EMU NL — Annual Report 2011

Sep 29, 2011

==> picture [235 x 97] intentionally omitted <==

NL

ABN: 50 127 291 927

ANNUAL REPORT FINANCIAL YEAR ENDED 30 JUNE 2011

CONTENTS
Corporate Directory	3
Review of Operations	4
Directors’ Report	13
Auditor’s Independence Declaration	19
Corporate Governance Statement	20
Statement of Comprehensive Income	25
Statement of Financial Position	26
Statement of Changes in Equity	27
Statement of Cash Flows	28
Notes to and forming part of the Financial Statements	29
Directors’ Declaration	44
Independent Audit Report	45
Tenement Schedule	47
Other Information	48

• 2 -

CORPORATE DIRECTORY

DIRECTORS

PETER THOMAS Non-Executive Chairman

GEORGE SAKALIDIS Managing Director ROGER THOMSON Executive Director

COMPANY SECRETARY

==> picture [123 x 51] intentionally omitted <==

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

BANKERS

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

Rudolf Tieleman

AUDITORS

REGISTERED OFFICE

2[nd] Floor 16 Ord Street, West Perth WA 6005 Telephone: (08) 9226 4266 Facsimile: (08) 9485 2840

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

STOCK EXCHANGE

Australian Securities Exchange

WEBSITE

www.emunickel.com.au

COMPANY CODE

EMU (Fully paid shares)

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

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

180,000 options to acquire fully paid ordinary shares exercisable at $0.1961 by 21.12.2015

• 3 -

REVIEW OF OPERATIONS

==> picture [123 x 51] intentionally omitted <==

PROJECT SUMMARIES

Emu Nickel has continued to maintain its focus on a package of exploration licences in the Yilgarn Craton of Western Australia, one of the world’s most fertile nickel provinces. During the year further nickel sulphide intersections were obtained at the prospective Emu Lake nickel projects, significantly increasing the strike length of the mineralised contact zone.

==> picture [385 x 501] intentionally omitted <==

Figure 1 Location Map

• 4 -

REVIEW OF OPERATIONS

==> picture [123 x 51] intentionally omitted <==

EMU LAKE (Emu 30.3%)

During the year additional fixed loop electromagnetic (FLEM) surveys were completed to infill gaps in previous surveys. Whilst no new conductors were identified by the latest phase, processing of the FLEM survey data has confirmed a 2km-long zone of elevated conductance, as shown in Figure 2 (with the recent survey area shown by the red dots). The northern 1km of this zone coincides with the known nickel sulphide mineralisation at Binti Gossan. The southern 1km of elevated conductance at Binti South is largely unexplored.

==> picture [227 x 274] intentionally omitted <==

Figure 2 Binti Gossan and Binti South Fixed Loop EM Conductance

Three diamond drill holes (totalling 1,359 m) were completed to test the conductors identified by the FLEM and DHEM surveys at Binti South situated some 500m to 1000m south of the Binti Gossan zone. The drilling results are summarised in Table 1.

Table 1

Emu Lake Diamond Drilling Results

Drillhole Number	Collar Coordinates	Collar Coordinates	Azimuth	Dip	From m	To m	Interval m	Ni %	Cu %
	East	North
ELD 045	400120	6647590	232	-63	362.8	363.8	1.00	1.41	0.13
ELD 046	400001	6647723	232	-55				nsa
ELD 047	399540	6647825	056	-56	172.25	172.95	0.7	1.82	0.14
					447.35	447.60	0.25	5.68	0.67

nsa; no significant assay. True width not yet confirmed. PGE assays pending.

Drill hole ELD047 encountered high grade nickel sulphides grading 5.68%Ni over a 0.25 metre intersection width, located close to the interpreted basal contact of the main target ultramafic unit as shown in the cross section in Figure 3. This intersection occurs 170 metres down dip from a similar high grade intersection in drill hole ELD023 (drilled 2009) with 0.28 metres @ 5.35%Ni, indicating potential for extensions to this contact mineralisation south of Binti Gossan.

Drill hole ELD045 intersected stringer mineralisation (1 metre @ 1.41%Ni) at the same interpreted contact position some 500 metres to the south, however the intervening drill holeELD046, about 200 metres further south, did not intersect significant mineralisation.

• 5 -

REVIEW OF OPERATIONS

==> picture [123 x 51] intentionally omitted <==

==> picture [235 x 290] intentionally omitted <==

Figure 3 Drill Section 48050N

Diamond drilling at Emu lake has now extended the strike length of massive or stringer nickel sulphides at Binti Gossan and Binti South to some 1,200m as shown on the longitudinal projection in Figure 4, and increased the number of drill intersections in excess of 3%Ni to 15, some with significant platinum and palladium credits, as summarised in Table 2.

==> picture [424 x 218] intentionally omitted <==

Figure 4 Binti Gossan and Binti South Longitudinal Projection

• 6 -

REVIEW OF OPERATIONS

==> picture [123 x 51] intentionally omitted <==

			Table 2 Binti Gossan and Binti South Drill Intersections >3%Ni	Table 2 Binti Gossan and Binti South Drill Intersections >3%Ni	Table 2 Binti Gossan and Binti South Drill Intersections >3%Ni
Hole No	From (m)	To (m)	Interval (m)	Ni %	Cu %	Pt ppb	Pd ppb	Pt+Pd g/t
ELD 5	256.40	256.70	0.30	7.55	0.35	1015	1726	2.74
	277.06	277.23	0.17	7.08	6.46	1092	2315	3.41
ELD 11	364.05	364.10	0.05	3.55	0.01	205	745	0.95
ELD 14	194.52	194.65	0.13	5.56	0.18	940	3230	4.17
ELD 15	336.00	338.00	2.00	6.20	1.78	749	1424	2.17
ELD 16	377.07	377.35	0.28	6.66	0.24	423	226	0.65
ELD 16	302.57	302.68	0.11	3.95	0.18	632	723	1.35
ELD 21	366.50	366.65	0.15	7.54	0.11	928	1310	2.24
ELD 23	292.79	293.07	0.28	5.35	0.40	na	na	na
ELD 25	346.60	346.70	0.10	10.90	0.07	na	na	4.17
ELD 29	551.05	551.55	0.50	3.76	0.23	na	na	na
ELD 36	320.56	322.14	1.58	3.70	1.33	na	na	na
ELD 36	476.83	477.00	0.17	3.84	0.91	31	3096	3.13
ELD 42A	282.28	282.49	0.21	6.32	0.39	na	na	na
ELD 47	447.35	447.60	0.25	5.68	0.67	na	na	na

na: assays not yet available

Joint venturer Xstrata Nickel Australasia Operations (XNAO) indicated that it did not wish to participate in funding the 2010 drilling programme. As a consequence XNAO’s interest has been diluted pursuant to the joint venture agreement. It was agreed in principle that XNAO would delegate management of the Emu Lake project to Emu Nickel while Emu sole funded the project or while Emu held a majority interest in the project. Following XNAO’s election not to fund its share of the 2010 diamond drilling programme its interest has diluted to 62.1%, leaving Emu and Image Resources NL with the balance of 37.9%. Emu has earned 80% of Image’s interest and elected to proceed to 100% by sole funding exploration on a package of tenements, including Emu Lake. The current interests in Emu Lake are thus: XNAO 62.1%, Emu 30.3% and Image 7.6%.

Emu is currently reviewing the joint venture database with a view to carrying out further drilling on the highly prospective 1.2km of mineralised contacts identified to date.

WINDY KNOB (Emu 51%)

The Windy Knob joint venture tenements are situated about 55km south of Meekatharra in the Murchison region of WA, adjacent to the Austin volcanogenic massive sulphide (VMS) discovery made by the Silver Swan Group. The Austin VMS Cu-Zn-Ag-Au mineralisation is close to a joint venture tenement boundary and appears to be plunging towards this boundary at depth. Emu is continuing to model available data on the Austin resource (1.48Mt @ 1.02% Cu, 1.39% Zn, 3.51g/t Ag, 0.24g/t Au) with a view to deep drilling to test the plunge extension of this mineralisation on the joint venture tenements.

During the year Emu completed a four-hole, 1211m RC drilling programme at the Austin South, Defiance and 4E prospects - see Figure 5. The targets at Austin South and 4E comprise discrete magnetic anomalies similar to that associated with the Austin VMS deposit. The target at Defiance comprises a 1km-long magnetic anomaly with anomalous copper and zinc values associated with a silica-magnetite unit identified in previous shallow drilling. Significant results are shown in Table 3.

• 7 -

REVIEW OF OPERATIONS

==> picture [123 x 51] intentionally omitted <==

==> picture [429 x 218] intentionally omitted <==

Figure 5 Windy Knob Drill Targets

Table 3

		Table 3	Table 3
		RC Drilling Results
Hole Number	From m	To m	Interval m	Cu %	Zn %	Au g/t
WKRC 4*	144	148	4	0.18	-	-
	148	156	8	-	0.34	-
WKRC 5+	126	136	10	0.23	-	-
including	129	130	1	0.55	-	-
	129	131	2	-	-	0.14

• 4m composite samples + 1m samples. Aqua regia digestion followed ICPMS determination

Cross sections of WKRC4 at Defiance and WKRC5 at 4E are shown in Figures 6 and 7 respectively. The geology and alteration suggest that the sequence may be overturned (i.e. interpreted chloritic footwall alteration is now in the hanging wall) similar to the sequence at Austin. The silicamagnetite-sulphide horizon anomalous in copper and zinc also appears to be similar to that associated with the VMS mineralisation at Austin and may be a fold or thrust repeat of this horizon.

• 8 -

REVIEW OF OPERATIONS

==> picture [123 x 51] intentionally omitted <==

==> picture [358 x 248] intentionally omitted <==

Figure 6 Defiance Prospect, Section WKRC4

==> picture [251 x 310] intentionally omitted <==

==> picture [105 x 20] intentionally omitted <==

----- Start of picture text -----

Figure 7
4E Prospect, Section WKRC5
----- End of picture text -----

Downhole electromagnetic (DHEM) surveys were completed on three holes (WKRC4 was blocked and could not be surveyed). The DHEM in drill hole WKRC-1 at Austin South and WKRC3A at Defiance detected several minor in-hole or near-hole conductors consistent with disseminated or stringer sulphides. The DHEM in drill hole WKRC5 at 4E identified moderately strong in-hole and off-hole conductors interpreted to be related to flat lying stringer sulphides.

Emu is encouraged by these results which indicate possible extensions of the fertile horizon which hosts the Austin VHS deposit into the Windy Knob joint venture tenements. In addition, drilling at the nearby Austin deposit by Silver Swan continues to indicate that this VMS system plunges

• 9 -

REVIEW OF OPERATIONS

==> picture [123 x 51] intentionally omitted <==

towards the joint venture tenement boundary at depth, providing an attractive deep target for Emu. Further testing of these targets is being planned.

In addition, Emu carried out follow up soil sampling over a 6km-long gold-anomalous strike length of the Federal Basset Shear Zone. Soil sampling was also carried out over three VMS target areas along stratigraphy prospective for VMS mineralisation and where the regolith appears to be suitable for sampling. A total of 727 soil samples were taken with results yet to be received. 31 orientation regolith samples were also taken over the Defiance VMS prospect. Defiance is obscured by transported cover and as such is unlikely to be detected by conventional soil sampling. The regolith samples are being analysed by seven different partial leach methods in order to evaluate the use of partial leach geochemistry in testing other areas of transported cover overlying prospective stratigraphy. Analysis of the orientation samples is in progress.

KAMBALDA WEST (Emu 24%, earning 30%)

A five-hole, 968m initial RC drilling programme was completed at Woolgangie, situated about 60km south west of Coolgardie and part of the Kambalda West joint venture. The drilling programme was designed to test electromagnetic (EM) anomalies that were identified by an airborne VTEM survey and confirmed by a ground EM survey. The EM anomalies are associated with a large magnetic anomaly, as shown in Figure 8. Significantly, all five drill holes intersected massive to semi-massive sulphides in the target zones. The sulphides comprise pyrrhotite and pyrite with associated magnetite in a granitic host but with no economic metal grades identified at this stage. However, anomalous levels of copper and silver are present in minor chalcopyrite and tellurides. Results are summarised in Table 4.

Table 4

Woolgangie Initial RC Drilling Results

Hole Number	Collar Coordinates	Collar Coordinates	Dip	Azimuth	From m	To m	Interval m	Ag g/t	Ca %
	E	N
WRC001	80944	34464	-90	360	144	154	10	3.73	0.10
WRC002	81305	36176	-90	360	nsr
WRC003	79248	37442	-70	100	80	126	46	2.20	0.22
WRC004	83162	37975	-70	150	nsr
WRC005	78822	37466	-70	340	146	156	10	1.43	0.02

nsr – No significant results. 2m samples. Aqua regia digestion followed ICPMS determination. True widths of the drill intersections are yet to be determined

An 11-hole 2,228m follow up RC drilling programme was then completed to test massive iron sulphides intersected during the initial programme and to test for possible metal zonation rends - see Figure 7. Results of the follow up programme are summarised in Table 5.

Table 5

Woolgangie RC Drilling Results

Hole Number	Collar Co-ordinates	Collar Co-ordinates	Azimuth	Dip	From m	To m	Interval m*	Ag g/t	Cu %
	East	North
WRC006	279308	6537420	100	-70				nsr	nsr
WRC007	279193	6537464	100	-70	150	158	8	1.76	0.14
					194	206	12	1.83	0.09
WRC008	278802	6537525	340	-70	74	84	10	1.01	nsr
WRC009	278827	6537445	340	-78				nsr	nsr
WRC010	280976	6534515	0	-90	124	128	4	2.16	0.06
					150	154	4	2.34	0.06
WRC011	280906	6534417	0	-90	144	148	4	1.55	0.65
WRC012	281120	6534706	80	-60				nsr	nsr

nsa: no significant results. 2m samples. Aqua regia digestion followed by ICPMS determination. *True width yet to be determined

• 10 -

REVIEW OF OPERATIONS

==> picture [123 x 51] intentionally omitted <==

==> picture [374 x 450] intentionally omitted <==

Figure 8 Woolgangie Aeromagnetic Image showing RC Drill Holes and EM conductors

Drill holes WRC006-WRC012 were drilled into EM conductors up and down dip and along plunge from previously intersected mineralisation with a best intersection of 12m of massive pyrrhotite-pyrite-magnetite mineralisation grading 1.83g/t Ag and 0.09% Cu. There was no evidence of metal zonation along the drilled EM conductors. Four holes, WRC013-WRC016 were drilled along a major fault trend into conductors identified in previous EM surveys. All the target conductors were identified as massive sulphide bodies comprised of pyrrhotite and pyrite with magnetite, along granitoid margins. No significant assays were returned. A detailed geological review of this unusual mineralisation style is currently in progress.

Mincor advised that it had earned a 70% interest in the Kambalda West tenement package and that the joint venture is now on a contributing basis by both Mincor and Emu. It is planned to carry out a detailed ground magnetic survey of the Woolgangie anomalies to identify targets for further drilling. In addition a RAB drilling programme is proposed to follow up a gold intersection (drill hole NRB042: 3m @ 2.3 g/t Au) identified in previous drilling about 13 km south of the Nepean nickel mine.

• 11 -

REVIEW OF OPERATIONS

==> picture [123 x 51] intentionally omitted <==

SALMON GUMS (Emu 100%)

Emu holds several exploration licences (total 927 sq km in area) in the Salmon Gums area on the south western extension of the 500 km-long Tropicana gold trend situated on the Fraser Range mobile belt collision zone. Significant discoveries on this trend include the +5Moz Tropicana gold deposit and several more recent gold discoveries. During the year Emu carried out additional geochemical sampling to follow up existing gold anomalies and sample new target areas.

The sampling results identified a gold anomaly (20ppb Au compared to a background of 1ppb Au) at Lake Pyramid about 50km WSW of Salmon Gums. Wide spaced samples returned values in the range 16ppb Au - 17ppb Au over an interpreted 1km strike length, open along strike. Follow up sampling has identified two areas of significant gold response which appear to be located along the periphery of a discrete copper zone also defined by the sampling as shown in Figure 9. Subject to completion of land access agreements, further sampling is planned to assess the extent of the gold anomalies within the company’s tenements.

==> picture [263 x 330] intentionally omitted <==

Figure 9 Lake Pyramid Gold Geochemistry

The information in this report that relates to exploration results is based on information compiled or reviewed by Roger Thomson BSc, ARSM, MAusIMM, MAIG. 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.

• 12 -

DIRECTORS’ REPORT

==> picture [123 x 51] intentionally omitted <==

Your directors present their report on the Company for the year ended 30 June 2011.

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 $470,760 (2010 - $1,453,470).

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 0.79 cents (2010 – 2.43 cents).

FINANCIAL POSITION

The Company’s cash position as at 30 June 2011 was $5,398,869, a reduction from the 30 June 2010 cash balance which was $6,017,935. 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’s exploration manager is responsible for being aware of and monitoring compliance with regulations. During or since the financial period there have been no known significant breaches of these regulations.

• 13 -

DIRECTORS’ REPORT

==> picture [123 x 51] intentionally omitted <==

INFORMATION ON DIRECTORS AND COMPANY SECRETARIES

Peter Thomas (Appointed on incorporation) Chairman

Mr Thomas was a practising solicitor from 1980 until June 2011, specialising in the provision of corporate and commercial advice to explorers and miners. Since the mid-1980s, he has served on the boards of various listed companies. He is also non-executive founding 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 Middle Island Resources Limited (since 2 March 2010), all four of whom are ASX listed. He was also appointed non-executive director of ANCOA Pty Ltd (previously known as Court Resources WA Pty Ltd) on 28 July 2010. Within the last three years, he was the founding chairman of Sandfire Resources NL for the period June 2003 to December 2006 and non-executive director of GoldLink IncomePlus Limited 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 25 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), non-executive director of Potash West NL (since that company was incorporated on 12 November 2010) and managing director of this company, Magnetic Resources NL (since its incorporation on 29 August 2007), all five of whom are ASX listed. He is also non-executive chairman of unlisted 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 25 years’ experience in public practice. He has extensive knowledge in matters relating to the operation and administration of listed mining companies in Australia.

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 are dealt with by the full board.

MEETINGS OF DIRECTORS

During the financial year ended 30 June 2011, there were seven meetings of directors, all of which were attended by all the directors.

• 14 -

DIRECTORS’ REPORT

==> picture [123 x 51] intentionally omitted <==

REMUNERATION REPORT (Audited)

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

Key Management Person	Position
Peter Thomas	Non-Executive Chairman
George Sakalidis	Managing Director
Roger Thomson	Executive Director
Rudolf Tieleman	Company Secretary

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;

• aligns the interests of key leadership with the interests of the Company’s shareholders;

• are paid within 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; and

• 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

• 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 externally managed complying superannuation funds during the year. These benefits were paid as superannuation contributions to satisfy (at least) the requirements of the Superannuation Contribution Guarantee Act and in satisfaction of any salary sacrifice requests. All contributions were made to accumulation type funds selected by the director and accordingly actuarial assessments were not required.

• 15 -

DIRECTORS’ REPORT

==> picture [123 x 51] intentionally omitted <==

Key Management Personnel Remuneration

		Year ended 30 June	2011
Key Management Person	Short-term benefits Fees & contractual payments ($)	Post- employment benefits Statutory superannuation ($)	Total cash and cash equivalent benefits ($)	Equity-settled share based payments ($)	Total ($)
Peter Thomas Non-Executive Chairman	50,000	4,500	54,500	-	54,500
George Sakalidis Executive Managing Director	79,915	4,500	84,415	-	84,415
Roger Thomson Executive Director	87,125	4,500	91,625	-	91,625
Rudolf Tieleman Company Secretary	42,955	-	42,955	-	42,955
Total	259,995	13,500	273,495	-	273,495

		Year ended 30 June	2010
Key Management Person	Short-term benefits Fees & contractual payments ($)	Post- employment benefits Statutory superannuation ($)	Total cash and cash equivalent benefits ($)	Equity-settled share based payments (1) ($)	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 were 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). The options vested immediately.

• 16 -

DIRECTORS’ REPORT

==> picture [123 x 51] intentionally omitted <==

Consultant Agreements

A consulting agreement has been executed between the Company and Mr Sakalidis’ nominated associated entity under which Mr Sakalidis deliver consulting services to the Company. Either party may, in its sole and absolute discretion, terminate the engagement by providing 30 days written notice. The Company may, at its option, elect to pay the consultant the equivalent remuneration for the period of the notice and dispense with the notice period. There are no provisions for the payment of any other termination payments.

There is another consulting agreement between the Company and Mr Thomson’s nominee which is in the same form as the one above described. Other major provisions of those agreements are set out as follows:

Contracted entity	Term of agreement	Rate	Reviewperiod	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 (R 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

No options have been issued to directors and officers during or since the end of the financial year.

END OF AUDITED SECTION.

EMPLOYEES

Aside from directors (all of whom were treated as employees for tax purposes), the Company had no non-casual employees at 30 June 2011.

CORPORATE STRUCTURE

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

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.

• 17 -

DIRECTORS’ REPORT

==> picture [123 x 51] intentionally omitted <==

INDEMNIFICATION AND 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 $10,429 (2010: $13,210) was incurred in insurance premiums for this purpose.

OPTIONS

As at the date of this report there are the following unquoted options over unissued ordinary shares in the Company:

• (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;

• (c) 180,000 exercisable at $0.1961 per option on or before 21 December 2015.

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

==> picture [182 x 38] intentionally omitted <==

GEORGE SAKALIDIS

Managing Director Perth 30 September 2011

• 18 -

AUDITOR’S INDEPENDENCE DECLARATION

==> picture [95 x 109] intentionally omitted <==

Auditors Independence Declaration

To those charged with governance of Emu Nickel NL

As auditor for the audit of Emu Nickel NL for the year ended 30 June 2011, I declare that, to the best of my knowledge and belief, there have been:

• a) No contraventions of the independence requirements of the Corporations Act 2001 in relation to the audit; and

• b) No contraventions of any applicable code of professional conduct in relation to the audit.

==> picture [127 x 40] intentionally omitted <==

Somes and Cooke

==> picture [118 x 60] intentionally omitted <==

Kevin Somes

1304 Hay Street West Perth WA 6005 Date: 30 September 2011

• 19 -

CORPORATE GOVERNANCE STATEMENT

==> picture [123 x 51] intentionally omitted <==

Preamble

This statement is provided in compliance with the recommendations ( Recommendations ) in the ASX Corporate Governance Council’s second edition 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 2011, 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 .

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.

• 20 -

CORPORATE GOVERNANCE STATEMENT

==> picture [123 x 51] intentionally omitted <==

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), 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. Refer 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.

• 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

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.

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;

• 21 -

CORPORATE GOVERNANCE STATEMENT

==> picture [123 x 51] intentionally omitted <==

	4.2.3. is chaired by an independent chair, who is not chair of the board; and
	4.2.4. has at least three members.
4.3.	The audit committee should have a formal charter.
4.4.	Companies should provide the information indicated in Guide to reporting on Principle 4.
	“If not, why not”:
	The Company has a policy regarding the formation, composition, role, powers and responsibilities of an audit committee although it has
	not yet established such a committee.
	The Company is small, has a small board with a tight management structure, relies on equity capital for funding and in all the
	circumstances of the Company the board does not perceive that any gains are to be derived through the operation of a formal committee
	structure.
5.	MAKE TIMELY AND BALANCED DISCLOSURE
	Companies should promote timely and balanced disclosure of all material matters concerning the Company.
5.1.	Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to
	ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.
5.2.	Companies should provide the information indicated in the_Guide to reporting on Principle 5._
6.	RESPECT THE RIGHTS OF SHAREHOLDERS
	Companies should respect the rights of shareholders and facilitate the effective exercise of those rights.
6.1.	Companies should design a communications policy for promoting effective communication with shareholders and encouraging their
	participation at general meetings and disclose their policy or a summary of that policy.
6.2.	Companies should provide the information indicated in the Guide to reporting on Principle 6.
7.	RECOGNISE AND MANAGE RISK
	Companies should establish a sound system of risk oversight and management and internal control.
7.1.	Companies should establish policies for the oversight and management of material business risks and disclose a summary of those
	policies.
7.2.	The board should require management to design and implement the risk management and internal control system to manage the
	company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that
	management has reported to it as to the effectiveness of the company’s management of its material business risks.
7.3.	The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial
	officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound
	system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial
	reporting risks.
7.4.	Companies should provide the information indicated in 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.

• 22 -

CORPORATE GOVERNANCE STATEMENT

==> picture [123 x 51] intentionally omitted <==

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 .

• 23 -

CORPORATE GOVERNANCE STATEMENT

==> picture [123 x 51] intentionally omitted <==

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 pro-forma net assets.

• 1.2. Profit And Loss items:

  • Statement of Comprehensive Income 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 Statement of Comprehensive Income 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.

• 24 -

STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

Notes Revenue: Interest income Other income 3 Expenses: Depreciation expense 11 Exploration and tenement expenses written off 12 Impairment of available for sale financial assets Share based payments expense 22 Other expenses 3 (Loss) before income tax expense Income tax expense 4 (Loss) from continuing operations Other comprehensive income: Changes in the fair value of available-for-sale financial assets Other comprehensive income for the year, net of tax Total comprehensive income for the year Total comprehensive income for year attributable to members of the Company Basic (loss) per share (cents per share) 7 Diluted (loss) per share (cents per share) 7	2011 ($) 315,550 18,129 (19,686) (278,792) (8,750) - (497,211) (470,760) - (470,760) - - (470,760) (470,760) (0.79) (0.79)	2010 ($) 305,020 82,033 (19,511) (1,183,917) (32,250) (100,650) (504,195)
		(1,453,470) -
		(1,453,470)
		(1,000)
		(1,000)
		(1,454,470)
		(1,454,470)
		(2.43) (2.43)

The accompanying notes form part of these financial statements.

• 25 -

STATEMENT OF FINANCIAL POSITION
As at 30 June 2011
	Notes	2011	2010
		($)	($)
Current Assets
Cash and cash equivalents	8	5,398,869	6,017,935
Trade and other receivables	9	231,535	25,610
Other assets	10	12,760	11,547
Total Current Assets		5,643,164	6,055,092
Non-Current Assets
Property, plant and equipment	11	33,876	53,060
Mineral interests	12	-	-
Other financial assets	13	42,200	40,950
Total Non-Current Assets		76,076	94,010
TOTAL ASSETS		5,719,240	6,149,102
Current Liabilities
Trade and other payables	14	126,999	86,551
Provisions	15	816	366
Total Current Liabilities		127,815	86,917
TOTAL LIABILITIES		127,815	86,917
NET ASSETS		5,591,425	6,062,185
Equity
Contributed equity	16	8,815,929	8,815,929
Reserves	16	120,650	120,650
Accumulated losses		(3,345,154)	(2,874,394)
TOTAL EQUITY		5,591,425	6,062,185

The accompanying notes form part of these financial statements.

• 26 -

STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

Balance at 1.7.2009 Operating (loss) for the year Other comprehensive (loss) Share based payments expense Balance at 30.6.2010 Balance at 1.7.2010 Operating (loss) for the year Balance at 30.6.2011	Ordinary Share Capital (Net of Costs) ($) Available for Sale Asset Reserve ($) Employee Benefit Reserve ($) Accumulated Losses ($) Total ($) 8,815,929 1,000 20,000 (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
	8,815,929 - 120,650 (2,874,394) 6,062,185 - - - (470,760) (470,760)
	8,815,929 - 120,650 (3,345,154) 5,591,425

The accompanying notes form part of these financial statements.

• 27 -

STATEMENT OF CASH FLOWS
For the year ended 30 June 2011
	Notes	2011	2010
		($)	($)
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and contractors		(449,856)	(358,022)
Interest received		315,550	305,020
Net cash (used in) operating activities	17	(134,306)	(53,002)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment		(501)	(3,375)
Payments for exploration and evaluation		(438,825)	(1,196,234)
Payments for new prospects		(35,434)	(19,013)
Purchase of investments		(10,000)	(63,200)
Proceeds from sale of investments		-	68,904
Net cash (used in) investing activities		(484,760)	(1,212,918)
Net (decrease) in cash held		(619,066)	(1,265,920)
Cash and cash equivalents at the beginning of the financial
year		6,017,935	7,283,855
Cash and cash equivalents at the end of the financial year	8	5,398,869	6,017,935

The accompanying notes form part of these financial statements.

• 28 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

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

NOTE 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

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

The financial statements were authorised for issue on 30 September 2011.

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

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.

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.

Accounting Policies

(a) Revenue

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

(b) Employee Benefits

Provision is made for the Company’s liability for employee benefits arising from services rendered by non-casual employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. There is no liability 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 Statement of Financial Position. That the carrying value of mineral assets, 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.

• 29 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

(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.

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 set-off 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 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 and 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 (EPS) 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) Property, plant, and equipment

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%.

• 30 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

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.

(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.

Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified at fair value through profit and loss, in which case transaction costs are expensed to profit and loss 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 profit and loss.

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.

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 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 maturity or determinable payments.

They are subsequently measured at fair value with changes in such fair value (i.e., gains and losses) recognised in other comprehensive income (except for impairment losses and foreign exchange gains and losses). When the financial asset is derecognised, the cumulative gain or loss pertaining to that asset previously recognised in other comprehensive income is reclassified into profit and loss.

Available-for-sale financial assets are included in current assets where they are expected to be sold within 12 months after the end of the reporting period. All other financial assets are classified as non-current assets.

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.

• 31 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

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 profit or loss.

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 profit or loss.

(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 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.

The International Financial Reporting Standards specifies that a valuation technique must be applied in determining the fair value of employees’ or directors’ stock options as at their grant date. No particular model is specified.

In respect of share options granted, the (theoretical) fair value is recognised over the vesting period 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 taking into account the terms and conditions upon which the options were granted, 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.

• 32 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

(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 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.

(s) 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.

(t) Changes in Accounting Policies

The Company has adopted the following revisions and amendments to AASB’s issued by the Australian Accounting Standards Board and IFRS issued by the International Accounting Standards’ Board, which are relevant to and effective for the Company’s financial statements for the annual period beginning 1 July 2010:

• a) Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project – AASB 2009-5: The amendment requires that leases are classified as finance or operating by applying the general principles of AASB 117. The Company has assessed that none of its leases require reclassification.

• b) Improvements to IFRS – AASB 2010-03: Most of these amendments become effective in annual periods beginning on or after 1 July 2010 or 1 January 2011. The 2010 improvements amend certain provisions of AASB 3, clarify presentation of the reconciliation of each of the components of other comprehensive income and clarify certain disclosure requirements for financial instruments. The 2010 improvements did not have a material impact on the Company’s financial statements.

An overview of standards, amendments and interpretations to IFRS’s and AASB’s issued but not effective is given in note ‘u’ below.

(u) Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Company

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Company. Management anticipates that all of the relevant pronouncements will be adopted in the Company’s accounting policies for the first period beginning after the effective date of the pronouncement. The new standards and interpretations are not expected to have a material impact on the Company’s financial statements.

• 33 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

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.

Major customers

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

NOTE 3 REVENUE AND EXPENDITURE REVENUE Other Income Profit on sale of investments Expense recoveries EXPENDITURE Other Expenses Occupancy costs Filing and ASX Fees Corporate and management Other expenses from continuing operations	2011 ($) - 18,129 18,129 (90,000) (21,656) (209,330) (176,225) (497,211)	2010 ($) 63,904 18,129
		82,033
		(72,500) (26,005) (204,110) (201,580)
		(504,195)

• 34 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

NOTE 4 INCOME TAX EXPENSE The components of tax expense comprise: Current tax Deferred tax asset/liability The prima facie tax on loss from ordinary activities before income tax is reconciled to income tax 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 • Equity-settled share based payment expenses • 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	2011 ($) - - - 470,760 141,228 - 39,752 (180,980) - (3,828) 15,420 2,625 14,217	2010 ($) - -
		-
		1,453,470
		436,041 (30,195) (9,682) (396,164)
		-
		(3,464) 14,622 9,675
		20,833

Unrecognised deferred tax assets

The Company has accumulated tax losses of $3,249,124 (2010 - $2,645,856).

The potential deferred tax benefit of these losses $974,737 will only be recognised 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.

• 35 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

NOTE 5 KEY MANAGEMENT PERSONNEL COMPENSATION

Short-term employee benefits Post-employment benefits Equity-settled share based payments	2011 ($) 2010 ($) 259,995 268,110 13,500 13,500 - 88,000 273,495 369,610

Further key management personnel remuneration information 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 2011:

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 the year
Peter Thomas	400,000	-	-	-	400,000	400,000
George Sakalidis	2,550,000	-	-	-	2,550,000	2,550,000
Roger Thomson	2,450,000	-	-	-	2,450,000	2,450,000
Rudolf Tieleman	800,000	-	-	-	800,000	800,000

30 June 2010:

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 the year
Peter Thomas	-	400,000	-	-	400,000	400,000
George Sakalidis	2,000,000	550,000	-	-	2,550,000	2,550,000
Roger Thomson	2,000,000	450,000	-	-	2,450,000	2,450,000
Rudolf Tieleman	600,000	200,000	-	-	800,000	800,000

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.

• 36 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

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 related entities are set out below:

30 June 2011:

30 June 2011:
Name	Balance at the start of	Share movements		Balance at the	end of the
	theyear			year
Peter Thomas	406,242	-		406,242
George Sakalidis	4,563,497	-		4,563,497
Roger Thomson	865,693	-		865,693
Rudolf Tieleman	197,042	2,958		200,000
30 June 2010:
Name	Balance at the start of	Share movements		Balance at the	end of the
	theyear			year
Peter Thomas	406,242	-		406,242
George Sakalidis	4,054,056	509,441		4,563,497
Roger Thomson	865,693	-		865,693
Rudolf Tieleman	197,042	-		197,042
NOTE 6 AUDITORS REMUNERATION		2011				2010
		($)				($)
Amounts received or due and receivable by the auditors of the Company for:
Auditing and reviewing the financial reports		19,500				28,300
Other		-				-
		19,500				28,300
NOTE 7 EARNINGS PER SHARE		2011				2010
		($)				($)
The following reflects the earnings and share data used in the calculation of basic
and diluted earnings per share
Loss for the year		(470,760)			(1,453,470)
Earnings used in calculating basic and diluted earnings per share		(470,760)			(1,453,470)
Weighted average number of ordinary shares used in	calculating basic and diluted
earnings per share		59,828,940			59,828,940
The Company had 12,010,000 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.
NOTE 8 CASH AND CASH EQUIVALENTS		2011				2010
		($)				($)
Cash at bank		147,672				156,597
Deposits at call		5,251,197				5,861,338
		5,398,869				6,017,935

• 37 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

NOTE 9 TRADE AND OTHER RECEIVABLES Trade receivables (i) GST refundable (i) Includes $218,740 in relation to the portion of exploration expenses incurred by the Company that are assigned to JV partners NOTE 10 OTHER ASSETS Prepayments NOTE 11 PROPERTY, PLANT AND EQUIPMENT Plant, equipment, and motor vehicles Less: Accumulated depreciation Reconciliation of the carrying amount of plant, equipment and motor vehicles from the beginning to the end of the financial year. Plant, equipment, and motor vehicles Carrying amount at beginning of year Additions Depreciation expense Total plant, equipment, and motor vehicles at end of year NOTE 12 MINERAL INTERESTS Opening balance Net exploration and evaluation expenditure incurred during the year Tenements disposed of during the year Expenditure written off during the year Closing balance NOTE 13 OTHER FINANCIAL ASSETS Non-Current Available-for-sale financials assets – shares in listed corporations NOTE 14 TRADE AND OTHER PAYABLES Trade creditors and accruals NOTE 15 CURRENT PROVISIONS Employee leave accruals			2011 ($) 220,739 10,796 231,535 2011 ($) 12,760 2011 ($) 97,256 (63,380) 33,876 53,060 502 (19,686) 33,876 2011 ($) - 278,792 - (278,792) - 2011 ($) 42,200 2011 ($) 126,999 2011 ($) 816		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 ($) 40,950
					2010 ($) 86,551
					2010 ($) 366

• 38 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

NOTE 16 EQUITY Contributed Equity – Ordinary Shares At the beginning of the year Closing balance: Reserves Employee benefits reserve Closing balance: Options The Company had the following options over un-issued fully paid ordinary shares at the end of the year: 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 Options exercisable at $0.1961 on or before 21.12.2015 – fully vested Total Options	2011	2011
	No.	$
	59,828,940
	59,828,940
	10,000,000 1,830,000 180,000
	12,010,000

Terms and condition of contributed equity

Ordinary Fully Paid Shares

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

At a general meeting every shareholder present in person or by proxy, representative or attorney has: a) on a show of hands, one vote; and b) on a poll, one vote for each fully paid share held and in respect of a partly paid share, a fraction of a vote equivalent to the proportion which the amount paid up bears to the total issue price.

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: Decrease in trade and other receivables relating to operating activities (Increase) in prepayments Increase in trade and other payables relating to operating activities Increase in provisions Cash flow from operations	2011 ($) (470,760) 19,686 278,792 8,750 7,828 (1,213) 22,161 450 (134,306)	2010 ($) (1,453,470) 19,511 1,183,917 (63,903) 32,250 100,650 118,329 (5,322) 14,758 278
		(53,002)

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 $1,441,080. Of this amount, $220,324 is expected to be met by JV participants as a result of various joint ventures entered into.

• 39 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

NOTE 19 JOINT VENTURES

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

Name of Project

Image Resources JV

Windy Knob JV

% Interest

Earned 80% in Image’s interests (this includes Images interest in the Emu Lake JV 37.9%, 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 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. Unless it already has secured such rights, there can be no assurance that the Company will secure rights to access those portions of the Tenements encroaching freehold land but, importantly, any native title was extinguished by the grant of freehold so wherever the Tenements encroach freehold the Company is in the position of not having to abide by the Native Title Act albeit aboriginal heritage matters still be of concern.

NOTE 21 EVENTS SUBSEQUENT TO REPORTING DATE

No matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years other than the matters referred to in the directors' report or as reported to ASX.

NOTE 22 SHARE BASED PAYMENTS

On 27 June 2011, 180,000 share options were granted to employees and contractors to take up ordinary shares at an exercise price of $0.1961 each. The options are exercisable on or before 21 December 2015, are not listed, hold no voting or dividend rights, are transferable and vested immediately upon issue. No share based payment expense is included in the Statement of Comprehensive Income as the options had minimal value on date of issue. The share based payments expense shown in the financial report ended 30 June 2010 amounted to $100,650.

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:

Total amounts owing to directors or their associated entities (excluding GST) at 30 June 2011 amounted to $40,927.

The Company has entered into a Joint Venture Agreement with Image Resources NL ( Image ), a director related entity, whereby Image has agreed to farm out various interests in its tenements. The Company has earned an 80% interest in those tenements by the expenditure of at least $2 million and has 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. Because of factors occasioned by the global financial crisis, the parties have agreed that this latter expiration date be extended from 27 February 2011 to 27 February 2014. In all other respects, the original agreement remains unchanged.

The Company 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 $7,500 per month commencing on 1 January 2010, 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.

• 40 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

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.

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 2011 and 30 June 2010 was as follows:

Cash and cash equivalents Trade and other receivables Trade and other payables and provisions Working capital position	2011 ($) 5,398,869 231,535 (127,815) 5,502,589	2010 ($) 6,017,935 25,610 (86,917)
		5,956,628

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.

Trade and other receivables Trade receivables GST and tax refundable	2011 ($) 220,739 10,796 231,535	2010 ($) 3,030 22,580
		25,610

• 41 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

(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.

2011 Weighted Average Effective Interest Rate %	Floating Interest Rate ($) Non-Interest Bearing ($)	Total ($)
Financial Assets Cash and cash equivalents 5,398,178 691 Trade and other receivables - 231,535 Available-for-sale financial assets - 42,200 Total Financial Assets 5.61% 5,398,178 274,426 Financial Liabilities Trade and other payables - (126,999) Net financial assets 5,398,178 147,427 Trade and other payables are expected to be paid as follows: Less than 6 months 2010 Weighted Average Effective Interest Rate % Floating Interest Rate ($) Non-Interest Bearing ($)	5,398,178 691 - 231,535 - 42,200	5,398,869 231,535 42,200
	5,398,178 274,426 - (126,999)	5,672,604 (126,999)
	5,398,178 147,427	5,545,605
		2011 ($) (126,999)
		(126,999)
		Total ($)
Financial Assets Cash and cash equivalents 6,016,586 1,349 Trade and other receivables - 25,610 Available-for-sale financial assets - 40,950 Total Financial Assets 5.44% 6,016,586 67,909 Financial Liabilities Trade and other payables - (86,551) Net financial assets 6,016,586 (18,642) Trade and other payables are expected to be paid as follows: Less than 6 months	6,016,586 1,349 - 25,610 - 40,950	6,017,935 25,610 40,950
	6,016,586 67,909 - (86,551)	6,084,495 (86,551)
	6,016,586 (18,642)	5,997,944
		2010 ($) (86,551)
		(86,551)

(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.

The carrying values of financial assets and liabilities as presented in the statement of financial position approximate their fair values.

• 42 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2011

==> picture [123 x 51] intentionally omitted <==

(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:

		2011	2010
		($)	($)
Change	in loss – increase/(decrease):
-	Increase in interest rate by 2%	(107,963)	(120,332)
-	Decrease in interest rate by 2%	107,963	120,332
Change	in equity – increase/(decrease):
-	Increase in interest rate by 2%	107,963	120,332
-	Decrease in interest rate by 2%	(107,963)	(120,332)

• 43 -

DIRECTORS’ DECLARATION

==> picture [123 x 51] intentionally omitted <==

The directors of the Company declare that:

1. the accompanying financial statements and notes are in accordance with the Corporations Act 2001 and:

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

3. (b) give a true and fair view of the financial position as at 30 June 2011 and performance for the year ended on that date of the Company;

4. (c) the audited remuneration disclosures set out in the Remuneration Report section of the Directors’ Report for the year ended 30 June 2011 complies with section 300A of the Corporations Act 2001.

5. the Chief Financial Officer has declared pursuant to section 295A(2) of the Corporations Act 2001 that:

6. (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;

7. (b) the financial statements and the notes for the financial year comply with Accounting Standards; and

8. (c) the financial statements and notes for the financial year give a true and fair view.

9. 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.

10. 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.

==> picture [182 x 38] intentionally omitted <==

George Sakalidis MANAGING DIRECTOR

PERTH

Dated this 30th day of September 2011

• 44 -

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF EMU NICKEL NL

INDEPENDENT AUDITOR’S REPORT

==> picture [95 x 110] intentionally omitted <==

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 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply 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. Those 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 of the financial report that gives a true and fair view 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.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of Emu Nickel NL, would be in the same terms if given to the directors as at the time of this auditor’s report.

Opinion

In our opinion:

• (a) the financial report of Emu Nickel NL is in accordance with the Corporations Act 2001 , including:

• (i) giving a true and fair view of the entity’s financial position as at 30 June 2011 and of its performance for the year ended on that date; and

• (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;

• (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

• 45 -

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF EMU NICKEL NL

Report on the Remuneration Report

We have audited the Remuneration Report included in pages15 to17 of the directors’ report for the year ended 30 June 2011. 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.

Opinion

In our opinion the Remuneration Report of Emu Nickel NL for the year ended 30 June 2011, complies with section 300A of the Corporations Act 2001.

==> picture [127 x 40] intentionally omitted <==

Somes and Cooke

==> picture [118 x 59] intentionally omitted <==

Kevin Somes

Somes and Cooke 1304 Hay Street West Perth WA 6005

30 September 2011

• 46 -

TENEMENT SCHEDULE

==> picture [124 x 51] intentionally omitted <==

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%
E15/1277	Granted	Pigeon(Woolgangie)	100%
E20/0722	Granted	Nallan	100%
E27/0084	Granted	Emu Lake(Xstrata JV)	Earning37.9%
E27/0353	Granted	Emu Lake(Xstrata JV)	Earning37.9%
E27/0354	Granted	Emu Lake(Xstrata JV)	Earning37.9%
E27/0434	Granted	Emu Lake	Earning37.9%
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	Granted	Barlee South East	100%
E51/0900	Granted	WindyKnob(Aspire JV)	Earned 51%
E51/1300	Granted	WindyKnob(Aspire JV) (Polelle)	Earned 51%
E51/1315	Granted	Austin	Earned 51%
E51/1339	Granted	Murchison Downs	100%
E51/1472	Application	Austin(Cullculli)	Earned 51%
E51/1473	Application	Austin(Cogla Downs)	Earned 51%
E63/1098	Granted	Beetle Lake(IMA JV)	Earning100%
E63/1310	Granted	Salmon Gums	100%
E63/1311	Granted	Geordie Rock	100%
E63/1312	Granted	Grass Patch	100%
E63/1399	Granted	Recruit Hill	100%
E63/1507	Application	Taylor Rock	100%
E74/0431	Granted	Lake Pyramid	100%
E77/1665	Granted	Woongaring	100%
E77/1925	Application	Boodarding (IMA JV)	Earning100%
M27/0457	Granted	Emu Lake	Earning37.9%
M27/0458	Granted	Emu Lake	Earning37.9%
M27/0459	Granted	Emu Lake	Earning37.9%
M27/0460	Granted	Emu Lake	Earning37.9%
P27/1750	Granted	Emu Lake(Xstrata JV)	Earning37.9%
P27/1751	Granted	Emu Lake(Xstrata JV)	Earning37.9%
P27/1752	Granted	Emu Lake(Xstrata JV)	Earning37.9%
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	Granted	Austin	Earned 51%
P51/2616	Granted	Austin	Earned 51%
P51/2645	Granted	Austin	100%
P51/2646	Granted	Austin	100%
P51/2647	Granted	Austin	100%
P51/2648	Granted	Austin	100%

• 47 -

OTHER INFORMATION

==> picture [124 x 51] intentionally omitted <==

The following information was applicable as at 20 September 2011.

Share and Option holding

Category(Size of Holding)	Fully Paid Ordinary Shares	Options 27.2.2013	Options 22.12.2014	Options 21.12.2015
1 to 1,000	549
1,001 to 5,000	712		3	1
5,001 to 10,000	268		2	3
10,001 to 100,000	467	3	5	4
100,001 and over	87	8	4
Total	2,083	11	14	8

The number of shareholdings held in less than marketable parcels is 1,355.

There are no listed options.

Substantial shareholders:

The names of the substantial shareholders listed in the Company's register as at 20 September 2011:

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	10,963,499	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	2,076,875	3.47
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.	BC Mullan and AL Reid	1,000,000	1.42
10.	Roger M Thomson	865,693	1.45
11.	National Nominees PtyLtd	672,050	1.12
12.	Auto Management PtyLtd	655,962	1.10
13.	TP and JJ Williamson	627,713	1.05
14.	St Barnabas Investments PtyLtd	611,000	1.02
15.	William H Hernstadt	600,000	1.00
16.	Paso Holdings PtyLtd	597,000	1.00
17.	Peter and M Taylor	525,000	0.88
18.	DevompPtyLtd	502,700	0.84
19.	Denis and J Ribton	500,000	0.84
20.	Andrew and Sophie Kyriazis	500,000	0.84
	Total	26,357,248	43.81

• 48 -

OTHER INFORMATION

==> picture [124 x 51] intentionally omitted <==

All Option-holders - All options are unquoted:

Option-holder Name	Number of Options Expiring 27.2.2013	% Held	Number of Options Expiring 22.12.2014	% Held	Number of Options Expiring 21.12.2015	% 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 trust>	2,000,000	20.00
TPT Nominees Pty Ltd	600,000	6.00
Earle McIntosh	500,000	5.00
Martin and LM Angel FamilyA/c>	500,000	5.00
Bulow Pty Ltd A/c>	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	180,000	100.00
Total	10,000,000	100.00%	1,830,000	100.00	180,000	100.00

There are a total of 59,828,940 fully paid ordinary shares and 12,010,000 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.

• 49 -