrying values in the

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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Statement of Financial Position. That the carrying value of an asset, as a result of the operation of this policy, is zero does not necessarily reflect the board’s view as to the market value of that asset.

(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.

(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 Statement of Financial Position 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 Statement of Financial Position.

Cash flows are presented in the statement of cash flows 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 income tax expense for the year comprises current income tax expense and deferred tax expense.

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

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses, if any in fact are brought to account.

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

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 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 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.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of setoff exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

(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 Statement of Comprehensive Income. This policy has no application where paragraph (c) (Exploration and Evaluation Expenditure) applies.

(i) Earnings per Share

(i) Basic Earnings per Share – Basic earnings per share is determined by dividing the loss from continuing operations after related income tax expense by the weighted average number of ordinary shares outstanding during the financial period.
(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 as indicated less, where applicable, any accumulated depreciation and impairment losses.

Plant, equipment and motor vehicles are measured on the cost basis.

The carrying amounts of plant, equipment and motor vehicles are reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

Depreciation

The depreciable amount of all plant, equipment and motor vehicles are depreciated on a straight-line basis over the asset’s useful life to the Company commencing from the time the asset is held ready for use.

The depreciation rates used for the class of plant, equipment and motor vehicle depreciable assets range between 20% and 100%.

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

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the Statement of Comprehensive Income. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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(k) Financial Instruments

Recognition and Initial Measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the Company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted).

Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified “at fair value through Statement of Comprehensive Income”, in which case transaction costs are expensed to Statement of Comprehensive Income immediately.

Classification and Subsequent Measurement

Finance 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. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted.

Amortised cost is calculated as:

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

less principal repayments;

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

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 Statement of Comprehensive Income.

The Company does not designate any interests in joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments.

Financial assets at fair value through Statement of Comprehensive Income

Financial assets are classified at “fair value through Statement of Comprehensive Income” when they are either held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in Statement of Comprehensive Income.

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.

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortised cost.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either not suitable to be classified into other categories of financial assets due to their nature, or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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maturity nor fixed or determinable payments. Such assets are subsequently measured at fair value with increases in carrying value being initially credited to an asset revaluation reserve; subsequent decreases are offset first against the balance for the asset carried in that asset revaluation reserve and any balance of write-downs being included as an expense in the Statement of Comprehensive Income.

Financial liabilities

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

Fair Value

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

Impairment

At each reporting date, the Company 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.

Financial Guarantees

Where material, financial guarantees issued, which require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due, are recognised as a financial liability at fair value on initial recognition.

The guarantee is subsequently measured at the higher of the best estimate of the obligation and the amount initially recognised less, when appropriate, cumulative amortisation in accordance with AASB 118: Revenue. Where the entity gives guarantees in exchange for a fee, revenue is recognised under AASB 118.

The fair value of financial guarantee contracts has been assessed using a probability weighted discounted cash flow approach. The probability has been based on:

the likelihood of the guaranteed party defaulting in a year period;

the proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and

the maximum loss exposed if the guaranteed party were to default.

De-recognition

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 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 expired. 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 Statement of Comprehensive Income.

(l) Provisions

Provisions are recognised when the Company has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

(m) Leases

Lease payments for operating leases (where substantially all the risks and benefits remain with the lessor) are charged as an expense in the periods in which they are incurred.

Lease incentives under operating leases, if any, are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

(n) Interest in Joint Ventures

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

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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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.

(o) 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.

(p) Share-based Payments and Value Attribution to Equity Remuneration/Benefits

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) option models. The model has been adjusted for the effects of non-transferability, exercise restrictions and behavioural considerations. Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital.

Where this Annual Report ascribes a value to non-cash (equity) remuneration, that attribution complies with the mandatory requirement of the Corporations Act that such attribution must be made on a basis that accords with the International Financial Reporting Standards. That requirement does not allow the board to ascribe a value arrived at on another basis where the board is of the view that the fair market value of the relevant equity is not thereby reflected. Accordingly, all figures, reports, declarations, valuations, notes and other statements appearing in this Annual Report which pertain to or are directly or indirectly impacted by any such value attribution must be construed in the context that such value attribution does not necessarily reflect the board's view of the fair market value of the relevant equity remuneration.

The board’s declaration that the financial report and notes appearing in the Annual Report are in accordance with the Corporations Act 2001 and:

(a) comply with Accounting Standards and the Corporations Act 2001; and
(b) give a true and fair view of the financial position as at 30 June 2010 and performance for the year ended on that date of the Company

is made on the basis that if one complies with all relevant standards and the law, then it follows that the declaration is correct even though the board does not consider the value ascribed to equity remuneration reflects fair market value.

(q) Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial period.

(r) Segment Reporting

Operating segments are now reported in a manner that is consistent with the internal reporting to the chief operating decision maker (“CODM”), which has been identified by the company as the Managing Director and other members of the Board of directors.

Change in Accounting policy

The group adopted AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB 114 Segment Reporting . the new standard requires a “management approach” under which segment information is presented on the same basis as that used for internal reporting purposes.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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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 - Taxation

Balances disclosed in the financial statements and the notes thereto related to taxation are based on best estimates by directors. These estimates take into account both the financial performance and position of the Company as they pertain to current income tax legislation and the directors understanding thereof. No adjustment has been made for pending or future taxation legislation. The current tax position represents the directors’ best estimate pending an assessment being received from the Australian Taxation Office.

Key Judgment – Environmental Issues

Balances disclosed in the financial statements and notes thereto are not adjusted for any pending or enacted environmental legislation and the directors understanding thereof. At the current stage of the Company’s development and its current environmental impact, the directors believe such treatment is reasonable and appropriate.

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. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

New Accounting Standards for Application in Future Periods

The following standards, amendments to standards and interpretations have been identified as those which may impact the Company in the period of initial application. They are available for early adoption at 30 June 2010, but have not been applied in preparing this financial report:

AASB 2009-5 “Further amendments to Australian Accounting Standards arising from the Annual Improvement Process” affect various AASB’s resulting in minor changes for presentation, disclosure, recognition and measurement purposes. The Amendments, which become mandatory in respect of the Company’s 30 June 2011 financial statements, are not expected to have a significant impact on the financial statements.

Other Australian Accounting Standards issued but not yet effective are not expected to result in significant accounting policy or disclosure changes.

NOTE 2 OPERATING SEGMENTS

Segment Information

Identification of reportable segments

The Company has identified that it operates in only one segment based on the internal reports that are reviewed and used by the board of directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The Company's principal activity is mineral exploration.

Revenue and assets by geographical region

The Company's revenue is received from sources and assets are located wholly within Australia.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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Major customers

Due to the nature of its current operations, the Company does not provide products and services.

Financial information

Reportable items required to be disclosed in this note are consistent with the information disclosed in the Statement of Comprehensive Income and Statement of Financial Position and are not duplicated here.

NOTE 3 REVENUE AND EXPENDITURE (Loss) before income tax expense includes: REVENUE Other Income Interest received Profit on sale of investments Expense recoveries EXPENDITURE Other Expenses Occupancy costs Filing and ASX Fees Corporate and management Other expenses from continuing operations	2010 ($) 305,020 63,904 18,129 387,053 (72,500) (26,005) (204,110) (201,580) (504,195)	2009 ($) 494,871 - -
		494,871
		(48,000) (17,751) (227,812) (180,644)
		(474,207)

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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NOTE 4 INCOME TAX The components of tax expense comprise: Current tax Deferred tax The amount of income tax provided for in the financial accounts differs from the amount prima facie payable on the operating loss. The difference is reconciled as follows: Loss from continuing operations before income tax Prima facie tax benefit attributable to loss from continuing operations before income tax at 30% Tax effect of Non-allowable items • Share based payments • Other Deferred tax benefit on tax losses not brought to account Income tax attributable to operating loss Unrecognised temporary differences Net deferred tax assets (calculated at 30%) have not been recognised in respect of the following items: Prepayments Provisions Available for sale financial assets loss Unrecognised deferred tax assets relating to the above temporary differences	2010 ($) - - - 1,453,470 436,041 (30,195) (9,682) (396,164) - (3,464) 14,622 9,675 20,833	2009 ($) - -
		-
		1,070,818
		321,245 - (278) (320,967)
		-
		(1,867) 11,803 -
		9,936

Unbooked deferred tax benefits

The Company has accumulated tax losses of $2,645,856.

The potential deferred tax benefit of these losses $793,757 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.
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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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NOTE 5 KEY MANAGEMENT PERSONNEL COMPENSATION

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

Information on related entity transactions is disclosed in Note 23.

Options held by Key Management Personnel

The number of options over fully paid ordinary shares in the Company held during the financial period by key management personnel and/or their statutorily related entities are set out below:

30 June 2010:

Name	Balance at the start of the year	Granted during the year	Exercised during the year	Other changes during the year	Balance at the end of the year	Vested exercisable at the end of theyear
Peter S Thomas	-	400,000	-	-	400,000	400,000
George Sakalidis	2,000,000	550,000	-	-	2,550,000	2,550,000
Roger M Thomson	2,000,000	450,000	-	-	2,450,000	2,450,000
Rudolf Tieleman	600,000	200,000	-	-	800,000	800,000
30 June 2009:
Name	Balance at the start of the year	Granted during the year	Exercised during the year	Other changes during the year	Balance at the end of the year	Vested exercisable at the end of theyear
Peter S Thomas	-	-	-	-	-	-
George Sakalidis	2,000,000	-	-	-	2,000,000	2,000,000
Roger M Thomson	2,000,000	-	-	-	2,000,000	2,000,000
Rudolf Tieleman	600,000	-	-	-	600,000	600,000

These were the only options granted, vested or sold in which any of the key management personnel had an interest (directly or indirectly) during each of those two years.

Shareholdings held by Key Management Personnel

The number of fully paid ordinary shares in the company held during the financial year by key management personnel and/or their statutorily related entities are set out below:

30 June 2009:

30 June 2009:
Name	Balance at the start of theyear	Share movements	Balance at the end of theyear
Peter S Thomas	406,242	-	406,242
George Sakalidis	4,054,056	509,441	4,563,497
Roger M Thomson	865,693	-	865,693
Rudolf Tieleman	197,042	-	197,042

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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Shareholdings held by Key Management Personnel (Continued..)

30 June 2009:
Name Balance at the	Share movements		Balance	at the	end
start of theyear			of theyear
Peter S Thomas 406,242	-		406,242
George Sakalidis 3,264,051	790,005		4,054,056
Roger M Thomson 865,693	-		865,693
Rudolf Tieleman 197,042	-		197,042
NOTE 6 AUDITORS REMUNERATION	2010				2009
	($)				($)
Amounts received or due and receivable by the auditors of the
Company for:
Auditing and reviewing the financial reports	28,300			20,000
	28,300			20,000
NOTE 7 EARNINGS PER SHARE	2010			2009
	($)				($)
The following reflects the income and share data used in the
calculation of basic and diluted earnings per share
Net (loss)	(1,453,470)			(1,070,818)
Adjustments:
Nil	-				-
Earnings used in calculating basic and diluted earnings per
share	(1,453,470)			(1,070,818)
Weighted average number of ordinary shares used in
calculating basic earnings per share	59,828,940			59,828,940
Adjusted weighted average number of ordinary shares used in
calculating diluted earnings per share	59,828,940			59,828,940
The Company had 11,830,000 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
year 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 8 CASH ASSETS	2010			2009
	($)				($)
Cash at bank	156,597			124,933
Deposits at call	5,861,338			7,158,922
	6,017,935			7,283,855

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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NOTE 9 CURRENT RECEIVABLES Trade receivables GST refundable NOTE 10 OTHER CURRENT ASSETS Prepayments NOTE 11 PLANT, EQUIPMENT, MOTOR VEHICLES Plant, equipment, motor vehicles Less: Accumulated depreciation Reconciliations of the carrying amounts of plant, equipment and motor vehicles at the beginning and end of the current financial year. Plant, equipment, motor vehicles Carrying amount at beginning of period Additions Disposals Depreciation expense Total plant, equipment, motor vehicles at end of period NOTE 12 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 13 OTHER FINANCIAL ASSETS Non-Current Available-for-sale financials assets Listed investments at fair value Shares in listed corporations NOTE 14 CURRENT PAYABLES Trade creditors and accruals			2010 ($) 3,030 22,580 25,610 2010 ($) 11,547 2010 ($) 96,754 (43,694) 53,060 69,196 3,375 - (19,511) 53,060 2010 ($) - 1,183,917 - (1,183,917) - 2010 ($) 40,950 40,950 40,950 2010 ($) 86,551		2009 ($) 24,028 119,911
					143,939
					2009 ($) 6,225
					2009 ($) 93,379 (24,183)
					69,196
					71,951 16,216 - (18,971)
					69,196
					2009 ($) - 1,072,511 - (1,072,511) -
					2009 ($) 16,000
					16,000

					16,000
					2009 ($) 103,122

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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NOTE 15 CURRENT PROVISIONS Employee leave accruals NOTE 16 EQUITY Contributed Equity – Ordinary Shares Opening balance Closing balance: Total Contributed Equity Reserves Share based payments Available-for-sale assets reserve 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 Options exercisable at $0.27 on or before 22.12.2014 – fully vested Total Options
	2010

	No.		$
	59,828,940
	59,828,940

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.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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NOTE 17 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 Profit on sale of investments Provision for diminution in value of investments Share based payments Changes in operating assets and liabilities: (Increase) / Decrease in receivables (Increase) / Decrease in prepayments Increase / (Decrease) in payables Increase / (Decrease) in provisions Cash flow from operations	2010 ($) (1,453,470) 19,511 1,183,917 (63,903) 32,250 100,650 118,329 (5,322) 14,758 278 (53,002)	2009 ($) (1,070,818) 18,971 1,072,511 - - (7,842) 35,348 (13,812) -
		34,358

NOTE 18 TENEMENT EXPENDITURES

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 $986,340. Of this amount, $376,340 is expected to be met by JV participants as a result of various joint ventures entered into.

NOTE 19 JOINT VENTURES

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

Name of Project % Interest

Image Resources JV

Windy Knob JV

Earned 80% in Image’s interests (this includes Images interest in the Emu Lake JV 33 1/3%, Kambalda West JV 30% and Ward Springs JV 90%), with a right to increase earning to 100% of Image’s total interest. Image will retain a 1% royalty after earn-in.

Earned 51%, 49% contributing by Aspire Mining Ltd

NOTE 20 TENEMENT ACCESS

The interests of holders of freehold land (if applicable) 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 future act right to negotiate procedures under the Native Title Act albeit aboriginal heritage matters still be of concern. See also Note 24.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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NOTE 21 EVENTS SUBSEQUENT TO REPORTING DATE

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

NOTE 22 SHARE BASED PAYMENTS

On 22 December 2009, 1,830,000 share options were granted to key management personnel, employees and contractors to take up ordinary shares at an exercise price of $0.27 each. The options are exercisable on or before 22 December 2014, are not listed, hold no voting or dividend rights, are transferable and vested immediately upon issue. Included under share based payments expense in the Statement of Comprehensive Income is $100,650 which relates to this equity-settled share-based payment transaction (2009: $Nil).

NOTE 23 RELATED PARTY AND RELATED ENTITY TRANSACTIONS

Transactions with directors, director-related parties and related entities other than those disclosed elsewhere are as follows:

Smyth & Thomas, a legal firm of which Peter S Thomas is the principal, provided legal and other services to the Company during the financial period on terms and conditions which were more favourable to the Company than he extends to clients generally. The firm was paid $3,721 (Net of GST) for legal services.

Total amounts owing to directors or their associated entities (excluding GST) at 30 June 2010 amounted to $35,513.

Emu Nickel has entered into a Joint Venture Agreement with Image whereby Image has agreed to farm out various interests in its tenements. Emu Nickel has earned an 80% interest in those tenements by the expenditure of at least $2 million and elected 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 has entered into a Serviced Offices Agreement with Image whereby Image has agreed to provide the Company with serviced offices at 16 Ord Street, West Perth for a fee of $6,041 per month commencing on 1 July 2009, terminable at will by either party on one month’s notice.

NOTE 24 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 represents, 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.

NOTE 25 FINANCIAL INSTRUMENTS DISCLOSURE

(a) Financial Risk Management Policies

The Company’s financial instruments consist of deposits with banks, receivables, available-for-sale financial assets and payables.

Risk management policies are approved and reviewed by the board. The use of hedging derivative instruments is not contemplated at this stage of the Company’s development.

Specific Financial Risk Exposure and Management

The main risks the Company is exposed to through its financial instruments, are interest rate and liquidity risks.

Interest Rate Risk

Exposure to interest rate risk arises on financial assets and financial liabilities recognised at reporting date whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments.

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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Liquidity Risk

The Company manages liquidity risk by monitoring forecast cash flows, cash reserves, liquid investments, receivables and payables.

Capital Risk

The Company’s objectives when managing capital are to safeguard their ability to continue as a going concern so that they may continue to provide returns for shareholders and benefits for other stakeholders.

Due to the nature of the Company’s activities being mineral exploration, the Company does not have ready access to credit facilities, with the primary source of funding being equity raisings. Therefore, the focus of the Company’s capital risk management is the current working capital position against the requirements of the Company to meet exploration programmes and corporate overheads. The Company’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raising as required.

The working capital position of the Company at 30 June 2010 and 30 June 2009 was as follows:

Cash and cash equivalents Trade and other receivables Trade and other payables Working capital position	2010 ($) 6,017,935 25,610 (86,917) 5,956,628	2009 ($) 7,283,855 143,939 (103,210)
		7,324,584

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 Statement of Financial Position and notes to the financial statements.

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

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

Receivables Trade receivables GST and tax refundable	2010 $ 3,030 22,580 25,610	2009 $ 24,028 119,911
		143,939

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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(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.

2010 Weighted Average Effective Interest Rate %	Floating Interest Rate ($) Non Interest Bearing ($)	Total ($)
Financial Assets Cash and cash equivalents 6,016,586 1,349 Other receivables - 25,610 Available-for-sale financial assets - 40,950 Total Financial Assets 5.44% 6,016,586 67,909 Financial Liabilities Payables - 86,917 Trade and other payables are expected to be paid as follows: Less than 6 months	6,016,586 1,349 - 25,610 - 40,950	6,017,935 25,610 40,950
	6,016,586 67,909 - 86,917	6,084,495 86,917
		2010 ($) 86,917
		86,917

2009 Weighted Average Effective Interest Rate %	Floating Interest Rate ($) Non Interest Bearing ($)	Total ($)
Financial Assets Cash and cash equivalents 7,282,464 1,391 Other receivables - 143,939 Available-for-sale financial assets - 16,000 Total Financial Assets 4.25% 7,282,464 161,330 Financial Liabilities Payables - 103,210 Trade and other payables are expected to be paid as follows: Less than 6 months	7,282,464 1,391 - 143,939 - 16,000	7,283,855 143,939 16,000
	7,282,464 161,330 - 103,210	7,443,794 103,210
		2009 ($) 103,210
		103,210

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NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2010

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(c) Net Fair Values

Fair value estimation

The fair values of financial assets and liabilities are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arms’ length transaction.

Fair values derived may be based on information that is estimated or subject to judgment, where changes in assumptions may have a material impact on the amounts estimated. Where possible, valuation information used to calculate fair value is extracted from the market, with more reliable information available from markets that are actively traded. In this regard, fair values for listed securities are obtained from quoted bid prices

(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’s 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:
		2010
		($)
Change	in loss – increase/(decrease):
-	Increase in interest rate by 2%	(120,332)
-	Decrease in interest rate by 2%	120,332
Change	in equity – increase/(decrease):
-	Increase in interest rate by 2%	120,332
-	Decrease in interest rate by 2%	(120,332)

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DIRECTORS’ DECLARATION

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The directors of the Company declare that:

the accompanying financial report and notes are in accordance with the Corporations Act 2001 and:
(a) comply with Accounting Standards and the Corporations Act 2001; and
(b) give a true and fair view of the financial position as at 30 June 2010 and performance for the year ended on that date of the Company;
(c) the audited remuneration disclosures set out in the Remuneration Report section of the Directors’ Report for the year ended 30 June 2010 comply with section 300A of the Corporations Act 2001.
the Chief Financial Officer has declared pursuant to section 295A(2) of the Corporations Act 2001 that:
(a) the financial records of the company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001;
(b) the financial statements and the notes for the financial year comply with Accounting Standards; and
(c) the financial statements and notes for the financial year give a true and fair view;
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.
the directors have included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards.

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

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George Sakalidis MANAGING DIRECTOR

PERTH

Dated this 28th day of September 2010

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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 statement of financial position as at 30 June 2010, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration.

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 statements 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.

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

50 -

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:

a. 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 2010 and of its performance for the year ended on that date; and
b) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001.
b. the financial report also complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 15 to 18 of the directors’ report for the year ended 30 June 2010. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Emu Nickel NL for the year ended 30 June 2010, complies with section 300A of the Corporations Act 2001.

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Somes and Cooke

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Kevin Somes

Somes and Cooke 1304 Hay Street West Perth WA 6005

29 September 2010

51 -

TENEMENT SCHEDULE

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Tenement	Nature of Interest	Project	Equity (%)
E15/0883	Granted	Woolgangie South(Mincor JV)	Earning30%
E15/0884	Granted	Yilmia 1(Mincor JV)	Earning30%
E15/0885	Granted	Queen Victoria Rocks(Mincor JV)	Earning30%
E15/0887	Granted	Banks Rock(Mincor JV)	Earning30%
E15/0888	Granted	Cave Hill West(Mincor JV)	Earning30%
E15/0890	Granted	Yilmia 2(Mincor JV)	Earning30%
E15/0958	Granted	Dingo Dam(IMA JV)	Earning100%
E20/0722	Application	Nallan	100%
E27/0084	Granted	Emu Lake(Xstrata JV)	Earning33.33%
E27/0353	Granted	Emu Lake(Xstrata JV)	Earning33.33%
E27/0354	Granted	Emu Lake(Xstrata JV)	Earning33.33%
E27/0434	Application	Emu Lake	Earning33.33%
E28/1899	Granted	Madoonia Downs	100%
E29/0703	Granted	Depot Spring	100%
E30/0376	Granted	Ward Springs(Mt Marmion) (Ward JV)	Earning90%
E30/0395	Granted	Barlee South	100%
E30/0418	Application	Barlee South East	100%
E51/0900	Granted	WindyKnob(Aspire JV)	Earned 51%
E51/1300	Application	WindyKnob(Aspire JV) (Polelle)	Earned 51%
E51/1307	Application	Austin	Earned 51%
E51/1309	Application	Austin(PeggyBore)	Earned 51%
E51/1314	Application	Austin(Peregrine Well)	Earned 51%
E51/1315	Application	Austin	Earned 51%
E51/1338	Application	Austin(Cullculli)	Earned 51%
E51/1339	Application	Murchison Downs	100%
E63/0977	Granted	Taylor Rock(Mincor JV)	Earning30%
E63/0978	Granted	SundaySoak(Mincor JV)	Earning30%
E63/1098	Granted	Beetle Lake(IMA JV)	Earning100%
E63/1099	Granted	Bronzite(IMA JV)	Earning100%
E63/1310	Granted	Salmon Gums	100%
E63/1311	Granted	Geordie Rock	100%
E63/1312	Granted	Grass Patch	100%
E63/1399	Application	Recruit Hill	100%
E74/0431	Granted	Lake Pyramid	100%
E77/1212	Granted	Koolyanobbing (IMA JV)	Earning100%
E77/1288	Application	Boodarding (IMA JV)	Earning100%
E77/1665	Granted	Woongaring	100%
M27/0457	Application	Emu Lake	Earning33.33%
M27/0458	Application	Emu Lake	Earning33.33%
M27/0459	Application	Emu Lake	Earning33.33%
M27/0460	Application	Emu Lake	Earning33.33%
P27/1750	Granted	Emu Lake(Xstrata JV)	Earning33.33%
P27/1751	Granted	Emu Lake(Xstrata JV)	Earning33.33%
P27/1752	Granted	Emu Lake(Xstrata JV)	Earning33.33%
P51/2596	Granted	WindyKnob(Aspire JV) (Dan Well)	Earned 51%
P51/2597	Granted	WindyKnob(Aspire JV) (Cogla Downs)	Earned 51%
P51/2603	Granted	WindyKnob(Aspire JV)	Earned 51%
P51/2604	Granted	WindyKnob(Aspire JV)	Earned 51%
P51/2615	Application	Austin	Earned 51%
P51/2616	Application	Austin	Earned 51%

52 -

OTHER INFORMATION

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The following information was applicable as at 16 September 2010.

Share and Option holding

Category(Size of Holding)	Fully Paid Ordinary Shares	Options 27.2.2013	Options 22.12.2014
1 to 1,000	561
1,001 to 5,000	762		3
5,001 to 10,000	306		2
10,001 to 100,000	534	3	5
100,001 and over	80	8	4
Total	2,243	11	14

The number of shareholdings held in less than marketable parcels is 1,085.

There are no listed options.

Substantial shareholders:

The names of the substantial shareholders listed in the Company's register as at 16 September 2010:

Shareholder Name	Number of Shares	% of Issued Share Capital
George Sakalidis	4,563,497	7.63
Denis Ribton	3,910,002	6.54
JP Morgan Nominees Australia Ltd	2,990,000	5.00
Total	11,463,499	19.17

Twenty largest fully paid shareholders:

	Shareholder Name	Number of Shares	% of Issued Share Capital
1.	Denis Ribton	3,410,002	5.70
2.	George Sakalidis	3,400,052	5.68
3.	JP Morgan Nominees Australia Ltd	2,990,000	5.00
4.	CiticorpNominees PtyLtd	2,091,875	3.50
5.	ABN Amro ClearingSydney	2,036,900	3.40
6.	WIT Team Enterprises Ltd	1,992,300	3.33
7.	Image Resources NL	1,732,650	2.90
8.	Leeman PtyLtd	1,061,351	1.77
9.	Roger M Thomson	865,693	1.45
10.	BC Mullan and AL Reid	850,000	1.42
11.	National Nominees PtyLtd	752,050	1.26
12.	Auto Management PtyLtd	655,962	1.10
13.	Peter and M Taylor	525,000	0.88
14.	Gilpin Park PtyLtd	512,321	0.86
15.	DevompPtyLtd	502,700	0.84
16.	Denis and J Ribton	500,000	0.84
17.	Donald N Coultas	500,000	0.84
18.	Vernon and J Wheatley	416,850	0.70
19.	Invia Custodians PtyLtd(Panorama A/c>	416,000	0.70
20.	Tulla Capital Management PtyLtd	400,000	0.67
	Total	25,611,706	42.84

53 -

OTHER INFORMATION

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All Option-holders - All options are unquoted:

ption-holders - All options are unquoted:
Option-holder Name	Number of Options Expiring 27.2.2013	% Held	Number of Options Expiring 22.12.2014	% Held
George Sakalidis	2,000,000	20.00	550,000	30.05
Roger Thomson	2,000,000	20.00	450,000	24.59
Ian Baron	2,000,000	20.00
Emu Nickel NL	2,000,000	20.00
TPT Nominees PtyLtd	600,000	6.00
Earle McIntosh	500,000	5.00
Martin and LM Angel	500,000	5.00
Bulow PtyLtd	200,000	2.00
Alex Romanoff	100,000	1.00
Barrington Dance	50,000	0.50
Jean P Dance	50,000	0.50
Peter Thomas			400,000	21.86
Rudolf Tieleman			200,000	10.93
Holders of Employee Share Options			230,000	12.57
Total	10,000,000	100.00%	1,830,000	100.00

There are a total of 59,828,940 fully paid ordinary shares and 11,830,000 options on issue. Only the fully paid ordinary shares are listed on Australian Securities Exchange Limited.

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.

54 -

AI assistant

EMU NL — Annual Report 2010

64851_rns_2010-09-29_92aaa8df-b05f-4cfe-a16d-e7ef85888905.pdf

NL

ANNUAL REPORT FINANCIAL YEAR ENDED 30 JUNE 2010

CORPORATE DIRECTORY

DIRECTORS

FOR INFORMATION ON THE COMPANY CONTACT

SOLICITORS TO THE COMPANY

REGISTERED OFFICE

WEBSITE

FOR SHAREHOLDER INFORMATION CONTACT

SHARE REGISTRY

BANKERS

AUDITORS

ISSUED CAPITAL

REVIEW OF OPERATIONS

PROJECT SUMMARIES

REVIEW OF OPERATIONS

Table 1

Binti Gossan Drill Results

REVIEW OF OPERATIONS

REVIEW OF OPERATIONS

Cross Section ELD 042A

REVIEW OF OPERATIONS

Fixed loop EM targets (black) on Aeromagnetics (TMI)

REVIEW OF OPERATIONS

WINDY KNOB (Emu 51%)

REVIEW OF OPERATIONS

REVIEW OF OPERATIONS

REVIEW OF OPERATIONS

KAMBALDA WEST (Emu earning 30%)

SALMON GUMS (Emu 100%)

OTHER PROSPECTS (Emu 100%)

DIRECTORS’ REPORT

DIRECTORS

PRINCIPAL ACTIVITIES

RESULTS FROM OPERATIONS

DIVIDENDS

REVIEW OF OPERATIONS

EARNINGS PER SHARE

FINANCIAL POSITION

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

ENVIRONMENTAL ISSUES

DIRECTORS’ REPORT

INFORMATION ON DIRECTORS AND COMPANY SECRETARY

Peter Thomas (Appointed on incorporation)

Chairman

George Sakalidis (Appointed on incorporation)

Managing Director

Roger Thomson (Appointed on incorporation) Executive Director

Rudolf Tieleman – Appointed 22 June 2009

Company Secretary

DIRECTORS’ REPORT

AUDIT COMMITTEE

MEETINGS OF DIRECTORS

REMUNERATION REPORT (Audited)

Key Management Personnel Remuneration and Incentive Policies

Non-Executive Directors

Incentive Plans and Benefits Programs

DIRECTORS’ REPORT

Retirement and Superannuation Payments

Constitutional Provisions as to Directors Fees

87. REMUNERATION OF MANAGING DIRECTORS AND EXECUTIVE DIRECTORS

DIRECTORS’ REPORT

Key Management Personnel Remuneration

Year ended 30 June 2010

Year ended 30 June 2009

DIRECTORS’ REPORT

Consultant Agreements

Guaranteed Rate Increases

DIRECTORS’ INTERESTS

SHARE OPTIONS GRANTED TO DIRECTORS AND OFFICERS

END OF AUDITED SECTION.

EMPLOYEES

CORPORATE STRUCTURE

DIRECTORS’ REPORT

ACCESS TO INDEPENDENT ADVICE

EMU NL Annual Report 2010