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

NL

ABN: 50 127 291 927

ANNUAL REPORT FINANCIAL YEAR ENDED 30 JUNE 2012

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

Corporate Directory	3
Review of Operations	4
Directors’ Report	8
Auditor’s Independence Declaration	14
Corporate Governance Statement	15
Statement of Comprehensive Income	19
Statement of Financial Position	20
Statement of Changes in Equity	21
Statement of Cash Flows	22
Notes to and forming part of the Financial Statements	23
Directors’ Declaration	39
Independent Audit Report	40
Tenement Schedule	42
Other Information	43

CORPORATE DIRECTORY

DIRECTORS

PETER THOMAS Non-Executive Chairman

GEORGE SAKALIDIS Managing Director

GREGORY STEEMSON Non-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

WEBSITE www.emunickel.com.au

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

STOCK EXCHANGE Australian Securities Exchange (ASX)

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

27,500,000 fully paid ordinary shares

4,596,438 options to acquire fully paid ordinary shares exercisable at $1.0878 by 27.2.2013

841,148 options to acquire fully paid ordinary shares exercisable at $0.5874 by 22.12.2014

82,736 options to acquire fully paid ordinary shares exercisable at $0.4266 by 21.12.2015

REVIEW OF OPERATIONS

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

PROJECT SUMMARIES

During the year Emu Nickel shareholders voted in favour of resolutions to acquire all the issued capital of ANCOA NL, an unlisted public company holding rights to purchase a 100% interest in the Hillgrove antimony-goldmine in NSW. The Hillgrove mine was considered to be a quality asset with the potential to transform Emu from a nickel explorer to an antimony and gold producer. The transaction was subject to Emu raising $60M for which a prospectus was issued. Despite considerable effort, the capital raising was not achieved and consequently the transaction was terminated. Emu is continuing its efforts to identify and acquire projects with the potential to add value for shareholders. In the meantime, Emu has reviewed its existing projects (refer Figure 1), determined to continue to explore Lake Pyramid and Ward Springs. Results are awaited with respect to the Kambalda West JV in respect of which a decision is yet to be made. No decision has been made in relation to Taylor Rock or Boodarding as one has only just been granted and the other is a mere application. The Company intends to farm-out or sell its other mineral assets in order to focus on new acquisitions.

==> picture [347 x 55] intentionally omitted <==

==> picture [347 x 54] intentionally omitted <==

==> picture [347 x 55] intentionally omitted <==

==> picture [347 x 54] intentionally omitted <==

==> picture [347 x 55] intentionally omitted <==

==> picture [347 x 54] intentionally omitted <==

==> picture [59 x 20] intentionally omitted <==

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

Figure 1
Location Map
----- End of picture text -----

REVIEW OF OPERATIONS

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

EMU LAKE (Emu 30.3%)

Emu has earned 80% of Image Resources’ 37.9% interest in this nickel project 70km NE of Kalgoorlie, with Xstrata Nickel Australia holding the balance of 62.1%. Nickel specialists Newexco Services recently reviewed the drilling and geophysical data on the 1,200m-long mineralised contact zones at Binti Gossan and Binti South where high grade nickel sulphides have been identified and a report from Newexco is awaited. To date a total of 15 drill intersections in excess of 3% Ni, some with significant platinum and palladium credits, have been obtained as shown in Figure 2 and Table1.

==> picture [487 x 13] intentionally omitted <==

==> picture [487 x 12] intentionally omitted <==

==> picture [487 x 13] intentionally omitted <==

==> picture [487 x 12] intentionally omitted <==

==> picture [487 x 13] intentionally omitted <==

==> picture [487 x 12] intentionally omitted <==

==> picture [487 x 13] intentionally omitted <==

==> picture [487 x 12] intentionally omitted <==

==> picture [487 x 13] intentionally omitted <==

==> picture [487 x 12] intentionally omitted <==

==> picture [487 x 13] intentionally omitted <==

==> picture [487 x 12] intentionally omitted <==

==> picture [487 x 13] intentionally omitted <==

==> picture [487 x 12] intentionally omitted <==

==> picture [487 x 13] intentionally omitted <==

==> picture [487 x 12] intentionally omitted <==

==> picture [487 x 13] intentionally omitted <==

==> picture [487 x 11] intentionally omitted <==

Figure 2 Binti Gossan and Binti South Longitudinal Projection

Table 1 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	258	0.30	7.55	0.35	1015	1726	2.74
	277	277	0.17	7.08	6.46	1092	2315	3.41
ELD 11	364	364	0.05	3.55	0.01	205	745	0.95
ELD 14	194	195	0.13	5.56	0.18	940	3230	4.17
ELD 15	336	338	2.00	6.2	1.78	749	1424	2.17
ELD 16	377	377	0.28	6.66	0.24	423	226	0.65
ELD 16	302	303	0.11	3.95	0.18	632	723	1.35
ELD 21	366	367	0.15	7.54	0.11	928	1310	2.24
ELD 23	293	293	0.28	5.35	0.4	na	na	Na
ELD 25	347	347	0.10	10.9	0.07	na	an	4.17
ELD 29	551	552	0.50	3.76	0.23	na	an	na
ELD 36	320	322	1.58	3.7	1.33	an	an	na
ELD 36	477	477	0.17	3.84	0.91	31	3096	3.13
ELD 42A	282	282	0.21	6.32	0.39	na	na	Na
ELD 47	447	448	0.25	5.68	0.67	na	na	Na

na: assays not yet available

REVIEW OF OPERATIONS

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

The aim of the Newexco study is to assess the practicality of drilling contact-parallel drill holes along selected positions near the mineralised contacts in order to use these drill holes as platforms for deep downhole EM surveys to test for massive nickel sulphides on these prospective contacts. This technique has proved successful in discovering significant nickel resources at several nickel deposits in Western Australia including the Silver Swan and Flying Fox nickel deposits. Emu is looking to deal on its interest in this project.

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. Extensions of the Austin resource (1.48Mt @ 1.02% Cu, 1.39% Zn, 3.51g/t Ag, 0.24g/t Au) are extrapolated to plunge into Emu’s tenement.

Orientation geochemical sampling over the Defiance VMS prospect, an area of known mineralisation with thick transported cover, has indicated that partial leach geochemistry can be used to identify mineralisation below transported cover.

Geochemical sampling completed along the Federal Bassett Shear Zone outlined a 3km-long gold anomaly up to 10 x background (range 5-16ppb Au). The gold anomaly forms part of a broader gold and multi-element anomaly along this gold-prospective structure. A 40-hole, 1612m scout aircore drilling programme (four lines about 1km apart) intersected a sequence of weathered mafic volcanics, sediments and felsic rocks. Hole WKAC98 on the most northerly line intersected anomalous gold (42m @ 78ppb Au) from surface including 8m @ 0.23g/t Au from 4m. Adjacent hole WKAC99 intersected anomalous gold (4m @ 61ppb Au from 32m) at the base of hole. These anomalous intersections in wide-spaced drilling may warrant follow up.

Emu and its joint venture partner, Aspire, are looking to deal their interests in this project.

KAMBALDA WEST JV (Emu 30%)

Joint venturer Mincor Resources has completed a 156 line-km ground magnetic survey over magnetic anomalies at Woolgangie where previous drilling by the joint venture had intersected massive iron sulphides associated with airborne EM anomalies. Some of the massive sulphides intersected contain anomalous levels of silver and copper. The results of the ground magnetic survey show a strong magnetic anomaly more than 1.3km in length and 300m in width, as shown in Figure 3. The source of the magnetic anomaly is interpreted to be a banded iron formation or a magnetite skarn. Drilling of this target has been completed and results are awaited. Also during the year Mincor completed 23 RAB drill holes south of Nepean, following up a previous drill intercept (NRB042 3m @ 2.34g/t Au from 57m) however no significant intersections were obtained. Emu awaits results before determining its position with respect to this asset.

==> picture [458 x 28] intentionally omitted <==

==> picture [458 x 27] intentionally omitted <==

==> picture [458 x 28] intentionally omitted <==

==> picture [458 x 27] intentionally omitted <==

==> picture [458 x 28] intentionally omitted <==

==> picture [458 x 27] intentionally omitted <==

==> picture [458 x 28] intentionally omitted <==

==> picture [458 x 27] intentionally omitted <==

Figure 3 Woolgangie Ground Magnetic Anomaly with Proposed Drill Hole Location

MADOONIA DOWNS (Emu 100%)

Emu holds a 100% interest in a 67sq km exploration licence in the Madoonia Downs area about 120km SE of Kalgoorlie. The licence is in two parts, the eastern part covering an ultramafic sequence prospective for nickel and the western part covering a mafic sequence prospective for gold. The eastern part is situated along strike from the Hootan and Talc Lake nickel sulphide prospects, in an area largely covered by alluvium and lake sediments.

The western part is along strike from the Angel Fish Lake gold occurrence, interpreted to be hosted by pyroxene basalt which trends through the Emu tenement. Wide-spaced (400m centres) systematic geochemical sampling has identified several anomalous gold zones (5-10ppb Au

REVIEW OF OPERATIONS

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

compared to a background of 1-2ppb Au). A pronounced 3km-long arsenic anomaly (20-80ppm As compared to a background of 3-4ppm As) has also been identified. Emu is looking at divest itself of this asset.

LAKE PYRAMID (FORMERLY CALLED SALMON GUMS) (Emu 100%)

Two areas of gold anomalism in soil have been identified in the Lake Pyramid area WSW of Salmon Gums on the interpreted southern extension of the Tropicana gold trend. Following completion of land access agreements, Emu carried out follow up soil sampling (371 samples) which identified several discrete areas of elevated gold values in the range of 5 to 25x background. Further sampling has been carried out (220 samples) to test the extent of the strongest anomaly and to infill low density sampling over other target areas, with analysis results awaited.

WARD SPRINGS (Emu 90%)

The Ward Spring’s exploration licence is situated on the eastern margin of Lake Barlee over a sequence of banded iron formation, mafic and ultramafic volcanic rocks and granite. The ultramafic rocks are considered to have potential for nickel sulphides. A previous airborne EM survey (VTEM) carried out by Emu identified two moderately strong conductors and a third weaker conductor all associated with an aeromagnetic trend interpreted to be related to banded iron formation and/or ultramafic rocks. Further field work is planned to investigate the EM anomalies.

TAYLOR ROCK (Emu 100%)

The Taylor Rock exploration licence covers a series of sand covered aeromagnetic targets west of Kambalda considered to have potential for nickel sulphides.

BOODARDING (Emu 100%)

The Boodarding exploration licence application is situated on the eastern flank of the Parker Dome, over an interpreted greenstone sequence where historical drilling has indicated potential for gold mineralisation.

The information in this report is based on information compiled or reviewed by George Sakalidis BSc (Hons), who is a member of the Australasian Institute of Mining and Metallurgy. George Sakalidis is a consultant of Emu Nickel NL. George Sakalidis 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 for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. George Sakalidis consents to the inclusion of this information in the form and context in which it appears in this report.

DIRECTORS’ REPORT

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

Your directors present their report on the Company for the year ended 30 June 2012.

DIRECTORS

The following persons were directors of Emu Nickel NL (“ Emu Nickel ”) during the year:

Peter Thomas (full year and to the date of this report) George Sakalidis (full year and to the date of this report) Roger Thomson (Resigned 4 April 2012) Gregory Steemson (Appointed 4 April 2012)

PRINCIPAL ACTIVITIES

The principal activities of the Company during the year were (i) to explore its tenement interests in Western Australia; and (ii) seek to acquire the Hillgrove Antimony gold mine in New South Wales (which it failed to do despite the board’s continuing confidence in that asset).

RESULTS FROM OPERATIONS

During the year, the Company recorded an operating loss of $2,668,329 (2011 - $470,760).

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 9.70 cents - 4.46 cents if calculated on a pre-consolidated basis (2011 – 0.79 cents on a preconsolidated basis – 1.72 cents on a post-consolidated basis to reflect consolidation of shares effected on 4 April 2012).

FINANCIAL POSITION

The Company’s cash position as at 30 June 2012 was $2,802,668, a reduction from the 30 June 2011 cash balance which was $5,398,869. The cash position is adequate to fund committed exploration expenditure.

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

During the financial period:

(i) the Company undertook a consolidation of its share capital;
(ii) the Company shifted its focus in the latter half of the period from those activities detailed in point (i) under the heading “Principal Activities” above to those activities detailed under point (ii); and
(iii) subsequently, to reviewing its existing projects (refer Figure 1) and determining how to treat them, namely, to continue to explore Lake Pyramid and Ward Springs, await results with respect to Kambalda West JV and to farm-out or sell its interests in Emu Lake and Windy Knob JV’s (no decision has been made as to the fate of either Taylor Rock or Boodarding).
The Company’s primary focus is now directed at identifying and acquiring a current or near term cash generating mineral resource assets across the globe.

Other than the above, 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 other than those reported to ASX, save as detailed under the headings Principal Activities and Significant Changes in State of Affairs above.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

In order to provide it with the necessary working capital and flexibility to consider, and if thought fit, to put in a stronger position make (or to secure the right to make) one or more acquisitions and to further its existing projects, the Company will likely undertake a capital raising in the near future. The outcomes of any such capital raising, potential acquisitions or existing projects (furtherance, disposal or otherwise) cannot be reliably ascertained at this time.

DIRECTORS’ REPORT

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

Other than as set out above, 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.

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 was a founding director of Sandfire Resources NL. He is also non-executive chairman of Image Resources NL (since 19 April 2002), Meteoric Resources NL (since the company was incorporated on 13 February 2004), Magnetic Resources NL (since the company was incorporated on 23 August 2006) and Middle Island Resources Limited (since 2 March 2010), each of which is ASX listed.

Mr Thomas has a relevant interest in 343,861 ordinary fully paid shares and 183,858 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 the executive exploration director of Image Resources NL (director since 13 May 1994, managing director since 13 June 2007 up to 24 May 2012), 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, Emu Nickel NL (since its incorporation on 29 August 2007), each of which is ASX listed.

Mr Sakalidis has a relevant interest in 2,122,479 ordinary fully paid shares and 1,172,392 options to acquire fully paid ordinary shares.

Gregory Steemson (Appointed 4 April 2012)

Non-Executive Director

Mr Steemson is a graduate of the University of Queensland and the University of Utah and is a qualified geologist and geophysicist. He has 40 years of experience over a wide range of geographies and commodities including gold, base metals, iron ore, diamonds, coal, mineral sands, phosphate, uranium and rare earth elements. He has operated in many different jurisdictions throughout the world and at most levels of the mineral industry from green-fields exploration to resource and project development through to mining. Mr Steemson was a founding director of Sandfire Resources Limited and Allied Gold Limited. He was a director of Allied Gold Limited, Carbine Resources Limited, Mineral Commodities Limited and Nord Pacific Limited.

Mr Steemson has a relevant interest in 132,073 ordinary fully paid shares.

Roger Thomson (Resigned 4 April 2012)

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 managing director of Meteoric Resources NL (since that company was incorporated on 13 February 2004) and executive director of Magnetic Resources NL (since that company was incorporated on 23 August 2006), each of which is ASX listed. He was an executive director of Image Resources NL from 19 April 2002 to 24 May 2012, and an executive director of this company, Emu Nickel NL from the date the Company was incorporated on 29 August 2007 to 4 April 2012.

Mr Thomson had a relevant interest in 865,693 pre-consolidated ordinary fully paid shares and 2,450,000 pre-consolidated options to acquire fully paid ordinary shares when he resigned on 4 April 2012.

DIRECTORS’ REPORT

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

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. All matters normally considered by an audit committee are dealt with by the full board.

REMUNERATION COMMITTEE

The Remuneration Committee comprises Messrs Thomas and Tieleman.

No remuneration committee meetings were held during the year, however, despite there being a remuneration committee, the whole Board (or those disinterested members) acted, in effect, as a Remuneration Committee on a number of occasions during the course of the financial year ended 30 June 2012 when considering remuneration of current and proposed directors.

MEETINGS OF DIRECTORS

During the financial year ended 30 June 2012, there were fourteen meetings of directors, each of which were attended by all the directors.

REMUNERATION REPORT (Audited)

Names and positions held of key management personnel (defined by the Australian Accounting Standards as being “ those people having authority and responsibility for planning, directing, and controlling the activities of an entity, either directly or indirectly. This includes an entity's directors ”) in office at any time during the financial year were:

REMUNERATION REPORT (Audited) Names and positions held of key management personnel (defined by and responsibility for planning, directing, and controlling the activities office at any time during the financial year were:	the Australian Accounting Standards as being “those people ha of an entity, either directly or indirectly. This includes an entity's
Key Management Person	Position
Peter Thomas	Non-Executive Chairman
George Sakalidis	Managing Director
Gregory Steemson (Appointed 4 April 2012)	Non-Executive Director
Roger Thomson (Resigned 4 April 2012)	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 ”) comprises Messrs Thomas and Tieleman and its mandate is to make recommendations to the Board 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.

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, disclosure shall be made to stakeholders and approvals obtained as required by law and the ASX listing rules.

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;
10 -

DIRECTORS’ REPORT

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

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
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 (self-managed) 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.

Relationship between Company Performance and Remuneration

There is no relationship between the financial performance of the Company for the current or previous financial year and the remuneration of the key management personnel. Remuneration is set having regard to market conditions and encourage the continual services of key management personnel.

Use of Remuneration Consultants

The Company did not employ the services of any remuneration consultant during the financial year ended 30 June 2012.

Key Management Personnel Remuneration


	Year ended 30 June 2012
Key Management Person	Short-term benefits Fees & contractual payments ($)	Post-employment benefits Statutory superannuation ($)	Total cash and cash equivalent benefits ($)
Peter Thomas Non-Executive Chairman	170,000	4,500	174,500
George Sakalidis Executive Managing Director	103,165	4,500	107,665
Gregory Steemson (Appointed 4.4.2012) Non-Executive Director	6,000	-	6,000
Roger Thomson (Resigned 4.4.2012) Executive Director	84,361	3,425	87,786
Rudolf Tieleman Company Secretary	97,570	-	97,570
Total	461,096	12,425	473,521

Year ended 30 June 2011

Year ended 30 June 2011	Year ended 30 June 2011	Year ended 30 June 2011	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 ($)
Peter Thomas Non-Executive Chairman	50,000	4,500	54,500
George Sakalidis Executive Managing Director	79,915	4,500	84,415
Roger Thomson Executive Director	87,125	4,500	91,625
Rudolf Tieleman Company Secretary	42,955	-	42,955
Total	259,995	13,500	273,495

11 -

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 delivers 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. Mr Thomson resigned as an executive director on 4 April 2012 but continues to provide contract services as and when required.

Other major provisions of those agreements:

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

Messrs Thomas, Stemson and Tieleman do not have employment contracts with the Company save to the extent that the Company’s constating documents comprise the same.

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	310,272	-	183,858
George Sakalidis	2,122,479	919,588	252,804
GregorySteemson	132,073	-	-
Total	2,598,413	919,588	436,662

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.

What follows in this Directors’ Report has not been subject to audit.

EMPLOYEES

At 30 June 2012, aside from directors who are for tax purposes treated as employees, the Company’s only other employees were part-time or casual staff. The same position prevailed at 30 June 2011.

CORPORATE STRUCTURE

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

12 -

DIRECTORS’ REPORT

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

ACCESS TO INDEPENDENT ADVICE

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

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

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

INDEMNIFICATION 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 $8,215 (2011: $10,429) 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) 4,596,438 exercisable at $1.0878 per option on or before 27 February 2013;
(b) 841,148 exercisable at $0.5874 per option on or before 22 December 2014;
(c) 82,736 exercisable at $0.4266 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

SIGNED: GEORGE SAKALIDIS

MANAGING DIRECTOR

Perth

28 September 2012

13 -

AUDITOR’S INDEPENDENCE DECLARATION

==> picture [513 x 102] intentionally omitted <==

To those charged with governance of Emu Nickel NL

As auditor for the audit of Emu Nickel NL for the year ended 30 June 2012, 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.

Somes Cooke

SIGNED: KEVIN SOMES

1304 Hay Street West Perth WA 6005

Date: 28 September 2012

14 -

CORPORATE GOVERNANCE STATEMENT

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

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 with 2010 amendments.

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 they 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.

By force of its adopted policies as uploaded to its website or as a matter of practice (but this may change), the Company complies with the Recommendations, except to the extent set out below after the relevant recommendation under the subheading “if not, why not” :

	Recommendation/Comment/Exception
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”:*
	There are three Directors on the Board, one of whom (Mr G Sakalidis) serves as an executive and therefore is not independent.
	Mr Steemson is considered to be independent other than in respect of the period from the date of his appointment as a director
	on 4 April 2012 until the Hillgrove transaction was abandoned on 8 May 2012.
	As to the chair, Mr PS Thomas, refer the “If not, why not” response to Recommendation 2.2.
	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 current
	number and the need for a board comprised of persons with a blend and diversity of traits, skills, gender, experience, expertise,
	entrepreneurialism, innovation, tenacity, vision and dedication in order to enliven the prospects of creating value for
	shareholders) it is thought by the Board that to appoint further directors (whose perceived independence is beyond doubt) or to
	procure the departure of one of the existing directors is not imperative.
2.2	The chair should be an independent director.
	*“If not, why not”:*
	The chair undertook a substantial amount of work on behalf of the Company as a contractor in relation to the Hillgrove
	transaction and had a material personal interest in that transaction, placing him in a position of conflict. Apart from that extensive
	contractual engagement and conflict, he has at all other times regarded himself as being free of any relationship that could
	materially interfere with the independent exercise of his judgement. Accordingly, he acknowledges that he was not an
	independent director during part of the year ended 30 June 2012. In addition, it might otherwise be perceived that his role in the
	formation and early development and promotion of the Company, his shareholding in the Company and his remuneration as a
	Director compromises or materially interferes with his independent exercise of judgement and ability to act in an entirely
	disinterested manner in all things.
2.3	The roles of the chair and chief executive officer (or equivalent) should not be exercised by the same individual.
2.4	The board should establish a nomination committee.
	*“If not, why not”*
	The Company planned to establish a Nomination, Risk Management and Audit Committees in accordance with the
	Recommendations upon and in the event of it completing the Hillgrove transaction. That transaction did not complete.
	The full Board undertakes, on an ad-hoc unstructured basis, the duties which would normally fall to a Nomination Committee.
	The Company does not currently have a formal Nomination Committee policy because of its size, limited resources and the

15 -

CORPORATE GOVERNANCE STATEMENT

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

	composition of the Board.
2.5	Companies should disclose the process for evaluating the performance of the board, its committees and individual Directors.
2.6	Companies should provide the information indicated in the Guide to Reporting on Principle 2_._
3.	Promote ethical and responsible decision- making
	Companies should actively promote ethical and responsible decision-making.
3.1	Companies should establish a code of conduct and disclose the code or a summary of the code as to the:
	3.1.1. practices necessary to maintain confidence in the Company’s integrity;
	3.1.2. practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders;
	3.1.3. responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
3.2	Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should
	include requirements for the board to establish measurable objectives for achieving gender diversity and for the board to assess
	annually both the objectives and progress in achieving them.
	*“If not, why not”:*
	The Company has not established a formal diversity policy. Its informal policy does not include requirements for the Board to
	seek to establish measurable objectives for achieving gender diversity. The Board does not think it useful to include measurable
	objectives in relation to gender but, rather, thinks capability and capacity are far more significant.
3.3	Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the board in
	accordance with the diversity policy and progress towards achieving them.
	*“If not, why not”:*
	See the response to 3.2 above.
3.4	Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in
	senior executive positions and women on the board.
	In compliance with the Company’s reporting requirement on that matter:
	 the proportion of women employees in the whole organisation is approximately 50% (excluding directors);
	 there are currently no women in senior executive positions; and
	 there are currently no women on the board.
3.5	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.
	*“If not, why not”:*
	The full Board undertakes the duties that would otherwise fall to the audit 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 the gains to be derived through the operation of a formal
	committee structured in the manner contemplated by the Recommendations can be cost justified.
4.2	The audit committee should be structured so that it:
	4.2.1. consists only of non-executive directors;
	4.2.2. consists of a majority of independent directors;
	4.2.3. is chaired by an independent chair, who is not chair of the board;
	4.2.4. has at least three members.
	*“If not, why not”:*
	See the response to 2.1 above.
	The Board structure makes it impossible to comply with this Recommendation.
	Until the Board is able to be structured properly in compliance with the Recommendations, the Audit Committee is comprised of
	all members of the Board.
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.
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.
	*“If not, why not”*
	If this requirement is directed at requiring such summary to appear in this statement, that has not happened because a copy of
	the Company Risk Management Policy can be viewed on the Company’s website.
7.2	The board shouldrequiremanagement to designandimplement therisk management andinternalcontrolsystemtomanage the

16 -

CORPORATE GOVERNANCE STATEMENT

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

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. “If not, why not” Management has not reported in writing to the board as to the effectiveness of the Company’s management of its material business risks. 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 that the Company has a Risk Management Policy in place and the nature, extent and scale of its operations are extremely limited with internal control measures already in place, the Company considers that it is managing its material business risks adequately. The Company will review the need to require management to design and implement risk management and internal control systems as it develops. 7.3 The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. 7.4 Companies should provide the information indicated in Guide to Reporting on Principle 7. 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. “If not, why not”: The whole Board (or those disinterested members) acted, in effect, as a Remuneration Committee on a number of occasions during the course of the financial year ended 30 June 2012 when considering remuneration of current and proposed directors. A Remuneration Committee has been formed with the Charter available on the Company’s website. The remuneration committee is comprised of Peter Thomas and Rudolf Tieleman (Company Secretary), however the composition of the Remuneration Committee can vary to accommodate the requirement that a director must not sit on the committee to consider that director’s remuneration. Messrs Thomas and Tieleman did not meet as a Remuneration Committee during the year ended 30 June 2012. 8.2 The Remuneration Committee should be structured so that it: 8.2.1. consists of a majority of independent directors; 8.2.2. is chaired by an independent director; 8.2.3. has at least three members. “If not, why not”: See the response to 2.1 above. 8.3 Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives. 8.4 Companies should provide the information indicated in Guide to Reporting on Principle 8. “If not, why not”: The information required by the Recommendation appears elsewhere in this Annual Report. Because the Board acted on an ad-hoc, unstructured basis as the Remuneration Committee, records were not maintained to enable full compliance.

17 -

CORPORATE GOVERNANCE STATEMENT

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

==> picture [483 x 510] intentionally omitted <==

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

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. Statement of Comprehensive Income items:
Profit and loss items are material if they will have an impact on the current year operating result of 10% or more.
2. MATERIALITY – QUALITATIVE
Items are also material if:
2.1. they are of a character that enlivens the obligation to disclose under either ASX Listing Rule 3.1 or the continuous disclosure
obligations arising in terms of the Corporations Act;
2.2. they impact on the reputation of the Company;
2.3. they involve a breach of legislation;
2.4. they are outside the ordinary course of business;
2.5. they could affect the Company’s rights to its assets;
2.6. if accumulated they would trigger the quantitative tests;
2.7. they involve a contingent liability that would have a probable effect of 5% or more on Statement of Financial Position or 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.
----- End of picture text -----

18 -

STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 June 2012

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

Notes Revenue: Interest income Other income 3 Expenses: Depreciation expense 11 Exploration and tenement expenses Impairment of available-for-sale financial assets Payments to related parties re Hillgrove 3, 21 Cost specifically identified as relating to Hillgrove 3 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	2012 ($) 248,469 18,129 (18,426) (477,489) (33,950) (1,040,000) (759,352) (605,710) (2,668,329) - (2,668,329) - - (2,668,329) (2,668,329) (9.70) (9.70)	2011 ($) 315,550 18,129 (19,686) (278,792) (8,750) - - (497,211)
		(470,760) -
		(470,760)
		-
		-
		(470,760)
		(470,760)
		(1.72) (1.72)

The accompanying notes form part of these financial statements.

19 -

STATEMENT OF FINANCIAL POSITION As at 30 June 2012

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

Notes Current Assets Cash and cash equivalents 8 Trade and other receivables 9 Other assets 10 Total Current Assets Non-Current Assets Property, plant and equipment 11 Other financial assets 12 Total Non-Current Assets TOTAL ASSETS Current Liabilities Trade and other payables 13 Provisions 14 Total Current Liabilities TOTAL LIABILITIES NET ASSETS Equity Contributed equity 15 Reserves 15 Accumulated losses TOTAL EQUITY	2012 ($) 2,802,668 120,814 106,128 3,029,610 15,450 33,250 48,700 3,078,310 153,869 1,345 155,214 155,214 2,923,096 8,815,929 120,650 (6,013,483) 2,923,096	2011 ($) 5,398,869 231,535 12,760
		5,643,164
		33,876 42,200
		76,076

		5,719,240
		126,999 816
		127,815

		127,815

		5,591,425
		8,815,929 120,650 (3,345,154)
		5,591,425

The accompanying notes form part of these financial statements.

20 -

STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2012

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

Balance at 1.7.2010 Operating (loss) for the year Balance at 30.6.2011 Balance at 1.7.2011 Operating (loss) for the year Balance at 30.6.2012	Contributed Equity (Net of Costs) ($) Available for Sale Asset Reserve ($) Employee Benefit Reserve ($) Accumulated Losses ($) Total ($) 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
	8,815,929 - 120,650 (3,345,154) 5,591,425 - - - (2,668,329) (2,668,329)
	8,815,929 - 120,650 (6,013,483) 2,923,096

The accompanying notes form part of these financial statements.

21 -

STATEMENT OF CASH FLOWS For the year ended 30 June 2012

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

Notes CASH FLOWS FROM OPERATING ACTIVITIES Payments to suppliers and contractors Interest received Net cash (used in) operating activities 16 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of plant and equipment Payments for exploration and evaluation (excludes Hillgrove) Payments for new prospects Purchase of investments Net cash (used in) investing activities Net (decrease) in cash held Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 8	2012 ($) (2,488,162) 248,469 (2,239,693) - (331,508) - (25,000) (356,508) (2,596,201) 5,398,869 2,802,668	2011 ($) (449,856) 315,550
		(134,306)
		(501) (438,825) (35,434) (10,000)
		(484,760)
		(619,066) 6,017,935
		5,398,869

The accompanying notes form part of these financial statements.

22 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

==> 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 28 September 2012.

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.

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 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.

(f) Income Tax

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

23 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

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

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 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 – Options that are considered to be dilutive are taken into consideration when calculating the diluted earnings per share.

(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%.

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.

24 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

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

(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. The expression “fair value” – and derivatives thereof – wherever used in this report bears the meaning ascribed to that expression by the Australian Accounting Standards Board. “Fair value” commonly does not reflect realisable value and the Board does not represent that stated fair values reflect their view of market or realisable values. This observation is over-riding and shall prevail over any inconsistent possible interpretation.

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.

25 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

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

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.

The Directors do not consider the resultant value as determined by the Black-Scholes Option Pricing Model is in anyway representative of the market value of the share options issued, however, in the absence of reliable measure of the goods or services received, AASB 2: Share Based Payments prescribes the measurement of the fair value of the equity instruments granted. The Black-Scholes Option Pricing Model is an industry accepted method of valuing equity instruments, at the date of grant.

(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.

26 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

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

(s) Critical Accounting Estimates, Assumptions, 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.

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.

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.

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.

Share based payments

Share-based payment transactions, in the form of options to acquire ordinary shares, are ascribed a fair value using the Black-Scholes option pricing model. This model uses assumptions and estimates as inputs.

(t) New Accounting Standards for Application in Future Periods

The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the Company. The Company has decided not to adopt any of the new and amended pronouncements before this becomes mandatory. The Company’s assessment of the new and amended pronouncements that are relevant to the Company but applicable in future reporting periods is set out below:

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

These Standards are applicable retrospectively and include revised requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements for financial instruments.

The key changes made to accounting requirements include:

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

The Company has not yet been able to reasonably estimate the impact of these pronouncements on its financial statements.

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

This Standard makes amendments to AASB 112: Income Taxes and incorporates Interpretation 121: Income Taxes – Recovery of Revalued Non-Depreciable Assets into AASB 112.

27 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

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

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

The amendments are not expected to significantly impact the Company.

AASB 10: Consolidated Financial Statements, AASB 11: Joint Arrangements, AASB 12: Disclosure of Interests in Other Entities, AASB 127: Separate Financial Statements (August 2011), AASB 128: Investments in Associates and Joint Ventures (August 2011) and AASB 2011–7: Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards [AASB 1, 2, 3, 5, 7, 9, 2009–11, 101, 107, 112, 118, 121, 124, 132, 133, 136, 138, 139, 1023 & 1038 and Interpretations 5, 9, 16 & 17] (applicable for annual reporting periods commencing on or after 1 January 2013).

AASB 10 replaces parts of AASB 127: Consolidated and Separate Financial Statements (March 2008, as amended) and Interpretation 112: Consolidation – Special Purpose Entities. AASB 10 provides a revised definition of control and additional application guidance so that a single control model will apply to all investees. The Company has not yet been able to reasonably estimate the impact of this Standard on its financial statements.

AASB 11 replaces AASB 131: Interests in Joint Ventures (July 2004, as amended). AASB 11 requires joint arrangements to be classified as either “joint operations” (where the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities) or “joint ventures” (where the parties that have joint control of the arrangement have rights to the net assets of the arrangement). Joint ventures are required to adopt the equity method of accounting (proportionate consolidation is no longer allowed).

AASB 12 contains the disclosure requirements applicable to entities that hold an interest in a subsidiary, joint venture, joint operation or associate. AASB 12 also introduces the concept of a “structured entity”, replacing the “special purpose entity” concept currently used in Interpretation 112, and requires specific disclosures in respect of any investments in unconsolidated structured entities. This Standard will affect disclosures only and is not expected to significantly impact the Company.

To facilitate the application of AASBs 10, 11 and 12, revised versions of AASB 127 and AASB 128 have also been issued. These Standards are not expected to significantly impact the Company.

AASB 13: Fair Value Measurement and AASB 2011–8: Amendments to Australian Accounting Standards arising from AASB 13 [AASB 1, 2, 3, 4, 5, 7, 9, 2009–11, 2010–7, 101, 102, 108, 110, 116, 117, 118, 119, 120, 121, 128, 131, 132, 133, 134, 136, 138, 139, 140, 141, 1004, 1023 & 1038 and Interpretations 2, 4, 12, 13, 14, 17, 19, 131 & 132] (applicable for annual reporting periods commencing on or after 1 January 2013).

AASB 13 defines fair value, sets out in a single Standard a framework for measuring fair value, and requires disclosures about fair value measurement.

AASB 13 requires:

inputs to all fair value measurements to be categorised in accordance with a fair value hierarchy; and
enhanced disclosures regarding all assets and liabilities (including, but not limited to, financial assets and financial liabilities) to be measured at fair value.

These Standards are not expected to significantly impact the Company.

AASB 2011–9: Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income [AASB 1, 5, 7, 101, 112, 120, 121, 132, 133, 134, 1039 & 1049] (applicable for annual reporting periods commencing on or after 1 July 2012).

The main change arising from this Standard is the requirement for entities to Company items presented in other comprehensive income (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently.

This Standard affects presentation only and is therefore not expected to significantly impact the Company.

AASB 119: Employee Benefits (September 2011) and AASB 2011–10: Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) [AASB 1, AASB 8, AASB 101, AASB 124, AASB 134, AASB 1049 & AASB 2011–8 and Interpretation 14] (applicable for annual reporting periods commencing on or after 1 January 2013).

These Standards introduce a number of changes to accounting and presentation of defined benefit plans. The Company does not have any defined benefit plans and so is not impacted by the amendment.

AASB 119 (September 2011) also includes changes to the accounting for termination benefits that require an entity to recognise an obligation for such benefits at the earlier of:

for an offer that may be withdrawn – when the employee accepts;
for an offer that cannot be withdrawn – when the offer is communicated to affected employees; and
where the termination is associated with a restructuring of activities under AASB 137: Provisions, Contingent Liabilities and Contingent Assets, and if earlier than the first two conditions – when the related restructuring costs are recognised.

The Company has not yet been able to reasonably estimate the impact of these changes to AASB 119.

28 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

==> 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 operations, the Company does not provide products and services.

NOTE 3 REVENUE AND EXPENDITURE REVENUE Other Income Expense recoveries EXPENDITURE Hillgrove Expenses – related parties (i) Option fee 21 Consultancy costs 21 Other Expenses – Hillgrove (i) Option extension fee paid to unrelated party Other costs Other Expenses Occupancy costs Filing and ASX Fees Corporate and management Legal fees Other expenses from continuing operations	2012 ($) 18,129 18,129 (800,000) (240,000) (1,040,000) (200,000) (559,352) (759,352) (90,000) (20,375) (271,891) (94,290) (129,154) (605,710)	2011 ($) 18,129
		18,129
		-
		-

		-
		(90,000) (21,656) (209,330) 598 (175,627)
		(497,211)

(i) Expenses relate to the Company’s attempt to acquire the Hillgrove antimony gold mine in New South Wales.

29 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

==> 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 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: Accrued expenses Provisions Available for sale financial assets loss Unrecognised deferred tax assets relating to the above temporary differences	2012 ($) - - - (2,668,329 800,499 (2,447) (798,052) - (3,046) 6,119 10,185 13,258	2011 ($) - -
		-
		470,760
		141,228 39,752 (180,980)
		-
		(3,828) 15,420 2,625
		14,217

Unrecognised deferred tax assets

The Company has accumulated tax losses of $5,909,298 (2011 - $3,249,124).

The potential deferred tax benefit of these losses $1,772,789 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.

30 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

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

NOTE 5 KEY MANAGEMENT PERSONNEL COMPENSATION

NOTE 5 KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term employee benefits Post-employment benefits	2012 ($) 461,096 12,425 473,521	2011 ($) 259,995 13,500
		273,495

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 21.

Options held by Key Management Personnel

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

30 June 2012:

30 June 2012:
Name	Balance at the start of the year Pre- consolidated	Consolidated during the year	Exercised during the year	Other changes during the year Consolidated	Balance at the end of the year Consolidated	Vested & exercisable at the end of the year Consolidated
Peter Thomas	400,000	(400,000) 183,858	-	-	183,858	183,858
George Sakalidis	2,550,000	(2,550,000) 1,172,092	-	-	1,172,092	1,172,092
Gregory Steemson Appointed 4.4.2012	-	-	-	-	-	-
Roger Thomson Resigned 4.4.2012	2,450,000	(2,450,000) 1,126,128	-	(1,126,128)	-	-
Rudolf Tieleman	800,000	(800,000) 367,715	-		367,715	367,715
Total	6,200,000	(3,351,207)	-	(1,126,128)	1,723,665	1,723,665

30 June 2011:

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
Total	6,200,000	-	-	-	6,200,000	6,200,000

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.

31 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

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

Shareholdings held by Key Management Personnel

The number of shares in the Company held at the beginning and end of the year and net movements during the financial year by key management personnel and/or their related entities are set out below:

30 June 2012:

Name	Balance at the start of the year *Pre-consolidated shares*	Share Consolidation 4.4.2012	Share movements *Consolidated Shares*	Balance at the end of the year *Consolidated Shares*
Peter Thomas	406,242	(406,242) 186,727	123,545	310,272
George Sakalidis	4,563,497	(4,563,497) 2,097,583	24,896	2,122,479
Gregory Steemson Appointed 4.4.2012	-	-	132,073	132,073
Roger Thomson Resigned 4.4.2012	865,693	-	(865,693)	-
Rudolf Tieleman	200,000	(200,000) 90,569	-	90,569
Total	6,035,432	(2,794,860)	(585,179)	2,655,393

30 June 2011:

30 June 2011:
Name	Balance at the start of the year	Share movements	Balance at the end of theyear
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
Total	6,032,474	2,958		6,035,432
NOTE 6 AUDITORS REMUNERATION Amounts received or due and receivable by the auditors of the Company for: Auditing and reviewing the financial reports Other NOTE 7 EARNINGS PER SHARE The following reflects the earnings and share data used in the calculation of basic and diluted earnings per share Loss for the year Earnings used in calculating basic and diluted earnings per share Weighted average number of ordinary shares used in calculating basic and diluted earnings per share (i)		2012 ($) 21,000 300 21,300 2012 ($) (2,668,329) (2,668,329) 27,500,000
				19,500
				2011 ($) (470,760) (470,760)
				59,828,940

The Company had 5,520,322 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.

32 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

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

(i) On 4 April 2012, the shareholders approved a consolidation of the Company’s share capital hence the decrease in the basis of calculation of the weighted average number of ordinary shares.

NOTE 8 CASH AND CASH EQUIVALENTS Cash at bank Deposits at call NOTE 9 TRADE AND OTHER RECEIVABLES Trade receivables (i) GST refundable (i) Includes $69,932 in relation to the portion of exploration expenses incurred by the Company that are assigned to JV partners NOTE 10 OTHER ASSETS Prepayments NOTE 11 PROPERTY, PLANT AND EQUIPMENT Plant, equipment, and motor vehicles Less: Accumulated depreciation Reconciliation of the carrying amount of plant, equipment and motor vehicles from the beginning to the end of the financial year. Plant, equipment, and motor vehicles Carrying amount at beginning of year Additions Depreciation expense Total plant, equipment, and motor vehicles at end of year NOTE 12 OTHER FINANCIAL ASSETS Non-Current Available-for-sale financials assets – shares in listed corporations NOTE 13 TRADE AND OTHER PAYABLES Trade creditors and accruals NOTE 14 CURRENT PROVISIONS Annual leave accruals		2012 ($) 169,372 2,633,296 2,802,668 2012 ($) 90,101 30,713 120,814 2012 ($) 106,128 2012 ($) 97,256 (81,806) 15,450 33,876 - (18,426) 15,450 2012 ($) 33,250 2012 ($) 153,869 2012 ($) 1,345	2011 ($) 147,672 5,251,197
			5,398,869
			2011 ($) 220,739 10,796
			231,535
			2011 ($) 12,760
			2011 ($) 97,256 (63,380)
			33,876
			53,060 502 (19,686)
			33,876
			2011 ($) 42,200 2011 ($) 126,999 2011 ($) 816

33 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

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

NOTE 15 EQUITY	2012	2012		2011	2011

	No.	$		No.	$
Contributed Equity – Ordinary Shares
At the beginning of the year	59,828,940	8,815,929		59,828,940	8,815,929
Share consolidation effected on basis of	(59,828,940)	-		-	-
1 share for every 2.175598 shares held on 4.4.2012	27,500,000	-		-	-
Closing balance:	27,500,000	8,815,929		59,828,940	8,815,929
Reserves
Employee benefits reserve		120,650			120,650
Closing balance:		120,650			120,650
Options – all fully vested
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	10,000,000			10,000,000
Number and exercise price adjusted to $1.0878 when ordinary	(10,000,000)
shares consolidated on 4.4.2012	4,596,438
Options exercisable at $0.27 on or before 22.12.2014	1,830,000			1,830,000
Number and exercise price adjusted to $0.5874 when ordinary	(1,830,000)
shares consolidated on 4.4.2012	841,148
Options exercisable at $0.1961 on or before 21.12.2015	180,000			180,000
Number and exercise price adjusted to $0.4266 when ordinary	(180,000)
shares consolidated on 4.4.2012	82,736
Total Options	5,520,322			12,010,000
Terms and condition of contributed equity
Ordinary Fully Paid Shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up of the Company, to participate in the proceeds from
the sale of all surplus assets in proportion to the number of shares held, regardless of the amount paid up			thereon.
At a general meeting every shareholder present in person or by proxy, representative		or attorney has: a) on a show of hands, one vote; and b) on a
poll, one vote for each fully paid share held and in respect of a partly paid share, a fraction of a vote equivalent to the proportion which the amount
paid up bears to the total issue price.
NOTE 16 CASH FLOW INFORMATION				2012	2011
				($)	($)
Reconciliation of operating loss after income tax with funds used in operating activities
Operating (loss) after income tax		(2,668,329)			(470,760)
Depreciation and amortisation			18,426		19,686
Exploration expenditure			477,489		278,792
Provision for diminution in value of investments			33,950		8,750
Changes in operating assets and liabilities:
(Increase) / Decrease in trade and other receivables relating to operating activities			(129,075)		7,828
Decrease / (Increase) in prepayments			2,606		(1,213)
Increase in trade and other payables in relation to operating activities			24,711		22,161
Increase in provisions				529	450
Cash flow from operations		(2,239,693)			(134,306)

34 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

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

NOTE 17 TENEMENT EXPENDITURE CONDITIONS

The Company has interest in numerous tenements to which obligations attach. In particular, rates and rentals are payable in respect thereof and prescribed expenditure conditions apply. The prescribed expenditure conditions applicable to the granted tenements for the next twelve months aggregate $1,007,440. Of this amount, $265,510 is expected to be met by JV participants as a result of various joint ventures. The Company has the ability to diminish the quantum of such expenditure conditions through the application of a variety of techniques including applying for exemptions (from the regulatory expenditure obligations), surrendering tenements and relinquishing portions of tenements. The Company has the option of seeking to lay off the cost of meeting such conditions by entering into farm-out agreements whereby third parties bear the burden of such obligations in whole or in part.

NOTE 18 JOINT VENTURES

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

Name of Project % Interest

Image Resources JV

Windy Knob JV

Earned 80% in Image’s interests (this includes Images interest in the Emu Lake JV 37.9%, Mincor 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 19 TENEMENT ACCESS

Native Title and Freehold

All or some of the tenements in which the Company has an interest are or may be affected by native title.

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

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

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 (if any) of the Tenements encroaching freehold land but, importantly, native title is extinguished by the grant of freehold so if and whenever the Tenements encroach freehold the Company is in the position of not having to abide by the Native Title Act in respect of the area of encroachment albeit aboriginal heritage matters still be of concern.

NOTE 20 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 21 RELATED PARTY AND RELATED ENTITY TRANSACTIONS

Hillgrove

Particulars of the most material related-party transactions were fully detailed in the Notice (dated 6 March 2012) convening a general meeting of the Company at which meeting shareholder approval was sought and obtained to the Company acquiring the entire issued capital of another company (then known as ANCOA NL), which held rights to acquire the Hillgrove antimony gold mine in New South Wales from ASX-listed Straits Resources Limited (ASX: SRQ).

Messrs Thomas and Steemson are directors and shareholders of ANCOA, who held and hold 19% and 24% (respectively) of ANCOA shares. By agreements entered into in February and March 2012 (since terminated) with ANCOA and Straits, the Company agreed to purchase all of the shares in ANCOA in consideration for the issue by the Company of 27,500,000 post-consolidation shares (the consolidation was effected on 4 April 2012), subject to certain conditions including Emu Nickel shareholder approvals and a minimum $60M capital raising by Emu Nickel.

The transaction also provided for the amount of $800,000 ( Option Fee ) to be paid to ANCOA upon shareholder approval (such approval received on 4 April 2012 and the payment consequently made). In the event the acquisition of ANCOA was completed it was a term of the transaction that the $800,000 would be an asset of ANCOA when Emu Nickel acquired its issued capital. Emu satisfied itself that ANCOA had incurred out of pocket expenses (not including the time value contribution of ANCOA’s directors) commensurate with (if not in excess of) the Option Fee amount securing rights to the mine, undertaking due diligence with respect thereto and developing intellectual property. Despite the Board’s continuing confidence in the Hillgrove asset, the $60M capital raising was not achieved in the necessary time-frames (despite extensions thereto) and the transaction therefore lapsed on 8 May 2012, resulting in the $800,000 being lost.

Whilst Mr Thomas was director of Emu Nickel at the time of the transaction was negotiated and entered into, Mr Steemson was not. Mr Steemson was appointed as a director of Emu Nickel at the shareholder meeting held on 4 April 2012 – that appointment was in accordance with the terms of the transaction. Each of Messrs Steemson and Thomas was a related party of Emu Nickel at the time the transaction was entered into (in Mr

35 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

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

Steemson’s case, he was a related party at that time only because it was proposed that he be a director), the date of the general meeting and at the time the $800,000 was lost.

Each of Messrs Steemson and Thomas was engaged by Emu Nickel under contract to assist in the implementation of the Hillgrove acquisition (via the acquisition of the issued capital of ANCOA) commencing 1 December 2011 and lapsing on the earlier of completion or abandonment of the transaction at the rate of $30,000 per month each. Under this arrangement, Mr Thomas was paid $120,000 which amount is included in the Remuneration Report. Mr Steemson was paid the same amount which is not shown in the Remuneration Report as it was paid to him prior to his appointment to the Board. Messrs Thomas and Steemson were entitled under those engagements to be paid further amounts but each has indicated that he will not make a claim for the same.

The Company is party to a Serviced Offices Agreement with Image Resources NL ( Image ), a director-related party, 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, terminable at will by either party on one month’s notice. The amount owing at 30 June 2012 under that arrangement amounted to $49,500 including GST.

Particulars of contractual arrangements with financial benefits provided to the key management personnel are detailed in the directors’ report. The total amount owing to directors and/or director-related parties (including GST) at 30 June 2012 was $17,807.

Save as disclosed above, there were no related party or related entity transactions.

NOTE 22 CONTINGENT LIABILITIES

Native Title

Tenements are commonly (but not invariably) affected by native title.

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

NOTE 23 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 2012 and 30 June 2011 was as follows:

Cash and cash equivalents Trade and other receivables Trade and other payables and provisions Working capital position	2012 ($) 2,802,668 120,814 (155,214) 2,768,268	2011 ($) 5,398,869 231,535 (127,815)
		5,502,589

36 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

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

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 following table provides information regarding the credit risk relating to cash and cash equivalents based on credit ratings:

	2012	2011
	($)	($)
AAA rated	-
AA rated	-
A rated	2,802,668	5,398,869

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

he 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	2012 ($) 90,101 30,713 120,814	2011 ($) 220,739 10,796
		231,535

(b) Financial Instruments

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

Financial Instrument composition and maturity analysis

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

2012 Weighted Average Effective Interest Rate %	Floating Interest Rate ($) Non-Interest Bearing ($)	Total ($)
Financial Assets Cash and cash equivalents 2,790,740 11,928 Trade and other receivables - 120,814 Available-for-sale financial assets - 33,250 Total Financial Assets 5.61% 2,790,740 165,992 Financial Liabilities Trade and other payables - (153,868) Net financial assets 2,790,740 12,124 Trade and other payables are expected to be paid as follows: Less than 6 months	2,790,740 11,928 - 120,814 - 33,250	2,802,668 120,814 33,250
	2,790,740 165,992 - (153,868)	2,956,732 (153,868)
	2,790,740 12,124	2,802,864
		2012 ($) (153,868)
		(153,868)

2011 Weighted Average Effective Interest Rate %	Floating Interest Rate ($) Non-Interest Bearing ($) Total ($)
Financial Assets Cash and cash equivalents Trade and other receivables Available-for-sale financial assets Total Financial Assets 5.61% Financial Liabilities	5,398,178 691 5,398,869 - 231,535 231,535 - 42,200 42,200
	5,398,178 274,426 5,672,604

37 -

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS For the year ended 30 June 2012

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

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	- (126,999)	(126,999)
	5,398,178 147,427	5,545,605
		2011 ($) (126,999)
		(126,999)

(c) Financial Instruments Measured at Fair Value

The financial instruments recognised at fair value in the statement of financial position have been analysed and classified using a fair value hierarchy reflecting the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following levels:

Quoted prices in active markets for identical assets or liabilities (Level 1);

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and

Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

2012	Level 1 $ Level 2 $ Level 3 $ Total $
Financial Assets: Financial assets at fair value through profit or loss: Available-for-sale financial assets: - Listed investments 2011	33,250 - - 33,250
	33,250 - - 33,250
	Level 1 $ Level 2 $ Level 3 $ Total $
Financial Assets: Financial assets at fair value through profit or loss: Available-for-sale financial assets: - Listed investments	42,200 - - 42,200
	42,200 - - 42,200

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:

		2012	2011
		($)	($)
Change	in loss – increase/(decrease):
-	Increase in interest rate by 2%	(55,815)	(107,963)
-	Decrease in interest rate by 2%	55,815	107,963
Change	in equity – increase/(decrease):
-	Increase in interest rate by 2%	55,815	107,963
-	Decrease in interest rate by 2%	(55,815)	(107,963)

38 -

DIRECTORS’ DECLARATION

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

The directors of the Company declare that:

the accompanying financial statements and notes are in accordance with the Corporations Act 2001 and: (a) comply with Accounting Standards and the Corporations Act 2001;
(b) give a true and fair view of the financial position as at 30 June 2012 and performance for the year ended on that date of the Company; and
(c) the audited remuneration disclosures set out in the Remuneration Report section of the Directors’ Report for the year ended 30 June 2012 complies with section 300A of the Corporations Act 2001;
each of the Chief Executive Officer and the Chief Financial Officer has declared pursuant to section 295A(2) of the Corporations Act 2001 that:
(a) the financial records of the company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001;
(b) the financial statements and the notes for the financial year comply with Accounting Standards; and
(c) the financial statements and notes for the financial year give a true and fair view;
in the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;
the directors have included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards.

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

SIGNED: GEORGE SAKALIDIS MANAGING DIRECTOR

PERTH

Dated this 28th day of September 2012

39 -

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF EMU NICKEL NL

==> picture [512 x 103] intentionally omitted <==

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 2012, 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 2012 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.
40 -

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF EMU NICKEL NL

Report on the Remuneration Report

We have audited the Remuneration Report included in pages10 to12 of the directors’ report for the year ended 30 June 2012. 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 2012, complies with section 300A of the Corporations Act 2001.

Somes Cooke

SIGNED: KEVIN SOMES

Somes Cooke 1304 Hay Street West Perth WA 6005

28 September 2012

41 -

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%
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%
E30/0376	Granted	WARD SPRINGS(MT MARMION) (Ward JV)	Earning90%
E51/0900	Granted	WINDY KNOB(Aspire JV)	Earned 51%
E51/1300	Granted	WINDY KNOB(Aspire JV) (POLELLE)	Earned 51%
E51/1315	Granted	AUSTIN	Earned 51%
E51/1472	Granted	AUSTIN (CULLCULLI)	Earned 51%
E51/1473	Granted	AUSTIN(COGLA DOWNS)	Earned 51%
E63/1507	Granted	TAYLOR ROCK	100%
E74/0431	Granted	LAKE PYRAMID	100%
E77/1925	Application	BOODARDING (IMA JV)	Earning100%
M27/0457	Application	EMU LAKE	Earning37.9%
M27/0458	Application	EMU LAKE	Earning37.9%
M27/0459	Application	EMU LAKE	Earning37.9%
M27/0460	Application	EMU LAKE	Earning37.9%
P27/1750	Granted	EMU LAKE(Xstrata JV)	Earning37.9%
P27/1751	Granted	EMU LAKE(Xstrata JV)	Earning37.9%
P51/2596	Granted	WINDY KNOB(Aspire JV) (DAN WELL)	Earned 51%
P51/2616	Granted	AUSTIN	Earned 51%
P51/2645	Granted	AUSTIN	100%
P51/2648	Granted	AUSTIN	100%

42 -

OTHER INFORMATION

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

The following information was applicable as at 20 September 2012.

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	816
1,001 to 5,000	685		3	1
5,001 to 10,000	194		2	3
10,001 to 100,000	248	3	5	4
100,001 and over	39	8	4
Total	1,982	11	14	8

The number of shareholdings held in less than marketable parcels is 1,591.

There are no listed options.

Substantial shareholders:

The names of the substantial shareholders listed in the Company's register as at 20 September 2012:

Shareholder Name	Number of Shares	% of Issued Share Capital
FDL Ribton and associated entities	1,797,236	6.54
G Sakalidis and associated entities	1,618,428	5.89
JP Morgan Nominees Australia Ltd	1,386,090	5.04
Total	4,801,754	17.47

Twenty largest fully paid shareholders:

	Shareholder Name	Number of Shares	% of Issued Share Capital
1.	FDL Ribton	1,567,414	5.70
2.	G Sakalidis	1,562,811	5.68
3.	JP Morgan Nominees Australia Ltd	1,386,090	5.04
4.	ABN Amro ClearingSydney	1,016,225	3.70
5.	CiticorpNominees PtyLtd	954,622	3.47
6.	WF and JI King	919,287	3.34
7.	WIT Team Enterprises Ltd	915,747	3.33
8.	Sept Rouges Ltd	802,078	2.92
9.	Image Resources NL	796,401	2.90
10.	Sancoast PtyLtd	600,000	2.18
11.	Leeman PtyLtd	568,355	2.07
12.	St Barnabas Investments PtyLtd	482,132	1.75
13.	BC Mullan and AL Reid	459,643	1.67
14.	Paso Holdings PtyLtd	413,679	1.50
15.	RM Thomson>	397,910	1.45
16.	Auto Management PtyLtd	301,509	1.10
17.	PW and MJ Taylor	241,313	0.88
18.	AJ and KL Jordan	234,789	0.85
19.	JH and JA Latimer	233,870	0.85
20.	DevompPtyLtd	231,063	0.84
	Total	14,084,938	51.22

43 -

OTHER INFORMATION

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

All Option-holders - All options are unquoted:

Option-holder Name	Options Expiring 27.2.2013	Options Expiring 22.12.2014	Options Expiring 21.12.2015	Total Options Held	% Held
George Sakalidis	919,288	252,804	-	1,172,092	21.23
Roger Thomson	919,288	206,840	-	1,126,128	20.40
Ian Baron	919,288	-	-	919,288	16.65
Emu Nickel NL	919,288	-	-	919,288	16.65
TPT Nominees PtyLtd	275,785	-	-	275,785	5.00
Earle McIntosh	229,822	-	-	229,822	4.16
Martin and LM Angel A/c>	229,822	-	-	229,822	4.16
Holders of Employee Share Options	-	105,717	82,736	188,453	3.41
Peter Thomas	-	183,858	-	183,858	3.33
Bulow PtyLtd	91,929	-	-	91,929	1.67
Rudolf Tieleman	-	91,929	-	91,929	1.67
Alex Romanoff	45,964	-	-	45,964	0.83
Barrington Dance	22,982	-	-	22,982	0.42
Jean P Dance	22,982	-	-	22,982	0.42
Total	4,596,438	841,148	82,736	5,520,322	100.00%

There are a total of 27,500,000 fully paid ordinary shares and 5,520,322 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.

44 -

AI assistant

EMU NL — Annual Report 2012

64851_rns_2012-09-30_167fc5ed-729a-4796-ae26-870ddb91c3f3.pdf

NL

ANNUAL REPORT FINANCIAL YEAR ENDED 30 JUNE 2012

CONTENTS

CORPORATE DIRECTORY

DIRECTORS

COMPANY SECRETARY

FOR INFORMATION ON THE COMPANY CONTACT

PRINCIPAL & REGISTERED OFFICE

BANKERS

AUDITORS

REGISTERED OFFICE

COMPANY CODE

FOR SHAREHOLDER INFORMATION CONTACT

SHARE REGISTRY

ISSUED CAPITAL

REVIEW OF OPERATIONS

PROJECT SUMMARIES

REVIEW OF OPERATIONS

EMU LAKE (Emu 30.3%)

REVIEW OF OPERATIONS

WINDY KNOB (Emu 51%)

KAMBALDA WEST JV (Emu 30%)

MADOONIA DOWNS (Emu 100%)

REVIEW OF OPERATIONS

LAKE PYRAMID (FORMERLY CALLED SALMON GUMS) (Emu 100%)

WARD SPRINGS (Emu 90%)

TAYLOR ROCK (Emu 100%)

BOODARDING (Emu 100%)

DIRECTORS’ REPORT

DIRECTORS

PRINCIPAL ACTIVITIES

RESULTS FROM OPERATIONS

DIVIDENDS

REVIEW OF OPERATIONS

EARNINGS PER SHARE

FINANCIAL POSITION

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

DIRECTORS’ REPORT

ENVIRONMENTAL ISSUES

INFORMATION ON DIRECTORS AND COMPANY SECRETARIES

Peter Thomas (Appointed on incorporation)

George Sakalidis (Appointed on incorporation)

Managing Director

Gregory Steemson (Appointed 4 April 2012)

Roger Thomson (Resigned 4 April 2012)

DIRECTORS’ REPORT

Rudolf Tieleman – Appointed 22 June 2009

Company Secretary

AUDIT COMMITTEE

REMUNERATION COMMITTEE

MEETINGS OF DIRECTORS

REMUNERATION REPORT (Audited)

Key Management Personnel Remuneration and Incentive Policies

Non-Executive Directors

Incentive Plans and Benefits Programs

DIRECTORS’ REPORT

Retirement and Superannuation Payments

Relationship between Company Performance and Remuneration

Use of Remuneration Consultants

Key Management Personnel Remuneration

Year ended 30 June 2011

DIRECTORS’ REPORT

Consultant Agreements

Guaranteed Rate Increases

DIRECTORS’ INTERESTS

SHARE OPTIONS GRANTED TO DIRECTORS AND OFFICERS

What follows in this Directors’ Report has not been subject to audit.

EMPLOYEES

CORPORATE STRUCTURE

DIRECTORS’ REPORT

ACCESS TO INDEPENDENT ADVICE

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

OPTIONS

PROCEEDINGS ON BEHALF OF THE COMPANY

AUDITOR’S INDEPENDENCE DECLARATION

EMU NL Annual Report 2012