ENCOUNTER RESOURCES LIMITED

==> picture [135 x 101] intentionally omitted <==

ABN 47 109 815 796

==> picture [596 x 176] intentionally omitted <==

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

A N N u A l r e p o r T 2 0 1 2
----- End of picture text -----

ABN 47 109 815 796

==> picture [163 x 35] intentionally omitted <==

Corporate Directory

Directors

Paul Chapman Will Robinson Peter Bewick Jonathan Hronsky

Non-Executive Chairman Managing Director Exploration Director Non-Executive Director

Company Secretary

Kevin Hart Dan Travers (Joint Company Secretary)

principal and registered office

Level 7, 600 Murray Street West Perth, Western Australia 6005 Telephone (08) 9486 9455 Facsimilie (08) 6210 1578 Web www.enrl.com.au

Auditor

Crowe Horwath Perth Level 6, 256 St Georges Terrace Perth, Western Australia 6000

Share registry

Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross, Western Australia 6153 Telephone (08) 9315 2333 Facsimilie (08) 9315 2233

Stock exchange listing

The Company’s shares are quoted on the Australian Securities Exchange. The home exchange is Perth, Western Australia.

==> picture [373 x 257] intentionally omitted <==

	Contents
		page
	Letter from the Chairman & Managing Director	1
	Exploration Review	3
	Summary of Tenements	19
	Corporate Governance Statement	20
	Directors’ Report Auditor’s Independence Declaration	27 33
	Consolidated Statement of Comprehensive Income	34
	Consolidated Statement of Financial Position	35
	Consolidated Statement of Changes in Equity	36
	Consolidated Statement of Cash Flows	37
	Notes to the Financial Statements	38
	Directors’ Declaration Independent Auditor’s Report	62 63
	ASX Additional Information	65

ASX Code

ENR – Ordinary shares

competent Persons statement

letter from the Chairman & Managing Director

Dear Fellow Shareholder,

Over the past 12 months the Company has been actively advancing its greenfield copper discoveries made at the Yeneena Project (“Yeneena”) in the Paterson Province in Western Australia (“WA”).

The Company completed a total of 37,000 metres of drilling during the 2011 calendar year. In 2012 the Company is investing in 25,000 metres of diamond, RC and aircore drilling at Yeneena. The significant escalation in exploration activity over the last 18 months has been demanded by the discovery of significant copper at four separate locations at Yeneena.

Yeneena is located in a region that has demonstrated the capacity to produce world class mineral deposits including the giant gold/copper mine at Telfer, the Woodie Woodie manganese mine, the Nifty copper mine and the Kintyre uranium deposit. Importantly, all of these deposits were discovered in areas of outcrop and minimal systematic exploration has occurred across the vast areas of sand cover in this region.

The initial BM1 discovery made by the Company was the first significant new copper discovery in this area for over 25 years. The initial discovery of high grade copper oxide at BM1 was a milestone and resulted in the rapid escalation of exploration activities at Yeneena. Drilling by the Company has defined a coherant zone of near surface copper oxide mineralisation at BM1 over an area of approximately 500m x 250m with intersections up to 10m @ 6.8% Cu from 32m.

New discoveries of copper with significant scale and grade potential have since been made at Yeneena, including:

n At the BM7 prospect, located 3km south of the initial copper discovery at BM1, RC and diamond drilling has confirmed a large new copper discovery. Intersections at this new discovery drilled in 2012 include:
n 73m @ 0.4% copper incl. 8m @ 1.0% copper
n 34m @ 0.6% copper incl. 10m @ 1.6% copper
n 22m @ 0.4% copper incl. 2m @ 2.9% copper
n 34m @ 0.5% copper incl. 14m @ 0.8% copper
n 16m @ 0.4% copper incl. 7m @ 0.7% copper

==> picture [455 x 291] intentionally omitted <==

Drilling at the Yeneena project

A N N u A l r e p o r T 2 0 1 2

letter from the Chairman & Managing Director continued

n The BM2 prospect where the Company has discovered an 800m long 0.25% copper oxide anomaly. The deep drill program completed at BM2 in April 2012 resulted in an intersection of 26m @ 0.6% copper from a depth of 100m. This drill program also uncovered a highly anomalous zinc unit with an intersection of 201m @ 0.6% zinc from a depth of 233m to end of hole.
n The T4 prospect where a stratigraphic diamond hole intersected multiple zones of copper anomalism up to 0.9m @ 0.84% copper. The copper at T4 is related to a magnetic anomaly with a strike-length of approximately 4km that is interpreted to represent magnetite alteration associated with copper mineralisation.

Our targeting methodologies at Yeneena are having a tremendous success rate at finding new zones of copper mineralisation under sand cover across our major land position in this region. We believe we are seeing the hallmarks of the early stages of a new copper province in Western Australia.

During the year the Company expanded its land holding at Yeneena with the completion of a joint venture agreement with the Independence Group in July 2012. The Company has secured a huge foothold in this region with the 1,400km[2] land holding containing an extensive pipeline of exploration opportunities.

The significant escalation in exploration activity over the last 18 months has been demanded by the discovery of significant copper at four separate locations at Yeneena.

The Company has established a distinct competitive advantage in the area through our understanding of ore forming processes and how these mineralised systems are represented in regional datasets. Advances in modern geophysics (including advances in rapid collection airborne electromagnetics) and geochemistry (improved assay detection limits and real time analysis though hand held technologies) continue to improve the explorability of this world class mineral province.

The focus for the upcoming year is to advance one or more of these recent copper discoveries from the initial groundbreaking intersections to a mineral resource definition program.

At BM7, the Company has uncovered a large scale copper-cobalt mineral system. BM7 has demonstrated broad thicknesses of lower grade copper mineralisation intersected over a large area. The recent intersection of up to 0.9m @ 4.9% copper, has demonstrated the potential for high grade copper within this large mineral system. To date the Company has only had access to the northern quarter of the 3km long target at BM7 and drilling has been on a broad spacing. The tenement over the remaining part of the BM7 target was granted in August 2012 with drilling scheduled to commence in October 2012.

In closing we would like to thank our committed team for their professionalism and dedication. The company is fortunate to have such a talented team of geologists who are leaders in their field. Finally, we would also take this opportunity to thank our fellow shareholders for their ongoing support.

Yours sincerely

==> picture [70 x 55] intentionally omitted <==

paul Chapman Chairman

==> picture [106 x 40] intentionally omitted <==

Will robinson Managing Director

E n c o u n t E r r E s o u r c E s l I M I T e D

exploration Review

Encounter Resources Limited (Encounter) is a Western Australian (WA) based exploration and resource development company with projects in three geological regions of WA. Encounter’s portfolio covers approximately 4,000km² of strategically located and highly prospective exploration projects (Figure 1). The portfolio includes:

n The Yeneena project (“Yeneena”) – a major ground position between the Nifty copper mine, the Telfer gold/copper mine and the Kintyre uranium deposit where Encounter has made a series of new copper discoveries that have demonstrated the potential for large tonnage copper deposits;
n Inferred Resources of 11 million pounds of near surface, calcrete style uranium in the Yilgarn Province; and
n Three projects targeting base metals deposits in the Bangemall Basin.

==> picture [423 x 488] intentionally omitted <==

Figure 1: Project location plan.

A N N u A l r e p o r T 2 0 1 2

exploration Review continued

paterson province

YEnEEnA ProJEct

(e45/2500, e45/2501, e45/2502, e45/2503, e45/2561, e45/2657, e45/2658, e45/2805 and e45/2806 – 100% encounter), elA45/3881 earning up to 85%

The Yeneena project covers a 1,400km[2] tenement package in the Paterson Province of WA located between the Nifty copper mine, the Telfer gold/copper mine and the Kintyre uranium deposit (Figure 2). Encounter has made a series of new copper discoveries that demonstrate the potential of the area for large tonnage copper deposits. The project is considered highly prospective for Nifty/Isa style copper mineralisation, silver-lead-zinc mineralisation, Woodie Woodie style manganese mineralisation and unconformity related uranium mineralisation.

Outside of the known discoveries at Nifty (copper) and Kintyre (uranium), found in areas of outcrop, the greenfields Yeneena Basin in the Paterson Province is significantly under-explored due to extensive sand cover and the remoteness of the location.

Simplified geology for the Yeneena Basin comprises the Palaeoproterozoic Rudall Complex as the lowermost unit, unconformably overlain by the Neoproterozoic Coolbro Sandstone which is conformably overlain by the Broadhurst Formation. The Broadhurst Formation is the host to Encounter’s base metals targets and the Nifty copper mine. The Kintyre uranium deposit sits directly below the unconformity between the Coolbro Sandstone and the Rudall Complex.

A total of 37,000m of drilling was completed in 2011, along with extensive airborne geophysical surveys and geochemical programs. In 2012 the company is in the process of completing a 25,000m program of aircore, RC and diamond drilling. This work has resulted in the discovery of copper sulphide mineralisation at four separate targets at Yeneena (BM1, BM2, BM7 and T4).

==> picture [455 x 311] intentionally omitted <==

Figure 2: Yeneena project leasing and target plan.

E n c o u n t E r r E s o u r c E s l I M I T e D

==> picture [455 x 327] intentionally omitted <==

Diamond drill rig at T4

BM7 copper Discovery

The BM7 prospect is located 3km south of the initial BM1 discovery (Figure 2), at the intersection of the north-east trending Queen fault and the regionally-extensive McKay fault. Copper-oxide mineralisation has been defined by aircore drilling over 3.5km along the Queen fault and remains open both along strike and to the south. The best development of this mineralisation observed to date in shallow aircore drilling is close to the intersection of the Queen and McKay faults.

The first diamond drill hole beneath the large scale copper-oxide anomaly, EPT1109, was completed in December 2011. The drill hole intersected an extensive hydrothermal stockwork system containing broad zones of finely disseminated, locally blebby and stringer copper sulphide mineralisation. Assay results included a zone of 102m @ 0.2% Cu and 243ppm Co from 274m. These results indicate the presence of a large-scale, depth-extensive, primary copper-mineralised system at BM7.

A total of 29 RC drill holes were completed at BM7 during May and June 2012 in a broad 200m x 200m pattern. This drill program was expanded from the original 2500m program following the identification of significant extensions to the zone of copper-oxide mineralisation defined by the aircore drill program.

The assay results from the RC program include several zones of oxide, transitional and sulphide copper mineralisation:

n 34m @ 0.64% copper and 793ppm cobalt from 156m incl. 10m @ 1.64% copper and 1616ppm cobalt from 166m
n 22m @ 0.38% copper and 185ppm cobalt from 140m incl. 2m @ 2.87% copper and 518ppm cobalt from 156m
n 34m @ 0.48% copper from 20m incl. 14m @ 0.83% copper from 28m
n 18m @ 0.38% copper and 298ppm cobalt from 46m incl. 2m @ 2.24% copper from 50m
n 40m @ 0.21% copper and 143ppm cobalt from 100m incl. 12m @ 0.40% copper from 100m
n 12m @ 0.40% copper and 318ppm cobalt from 40m
n 12m @ 0.24% copper and 116ppm cobalt from 18m

Nine diamond drill holes have been completed at BM7 in 2012. This program has successfully intersected zones of copper-sulphide mineralisation below the depth of the RC drilling. This mineralisation varies from coarse blebby coppersulphides in stockwork style vein arrays to narrower, strongly brecciated and sheared zones containing pervasive disseminated copper-sulphides.

A N N u A l r e p o r T 2 0 1 2

exploration Review continued

BM7 copper Discovery continued

Assays results have been received from six drill holes to date and include the following intersections:

n 33m @ 0.37% copper and 221ppm cobalt from 410m incl. 19m @ 0.47% copper and 220ppm cobalt from 423m in EPT 1168
n 46m @ 0.21% copper from 148m in EPT1160
n 16m @ 0.41% copper and 324ppm cobalt from 498m incl. 7m @ 0.69% copper and 319ppm cobalt from 506m in EPT 1167
n 279m @ 0.1% Cu and 100ppm Co from 172m incl. 23m @ 0.31% Cu and 170ppm Co and 6m @ 0.7% Cu and 435ppm Co in EPT1244
n 73m @ 0.4% Cu and 100ppm Co from 74m incl. 8m @ 1.0% Cu and 120ppm Co and 0.9m at 4.9% Cu and 350ppm Co in EPT1159

The RC and diamond drilling programs at BM7 have confirmed a new copper discovery at the Yeneena project. Mineralisation intersected in drilling extends over an 800m strike extent and remains open to the south. The system appears to widen and strengthen to the south where copper mineralisation has been intersected in drill holes across a 1km wide section (Figure 3).

==> picture [455 x 399] intentionally omitted <==

Figure 3: BM7 prospect drill status plan.

E n c o u n t E r r E s o u r c E s l I M I T e D

BM7 copper Discovery continued

The shales at BM7 are highly dolomite and silica altered and this alteration appears to have subdued the conductance of the host rocks. A recently flown VTEM survey indicates that BM7 drilling to date is situated at the northern end of a substantial target area of low conductance (Figure 4). It is interpreted that the dolomite-silica alteration process is intimately associated with the copper mineralisation event, which implies that the BM7 copper system may extend a further 2.5km south of the current area of drilling.

The 3km long target zone of low conductivity at BM7 coincides with a major flexure in the McKay Fault, where it changes from a SSW to a SSE orientation. Conceptually such flexure zones are considered highly prospective positions as mineralising fluids are commonly focused at these locations in major ore systems.

The tenement to the south, E45/2805, was previously held under application by the Company, and prevented the extension of the drilling program further south. This tenement covers an area of 210km[2] and importantly hosts a 12km segment of the McKay Fault Zone running south from BM7. Exploration License E45/2805 was granted in August 2012. A heritage survey at the new tenement was completed in September 2012 and drilling is scheduled to re-commence in October 2012 to test the remaining 2.5km long extent of the geophysical target at BM7.

BM1 copper Discovery

The BM1 Copper Discovery is located approximately 60km south of the Nifty copper mine (Figure 2). The BM1 copper mineralisation is hosted within the Broadhurst Formation and is almost entirely overlain by 2-10 metres of transported cover. Aircore (“AC”) drilling in the BM1 region has defined copper oxide mineralisation over an 8km section of the McKay fault zone from BM6 in the north to the BM7 prospect in the south (Figure 4).

High grade copper mineralisation was first discovered in aircore drilling at BM1 in June 2010. Aircore and reverse-circulation (“RC”) drilling defined two zones of coherent near surface copper-oxide mineralisation named the Northern and Central Areas. This mineralisation lies adjacent to the intersection of the McKay Fault with the north-east trending King fault (Figure 4). At the Northern Area the flat lying copper oxide mineralisation extends over an area 500m by 250m and is interpreted to be the weathered remnants of a primary copper-sulphide position.

==> picture [256 x 537] intentionally omitted <==

Figure 4: BM1, BM7 and BM6 prospects Maximum copper in hole.

A N N u A l r e p o r T 2 0 1 2

exploration Review continued

BM1 copper Discovery continued

==> picture [455 x 296] intentionally omitted <==

Figure 5: Drill hole location plan BM1 Northern Area showing major faults and western breccia zone.

Diamond drilling during 2011 and 2012 focused on key structural intersections, interpreted to be pathways for the ore bearing fluids that generate large scale sediment-hosted copper deposits. Diamond drilling identified an intense, steep dipping fault breccia zone on the western margin of the BM1 Northern Area containing primary copper-sulphides (Figure 5). Copper-sulphide mineralisation of varying intensity was intersected and was generally associated with bands

==> picture [261 x 234] intentionally omitted <==

of intense quartz-carbonate veining along lithological boundaries. Two diamond drill holes intersected significant copper oxide mineralisation including the highest grade intersection at the project to date in EPT751 (10m @ 6.8% copper from 32m). Significantly diamond drilling confirmed that the copper system at BM1 is alive to a vertical depth of at least 500m.

The western breccia zone appears to be a long lived fluid pathway and has potentially been the focus of multiple mineralising events that introduced the copper, cobalt and silver mineralisation. The presence of multiple phases of mineralisation is supported by the observation that copper, cobalt and silver are not always found together within the zone.

At the end of the 2011 field campaign, EPT1128 was in progress and at a downhole depth of 534m. Visual inspection noted disseminated copper-sulphide mineralisation in the last few trays of drill core.

Copper oxide mineralisation from BM1

8 E n c o u n t E r r E s o u r c E s l I M I T e D

BM1 copper Discovery continued

Drill hole EPT1128 was re-entered when diamond drilling recommenced at BM1 in June 2012 and completed to a depth of 690.6m. The narrow bands of disseminated copper-sulphide mineralisation noted at the bottom of the hole at the end of the 2011 drilling continued for a further 40m downhole. Assay results from this extended hole are expected to be received in October 2012.

BM6 Prospect

A detailed helicopter EM survey (“VTEM”) completed at BM1 in June 2011 identified a regional scale anomaly 3km north of BM1, adjacent to the regionally significant McKay fault. This target was named BM6 (Figure 4). Initial reconnaissance aircore drilling over BM6 was completed in September 2011. Assays from reconnaissance aircore drilling included copper grades up to 1.4% Cu (Figure 6) and indicate a close correspondence between the strongest geochemical and geophysical anomalism. The copper anomaly at BM6 is currently 800m long, and is open to the north and south. Follow up drilling at the BM6 prospect is planned in 2013.

==> picture [270 x 356] intentionally omitted <==

Figure 6: BM6 Prospect drill status plan.

==> picture [455 x 303] intentionally omitted <==

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

VTEM survey helicopter and crew
----- End of picture text -----

A N N u A l r e p o r T 2 0 1 2

exploration Review continued

BM2 Prospect

The BM2 prospect is located 50km south-east of the Nifty copper deposit and 34km north-east of the BM1 copper discovery, on the regionally extensive Tabletop Fault. This structure is known to be metallogenically important and is closely associated with the position of the Nifty Copper deposit, 50km along strike to the north-west (Figure 2). The prospect was first aircore drilled in August 2010 and later followed up with a more extensive aircore drill program in 2011.

A broad zone of copper anomalism (+0.25% Cu) was identified within the regolith over a strike extent of 800m (Figure 7). The identification of this significant base metal anomaly was made in an area of no outcrop, with up to 20m of transported overburden.

An orientation partial leach soil geochemical survey was completed over the BM2 prospect in 2011. It was designed to determine if soil surveys can be used to ‘look through’ areas of thick transported cover. The results were encouraging, and highlighted an east-northeast copper anomaly that is consistent with the copper anomaly defined by aircore drilling. This surface sampling development has positive implications for the prioritisation and testing of sand-covered regional targets at the Yeneena project.

Two diamond drill holes completed in August 2011 were the first deep drilling at the prospect. These drill holes were co-funded through the Western Australian Government Exploration Incentive Scheme. The purpose of these drill holes was to test for the source of the 800m long copper anomaly defined in aircore drilling and to gain a basic understanding of the geology and structure at depth. Assay results from the two diamond drill holes drilled on section 389350mE confirmed extensive thicknesses of zinc mineralisation in both drill holes with the mineralisation open along strike and at depth (Figure 8). This zinc mineralisation appears stratabound in nature with the ‘Upper Zinc Contact’ coinciding with a marked change in lithogeochemical indicators. The lower contact of this mineralised unit remains untested with zinc anomalism extending to the bottom of all deep holes completed at BM2.

==> picture [455 x 311] intentionally omitted <==

Figure 7: BM2 maximum copper in aircore drilling and drill status plan (2012 RC and diamond collars in blue, 2011 diamond collars in black).

E n c o u n t E r r E s o u r c E s l I M I T e D

1 0

BM2 Prospect continued

==> picture [455 x 316] intentionally omitted <==

Figure 8: BM2 Cross Section A-A’ 389350mE.

Results from the August 2011 diamond drilling include:

n EPT798 – 188m @ 0.35% Zn from 213.3m to EOH incl. 44.7m @ 0.74% Zn
n EPT799 – 173.6m @ 0.30% Zn from 375m incl. 26.5m @ 0.51% Zn; and 23.9m @ 0.37% Zn from 608m to EOH

Significantly, the minor levels of copper anomalism observed in fresh rock at depth in these drill holes were considered insufficient to account for the scale and intensity of the 800m long near surface copper oxide anomalism at BM2. This interpretation suggests that the copper anomalism observed within the regolith on this section represent secondary dispersion from a primary source. It is noted that in many ore-systems it is not uncommon for zinc mineralisation to occur distal to a central zone of copper mineralisation.

The Company was successful in its merit-based application for a second round of WA Government co-funded RC/diamond drilling at BM2 in 2012. This funding contributed $150,000 towards the cost of drilling designed to test for the primary source of the copper oxide anomalism and define potential vectors to higher grade zinc mineralisation.

An RC drill program was completed to test up dip and to the west of section 389350mE where previous diamond drilling had intersected a broad zone of zinc sulphide mineralisation (see Figure 7). RC drilling results confirmed a heavily leached oxide profile with many drill holes showing a strengthening of mineralisation at depth. RC drill holes EPT1136A through to EPT1141 all ended in anomalous zinc and lead and have mapped out an extensive area of base-metal sulphide mineralisation that extends over 1km in strike (Figure 7).

Drill hole EPT1140, collared in the core of the regolith copper anomaly, returned the first copper sulphide intersection at BM2 of 26m @ 0.60% copper from 100m incl. 10m @ 0.92% copper from 100m (see Figure 9). This intersection sits below the depth of the original aircore drilling and remains open to the west and at depth.

A N N u A l r e p o r T 2 0 1 2

1 1

exploration Review continued

BM2 Prospect continued

==> picture [455 x 312] intentionally omitted <==

Figure 9: BM2 Cross Section 389150mE.

Diamond drill hole EPT1174 was designed to test for copper sulphide mineralisation at depth below EPT1140 and to test for extensions to the zinc sulphide mineralisation drilled in EPT798 and EPT799. The hole intersected a broad zone of carbonate alteration and veining in the shale unit that contained visible zinc and lead sulphides (Figure 9). Assays from this hole confirmed the increased thicknesses and grade of primary zinc mineralisation, relative to intial results from section 389350mE.

==> picture [239 x 206] intentionally omitted <==

Assay results for EPT1174 include:

n 201m @ 0.6% zinc from 233m to end of hole including: n 13m @ 1.3% zinc from 295m; and

n 8m @ 1.5% zinc from 349m; and
n 29m @ 1.0% zinc from 400m

A helicopter based VTEM (“Versatile Time domain Electromagnetic”) survey was also completed over the BM2 prospect during 2012. A series of 150m spaced north-south lines were flown to assess whether any conductors could be mapped out within the area of the copper regolith anomalism. Initial processing and modelling of the VTEM data has outlined a shallow NE dipping conductor centred to the west and downdip of EPT1140. Further drilling at the BM2 prospect is planned to test the modelled EM conductor located adjacent to the copper mineralisation intersected in EPT1140.

Sunset at the Yeneena project

1 2 E n c o u n t E r r E s o u r c E s l I M I T e D

==> picture [596 x 245] intentionally omitted <==

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

Electromagnetics Magnetics Gravity
Diamond holes Diamond holes Diamond holes
April 2012 April 2012 April 2012
EPt801 EPt801
EPt801 – copper sulphides
Intersected in 2011
Figure 10 : T4 Palaeo-Proterozoic basement block interpretation over AEM, TMI magnetics and Gravity data.
4km
----- End of picture text -----

t4 Prospect

The T4 prospect is located at the north of the Yeneena Project, about 30km north-east of the BM1 copper discovery (see Figure 2). The geology of the T4 area is dominated by an 8km by 5km dome-shaped uplifted block of Palaeoproterozoic Rudall Complex metamorphics. Encounter identified the presence of this block of Palaeoproterozoic basement rocks as an anomalous response in three independent geophysical datatsets (AEM, magnetics and gravity; see Figure 10).

The T4 target represents a compelling structural, geological and geophysical target at the Yeneena project. Base metal mineralisation is being targeted along structures internal to the basement block and along the margins of the dome. This area has significant scale potential, is totally sand-covered and has received minimal prior exploration.

Two diamond drill holes were drilled at T4 in August 2011. The first hole targeted the margin of the interpreted block of Rudall Complex and the second was drilled within the boundary of the block. These drill holes confirmed the geological interpretation of the T4 block as a basement inlier and significantly, one of them (EPT801) intersected multiple zones of disseminated copper-sulphides.

==> picture [185 x 185] intentionally omitted <==

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

1cm
chalcopyrite
Bornite
----- End of picture text -----

Core samples from EPT801 were submitted to the GEMOC research facility at Macquarie University for U-Pb age analysis. The results confirmed that the age of the peak metamorphic event in these rocks is 1780 ± 9Ma and the age of the igneous protolith is at least 1980Ma. These results confirmed that the copper target at T4 is hosted within metamorphic basement rocks equivalent to those of the Rudall Complex.

As mentioned above, EPT801 also intersected narrow zones of disseminated sulphide mineralisation including an intersection of 0.9m @ 0.84% copper and 8g/t silver, within a broader zone of copper-silver anomalism. These results confirmed the presence of a copper-mineralising event in the T4 region. This is considered to be a highly significant result as EPT801 was a stratigraphic hole that was not specifically targeted to intersect mineralisation but drilled at a logistically convenient position along an existing track to test our geological model.

EPt801 – 194m – Disseminated chalcopyrite and bornite in altered metamorphics – 0.8% cu

A N N u A l r e p o r T 2 0 1 2

1 3

exploration Review continued

t4 Prospect continued

A surface geochemical sampling program in the sand dune swales at T4 was completed in late 2011. Results highlighted multiple Cu-Ag anomalies on the margins of the T4 block. Final results from that survey have highlighted four anomalies (Figure 11; Anomalies A to D).

Significantly, a copper-silver geochemical anomaly (Anomaly A) has been defined across two sample lines to the north of EPT801. Anomaly A lies coincident with a +4km long magnetic and gravity geophysical anomaly that have both now been modelled. The magnetic anomaly dips steeply to the east-northeast and the gravity anomaly has been modelled as a broad, flat lying, near surface +0.5 Mgal density anomaly.

Two diamond drill holes were completed at T4 in April-May 2012 for a total of 841m. These drill holes were drilled 1.6km

north of EPT801 (Figure 10).

Assay results from these two drill holes confirmed that zones of elevated copper anomalism (300-1000ppm copper) are associated with more intense magnetite alteration at T4. Magnetic susceptibility testing of the drill holes is in progress to allow analysis of the original airborne magnetic modeling and to ensure drilling intersected the main geophysical anomaly.

A track mounted aircore rig completed a 160 hole (5700m) drill program at the T4 prospect in August 2012. Broad spaced drill lines were designed across the southern half of the Rudall Complex Inlier to identify zones of stronger copper mineralisation and to test a series of geochemical targets around the margin of the Inlier identified at T4.

This drilling confirmed a shallow cover sequence and a strongly stripped regolith profile. The majority of holes drilled over the main geophysical anomalies intersected 7-10m of cover and then progressed directly into 10-15m of saprolitic metamorphic rock. Due to the strongly stripped nature of the regolith profile at T4, any oxide or supergene dispersion from a primary copper-sulphide horizon is likely to be very narrow. It is therefore considered that any coherent copper anomalism identified in this broad spaced program is potentially significant.

==> picture [225 x 324] intentionally omitted <==

Figure 11: a) Copper – Silver partial leach geochemical anomalies at T4; b) Copper – Silver anomalies on TMI magnetics.

E n c o u n t E r r E s o u r c E s l I M I T e D

1 4

t4 Prospect continued

Initial handheld XRF analysis of the aircore samples has defined four corridors of copper anomalism that extend 1-2km in strike length. The copper corridors appear to be structurally controlled and are located adjacent to the area of magnetic anomalism. Importantly it appears none of the three stratigraphic diamond drill holes completed at T4 have tested any of these four corridors. Following the receipt of geochemical analysis of samples from the aircore drilling, further shallow drilling and/or geophysical surveys are planned to define targets for follow up RC or diamond drilling.

BM5 target

The BM5 target is located along the regionally extensive Kintyre Fault (Figure 2). In 2009, diamond drill hole EPT062 was drilled to test beneath a gossanous iron manganese horizon associated with copper-lead-zinc-silver geochemical anomalism and returned an intersection of 0.1m @ 28.5% zinc, 2.3% lead and 33.9g/t silver from 301.6m (see Figure 12).

No exploration activity was completed at the BM5 prospect in 2011/12, however, additional RC drilling is planned towards the north of BM5 where it is interpreted that the prospective geological contact is trending closer to surface.

==> picture [276 x 398] intentionally omitted <==

Figure 12: BM5 Cross Section 7565150mN.

==> picture [455 x 262] intentionally omitted <==

Soil sampling at Yeneena project

A N N u A l r e p o r T 2 0 1 2

1 5

exploration Review continued

Yilgarn District

cALcrEtE urAnIuM rEsourcEs

A strategic review of the calcrete uranium resource continues to consider the potential development and commercial alternatives to advance the projects. The area of interest is shown on Figure 13.

HILLVIEW (e51/1127 – 83% encounter, 17% Avoca)

The Hillview uranium project is located 50km south east of Meekatharra and contains an Inferred Resource of 27.6 million tonnes, averaging 174ppm U3O8 for a contained 10.6 million pounds of U3O8. The Inferred Resource is reported in accordance with the JORC code (2004) and guidelines.

The main mineralised zone at Hillview is 7km long by 1.4km wide with an average thickness of 3.15m. The resource is a flat lying, consistent body of near surface uranium mineralisation with minimal internal dilution.

LAKE WAY soutH (e53/1232 – 60% encounter, 40% Avoca uranium rights only)

The Lake Way South project is located approximately 10kms south of Wiluna, between Toro Energy’s Lake Way and Centipede uranium deposits. An Inferred Resource for the area of the Centipede Extension resource within the JV tenement has been calculated. This resource contains 220,000t @ 244ppm U3O8 for 120,000lbs of U3O8. The Inferred Resource is reported in accordance with the JORC code (2004) and guidelines.

BELLAH BorE EAst (elA53/1685 – 100% encounter)

The Bellah Bore East is situated in the upper reaches of the Yeelirrie Channel. An Inferred Resource of 350,000t averaging 210ppm U3O8 for 160,000lb of U3O8 has been calculated for the Bellah Bore East prospect. The Inferred Resource is reported in accordance with the JORC code (2004) and guidelines.

==> picture [455 x 290] intentionally omitted <==

Figure 13: Location of uranium resources in the north east Yilgarn Province.

E n c o u n t E r r E s o u r c E s l I M I T e D

1 6

DArLot EAst ProJEct – Gold (elA 37/1148 – 100% encounter)

The Darlot East project covers 285km[2] and is located approximately 6kms east of the Darlot Gold mine, 70kms east of the township of Leinster. The project is situated within an area of interpreted granite gneiss between the Yandal Greenstone Belt to the west and the Duketon Greenstone Belt to the east. Interpretation of the regional aeromagnetics has identified an extensive NNW trending structural corridor that ‘horsetails’ as it flexes along the margin of a major granite intrusion located in the east of the project. Drilling to the north of the project by Encounter has identified a +1km wide zone of greenstone lithologies that is interpreted to extend south into the Darlot East project.

Regional geochemical datasets collect by CSIRO have highlighted minor gold anomalism within the project area in association with lithological indicators similar to other mapped greenstone terrains.

Drilling is planned at the project to determine if any significant regolith gold anomalism occurs within the area of interpreted greenstone lithologies.

Bangemall Basin

BEYonDIE (encounter – 100%)

A regional targeting exercise was initiated during late 2009 incorporating key learnings from the work completed at the Yeneena project and building on our understanding of the formation of large scale base metal systems.

The targeting program highlighted an area on the eastern margin of the Bangemall Basin that demonstrates a number of key structural ingredients. Applications have been lodged over an area of 1500km[2] located approximately 150km south south east of Newman. The tenements capture the intersection of the Tangadee Lineament with the margin of the Bangemall Basin and northern Yilgarn block (Figure 14).

Minimal exploration work was completed on the Bangemall Basin projects during the 2011/2012 year due to the prioritisation of the exploration activities at Yeneena.

==> picture [455 x 290] intentionally omitted <==

Figure 14: Location of Encounter Tenements in the Bangemall Basin.

A N N u A l r e p o r T 2 0 1 2

exploration Review continued

Hillview Qualifying statement

The information in this report that relates to Exploration Results is based on information compiled by Mr Peter Bewick who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Bewick is a full time employee of Encounter Resources Ltd (Encounter) and has sufficient experience which is relevant to the style of mineralisation under consideration to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’.

The Mineral Resource is based on information compiled by Mr Neil Inwood who is employed by Coffey Mining Ltd. Mr Peter Bewick from Encounter has consented to a joint sign off for the Resource, Mr Bewick taking responsibility for the quality and reliability of the drillhole database and Mr Inwood is responsible for the grade estimate and classification of the resource. Messrs Inwood and Bewick have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they have undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves”.

The information in this report that relates to gamma uranium grades is based on information compiled by David Wilson BSc MSc MAusIMM from 3D Exploration Ltd based in Western Australia.

Holes were logged with an Auslog A75 total count gamma tool. The gamma tool was calibrated in Adelaide at the Department of Water, Land and Biodiversity Conservation in calibration pits constructed under the supervision of the CSIRO. These calibration pits have been shown to provide calibration standards for drill hole logging tools that are comparable to those at the DOE facility in Grand Junction, Colorado USA. The gamma tool measures the total gamma ray flux in the drill hole. Readings were averaged over 2 centimetre intervals and the reading and depth recorded on a portable computer. The gamma ray readings were then converted to equivalent U3O8 readings by using the calibration factors derived in the Adelaide calibration pits. These factors also take into account differences in hole size and water content.

The gamma radiation used to calculate the equivalent U3O8 is predominately from the daughter products in the uranium decay chain. When a deposit is in equilibrium, the measurement of the gamma radiation from the daughter products is representative of the uranium present. It takes approximately 2.4M years for the uranium decay series to reach equilibrium. Thus, it is possible that these daughter products, such as radium, may have moved away from the uranium or not yet have achieved equilibrium if the deposit is younger than 2.4M years. In these cases the measured gamma radiation will over or under estimate the amount of uranium present. At Hillview, the calculated U3O8 from the measured gamma radiation appears to be under reporting, by 20%, the true grades when compared to the ICP assays from 42 holes. Further studies on this apparent disequilibrium are being conducted.

Mr Wilson is a full-time employee of 3D Exploration Pty Ltd, a consultant to Encounter Resources Limited. Mr Wilson 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’.

Messrs Wilson, Inwood and Bewick consent to the inclusion in the report of the matters based on the information compiled by them, in the form and context in which it appears.

Bellah Bore East Qualifying statement

The information in this report that relates to Exploration Results is based on information compiled by Mr Peter Bewick who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Bewick is a full time employee of Encounter Resources Ltd (Encounter) and has sufficient experience which is relevant to the style of mineralisation under consideration to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’.

Resource numbers are rounded to reflect the accuracy of the estimation process and as a consequence exhibit rounding errors. Both Contained U3O8 tonnes and Contained U3O8 pounds are based on contained metal content and at this stage do not consider any mining, metallurgical or economic parameters.

The estimate is based on a cut off of 100ppm U3O8 over a minimum downhole distance of 1m. Shallow aircore drilling has been completed on a nominal 150m by 150m grid. All grade values used in the calculation are based on chemical analysis of representative drill samples. A specific gravity of 2.1 was used in the calculation which is an assumed figure based on a literature search of similar deposits found in Western Australia and Namibia.

The mineralised zone varies in vertical thickness from 1m to 6m. The main uranium mineral identified in drilling is carnotite which is a common mineral found in Surficial style deposit in Western Australia. All mineralised intervals in the modelled area are within 10m of surface and, therefore, are potentially easily mined.

Additional drilling is required determine the extent of the higher grade core of the mineralisation centred on EYN064 (3m@781ppm U3O8 including 1m@2111ppm U3O8). The assay interval of 1m@2111ppm U3O8 in EYN064 was treated as an outlier in the resource model and cut to 500ppm U3O8. If further drilling can extend the high grade area it is anticipated that the resource grade will increase.

Mr Bewick consents to the inclusion in the report of the matters based on the information compiled by him, in the form and context in which it appears.

Lake Way Qualifying statement

The information in this report that relates to Exploration Results is based on information compiled by Mr Peter Bewick who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Bewick is a full time employee of Encounter Resources Ltd (Encounter) and has sufficient experience which is relevant to the style of mineralisation under consideration to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’.

The figures are rounded to reflect the accuracy of the estimation process and as a consequence exhibit rounding errors. Both Contained U3O8 tonnes and Contained U3O8 pounds are based on contained metal content and at this stage do not consider any mining, metallurgical or economic parameters.

The estimate is based on a cut off of 70ppm U3O8 over a minimum downhole distance of 1m. Shallow aircore drilling has been completed on a nominal 200m by 200m grid. All grade values used in the calculation are based on chemical analysis of representative drill samples.

Mr Bewick consents to the inclusion in the report of the matters based on the information compiled by him, in the form and context in which it appears.

E n c o u n t E r r E s o u r c E s l I M I T e D

1 8

Summary of Tenements

==> picture [455 x 35] intentionally omitted <==

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

Area
lease lease Name project Name km [2] Managing Company encounter Interest
----- End of picture text -----

lease	lease Name	project Name	Area km2	Managing Company	encounter Interest

E52/2648	Staten	Bangemall Basin	109.4	Encounter Resources Limited	100%
E52/2654	Tchintaby	Bangemall Basin	106.6	Encounter Resources Limited	100%
ELA69/2966	Beyondie	Bangemall Basin	359.1	Hamelin Resources Pty Ltd	100%
ELA69/2967	Beyondie	Bangemall Basin	499.8	Hamelin Resources Pty Ltd	100%
ELA69/2968	Beyondie	Bangemall Basin	568.1	Hamelin Resources Pty Ltd	100%
E53/1232	Wiluna South	Lake Way South JV	30.17	Avoca Resources Limited	60% of Uranium Rights
E36/769	Yeelirrie South	Yilgarn	48.83	Encounter Resources Limited	100%
ELA37/1148	Darlot	Yilgarn	212.4	Encounter Resources Limited	100%
ELA53/1685	Bellah Bore East	Yilgarn	45.96	Encounter Resources Limited	100%
E51/1127	Hillview	Yilgarn	52.02	Encounter Resources Limited	83%
ELA57/905	Nesbitt Soak	Yilgarn	212	Encounter Resources Limited	100%
ELA57/906	Nesbitt Soak	Yilgarn	212	Encounter Resources Limited	100%
E45/2500	Yeneena	Paterson	163.4	Encounter Operations Pty Ltd	100%
E45/2501	Yeneena	Paterson	41.4	Encounter Operations Pty Ltd	100%
E45/2502	Yeneena	Paterson	216.3	Encounter Operations Pty Ltd	100%
E45/2503	Yeneena	Paterson	76.3	Encounter Operations Pty Ltd	100%
E45/2561	Yeneena	Paterson	86	Encounter Operations Pty Ltd	100%
E45/2657	Yeneena	Paterson	222.8	Encounter Operations Pty Ltd	100%
E45/2658	Yeneena	Paterson	222.8	Encounter Operations Pty Ltd	100%
E45/2805	Yeneena	Paterson	209.7	Encounter Operations Pty Ltd	100%
E45/2806	Yeneena	Paterson	63.7	Encounter Operations Pty Ltd	100%
ELA45/3881	Yeneena	Paterson	114.4	Encounter Operations Pty Ltd	0% earning up to 85%

A N N u A l r e p o r T 2 0 1 2 1 9

Corporate Governance Statement

Introduction

Since the introduction of the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations (“ASX Guidelines” or “the Recommendations”), Encounter Resources Limited (“Company”) has made it a priority to adopt systems of control and accountability as the basis for the administration of corporate governance. Some of these policies and procedures are summarised in this report. Commensurate with the spirit of the ASX Guidelines, the Company has followed each Recommendation where the Board has considered the Recommendation to be an appropriate benchmark for corporate governance practices, taking into account factors such as the size of the Company, the Board, resources available and activities of the Company. Where, after due consideration, the Company’s corporate governance practices depart from the Recommendations, the Board has offered full disclosure of the nature of, and reason for, the adoption of its own practice.

The Company has adopted systems of control and accountability as the basis for the administration of corporate governance. The Board of the Company is committed to administering the policies and procedures with openness and integrity, pursuing the true spirit of corporate governance commensurate with the Company’s needs.

Further information about the Company’s corporate governance practices is set out on the Company’s website at www.enrl.com.au . In accordance with the recommendations of the ASX, information published on the Company’s website includes:

Board Charter Nomination Committee Charter Remuneration Committee Charter Audit Committee Charter Code of Conduct Diversity Policy Policy and Procedure for Selection and Appointment of New Directors Summary of Policy for Trading in Company Securities Summary of Compliance Procedures Procedure for the Selection, Appointment and Rotation of External Auditor Shareholder Communication Strategy Summary of Company’s Risk Management Policy

explanation for Departures from Best practice recommendations

During the Company’s 2011/2012 financial year the Company has complied with the Corporate Governance Principles and the corresponding Best Practice Recommendations as published by the ASX Corporate Governance Council (“Corporate Governance Principles and Recommendations”), other than as stated below. Significant policies and details of any significant deviations from the principles are specified below.

Corporate Governance Council recommendation 1

Lay Solid Foundations for Management and Oversight

Role of the Board of Directors

The role of the Board is to increase shareholder value within an appropriate framework which safeguards the rights and interests of the Company’s shareholders and ensure the Company is properly managed.

In order to fulfil this role, the Board is responsible for the overall corporate governance of the Company including formulating its strategic direction, setting remuneration and monitoring the performance of Directors and executives. The Board relies on senior executives to assist it in approving and monitoring expenditure, ensuring the integrity of internal controls and management information systems and monitoring and approving financial and other reporting.

In complying with Recommendation 1.1 of the Corporate Governance Council, the Company has adopted a Board Charter which clarifies the respective roles of the Board and senior management and assists in decision making processes. A copy of the Board Charter is available on the Company’s website.

E n c o u n t E r r E s o u r c E s l I M I T e D

2 0

Board Processes

An agenda for the meetings has been determined to ensure certain standing information is addressed and other items which are relevant to reporting deadlines and or regular review are scheduled when appropriate. The agenda is regularly reviewed by the Chairman, the Managing Director and the Company Secretary.

Evaluation of Senior Executive Performance

The Company has not complied with Recommendation 1.2 of the Corporate Governance Council. Due to the early stage of development of the Company it is difficult for quantitative measures of performance to be established. As the Company progresses its projects, the board intends to establish appropriate evaluation procedures. The Chairman assesses the performance of the Executive Directors on an informal basis.

Corporate Governance Council recommendation 2

Structure the Board to Add Value

Board Composition

The Constitution of the Company provides that the number of Directors shall not be less than three. There is no requirement for any share holding qualification.

The membership of the Board, its activities and composition is subject to periodic review. The criteria for determining the identification and appointment of a suitable candidate for the Board shall include the quality of the individual, background of experience and achievement, compatibility with other Board members, credibility within the scope of activities of the Company, intellectual ability to contribute to Board duties and physical ability to undertake Board duties and responsibilities.

Directors are initially appointed by the Board and are subject to re election by shareholders at the next general meeting. In any event one third of the Directors are subject to re election by shareholders at each general meeting.

The Board is comprised of four members, two Non-Executive and two Executive. The Non-Executive Directors are Mr Paul Chapman (Chairman) and Dr Jonathan Hronsky. The skills, experience and expertise of all Directors is set out in the Directors’ Report section of this Annual Report.

The Board has assessed the independence of its non-executive directors according to the definition contained within the ASX Corporate Governance Guidelines and has concluded that both of the current Non-Executive Directors meet the recommended independence criteria. As a result the Company complies with Recommendation 2.1 of the Corporate Governance Council. The Board considers that both its structure and composition are appropriate given the size of the Company and that the interests of the Company and its shareholders are well met.

Independent Chairman

The Chairman is considered to be an independent director and as such Recommendation 2.2 of the Corporate Governance Council has been complied with. The Board believes that Mr Chapman is the most appropriate person for the position as Chairman because of his industry experience and proven track record as a public company director.

Roles of Chairman and Chief Executive Officer

The roles of Chairman and Chief Executive Officer are exercised by different individuals, and as such the Company complies with Recommendation 2.3 of the Corporate Governance Council.

Nomination Committee

The Board does not have a separate Nomination Committee comprising of a majority of independent Directors and as such does not comply with Recommendation 2.4 of the Corporate Governance Council. The selection and appointment process for Directors is carried out by the full Board. The Board considers that given the importance of Board composition it is appropriate that all members of the Board partake in such decision making. The Company adopted the Nomination Committee Charter on 8 February 2006.

A N N u A l r e p o r T 2 0 1 2 2 1

Corporate Governance Statement continued

Evaluation of Board Performance

The Company does not have a formal process for the evaluation of the performance of the Board and as such does not comply with Recommendation 2.5 of the Corporate Governance Council. The Board is of the opinion that the competitive environment in which the Company operates will effectively provide a measure of the performance of the Directors, in addition the Chairman assesses the performance of the Board, individual directors and key executives on an informal basis.

Education

All Directors are encouraged to attend professional education courses relevant to their roles.

Independent Professional Advice and Access to Information

Each Director has the right to access all relevant information in respect of the Company and to make appropriate enquiries of senior management. Each Director has the right to seek independent professional advice at the Company’s expense, subject to the prior approval of the Chairman, which shall not be unreasonably withheld.

Corporate Governance Council recommendation 3

Promote Ethical and Responsible Decision Making

The Board actively promotes ethical and responsible decision making.

Code of Conduct

The Board has adopted a Code of Conduct that applies to all employees, executives and Directors of the Company, and as such complies with Recommendation 3.1 of the Corporate Governance Council. This Code addresses expectations for conduct in accordance with legal requirements and agreed ethical standards. A copy of the Code is available on the Company’s website.

Guidelines for Trading in Company Securities

The Board has committed to ensuring that the Company, its Directors and executives comply with their legal obligations as well as conducting their business in a transparent and ethical manner. The Board has adopted a procedure on dealing in the Company’s securities by directors, officers and employees which prohibits dealing in the Company’s securities when those persons possess inside information.

The guidelines also provide that the acknowledgement of the Chairman or the Board should be obtained prior to trading. A summary of the Guidelines are available on the Company’s website.

The Company’s policy restricts, notwithstanding exceptional circumstances, the trading in Company’s securities by those individuals covered by the policy to trading windows that are open for 10 days following the hosting of General Meetings of the Company, the release of annual, half yearly results and quarterly reports and after any other public announcement on ASX.

Diversity

The Board has adopted a diversity policy that details the purpose of the policy and the employee selection and appointment guidelines, consistent with the recommendations of the Corporate Governance Council. The Board believes that the adoption of an efficient diversity policy has the effect of broadening the employee recruitment pool, supporting employee retention, including different perspectives and is socially and economically responsible governance practice.

The Company employs new employees and promotes current employees on the basis of performance, ability and attitude. The Board is continually reviewing its practices with a focus on ensuring that the selection process at all levels within the organisation is formal and transparent and that the workplace environment is open, fair and tolerant.

E n c o u n t E r r E s o u r c E s l I M I T e D

2 2

The Company, in keeping with the recommendations of the Corporate Governance Council provides the following information regarding the proportion of gender diversity in the organisation as at 30 June 2012:

	proportion of female / total number of persons employed
Females employed in the Company as a whole	5/13
Females employed in the Company in senior positions	1/1
Females appointed as a Director of the Company	0/4

The recommendations of the Corporate Governance Council relating to reporting require a Board to set measurable objectives for achieving diversity within the organisation, and to report against them on an annual basis. The Company has implemented measurable objectives as follows:

==> picture [455 x 33] intentionally omitted <==

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

objective
Measurable objective Satisfied Comment
----- End of picture text -----

Measurable objective	objective Satisfed	Comment

Adoption and promotion of a Formal Diversity Policy	Yes	The Company has adopted a formal diversity policy which has been made publicly available via the ASX and the Company’s website.
To ensure Company policies are consistent with and aligned with the goals of the Diversity Policy	Yes	The Company’s selection, remuneration and promotion practices are merit based and as such are consistent with the goals of the Company’s Diversity Policy.
To provide fexible work and salary arrangements to accommodate family commitments, study and self-improvement goals, cultural traditions and other personal choices of current and potential employees.	Yes	The Company does, where considered reasonable, and without prejudice, accommodate requests for fexible working arrangements.
To implement clear and transparent policies governing reward and recognition practices.	Yes	The Company grants reward and promotion based on merit and responsibility as part of its annual and ongoing review processes.
To provide relevant and challenging professional development and training opportunities for all employees.	Yes	The Company seeks to continually encourage self-improvement in all employees, irrespective of seniority, ability or experience, through external and internal training courses, regular staff meetings and relevant on job mentoring.

The Company has not implemented specific measurable objectives regarding the proportion of females to be employed within the organisation or implement requirements for a proportion of female candidates for employment and Board positions. The Board considers that the setting of quantitative gender based measurable targets is not consistent with the merit and ability based policies currently implemented by the Company.

The Board will consider the future implementation of gender based diversity measurable objectives when more appropriate to the size and nature of the Company’s operations.

A N N u A l r e p o r T 2 0 1 2 2 3

Corporate Governance Statement continued

Corporate Governance Council recommendation 4

Safeguarding Integrity in Financial Reporting

Audit Committee

During the 2012 financial year the Board formed a separate Audit Committee and as such complies with Recommendation 4.1 of the Corporate Governance Council.

The Audit Committee is comprised of the Company’s Non-Executive Directors, who are also considered to be independent, and the Committee is chaired by Dr Jon Hronsky who is not the Chairman of the Board. The Board believes that with the composition of the Audit Committee being of Independent Non-Executive Directors, the Company is able to meet the objectives of Recommendation 4.2, and discharge its duties in this area. The relevant experience of members is detailed in the Directors’ section of the Directors’ Report.

The Audit Committee has adopted a formal Audit Committee Charter which sets its role and responsibilities, as per Recommendation 4.3. A copy of the Audit Committee Charter is available on the Company’s website.

Financial reporting

The Board relies on senior executives to monitor the internal controls within the Company. Financial performance is monitored on a regular basis by the Managing Director who reports to the Board at the scheduled Board meetings.

The Board reviews the performance of the external auditors on an annual basis and meets with them during the year to review findings and assist with Board recommendations.

The Audit Committee are available for correspondence with the auditors of the Company.

Corporate Governance Council recommendation 5

Make Timely and Balanced Disclosure

Continuous Disclosure

The Board is committed to the promotion of investor confidence by providing full and timely information to all security holders and market participants about the Company’s activities and to comply with the continuous disclosure requirements contained in the Corporations Act 2001 and the Australian Securities Exchange’s Listing Rules. The Company has established written policies and procedures, designed to ensure compliance with the ASX Listing Rule Requirements, in accordance with Recommendation 5.1 of the Corporate Governance Council.

Continuous disclosure is discussed at all regular Board meetings and on an ongoing basis the Board ensures that all activities are reviewed with a view to the necessity for disclosure to security holders.

In accordance with ASX Listing Rules the Company Secretary is appointed as the Company’s disclosure officer.

Corporate Governance Council recommendation 6

Respect the Rights of Shareholders

Communications

The Board fully supports security holder participation at general meetings as well as ensuring that communications with security holders are effective and clear. This has been incorporated into a formal shareholder communication strategy, in accordance with Recommendation 6.1 of the Corporate Governance Council. A copy of the policy is available on the Company’s website.

In addition to electronic communication via the ASX website, the Company publishes all significant announcements together with all quarterly reports. These documents are available in both hardcopy on request and on the Company website at www.enrl.com.au

Shareholders are able to pose questions on the audit process and the financial statements directly to the independent auditor who attends the Company Annual General Meeting for that purpose.

E n c o u n t E r r E s o u r c E s l I M I T e D

2 4

Corporate Governance Council recommendation 7

Recognise and Manage Risk

Risk management policy

The Board has adopted a risk management policy that sets out a framework for a system of risk management and internal compliance and control, whereby the Board delegates day-to-day management of risk to the Managing Director, therefore complying with Recommendation 7.1 of the Corporate Governance Council. The Board is responsible for supervising management’s framework of control and accountability systems to enable risk to be assessed and managed.

Risk management and the internal control system

The Managing Director, with the assistance of senior management as required, has responsibility for identifying, assessing, treating and monitoring risks and reporting to the Board on risk management.

In order to implement the Company’s Risk Management Policy, it was considered important that the Company establish an internal control regime in order to:

n Assist the Company to achieve it’s strategic objectives;
n Safeguard the assets and interests of the Company and its stakeholders; and
n Ensure the accuracy and integrity of external reporting.

Key identified risks to the business are monitored on an ongoing basis as follows:

n Business risk management

The Company manages its activities within budgets and operational and strategic plans.

n Internal controls

The Board has implemented internal control processes typical for the Company’s size and stage of development. It requires the senior executives to ensure the proper functioning of internal controls and in addition it obtains advice from the external auditors as considered necessary.

n Financial reporting

Directors approve an annual budget for the Company and regularly review performance against budget at Board Meetings.

n operations review

Members of the Board regularly visit the Company’s exploration project areas, reviewing both geological practices, and environmental and safety aspects of operations.

n environment and safety

The Company is committed to ensuring that sound environmental management and safety practices are maintained on its exploration activities.

The Company’s risk management strategy is evolving and will be an ongoing process and it is recognised that the level and extent of the strategy will develop with the growth and change in the Company’s activities.

Risk Reporting

As the Board has responsibility for the monitoring of risk management it has not required a formal report regarding the material risks and whether those risks are managed effectively therefore not complying with Recommendation 7.2 of the Corporate Governance Council. The Board believes that the Company is currently effectively communicating its significant and material risks to the Board and its affairs are not of sufficient complexity to justify the implementation of a more formal system for identifying, assessing monitoring and managing risk in the Company.

The Company does not have an internal audit function.

A N N u A l r e p o r T 2 0 1 2

2 5

Corporate Governance Statement continued

Managing Director and Chief Financial Officer Written Statement

The Board requires the Managing Director and the Company Secretary provide a written statement that the financial statements of company present a true and fair view, in all material aspects, of the financial position and operational results and have been prepared in accordance with Australian Accounting Standards and the Corporation Act. The Board also requires that the Managing Director and Company Secretary provide sufficient assurance that the declaration is founded on a sound system of risk management and internal control, and that the system is working effectively.

The declarations have been received by the Board, in accordance with Recommendation 7.3 of the Corporate Governance Council.

Corporate Governance Council recommendation 8 Remunerate Fairly and Responsibly

Remuneration Committee

The Board does not have a separate Remuneration Committee and as such does not comply with Recommendation 8.1 of the Corporate Governance Council. Remuneration arrangements for Directors are determined by the full Board. The Board is also responsible for setting performance criteria, performance monitors, share option schemes, superannuation, termination and retirement entitlements, and professional indemnity and liability insurance cover.

The Board considers that the Company is effectively served by the full Board acting as a whole in remuneration matters, and ensures that all matters of remuneration continue to be decided upon in accordance with Corporations Act requirements, by ensuring that no Director participates in any deliberations regarding their own remuneration or related issues.

Distinguish Between Executive and Non-Executive Remuneration

The Company does distinguish between the remuneration policies of its Executive and Non-Executive Directors in accordance with Recommendation 8.2 of the Corporate Governance Council.

Executive Directors receive salary packages which may include performance based components, designed to reward and motivate, including the granting of share options, subject to shareholder approval.

Non-Executive Directors receive fees agreed on an annual basis by the Board, within total Non-Executive remuneration limits voted upon by shareholders at Annual General Meetings. Share options which were issued to a Non-Executive Director, were subject to shareholder approval. The grant of options was deemed appropriate by the Board to provide an incentive and to reward the Director.

E n c o u n t E r r E s o u r c E s l I M I T e D

2 6

Directors’ Report

The Directors present their report on Encounter Resources Limited (the Company) and the entities it controlled (the Group) at the end of, and during the year ended 30 June 2012.

Directors

The names and details of the Directors of Encounter Resources Limited during the financial year and until the date of this report are:

paul Chapman – B.Comm, ACA, Grad. Dip. Tax, CFTp(Snr), MAICD, MAusIMM

Non-Executive Chairman appointed 7 October 2005

Mr Chapman is a chartered accountant with over twenty years experience in the resources sector gained in Australia and the United States. Mr Chapman has experience across a range of commodity businesses including gold, nickel, uranium, manganese, bauxite/alumina and oil/gas. Mr Chapman has held managing director and other senior management roles in public companies of various sizes. Mr Chapman is the chairman of ASX listed gold producer Sliver Lake Resources Ltd and minerals explorer Rex Minerals Ltd.

Will robinson – B.Comm, MAusIMM

Managing Director (Executive) appointed 30 June 2004 Mr Robinson is a resources industry commercial and finance specialist with over eighteen years experience in commercial management, transaction structuring and negotiation, business strategy development and London Metals Exchange metals trading. Mr Robinson held various senior commercial positions with WMC in Australia and North America from 1994 to 2003. Mr Robinson has extensive experience in the sale and distribution of commodities and was Vice President – Marketing for WMC’s nickel business from 2001 to 2003. Mr Robinson founded Encounter Resources Limited in 2004 and has overseen the development of the Company as its Managing Director. Mr Robinson is the President of the Association of Mining and Exploration Companies (AMEC).

peter Bewick – B.eng (Hons), MAusIMM

Exploration Director (Executive) appointed 7 October 2005

Mr Bewick is an experienced geologist and has held a number of senior mine and exploration geological roles during a fourteen year career with WMC. These roles include Exploration Manager and Geology Manager of the Kambalda Nickel Operations, Exploration Manager for St Ives Gold Operation, Exploration Manager for WMC’s Nickel Business Unit and Exploration Manager for North America based in Denver, Colorado. Whilst at WMC, Mr Bewick gained extensive experience in project generation

for a range of commodities including nickel, gold and bauxite. Mr Bewick has been associated with a number of brownfields exploration successes at Kambalda and with the greenfield Collurabbie Ni-Cu-PGE discovery.

Jonathan Hronsky – BAppSci, phD, MAusIMM, FSeG

Non-executive director appointed 10 May 2007

Dr Hronsky has more than twenty five years of experience in the mineral exploration industry, primarily focused on project generation, technical innovation and exploration strategy development. Dr Hronsky has particular expertise in targeting for nickel sulfide deposits, but has worked across a diverse range of commodities. His work led to the discovery of the West Musgrave nickel sulfide province in Western Australia. Dr Hronsky was most recently Manager-Strategy & Generative Services for BHP Billiton Mineral Exploration. Prior to that, he was Global Geoscience Leader for WMC Resources Ltd. He is currently a Director of exploration consulting group Western Mining Services and Chairman of the board of management of the Centre for Exploration Targeting at the University of Western Australia.

Company Secretary

Kevin Hart – B.Comm, FCA

Mr Hart is a Chartered Accountant and was appointed to the position of Company Secretary on 4 November 2005. He has over 20 years experience in accounting and the management and administration of public listed entities in the mining and exploration industry.

He is currently a partner in an advisory firm, Endeavour Corporate, which specialises in the provision of company secretarial and accounting services to ASX listed entities.

Dan Travers – BSc (Hons), FCCA

Mr Travers is a Fellow of the Association of Chartered Certified Accountants and was appointed to the position of Joint Company Secretary on 20 November 2008. He is an employee of Endeavour Corporate, which specialises in the provision of company secretarial and accounting services to ASX listed entities in the mining and exploration industry.

A N N u A l r e p o r T 2 0 1 2 2 7

Directors’ Report continued

Directors’ Interests

As at the date of this report the Directors’ interests in shares and unlisted options of the Company are as follows:

	Directors’ Interests	Directors’ Interests	Options vested at
Director	in Ordinary Shares	in Unlisted Options	the reporting date
P Chapman	5,394,900	–	–
W Robinson	22,096,900	–	–
P Bewick	4,975,000	4,300,000	4,300,000
J Hronsky	–	1,300,000	1,300,000

Included in the Directors’ interests in Unlisted Options, there are 5,600,000 options that are vested and exercisable as at the date of signing this report.

Directors’ Meetings

The number of meetings of the Company’s Directors held during the year ended 30 June 2012, and the number of meetings attended by each Director are as follows:

	Board of Directors’ Meetings	Board of Directors’ Meetings
Director	Held	Attended
P Chapman	8	8
W Robinson	8	8
P Bewick	8	8
J Hronsky	8	8

review of Activities

exploration

Exploration activities for the financial year have been focussed on the Company’s Yeneena Project in the Paterson Province, principally at the BM1 and BM7 copper discoveries, T4 copper prospect and the BM2 copper/zinc prospect. The Yeneena Project covers a 1,400km[2] area of the Paterson Province in Western Australia.

Full details of the Company’s exploration activities are available in the Exploration Review in the Annual Report.

principal Activities

The principal activity of the Company during the financial year was mineral exploration in Western Australia.

There were no significant changes in these activities during the financial year.

results of operations

The consolidated net loss after income tax for the financial year was $758,706 (2011: $4,933,106).

Included in the consolidated loss for the current year is a write-off of deferred exploration expenditure totalling $234,086 (2011: $2,097,750).

Dividends

No dividend has been paid since the end of the previous financial year and no dividend is recommended for the current year.

Financial position

At the end of the financial year the Group had $5,185,337 (2011: $7,241,296) in cash and at call deposits. Capitalised mineral exploration and evaluation expenditure is $15,219,430 (2011: $7,535,748).

Expenditure was principally focused on the exploration for base metals at the Company’s Yeneena Project in the Paterson Province of Western Australia.

Significant Changes in the State of Affairs

During the year the Company completed a placement of 14,850,000 shares at $0.40 each, raising $5,940,000 before costs.

Other than the above, there have been no significant changes in the state of affairs of the Company and Group during or since the end of the financial year.

E n c o u n t E r r E s o u r c E s l I M I T e D

2 8

options over unissued Capital

unlisted options

As at the date of this report 8,025,000 unissued ordinary shares of the Company are under option as follows:

Number of Options Granted	Exercise Price	Expiry Date
500,000	53.5 cents	30 November 2012
400,000	55 cents	30 November 2012
400,000	70 cents	30 November 2012
200,000	30 cents	30 June 2013
5,425,000	$1.35	22 November 2014
550,000	80 cents	30 September 2015
550,000	40 cents	31 May 2016

All options on issue at the date of this report are vested and exercisable.

During the financial year the Company granted 1,250,000 unlisted options (2011: 5,500,000) over unissued shares to employees, directors and consultants of the Company.

During the year 50,000 options were cancelled (2011: 175,000) on the cessation of employment.

During the financial year no (2011: 1,200,000) ordinary shares were issued on the exercise of options.

Since the end of the financial year no options have been issued by the Company. No options have been exercised since the end of the financial year. Since the end of the financial year 50,000 options have been cancelled due to the lapse of exercise period.

Options do not entitle the holder to participate in any share issue of the Company or any other body corporate.

The holders of unlisted options are not entitled to any voting rights until the options are exercised into ordinary shares.

Matters Subsequent to the end of the Financial Year

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company to affect substantially the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years.

likely Developments and expected results of operations

Disclosure of any further information has not been included in this report because, in the reasonable opinion of the Directors to do so would be likely to prejudice the business activities of the Group and is dependent upon the results of the future exploration and evaluation.

environmental regulation and performance

The Group holds various exploration licences to regulate its exploration activities in Australia. These licences include conditions and regulations with respect to the rehabilitation of areas disturbed during the course of its exploration activities.

So far as the Directors are aware, all exploration activities have been undertaken in compliance with all relevant environmental regulations.

A N N u A l r e p o r T 2 0 1 2

2 9

Directors’ Report continued

remuneration report (Audited)

remuneration policy

Remuneration levels are competitively set to attract and retain appropriately qualified and experienced Directors and senior executives. Remuneration packages include fixed remuneration with bonuses or equity based remuneration entirely at the discretion of the Board based on the performance of the Company.

Total remuneration for all Non-Executive Directors was last voted on by shareholders on 26 November 2007, whereby it is not to exceed $200,000 per annum. Non-Executive Directors do not receive bonuses. Directors’ fees cover all main Board activities.

Short-term incentive bonus

The Non-Executive Directors set the key performance indicators (KPI) for the Key Management Personnel. The KPI’s include measures related to the Group and the individual, and may include safety, environmental, operational performance and financial measures. The measures are chosen to directly align the individual’s reward to the KPI’s of the Group and to its strategy and performance.

The objectives vary with position and responsibility and include measures such as achieving strategic and funding targets, safety and environmental performance, exploration and other operational success. All performance objectives are weighted when calculating the maximum bonus achievable.

At the end of each financial year the Non-Executive Directors assesses the performance of the Group against the KPI’s set at the beginning of the financial year. A percentage of the pre-determined maximum bonus amount is awarded depending on results. No bonus is awarded where performance falls below the minimum requirement.

There were no KPI’s set for the financial year ended 30 June 2012. The measurement of KPI’s and Key Management Personnel’s individual performance will be assessed for the financial year ended 30 June 2013, and the Non-Executive Directors will recommend the appropriate level of bonus to the Board.

The method of assessment provides the Non-Executive Directors with an objective measure of Key Management Personnel

performance.

Details of remuneration for Key Management personnel

During the year there were no senior executives which were employed by the Company for whom disclosure is required. Details of the remuneration of each Director of the Company are as follows:

Directors	Value of Share based Base Superannuation Other Options payments Emolument Contributions Benefits Granted Total as % of $ $ $ $ $ remuneration
2012 P Chapman W Robinson P Bewick J Hronsky Total 2011 P Chapman W Robinson P Bewick J Hronsky Total	60,000 5,400 – – 65,400 – 280,000 25,200 – – 305,200 – 260,000 23,400 – – 283,400 – 50,000 4,500 – – 54,500 –
	650,000 58,500 – – 708,500 – 52,000 4,608 – – 56,608 – 250,275 22,525 – – 272,800 – 231,000 20,790 – 1,509,449 1,761,239 85.7% 46,200 4,158 – 345,017 395,375 87.3%
	579,475 52,081 – 1,854,466 2,486,022 74.6%

E n c o u n t E r r E s o u r c E s l I M I T e D

3 0

executive employment Agreements

Remuneration and other terms of employment for the Managing Director and Exploration Director are set out in their respective Executive Employment Agreements. Both employment contracts are for a two year term commencing 23 January 2011 and are subject to a three month notice of termination of contract.

Payment of termination benefits by the employer, other than amongst other things for gross misconduct is equal to the payment limit set by Sub-section 200G of the Corporations Act 2001.

unlisted options

No options over unissued shares were issued to Key Management Personnel of the Company during the year (2011: 4,300,000).

No options have been issued to Directors or Key Management Personnel since the end of the financial year.

No options were exercised by Key Management Personnel during or since the end of the financial year.

end of remuneration report

officer’s Indemnities and Insurance

During the year the Company paid an insurance premium to insure certain officers of the Company. The officers of the Company covered by the insurance policy include the Directors named in this report.

The Directors and Officers Liability insurance provides cover against all costs and expenses that may be incurred in defending civil or criminal proceedings that fall within the scope of the indemnity and that may be brought against the officers in their capacity as officers of the Company. The insurance policy does not contain details of the premium paid in respect of individual officers of the Company. Disclosure of the nature of the liability cover and the amount of the premium is subject to a confidentiality clause under the insurance policy.

The Company has not provided any insurance for an auditor of the Company.

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 Group, or to intervene in any proceedings to which the Company or Group is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the Company or Group with leave of the Court under section 237 of the Corporations Act 2001.

Corporate Governance

In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of the Company support and have adhered to the principles of corporate governance. The Company’s corporate governance statement is contained in the Annual Report.

A N N u A l r e p o r T 2 0 1 2

3 1

Directors’ Report continued

Non-audit Services

During the year Crowe Horwath the Company’s auditor, has not performed any other services in addition to their statutory duties:

statutory duties:
	2012 2011 $ $
Total remuneration paid to auditors during the fnancial year: Audit and review of the Company’s fnancial statements Other services Total	39,240 32,000 – –
	39,240 32,000

The board considers any non-audit services provided during the year by the auditor and satisfies itself that the provision of any non-audit services during the year by the auditor is compatible with, and does not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

n all non-audit services are reviewed by the board to ensure they do not impact the impartiality and objectivity of the auditor; and
n the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants , as they do not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.

Auditor’s Independence Declaration

A copy of the Auditor’s Independence Declaration as required under Section 307C of the Corporations Act is set out on the following page.

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

Dated at Perth this 21st day of September 2012.

==> picture [94 x 36] intentionally omitted <==

W robinson Managing Director

E n c o u n t E r r E s o u r c E s l I M I T e D

3 2

==> picture [190 x 32] intentionally omitted <==

AUDITOR’S INDEPENDENCE DECLARATION

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Encounter Resources Limited 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 auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.

==> picture [236 x 37] intentionally omitted <==

CROWE HORWATH PERTH

==> picture [96 x 61] intentionally omitted <==

CYRUS PATELL Partner

Signed at Perth, 21 September 2012

Crowe Horwath Perth is a WHK Group Firm and a member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath is a separate and independent legal entity.

A N N u A l r e p o r T 2 0 1 2

3 3

Consolidated Statement of Comprehensive Income

For the financial year ended 30 June 2012

Revenue Total revenue Employee expenses Employee expenses recharged to exploration Equity based remuneration expense Non-executive Director’s fees Depreciation expense Corporate expenses Joint venture administration costs recharged Administration and Other expenses Exploration costs written off and expensed loss before income tax Income tax beneft/(expense) loss after tax Other comprehensive income Total comprehensive income for the year Earnings per share for loss attributable to the ordinary equity holders of the Company Basic earnings/(loss) per share Diluted earnings/(loss) per share	Note	Consolidated 2012 2011 $ $
	5 17 6 6 7 17 27 27	371,715 337,741
		371,715 337,741 (1,417,955) (1,038,130) 1,143,686 838,006 (207,409) (2,351,643) (110,000) (97,400) (11,509) (16,158) (87,823) (125,078) 642 34 (426,153) (382,728) (234,086) (2,097,750)
		(978,892) (4,933,106) 220,186 –
		(758,706) (4,933,106)
		– –
		(758,706) (4,933,106)
		Cents Cents
		(0.7) (5.2)
		(0.7) (5.2)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

E n c o u n t E r r E s o u r c E s l I M I T e D

3 4

Consolidated Statement of Financial Position

As at 30 June 2012

Current assets Cash and cash equivalents Trade and other receivables Other current assets Total current assets Non-current assets Property, plant and equipment Capitalised mineral exploration and evaluation expenditure Total non-current assets Total assets Current liabilities Trade and other payables Employee benefts Total current liabilities Total liabilities Net assets equity Issued capital Accumulated losses Equity remuneration reserve Total equity	Note	Consolidated 2012 2011 $ $
	8 9(a) 9(b) 11 12 14(a) 14(b) 15 17 17	5,185,337 7,241,296 407,678 121,144 77,994 98,584
		5,671,009 7,461,024
		381,585 337,195 15,219,430 7,535,748
		15,601,015 7,872,943
		21,272,024 15,333,967
		1,308,509 482,966 41,692 37,879
		1,350,201 520,845
		1,350,201 520,845
		19,921,823 14,813,122
		27,320,545 21,660,547 (10,178,761) (9,448,420) 2,780,039 2,600,995
		19,921,823 14,813,122

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

A N N u A l r e p o r T 2 0 1 2 3 5

Consolidated Statement of Changes in Equity

For the financial year ended 30 June 2012

		Consolidated	Consolidated
			equity
	Issued	Accumulated	remuneration
	capital	losses	reserve	Total
	$	$	$	$
2011
Balance at the start of the fnancial year	12,745,067	(4,742,176)	476,214	8,479,105
Comprehensive income for the fnancial year	–	(4,933,106)	–	(4,933,106)
Movement in equity remuneration reserve	–	226,862	2,124,781	2,351,643
Transactions with equity holders
in their capacity as equity holders:
Shares issued	8,915,480	–	–	8,915,480
Balance at the end of the fnancial year	21,660,547	(9,448,420)	2,600,995	14,813,122
2012
Balance at the start of the fnancial year	21,660,547	(9,448,420)	2,600,995	14,813,122
Comprehensive income for the fnancial year	–	(758,706)	–	(758,706)
Movement in equity remuneration reserve	–	28,365	179,044	207,409
Transactions with equity holders
in their capacity as equity holders:
Shares issued	5,659,998	–	–	5,659,998
Balance at the end of the fnancial year	27,320,545	(10,178,761)	2,780,039	19,921,823

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

E n c o u n t E r r E s o u r c E s l I M I T e D

3 6

Consolidated Statement of Cash Flows

For the financial year ended 30 June 2012

Cash fows from operating activities State Government funded drilling rebate R&D tax concession tax refund Interest received Payments to suppliers and employees Net cash used in operating activities Cash fows from investing activities Payments for exploration and evaluation Payments for plant and equipment Net cash used in investing activities Cash fows from fnancing activities Proceeds from the issue of shares Payments for share issue costs Net cash provided by fnancing activities Net increase/(decrease) in cash held Cash at the beginning of the fnancial year Cash at the end of the fnancial year	Note	Consolidated 2012 2011 $ $
	26 8(a)	130,552 – 10,936 171,542 241,163 295,885 (838,919) (754,242)
		(456,268) (286,815)
		(7,072,265) (3,504,287) (187,425) (257,726)
		(7,259,690) (3,762,013)
		5,940,000 9,446,640 (280,001) (531,161)
		5,659,999 8,915,479
		(2,055,959) 4,866,651 7,241,296 2,374,645
		5,185,337 7,241,296

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

A N N u A l r e p o r T 2 0 1 2

3 7

For the financial year ended 30 June 2012

Notes to the Financial Statements

Note 1 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes financial statements for the consolidated entity consisting of Encounter Resources Limited and its subsidiaries (“Group”).

(a) Basis of preparation

This general purpose financial report has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

The financial report is presented in Australian dollars and all values are rounded to the nearest dollar.

The separate financial statements of the parent entity have not been presented within this financial report as permitted by the Corporations Act 2001.

The financial report of the Group was authorised for issue in accordance with a resolution of Directors on 21 September 2012.

Statement of Compliance

The consolidated financial report of Encounter Resources Limited complies with Australian Accounting Standards, which include Australian Equivalents to International Financial Reporting Standards (AIFRS), in their entirety. Compliance with AIFRS ensures that the financial report also complies with International Financial Reporting Standards (IFRS) in their entirety.

Adoption of New and Revised Standards –

Changes in accounting policies on initial application of accounting standards

In the year ended 30 June 2012, the Group has reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period. It has been determined by the Group that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change is necessary to Group accounting policies other than those set out below.

The Group has also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2012. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to Group accounting policies.

Reporting basis and conventions

These financial statements have been prepared under the historical cost convention, and on an accrual basis.

Critical accounting estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3.

Principles of consolidation

The financial statements of subsidiary companies are included in the consolidated financial statements from the date control commences until the date control ceases. The financial statements of subsidiary companies are prepared for the same reporting period as the parent company, using consistent accounting policies.

Inter-entity balances resulting from transactions with or between controlled entities are eliminated in full on consolidation. Investments in subsidiary companies are accounted for at cost in the individual financial statements of the Company.

E n c o u n t E r r E s o u r c E s l I M I T e D

3 8

Note 1 Summary of significant accounting policies continued

(b) Segment reporting

Operating segments are identified and segment information disclosed, where appropriate, on the basis of internal reports reviewed by the Company’s board of directors, being the Group’s Chief Operating Decision Maker, as defined by AASB 8. Adoption of AASB 8 by the Group has not resulted in a redefinition of previously reported operating segments.

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, allowances and amounts collectable on behalf of third parties.

Interest income

Interest income is recognised on a time proportion basis and is recognised as it accrues.

(d) Income tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to the temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary timing differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantially enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to those timing differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Amounts receivable from the Australian Tax Office in respect of research and development tax concession claims are recognised in the year in which the expenditure on which the claim was incurred.

(e) leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases (Note 23). Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight line basis over the period of the lease.

A N N u A l r e p o r T 2 0 1 2

3 9

For the financial year ended 30 June 2012

Notes to the Financial Statements continued

Note 1 Summary of significant accounting policies continued

(f) Impairment of assets

Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non financial assets, other than goodwill, that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

(g) Cash and cash equivalents

For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(h) Fair value estimation

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

(i) property, plant and equipment

Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the assets.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation of property, plant and equipment is calculated using the straight line and diminishing value methods to allocate their cost, net of residual values, over their estimated useful lives, as follows:

Field equipment 33.3% Office equipment 33.3% Leasehold improvements Over the term of the lease

The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet 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 (Note 1(f)). Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement.

(j) Mineral exploration and evaluation expenditure

Mineral exploration and evaluation expenditure is written off as incurred or accumulated in respect of each identifiable area of interest and capitalised. These costs are carried forward only if they relate to an area of interest for which rights of tenure are current and in respect of which:

n such costs are expected to be recouped through the successful development and exploitation of the area of interest, or alternatively by its sale; or
n exploration and/or evaluation activities in the area have not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active or significant operations in, or in relation to, the area of interest are continuing.

E n c o u n t E r r E s o u r c E s l I M I T e D

4 0

Note 1 Summary of significant accounting policies continued

(j) Mineral exploration and evaluation expenditure continued

In the event that an area of interest is abandoned or if the Directors consider the expenditure to be of reduced value, accumulated costs carried forward are written off in the year in which that assessment is made. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Immediate restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are expensed as incurred and treated as exploration and evaluation expenditure. Exploration activities resulting in future obligations in respect of restoration costs result in a provision to be made by capitalising the estimated costs, on a discounted cash basis, of restoration and depreciating over the useful life of the asset. The unwinding of the effect of the discounting on the provision is recorded as a finance cost in the income statement.

(k) Joint ventures

Interests in joint ventures have been brought to account by including the appropriate share of the relevant assets, liabilities and costs of the joint ventures in their relevant categories in the financial statements. Details of these interests are shown in Note 13.

(l) Trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and usually paid within 30 days of recognition.

(m) employee benefits

Wages, salaries and annual leave.

Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

Long service leave.

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future salaries, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Share based payments.

Share based compensation payments are made available to Directors and employees.

The fair value of options granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.

The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the option. A discount is applied, where appropriate, to reflect the non-marketability and non-transferability of unlisted options, as the Black-Scholes option pricing model does not incorporate these factors into its valuation.

A N N u A l r e p o r T 2 0 1 2

4 1

For the financial year ended 30 June 2012

Notes to the Financial Statements continued

Note 1 Summary of significant accounting policies continued

(m) employee benefits continued

The fair value of the options granted is adjusted to reflect market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate.

Upon the exercise of options, the balance of the share based payments reserve relating to those options is transferred to share capital and the proceeds received, net of any directly attributable transaction costs, are credited to share capital.

Upon the cancellation of options on expiry of the exercise period, or lapsing of vesting conditions, the balance of the share based payments reserve relating to those options is transferred to accumulated losses.

(n) Issued capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(o) earnings per share

(i) Basic earnings per share

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

(ii) Diluted earnings per share

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

(p) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as a part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the taxation authority, are presented as operating cash flow.

(q) Comparative figures

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

E n c o u n t E r r E s o u r c E s l I M I T e D

4 2

Note 1 Summary of significant accounting policies continued

(r) Investments and other financial assets

Recognition

When financial assets are recognised initially, they are measured at fair value, plus in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end.

All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the marketplace.

(i) Financial assets at fair value through profit or loss

Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments held for trading are recognised in profit or loss.

(ii) Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold to maturity. Investments included to be held for an undefined period are not included in this classification. Investments that are intended to be held-to-maturity, such as bonds, are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process.

(iii) 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 stated at amortised cost using the effective interest rate method.

(iv) Financial liabilities

Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation.

(s) Fair value estimation

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods:

Investments in equity and debt securities

The fair value of financial assets at fair value through profit or loss, held to maturity investments and available for sale financial assets is determined by reference to their quoted bid price at the reporting date. The fair value of held to maturity investments is determined for disclosure purposes only. For investments with no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions, reference to the current market value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models.

Trade and other receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

A N N u A l r e p o r T 2 0 1 2

4 3

Notes to the Financial Statements continued

For the financial year ended 30 June 2012

Note 2 Financial risk management

The Group has exposure to a variety of risks arising from its use of financial instruments. This note presents information about the Company’s exposure to the specific risks, and the policies and processes for measuring and managing those risks. The Board of Directors has the overall responsibility for the risk management framework and has adopted a Risk Management Policy.

(a) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from transactions with customers and investments.

Trade and other receivables

The nature of the business activity of the Group does not result in trading receivables. The receivables that the Group does experience through it’s normal course of business are short term and the most significant recurring by quantity is receivable from the Australian Taxation Office, the risk of non-recovery of receivables from this source is considered to be negligible.

Cash deposits

The Directors believe any risk associated with the use of predominantly only one bank is addressed through the use of at least an A-rated bank as a primary banker and by the holding of a portion of funds on deposit with alternative A-rated institutions. Except for this matter the Group currently has no significant concentrations of credit risk.

(b) liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group manages its liquidity risk by monitoring its cash reserves and forecast spending. Management is cognisant of the future demands for liquid finance resources to finance the Company’s current and future operations, and consideration is given to the liquid assets available to the Company before commitment is made to future expenditure or investment.

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising any return.

Interest rate risk

The Group has significant cash assets which may be susceptible to fluctuations in changes in interest rates. Whilst the Group requires the cash assets to be sufficiently liquid to cover any planned or unforeseen future expenditure, which prevents the cash assets being committed to long term fixed interest arrangements; the Group does mitigate potential interest rate risk by entering into short to medium term fixed interest investments.

The Group does not have any direct contact with foreign exchange or equity risks other than their effect on the general economy.

E n c o u n t E r r E s o u r c E s l I M I T e D

4 4

Note 3 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances.

Accounting for capitalised exploration and evaluation expenditure

The Group’s accounting policy is stated at 1(j). There is some subjectivity involved in the carrying forward as capitalised or writing off to the income statement exploration and evaluation expenditure, however management give due consideration to areas of interest on a regular basis and are confident that decisions to either write off or carry forward such expenditure reflect fairly the prevailing situation.

Accounting for share based payments

The values of amounts recognised in respect of share based payments have been estimated based on the fair value of the equity instruments granted. Fair values of options issued are estimated by using an appropriate option pricing model. There are many variables and assumptions used as inputs into the models. If any of these assumptions or estimates were to change this could have a significant effect on the amounts recognised. See Note 16 for details of inputs into option pricing models in respect of options issued during the reporting period.

Note 4 Segment information

The Group has identified its operating segments based on the internal reports that are reviewed and used by the board of directors in assessing performance and determining the allocation of resources. Reportable segments disclosed are based on aggregating operating segments, where the segments have similar characteristics. The Group’s sole activity is mineral exploration and resource development wholly within Australia, therefore it has aggregated all operating segments into the one reportable segment being mineral exploration.

The reportable segment is represented by the primary statements forming these financial statements.

Note 5 revenue Operating activities State Government funded drilling rebate Interest receivable Other income Note 6 loss for the year Loss before income tax includes the following specifc expenses: Depreciation: Offce equipment Leasehold improvements Rental expenses on operating leases – minimum lease payments Total exploration costs not capitalised and written off	Consolidated 2012 2011 $ $
	130,552 42,208 240,026 295,297 1,137 236
	371,715 337,741
	11,509 8,779 – 7,379
	11,509 16,158
	63,606 51,674
	234,086 2,097,750

A N N u A l r e p o r T 2 0 1 2

4 5

For the financial year ended 30 June 2012

Notes to the Financial Statements continued

Note 7 Income tax (a) Income tax expense Current income tax: Current income tax charge (beneft) Current income tax not recognised R&D tax refund receivable Deferred income tax: Relating to origination and reversal of timing differences Deferred income tax beneft not recognised Income tax expense/(beneft) reported in the income statement	Consolidated 2012 2011 $ $
	(2,556,703) (1,266,734) 2,556,703 1,266,734 (220,186) – (269,215) (788,283) 269,215 788,283
	(220,186) –

The Group submitted a claim to the Australian Taxation Office for a Research and Development tax concession in respect of qualifying transactions which occurred during the year ended 30 June 2011.

(b) Reconciliation of income tax expense to prima facie tax payable Loss from continuing operations before income tax expense Tax at the Australian rate of 30% (2011: 30%) Tax effect of permanent differences: Non-deductible share based payment R&D tax refund receivable Exploration costs written off Capital raising costs claimed Net deferred tax asset beneft not brought to account Tax (beneft)/expense (c) Deferred tax – Balance Sheet Liabilities Prepaid expenses Capitalised exploration expenditure Assets Revenue losses available to offset against future taxable income Employee provisions Accrued expenses Deductible equity raising costs Net deferred tax asset/(liability)	(978,892) (4,933,106)
	(293,668) (1,479,932) 62,223 705,493 (220,186) – 70,226 629,325 (37,769) (39,071) 198,988 184,185
	(220,186) –
	(23,398) (29,576) (4,565,829) (2,260,724)
	(4,589,227) (2,290,300)
	6,621,346 4,359,507 12,508 11,364 16,295 6,000 129,447 129,458
	6,779,596 4,506,329
	2,190,369 2,216,029

4 6 E n c o u n t E r r E s o u r c E s l I M I T e D

Note 7 Income taxcontinued (d) Deferred tax – Income Statement Liabilities Prepaid expenses Capitalised exploration expenditure Assets Accruals Increase in tax losses carried forward Employee provisions Deferred tax beneft/(expense) not recognised	Consolidated 2012 2011 $ $
	6,178 (753) (2,305,105) (444,943) 10,295 – 2,556,703 1,241,507 1,144 (7,528)
	229,215 788,283

The deferred tax benefit of tax losses not brought to account will only be obtained if:

(i) The Company derives future assessable income of a nature and an amount sufficient to enable the benefit from the tax losses to be realised;

(ii) The Company continues to comply with the conditions for deductibility imposed by tax legislation; and

(iii) No changes in tax legislation adversely affect the Company realising the benefit from the deduction of the losses.

All unused tax losses of $22,071,152 (2011: $13,548,808) were incurred by Australian entities.

Note 8 Current assets – Cash and cash equivalents Cash at bank and on hand Deposits at call (a) Reconciliation to cash at the end of the year The above fgures are reconciled to cash at the end of the fnancial year as shown in the statement of cash fows as follows: Cash and cash equivalents per statement of cash fows	Consolidated 2012 2011 $ $
	1,185,337 126,321 4,000,000 7,114,975
	5,185,337 7,241,296
	5,185,337 7,241,296

(b) Deposits at call

The deposits are bearing fixed interest rates of 5.9% (2011: 6.0%). These deposits have an average maturity of 87 days.

A N N u A l r e p o r T 2 0 1 2 4 7

Notes to the Financial Statements continued

For the financial year ended 30 June 2012

Note 9 Current assets – receivables (a) Trade and other receivables R&D tax concession receivable Other receivables Recoverable joint venture expenses GST recoverable (b) Other current assets Prepaid tenement costs Prepaid expenses	Consolidated 2012 2011 $ $
	209,250 – 110,600 61,782 7,449 4,938 80,379 54,424
	407,678 121,144
	77,994 85,618 – 12,966
	77,994 98,584

Details of fair value and exposure to interest risk are included at Note 18.

Note 10 Non-current assets – Investment in controlled entities

(a) Investment in controlled entities

(a) Investment in controlled entities
The following amounts represent the respective investments in the share capital of Encounter Resources Limited’s wholly owned subsidiary companies: Encounter Operations Pty Ltd Hamelin Resources Pty Ltd Country of Subsidiary Company Incorporation	Company 2012 2011 $ $
	2 2 1 1
	ownership Interest 2012 2011 % %
Encounter Operations Pty Ltd Australia Hamelin Resources Pty Ltd Australia	100% 100% 100% 100%

n Encounter Operations Pty Ltd was incorporated in Western Australia on 27 November 2006.

n Hamelin Resources Pty Ltd was incorporated in Western Australia on 24 November 2009.

The ultimate controlling party of the group is Encounter Resources Limited.

The ultimate controlling party of the group is Encounter Resources Limited.
(b) Loans to controlled entities The following amounts are payable to the parent company, Encounter Resources Limited at the reporting date: Encounter Operations Pty Ltd Hamelin Resources Pty Ltd	Company 2012 2011 $ $
	14,630,795 6,986,449 – –

The loan to Encounter Operations Pty Ltd, to fund exploration activity is non interest bearing. The Directors of Encounter Resources Limited do not intend to call for repayment within 12 months.

E n c o u n t E r r E s o u r c E s l I M I T e D

4 8

Note 11 Non-current assets – property, plant and equipment Field equipment At cost Accumulated depreciation Offce equipment At cost Accumulated depreciation Leasehold improvements At cost Accumulated depreciation Reconciliation Field equipment Net book value at start of the year Additions Depreciation Net book value at end of the year Offce equipment Net book value at start of the year Additions Depreciation Net book value at end of the year Leasehold improvements Net book value at the start of the year Additions Depreciation Net book value at the end of the year	Consolidated 2012 2011 $ $
	759,949 592,309 (407,376) (275,851)
	352,573 316,458
	93,225 73,441 (64,213) (52,704)
	29,012 20,737
	22,137 22,137 (22,137) (22,137)
	– –
	381,585 337,195
	316,458 120,251 167,640 252,852 (131,525) (56,645)
	352,573 316,458
	20,737 24,644 19,784 4,872 (11,509) (8,779)
	29,012 20,737
	– 7,379 – – – (7,379)
	– –

No items of property, plant and equipment have been pledged as security by the Group.

A N N u A l r e p o r T 2 0 1 2 4 9

Notes to the Financial Statements continued

For the financial year ended 30 June 2012

Note 12 Non-current assets – Capitalised mineral exploration and evaluation expenditure In the exploration and evaluation phase Cost carried forward in respect of: Incurred at cost by Encounter Resources Limited on assets not governed by joint venture agreements (i) Costs capitalised by Encounter Operations Pty Ltd in respect of the Yeneena Project (ii) Capitalised share of exploration assets under JV Agreements (iii) Cost carried forward	Consolidated 2012 2011 $ $
	123,494 291,285 14,385,971 6,874,888 709,965 369,575
	15,219,430 7,535,748

Note 12 Non-current assets –
Capitalised mineral exploration and evaluation expenditure
In the exploration and evaluation phase
Cost carried forward in respect of:
Incurred at cost by Encounter Resources Limited on assets
not governed by joint venture agreements (i)
Costs capitalised by Encounter Operations Pty Ltd
in respect of the Yeneena Project (ii)
Capitalised share of exploration assets under JV Agreements (iii)
Cost carried forward

Consolidated
2012
2011
$ $

123,494
291,285
14,385,971
6,874,888
709,965
369,575

15,219,430
7,535,748

The recoverability of the carrying amount of the exploration and evaluation assets is dependent upon successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

(i) Exploration and evaluation expenditure recognised on exploration assets held solely by Encounter Resources Limited.
(ii) Exploration and evaluation expenditure recognised incurred by Encounter Operations Pty Ltd on tenements at the Yeneena Project.
(iii) Exploration and evaluation expenditure recognised on tenements under joint venture agreements with Avoca Resources Limited. This amount includes Encounter Resources Limited’s proportionate share of exploration assets held by the respective joint venture entities.

The capitalised exploration expenditure written off includes expenditure written off on surrender of, or intended surrender of tenements for both the group entities and the Group’s proportionate share of the exploration written off by the joint venture entities.

venture entities.
Capitalised exploration costs at the start of the period Total exploration costs for the period Total exploration costs written off and expensed for the period Capitalised exploration costs at the end of the period	Consolidated 2012 2011 $ $
	7,535,748 6,052,602 7,917,768 3,580,896 (234,086) (2,097,750)
	15,219,430 7,535,748

5 0 E n c o u n t E r r E s o u r c E s l I M I T e D

Note 13 Interest in joint ventures

Joint venture agreements have been entered into with third parties. Details of joint venture agreements are disclosed below.

Assets employed by these joint ventures and the Group’s expenditure in respect of them is brought to account initially as capitalised exploration and evaluation expenditure (Refer Note 12) until a formal joint venture agreement is entered into. Thereafter, investment in joint ventures is recorded distinctly from capitalised exploration costs incurred on the company’s 100% owned projects.

Regional Uranium Joint Venture Agreement

Under a Joint Venture and Exploration Agreement dated 1 April 2005 the Company and Avoca Resources Limited (“Avoca”) have agreed to establish an unincorporated joint venture for the purposes of identifying, acquiring, evaluating and developing or selling mining tenements with potential uranium deposits within Western Australia. Encounter is the manager of the joint venture.

Avoca Resources held a 20% free carried interest in Encounter’s exploration projects for the two year period which ended on 1 April 2007. In accordance with the Agreement, Avoca had elected to contribute to the exploration expenditure program commencing 1st April 2007 to maintain their 20% interest in the projects. Under the terms of the agreement either party may elect to dilute their interest to a 1% net smelter royalty. On 30 September 2008, Avoca Resources elected to cease contributing to the Joint Venture and is diluting its interest in the projects in accordance with the terms of the Joint Venture agreement.

Lake Way Uranium Joint Venture Agreement

Under the Lake Way Uranium Joint Venture dated 1 July 2007 between Avoca Resources Limited and the Company, the Company has a 60% joint venture interest in the Uranium at the Lake Way South tenement. The parties are contributing to expenditure in accordance with their equity interest. Encounter is the manager of the joint venture. The company’s interest in the joint venture may increase to 75% if Avoca elects to dilute its interest in the tenement and be free carried though to decision to mine.

Included in the assets and liabilities of the Group were the items below which represented the Group’s interest in the assets and liabilities employed in joint ventures.

Joint Ventures – Financial Results and Carrying Values

The total amount of the Group’s capitalised exploration and evaluation expenditure capitalised and employed under joint venture agreements at the reporting date is $709,965 (2011: $369,575 (Note 12). During the reporting period the Group recognised an expense of $55,560 (2011: $1,544,098) being its share of the exploration expenditure written off by the joint venture entities during the period.

Note 14 Current liabilities – Trade and other payables (a) Trade and other payables Trade payables and accruals Other payables (b) Employee benefits Liability for annual leave	Consolidated 2012 2011 $ $
	1,267,846 444,133 40,663 38,833
	1,308,509 482,966
	41,692 37,879

Liabilities are not secured over the assets of the Group. Details of fair value and exposure to interest risk are included at Note 18.

A N N u A l r e p o r T 2 0 1 2

5 1

For the financial year ended 30 June 2012

Notes to the Financial Statements continued

Note 15 Issued capital

(a) Ordinary shares

The Company is a public company limited by shares. The Company was incorporated in Perth, Western Australia. The Company’s shares are limited whereby the liability of its members is limited to the amount (if any) unpaid on the shares respectively held by them.

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

Ordinary shares have no par value. There is no limit to the authorised share capital of the Company.

(b) Share capital Issued share capital (c) Share movements during the year Balance at the start of the fnancial year Issued on exercise of options $0.10 Issued on exercise of options $0.20 Issued on exercise of options $0.30 Issued on exercise of options $0.45 Issued on exercise of options $0.50 Issued on exercise of options $0.525 Share placement $0.27 Share placement $0.80 Share placement $0.40 Less share issue costs Balance at the end of the fnancial year	2012 2011 2012 2011 No. No. $ $
	114,194,360 99,344,360 27,320,545 21,660,547
	99,344,360 79,161,435 21,660,547 12,745,067 – 500,000 – 50,000 – 100,000 – 20,000 – 125,000 – 37,500 – 100,000 – 45,000 – 125,000 – 62,500 – 250,000 – 131,250 – 11,482,925 – 3,100,390 – 7,500,000 – 6,000,000 14,850,000 – 5,940,000 – – – (280,002) (531,160)
	114,194,360 99,344,360 27,320,545 21,660,547

(d) Option plan

Information relating to the Encounter Resources Limited Directors, Officers and Employees Option Plan is set out in Note 16.

Note 16 options and share based payments

The establishment of the Encounter Resources Limited Directors, Officers and Employees Option Plan (‘the Plan”) was last approved by a resolution at the Annual General Meeting of shareholders of the Company on 30 November 2009. All eligible Directors, executive officers and employees of Encounter Resources Limited who have been continuously employed by the Company are eligible to participate in the Plan.

The Plan allows the Company to issue free options to eligible persons. The options can be granted free of charge and are exercisable at a fixed price in accordance with the Plan.

Options issued under the Plan have a 12 month vesting period prior to exercise, except under certain circumstances whereby options may be capable of exercise prior to the expiry of the vesting period.

(a) Options issued during the year

During the financial year the Company granted 1,250,000 options over unissued shares (2011: 5,500,000).

E n c o u n t E r r E s o u r c E s l I M I T e D

5 2

Note 16 options and share based payments continued

(b) Options exercised during the year

During the financial year the Company issued no shares on the exercise of unlisted employee options (2011: 1,200,000).

(c) Options cancelled during the year

During the year 50,000 options (2011: 175,000) were cancelled upon termination of employment.

(d) Options on issue at the balance date

The number of options outstanding over unissued ordinary shares at 30 June 2012 is 8,075,000 (2011: 6,875,000). The terms of these options are as follows:

Number of options outstanding	exercise price	expiry date
50,000	50 cents	9 August 2012
500,000	53.5 cents	30 November 2012
400,000	55 cents	30 November 2012
400,000	70 cents	30 November 2012
200,000	30 cents	30 June 2013
5,425,000	$1.35	22 November 2014
550,000	80 cents	30 September 2015
550,000	40 cents	31 May 2016
8,075,000

(e) Subsequent to the balance date

No options have been granted subsequent to the balance date and to the date of signing this report.

No options have been exercised subsequent to the balance date to the date of signing this report.

Subsequent to the balance date 50,000 options exercisable at 50 cents each were cancelled on expiry of the exercise period.

Reconciliation of movement of options over unissued shares

during the period including weighted average exercise price (WAEP)

Options outstanding at the start of the year Options granted during the year Options exercised during the year Options expiring unexercised during the year Options outstanding at the end of the year	2012 2011 WAep WAEP No. (cents) No. (cents)
	6,875,000 117.0 2,750,000 43.6
	1,250,000 69.0 5,500,000 135.0 – – (1,200,000) 28.9 (50,000) 135.0 (175,000) 135.0
	8,075,000 109.4 6,875,000 117.0

A N N u A l r e p o r T 2 0 1 2

5 3

Notes to the Financial Statements continued

For the financial year ended 30 June 2012

Note 16 options and share based payments continued

(e) Subsequent to the balance date continued

Weighted average contractual life

The weighted average contractual life for un-exercised options is 26.5 months (2011: 35.9 months).

Basis and assumptions used in the valuation of options.

The options issued during the year were valued using the Black-Scholes option valuation methodology.

				risk free		option
	Number of	exercise price		interest	Volatility	valuation
Date granted	options granted	(cents)	expiry date	rate used	applied	(cents)
18 November 2011	150,000	$1.35	22 November 2014	4.50%	85%	33.0
25 October 2011	450,000	$0.80	30 September 2014	4.50%	80%	21.3
8 March 2012	100,000	$0.80	30 September 2014	3.50%	85%	10.4
13 June 2012	550,000	$0.40	31 May 2016	2.35%	86%	9.4

Historical volatility has been used as the basis for determining expected share price volatility, as it is assumed that this is an indicator of future tender, which may not eventuate. A discount of 30% in respect of a lack of marketability has been applied to the Black-Scholes option valuation to reflect the non-negotiability and non-transferability of the unlisted options granted.

Note 17 reserves and accumulated losses

Note 17 reserves and accumulated losses
Balance at the beginning of the year Loss for the period Movement in equity remuneration reserve in respect of options issued Transfer to accumulated losses on exercise of options Transfer to accumulated losses on cancellation of options Balance at the end of the year	Consolidated 2012 2011 equity Equity Accumulated remuneraton Accumulated remuneration losses reserve (i) losses reserve (i) $ $ $ $
	(9,448,420) 2,600,995 (4,742,176) 476,214 (758,706) – (4,933,106) – – 207,409 – 2,351,643 – – 151,390 (151,390) 28,365 (28,365) 75,472 (75,472)
	(10,178,761) 2,780,039 (9,448,420) 2,600,995

(i) The equity remuneration reserve is used to recognise the fair value of options issued but not exercised.

E n c o u n t E r r E s o u r c E s l I M I T e D

5 4

Note 18 Financial instruments

Credit risk

The Directors do not consider that the Group’s financial assets are subject to anything more than a negligible level of credit risk, and as such no disclosures are made, Note 2(a).

Impairment losses

The Directors do not consider that any of the Group’s financial assets are subject to impairment at the reporting date. No impairment expense or reversal of impairment charge has occurred during the reporting period, other than the write off of deferred exploration assets at Note 12.

Interest rate risk

At the reporting date the interest profile of the Group’s interest-bearing financial instruments was:

Fixed rate instruments Financial assets Variable rate instruments Financial assets	Carrying amount ($) 2012 2011
	– –
	5,185,337 7,241,296

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant.

2012 Variable rate instruments 2011 Variable rate instruments	profit or loss equity 1% 1% 1% 1% increase decrease increase decrease $ $ $ $
	51,853 (51,853) 51,853 (51,853)
	72,413 (72,413) 72,413 (72,413)

Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements, Note 2(b):

Consolidated 2012 Trade and other payables 2011 Trade and other payables	Carrying Contractual 6 months 6-12 1-2 2-5 More than amount cash flows or less months years years 5 years $ $ $ $ $ $ $
	1,213,531 1,213,531 1,213,531 – – – –
	1,213,531 1,213,531 1,213,531 – – – –
	424,133 424,133 424,133 – – – –
	424,133 424,133 424,133 – – – –

A N N u A l r e p o r T 2 0 1 2

5 5

Notes to the Financial Statements continued

For the financial year ended 30 June 2012

Note 18 Financial instruments continued

Fair values

Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet are as follows:

as follows:
Cash and cash equivalents Trade and other payables	Consolidated 2012 2011 Carrying Carrying amount Fair value amount Fair value $ $ $ $
	5,185,337 5,185,337 7,241,296 7,241,296 (1,213,531) (1,213,531) (424,133) (424,133)
	3,971,806 3,971,806 6,817,163 6,817,163

The Group’s policy for recognition of fair values is disclosed at Note 1(s).

Note 19 Dividends

No dividends were paid or proposed during the financial year ended 30 June 2012 or 30 June 2011. The Company has no franking credits available as at 30 June 2012 or 30 June 2011.

Note 20 Key management personnel disclosures

(a) Directors and key management personnel

The following persons were directors of Encounter Resources Limited during the financial year:

(i) Chairman – non-executive

Paul Chapman

(ii) Executive directors

Will Robinson, Managing Director

Peter Bewick, Exploration Director
(iii) Non-executive directors

Jonathan Hronsky, Director

There were no other persons employed by or contracted to the Company during the financial year, having responsibility for planning, directing and controlling the activities of the Company, either directly or indirectly.

(b) Key management personnel compensation

Details of key management personnel remuneration are contained in the Audited Remuneration Report in the Directors’ Report. A summary of total compensation paid to key management personnel during the year is as follows:

Total short-term employment benefts Total share based payments Total post-employment benefts	2012 2011 $ $
	650,000 579,475 – 1,854,466 58,500 52,081
	708,500 2,486,022

E n c o u n t E r r E s o u r c E s l I M I T e D

5 6

Note 20 Key management personnel disclosures continued

(c) Equity instrument disclosures relating to key management personnel

Unlisted Options provided as remuneration and shares issued on exercise of such options

No options over unissued shares have been issued to key management personnel of the Company during the current or prior financial year.

The fair value of options issued as remuneration is allocated to the relevant vesting period of the options.

Options are provided at no cost to the recipients. No options were exercised by Key Management Personnel during the financial year.

Option holdings

Key Management Personnel have the following interests in unlisted options over unissued shares of the Company.

					Vested and
		received during			exercisable
	Balance at	the year as	other changes	Balance at the	at the end
Name – Directors	start of the year	remuneration	during the year	end of the year	of the year
2012
p Chapman	–	–	–	–	–
W robinson	–	–	–	–	–
p Bewick	4,300,000	–	–	4,300,000	4,300,000
J Hronsky	1,300,000	–	–	1,300,000	1,300,000
2011
P Chapman	–	–	–	–	–
W Robinson	–	–	–	–	–
P Bewick	800,000	3,500,000	–	4,300,000	4,300,000
J Hronsky	500,000	800,000	–	1,300,000	1,300,000

Share holdings

The number of shares in the Company held during the financial year by key management personnel of the Company, including their related parties are set out below. There were no shares granted during the reporting period as compensation.

		received during
	Balance at	the year on exercise	other changes	Balance at the
Name – Directors	start of the year	of options	during the year	end of the year
2012
p Chapman	4,747,000	–	647,900	5,394,900
W robinson	21,846,900	–	250,000	22,096,900
p Bewick	4,725,000	–	250,000	4,975,000
J Hronsky	–	–	–	–
2011
P Chapman	4,747,400	–	–	4,747,400
W Robinson	21,846,900	–	–	21,846,900
P Bewick	4,725,000	–	–	4,725,000
J Hronsky	–	–	–	–

(d) Loans made to key management personnel

No loans were made to key personnel, including personally related entities during the reporting period.

(e) Other transactions with key management personnel

There were no other transactions with key management personnel.

A N N u A l r e p o r T 2 0 1 2 5 7

Notes to the Financial Statements continued

For the financial year ended 30 June 2012

Note 21 remuneration of auditors Audit and review of the Company’s fnancial statements Other services Total	Consolidated 2012 2011 $ $
	39,240 32,000 – –
	39,240 32,000

Note 22 Contingencies

(i) Contingent liabilities

There were no material contingent liabilities not provided for in the financial statements of the Group as at 30 June 2012 or 30 June 2011 other than:

Yeneena Project Gold Claw-back

Included in the agreement for the Group’s acquisition of the remaining 25% interest in the Yeneena Project is a gold claw-back right in the event of a major discovery of a deposit of minerals dominant in gold, with gold revenue measured in a mining study equal to or exceeding 65% of total revenue and where a JORC compliant mineral resources exceeds 4,000,000 ounces of gold or gold equivalent, or is capable of producing at least 200,000 ounces of gold or gold equivalent per year for 10 years. Under the agreement Barrick (Australia Pacific) Limited retains the right to regain an interest of between 70 and 100% in the gold discovery at a price of between US$40-100 per ounce, with a 1.5% net smelter royalty to Encounter Resources.

Native Title and Aboriginal Heritage

Native title claims have been made with respect to areas which include tenements in which the Group has an interest. The Group is unable to determine the prospects for success or otherwise of the claims and, in any event, whether or not and to what extent the claims may significantly affect the Group or its projects. Agreement is being or has been reached with various native title claimants in relation to Aboriginal Heritage issues regarding certain areas in which the Group has an interest.

(ii) Contingent assets

There were no material contingent assets as at 30 June 2012 or 30 June 2011.

5 8 E n c o u n t E r r E s o u r c E s l I M I T e D

Note 23 Commitments

(a) Exploration

The Group has certain obligations to perform minimum exploration work on mineral leases held. These obligations may vary over time, depending on the Group’s exploration programmes and priorities. As at balance date, total exploration expenditure commitments on tenements held by the Group have not been provided for in the financial statements and which cover the following twelve month period amount to $916,000 (2011: $939,000). These obligations are also subject to variations by farm-out arrangements or sale of the relevant tenements. This commitment does not include the expenditure commitments which are the responsibility of the joint venture partners.

(b) Operating Lease Commitments Commitments for minimum lease payments in relation to non-cancellable operating leases are as follows: Due within one year Due later than one year but not later than fve years Total	Consolidated 2012 2011 $ $
	– 41,250 – –
	– 41,250

The operating lease commitment relates to the lease of the Group’s Perth office plus car park. The initial lease period was for three years commencing from 1 July 2008, and was extended for 6 months to 31 December 2011. At the reporting date there are no other operating lease commitments.

(c) Contractual Commitment

There are no material contractual commitments as at 30 June 2012 other than those disclosed above and not otherwise disclosed in the Financial Statements.

Note 24 related party transactions

Transactions with Directors during the year are disclosed at Note 20 – Key Management Personnel.

The Company incurred the following amounts during the year in respect of exploration activities on under joint venture agreements, for which it acts as manager:

agreements, for which it acts as manager:
Regional Uranium JV Lake Way Uranium JV Details of the Company’s interests under the joint venture agreements are provided at Note 13. As at the end of the fnancial year the Company had the following amounts (due to)/owing to it by the joint ventures: Regional Uranium JV Lake Way Uranium JV	2012 2011 $ $
	35,781 41,277 11,046 564
	(5,033) 8,440 11,173 12,345

A N N u A l r e p o r T 2 0 1 2

5 9

Notes to the Financial Statements continued

For the financial year ended 30 June 2012

Note 25 events occurring after the balance sheet date

Note 26 reconciliation of loss after tax to net cash inflow from operating activities Loss from ordinary activities after income tax Share of management fee to JV not capitalised Depreciation Exploration cost written off Share based payments expense Movement in assets and liabilities: (Increase)/decrease in R&D tax refundable (Increase)/decrease in prepaid expenses (Increase)/decrease in receivables Increase/(decrease) in payables Net cash outfow from operating activities Note 27 earnings per share (a) Basic earnings per share Loss attributable to ordinary equity holders of the Company (b) Diluted earnings per share Loss attributable to ordinary equity holders of the Company (c) Loss used in calculation of basic and diluted loss per share Consolidated loss after tax from continuing operations (d) Weighted average number of shares used as the denominator Weighted average number of shares used as the denominator in calculating basic and dilutive loss per share	Consolidated 2012 2011 $ $
	(758,706) (4,933,106) 6,381 6,243 11,509 16,158 234,086 2,097,750 207,409 2,351,643 (209,250) 171,542 12,965 (1,358) (2,596) (11,885) 41,934 16,198
	(456,268) (286,815)
	Consolidated 2012 2011 Cents Cents
	(0.7) (5.2)
	(0.7) (5.2)
	$ $
	(758,706) (4,933,106)
	No. No.
	104,761,710 93,776,980

At 30 June 2012 the Company has on issue 8,075,000 (2011: 6,875,000) unlisted options over ordinary shares that are not considered to be dilutive.

E n c o u n t E r r E s o u r c E s l I M I T e D

6 0

Note 28 parent entity information Financial position Assets Current assets Non-current assets Total Assets liabilities Current liabilities Total Liabilities NeT ASSeTS equity Issued Capital Equity remuneration reserve Accumulated losses ToTAl eQuITY Financial performance Loss for the year Other comprehensive income Total comprehensive income	Company 2012 2011 $ $
	5,234,356 7,349,463 15,845,839 7,984,504
	21,080,195 15,333,967
	1,350,201 520,845
	1,350,201 520,845
	19,729,994 14,813,122
	27,320,545 21,660,547 2,780,039 2,600,995 (10,370,590) (9,448,420)
	19,729,994 14,813,122
	(950,535) (4,933,106) – –
	(950,535) (4,933,106)

Guarantees entered into by the parent entity in relation to the debts of its subsidiaries

No guarantees have been entered into by the parent entity in relation to the debts of its subsidiary companies.

Contingent liabilities

For full details of contingencies see Note 22.

Commitments

For full details of commitments see Note 23.

A N N u A l r e p o r T 2 0 1 2 6 1

Directors’ Declaration

In the opinion of the Directors of Encounter Resources Limited (“the Company”)

(a) the financial statements and notes set out on pages 34 to 61 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) give a true and fair view of the financial position as at 30 June 2012 and of the performance for the year ended on that date of the Group.
(b) the remuneration disclosures that are contained in the Remuneration Report in the Directors Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures, The Corporations Act 2001 and the Corporations Regulations 2001.
(c) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.
(d) the financial statements comply with International Financial Reporting Standards as set out in Note 1.

The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2012.

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

Signed at Perth this 21st day of September 2012.

==> picture [94 x 35] intentionally omitted <==

W robinson Managing Director

6 2 E n c o u n t E r r E s o u r c E s l I M I T e D

==> picture [191 x 32] intentionally omitted <==

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ENCOUNTER RESOURCES LIMITED

Report on the Financial Report

We have audited the accompanying financial report of Encounter Resources Limited, which comprises the consolidated statement of financial position as at 30 June 2012, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated 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 of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

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 about 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 .

Crowe Horwath Perth is a WHK Group Firm and a member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath is a separate and independent legal entity.

A N N u A l r e p o r T 2 0 1 2

6 3

==> picture [194 x 32] intentionally omitted <==

Auditor’s Opinion

In our opinion:

(a) the financial report of Encounter Resources Limited is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the consolidated 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 ; and
(b) the consolidated financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 30 to 31 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.

Auditor’s Opinion

In our opinion, the Remuneration Report of Encounter Resources Limited. for the year ended 30 June 2012 complies with section 300A of the Corporations Act 2001.

==> picture [241 x 37] intentionally omitted <==

CROWE HORWATH PERTH

==> picture [98 x 63] intentionally omitted <==

CYRUS PATELL Partner

Signed at Perth, 21 September 2012

Crowe Horwath Perth is a WHK Group Firm and a member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath is a separate and independent legal entity

E n c o u n t E r r E s o u r c E s l I M I T e D

6 4

ASX Additional Information

Pursuant to the Listing Requirements of the Australian Securities Exchange, the shareholder information set out below was applicable as at 28 September 2012

A. Distribution of equity Securities

Analysis of numbers of shareholders by size of holding:

Distribution	Number of shareholders Securities held
1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 More than 100,000 Totals	113 61,982 302 949,104 222 1,844,246 532 17,981,067 143 93,357,961
	1,312 114,194,360

There were 213 shareholders holding less than a marketable parcel of ordinary shares.

B. Substantial Shareholders

An extract of the Company’s Register of Substantial Shareholders (who hold 5% or more of the issued capital) is set out below:

is set out below:
	Issued ordinary Shares
		percentage
Shareholder Name	Number of shares	of shares
William Michael Robinson	22,096,900	19.35%
Eye Investment Fund Limited	11,145,852	9.86%

A N N u A l r e p o r T 2 0 1 2

6 5

ASX Additional Information continued

C. Twenty largest Shareholders

The names of the twenty largest holders of quoted shares are listed below:

Shareholder Name	listed ordinary Shares percentage Number of shares of Shares
William Michael Robinson HSBC Custody Nominees Australia Limited Jacmew Pty Ltd Stone Poneys Nominees Pty Ltd Solvista Pty Ltd UBS Nominees Pty Ltd Jorge Bernhard HSBC Custody Nominees Australia Limited Willstreet Pty Ltd Samantha Hogg Pieter Los UBS Wealth Management Australia Nominees Charles Robinson Thirty-fifth Celebrations Pty Ltd Kiki Super Fund Picton Cove Pty Ltd Andrew Bewick Jonhston Family Account Stone Poneys Nominees Pty Ltd HSBC Custody Nominees Australia Limited Total	16,216,900 14.20% 11,175,813 9.79% 5,580,000 4.89% 4,650,000 4.07% 4,650,000 4.07% 3,850,000 3.37% 2,107,375 1.85% 1,921,629 1.68% 1,700,000 1.49% 1,583,000 1.39% 1,500,000 1.31% 1,221,551 1.07% 1,200,000 1.05% 1,000,000 0.88% 914,442 0.80% 811,913 0.71% 783,270 0.69% 750,000 0.66% 722,400 0.63% 719,400 0.63%
	63,057,693 55.23%

Shareholder Name

listed ordinary Shares
percentage
Number of shares
of Shares

William Michael Robinson
HSBC Custody Nominees Australia Limited
Jacmew Pty Ltd
Stone Poneys Nominees Pty Ltd
Solvista Pty Ltd
UBS Nominees Pty Ltd
Jorge Bernhard
HSBC Custody Nominees Australia Limited
Willstreet Pty Ltd
Samantha Hogg
Pieter Los
UBS Wealth Management Australia Nominees
Charles Robinson
Thirty-fifth Celebrations Pty Ltd
Kiki Super Fund
Picton Cove Pty Ltd
Andrew Bewick
Jonhston Family Account
Stone Poneys Nominees Pty Ltd
HSBC Custody Nominees Australia Limited
Total

16,216,900
14.20%
11,175,813
9.79%
5,580,000
4.89%
4,650,000
4.07%
4,650,000
4.07%
3,850,000
3.37%
2,107,375
1.85%
1,921,629
1.68%
1,700,000
1.49%
1,583,000
1.39%
1,500,000
1.31%
1,221,551
1.07%
1,200,000
1.05%
1,000,000
0.88%
914,442
0.80%
811,913
0.71%
783,270
0.69%
750,000
0.66%
722,400
0.63%
719,400
0.63%

63,057,693
55.23%

D. Voting rights

In accordance with the Company’s Constitution, voting rights in respect of ordinary shares are on a show of hands whereby each member present in person or by proxy shall have one vote and upon a poll, each share will have one vote.

e. restricted Securities

There are no restricted securities.

6 6 E n c o u n t E r r E s o u r c E s l I M I T e D

==> picture [596 x 842] intentionally omitted <==

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

Diamond drilling at T4 Prospect
----- End of picture text -----

==> picture [107 x 80] intentionally omitted <==

www.enrl.com.au

==> picture [246 x 76] intentionally omitted <==

NOTICE OF ANNUAL GENERAL MEETING

&

EXPLANATORY STATEMENT

To be held

At 10.00am (WST), Friday, 30 November 2012

at

The Offices of AMEC, 6 Ord Street, West Perth WA 6005

==> picture [245 x 76] intentionally omitted <==

Level 7, 600 Murray Street West Perth WA 6005

PO Box 273 West Perth WA 6872 P 08 9486 9455 F 08 6210 1578 www.enrl.com.au

18[th] October 2012

Dear Fellow Encounter Shareholder,

Please find enclosed the Notice of Annual General Meeting for the Shareholders’ Meeting to be held at 6 Ord Street, West Perth at 10.00am (WST) on Friday, 30 November 2012.

The purpose of the meeting is to conduct the annual business of the Company, being consideration of the annual financial statements, the remuneration report and in addition seek shareholder approval in accordance with the Corporations Act 2001 and the Listing Rules of the ASX to a number of resolutions, which are set out in the attached Notice of Meeting paper.

Your Directors seek your support and look forward to your attendance at the meeting.

Yours sincerely

==> picture [91 x 58] intentionally omitted <==

Paul Chapman Chairman

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Annual General Meeting of Encounter Resources Limited will be convened at 10.00am WST on Friday, 30 November 2012 at 6 Ord Street, West Perth, Western Australia.

AGENDA

ORDINARY BUSINESS

1. Discussion of Financial Statements and Reports

To discuss the Financial Report, the Directors’ Report and Auditor’s Report for the year ended 30 June 2012.

2. Adoption of the Remuneration Report

To consider and, if thought fit, to pass the following resolution as an ordinary resolution

“That, for the purpose of Section 250R(2) of the Corporations Act and for all other purposes, approval is given for the adoption of the remuneration report as contained in the Company’s annual financial report for the financial year ended 30 June 2012.”

3. Re-election of Director – Dr Jon Hronsky

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, Dr Jon Hronsky who retires in accordance with the Company’s Constitution and being eligible, offers himself for re-election, be re-elected as a Director.”

4. Approval of Additional 10% Placement Capacity

To consider and, if thought fit, to approve the following resolution, with or without amendment, as a special resolution :

"That, for the purpose of Listing Rule 7.1A and all other purposes, the Company approves the allotment and issue of Equity Securities up to 10% of the issued capital of the Company (at the time of the issue) calculated in accordance with in Listing Rule 7.1A.2 and on the terms and conditions set out in the Explanatory Statement."

5. Adoption of Encounter Resources Limited Employee Share Option Plan

“ To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purpose of ASX Listing Rule 7.2 (Exception 9) and for all other purposes, approval is given for the Company to issue securities under the employee incentive option scheme known as the “ Encounter Resources Limited Employee Share Option Plan” the rules of which are annexed as Schedule 1 to the Explanatory Statement,.”

6. Approval of Amendment to Terms and Conditions of Existing Options on Issue

“ To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purpose of ASX Listing Rule 6.23.4 and for all other purposes, Shareholders approve the amendment of the terms of all Options issued (but not yet exercised), to incorporate the cash less exercise provisions which are included in the terms and conditions of the new Employee Share Option Plan as proposed in Agenda Item 5, as set out in the Explanatory Statement.”

7. Approval of the Grant of Options to Director – Mr Peter Bewick

To consider, and if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That pursuant to and in accordance with ASX Listing Rule 10.11, and for all other purposes, Shareholders approve the issue of 1,500,000 options to Mr Peter Bewick to subscribe for ordinary shares in the Company. The issue to be in accordance with the terms and conditions set out in the Explanatory Statement.”

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

NOTICE OF ANNUAL GENERAL MEETING

8. Approval of the Grant of Options to Director – Dr Jon Hronsky

To consider, and if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That pursuant to and in accordance with ASX Listing Rule 10.11, and for all other purposes, Shareholders approve the issue of 500,000 options to Dr Jon Hronsky to subscribe for ordinary shares in the Company. The issue to be in accordance with the terms and conditions set out in the Explanatory Statement.”

OTHER BUSINESS

To deal with any other business which may be brought forward in accordance with the Constitution and the Corporations Act.

Details of the definitions and abbreviations used in this Notice are set out in the Glossary to the Explanatory Statement.

GENERAL NOTES

1. With respect to Agenda Item 2, the vote on this item is advisory only and does not bind the Directors of the Company. However, the Board will take the outcome of the vote into consideration when reviewing the remuneration practices and policies of the Company.

2. Voting Prohibition Statement:

The Company will disregard any votes cast on Agenda Item 2 by or on behalf of a Restricted Voter. However, the Company need not disregard a vote if:

(a) it is cast by a person as a proxy appointed by writing that specifies how the proxy is to vote on the proposed resolution; and
(b) it is not cast on behalf of a Restricted Voter.

Further, a Restricted Voter who is appointed as a proxy will not vote on Agenda Items 2, 5, 7 and 8 unless:

(a) the appointment specifies the way the proxy is to vote on those Resolutions; or
(b) the proxy is the Chair of the Meeting and the appointment expressly authorises the Chair to exercise the proxy even though the Resolutions are connected directly or indirectly with the remuneration of a member of the Key Management Personnel. Shareholders should note that the Chair intends to vote any undirected proxies in favour of Agenda Items 2, 5, 7 and 8. Shareholders may also choose to direct the Chair to vote against Agenda Items 2, 5, 7 and 8, or to abstain from voting.

3. Voting exclusion statements:

The Company will disregard any votes cast on Agenda Item 4 by any person who may participate in the proposed issue and any person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities if the Resolution is passed, and any person associated with those persons.

The Company will disregard any votes cast on Agenda Item 5 by any Director of the Company, other than any Directors who are ineligible to participate in any scheme or plan in relation to the Company, and any associates of those Directors.

The Company will disregard any votes cast on Agenda Item 6 by any person who holds an Option that is the subject of the approval, and any associate of that person.

The Company will disregard any votes cast on Agenda Item 7 by Mr Bewick and any of his associates.

The Company will disregard any votes cast on Agenda Item 8 by Dr Hronsky and any of his associates.

However, votes cast by a person as proxy for a person who is entitled to vote (in accordance with the directions on the proxy form) or the person chairing the meeting as proxy for a person who is entitled to vote (in accordance with a direction on the proxy form to vote as the proxy decides) will be taken into account.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

NOTICE OF ANNUAL GENERAL MEETING

GENERAL NOTES (CONTINUED)

4. Voting by Proxy : Sections 250BB and 250BC of the Corporations Act came into effect on 1 July 2011 and apply to voting by proxy on or after that date. Shareholders and their proxies should be aware of these changes to the Corporations Act, as they will apply to this Annual General Meeting. Broadly, the changes mean that:

if proxy holders vote, they must cast all directed proxies as directed; and
if a poll is demanded for a particular resolution, any directed proxies which are not voted (where the appointed proxy is not the chair of the meeting) will automatically default to the Chair, who must vote the proxies as directed.

Proxy vote if appointment specifies way to vote

Section 250BB(1) of the Corporations Act provides that an appointment of a proxy may specify the way the proxy is to vote on a particular resolution and, if it does :

the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way (i.e. as directed); and

if the proxy has 2 or more appointments that specify different ways to vote on the resolution – the proxy must not vote on a show of hands; and
if the proxy is the chair of the meeting at which the resolution is voted on – the proxy must vote on a poll, and must vote that way (i.e. as directed); and
if the proxy is not the chair – the proxy need not vote on the poll, but if the proxy does so, the proxy must vote that way (i.e. as directed).

Transfer of non-chair proxy to chair in certain circumstances

Section 250BC of the Corporations Act provides that, if:

an appointment of a proxy specifies the way the proxy is to vote on a particular resolution at a meeting of the Company's members; and
the appointed proxy is not the chair of the meeting; and
at the meeting, a poll is duly demanded on the resolution; and
either of the following applies:
the proxy is not recorded as attending the meeting;
the proxy does not vote on the resolution,

the chair of the meeting is taken, before voting on the resolution closes, to have been appointed as the proxy for the purposes of voting on the resolution at the meeting.

5. The Explanatory Statement to Shareholders attached to this Notice of Annual General Meeting is hereby incorporated into and forms part of this Notice of General Meeting.

6. The Directors have determined in accordance with Regulation 7.11.37 of the Corporations Regulations that, for the purposes of voting at the meeting, shares will be taken to be held by the registered holders at 5.00pm (WST) on 28 November 2012.

BY ORDER OF THE BOARD

==> picture [114 x 36] intentionally omitted <==

Kevin R Hart COMPANY SECRETARY Dated this 18[th] day of October 2012

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

The purpose of the Explanatory Statement is to provide shareholders with information concerning all of the Agenda Items in the Notice of Annual General Meeting.

Certain abbreviations and other defined terms are used throughout this Explanatory Statement. Defined terms are generally identifiable by the use of an upper case first letter. Details of the definitions and abbreviations are set out in the Glossary to the Explanatory Statement.

1. Discussion of Financial Statements & Reports

The Company’s financial reports for the financial year ended 30 June 2012, together with the Directors’ reports and the auditor’s report are placed before the Annual General Meeting thereby giving shareholders the opportunity to discuss those documents and to ask questions. The auditor will be attending the Annual General Meeting and will be available to answer any questions relevant to:

the conduct of the audit;
the preparation and content of the independent audit report;
the accounting policies adopted by the Company in relation to the preparation of accounts; and
the independence of the auditor in relation to the conduct of the audit.

Shareholders should consider these documents and raise any matters of interest with the Directors when this item is being considered.

2. Adoption of Remuneration Report

Section 250R(2) of the Corporations Act requires the Company to present to its Shareholders the Remuneration Report, as disclosed in the Company’s Annual Report.

The Resolution is advisory only and does not bind the Directors or the Company. The Annual Report (together with the Remuneration Report) is available on the Company’s website (www.enrl.com.au).

Under changes to the Corporations Act which came into effect on 1 July 2011, if at least 25% of the votes cast on the resolution to Agenda Item 2 are voted against adoption of the Remuneration Report at the Annual General Meeting, and then again at the Company's next Annual General Meeting, the Company will be required to put to Shareholders a resolution proposing the calling of general meeting to consider the appointment of directors of the Company ( Spill Resolution ).

If more than 50% of Shareholders vote in favour of the Spill Resolution, the Company must convene the general meeting ( Spill Meeting ) within 90 days of the Company's Annual General Meeting. All of the Directors who were in office when the Company's Directors' report was approved, other than the Managing Director of the Company, will cease to hold office immediately before the end of the Spill Meeting but may stand for re-election at the Spill Meeting. Following the Spill Meeting those persons whose election or re-election as Directors is approved will be the Directors of the Company.

The proportion of votes cast against the adoption of the 2011 Remuneration Report was less than 25% of the total votes cast. Accordingly the Spill Resolution is not relevant for this Annual General Meeting.

The Remuneration Report explains the Board policies in relation to the nature and level of remuneration paid to the Directors and sets out the Company’s remuneration arrangements for each of the Directors and senior management of the Company for the financial year ended 30 June 2012. The Remuneration Report is part of the Directors’ report contained in the annual financial report of the Company for the financial year ending 30 June 2012.

A reasonable opportunity will be provided for discussion of the remuneration report at the Annual General Meeting.

The Board considers that its current practices of setting executive and non-executive remuneration are within normal industry expectations, and provides an effective balance between the need to attract and retain the services of the highly skilled key management personnel that the Company requires. As such the directors recommend that shareholders vote in favour of the resolution to Agenda Item 2.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

2. Adoption of Remuneration Report (Continued)

Voting

Note that a voting exclusion applies to Agenda Item 2 in the terms set out in the Notice of Meeting. In particular, the Directors and other Restricted Voters may not vote on this Resolution and may not cast a vote as proxy, unless the appointment gives a direction on how to vote or the proxy is given to the Chair and expressly authorises the Chair to exercise your proxy even if the Resolution is connected directly or indirectly with the remuneration of a member of the Key Management Personnel. The Chair will use any such proxies to vote in favour of the Resolution.

Shareholders are urged to carefully read the proxy form and provide a direction to the proxy on how to vote on this Resolution.

3. Re-Election of Director – Dr Jon Hronsky

as an Ordinary Resolution

Dr. Jon Hronsky has more than twenty five years of experience in the mineral exploration industry, primarily focused on project generation, technical innovation and exploration strategy development. Dr. Hronsky has particular expertise in targeting for nickel sulfide deposits, but has worked across a diverse range of commodities. His work led to the discovery of the West Musgrave nickel sulfide province in Western Australia. Dr. Hronsky was most recently Manager-Strategy & Generative Services for BHP Billiton Mineral Exploration. Prior to that, he was Global Geoscience Leader for WMC Resources Ltd.

Dr Hronsky was appointed as Director on 10 May 2007.

4. Approval of Additional 10% Placement Capacity

as a Special Resolution

Listing Rule 7.1A enables eligible entities to issue Equity Securities up to 10% of its issued share capital over a 12 month period after the Annual General Meeting at which a resolution for the purposes of Listing Rule 7.1A is passed by special resolution ( Additional 10% Placement Capacity ). The Additional 10% Placement Capacity is in addition to the Company's 15% placement capacity under Listing Rule 7.1.

An entity will be eligible to seek approval under Listing Rule 7.1A if: (a) the entity has a market capitalisation of $300 million or less; and (b) the entity that is not included in the S&P ASX 300 Index. The Company is an eligible entity for the purposes of Listing Rule 7.1A.

The number of Equity Securities to be issued under the Additional 10% Placement Capacity will be determined in accordance with the formula set out in Listing Rule 7.1A.2.

The Company is putting Agenda Item 4 to Shareholders to seek approval to issue additional Equity Securities under the Additional 10% Placement Capacity.

This Resolution does not mean that the Company will necessarily utilise the 10% Additional Placement Capacity. Rather, capital markets have recently been in a state of fluctuation and the Directors acknowledge that they may need to act quickly to raise funds when favourable markets emerge. The Company’s failure to raise capital, if and when needed, could delay or suspend the Company’s business strategy and could have a material adverse effect on the Company’s activities. Under these circumstances, the Additional 10% Placement Capacity will provide flexibility for the Company to issue additional securities, in the event that the Directors determine that the issue of the additional securities is in the interests of the Shareholders and the Company in achieving its objectives.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

4. Approval of Additional 10% Placement Capacity (Continued)

Listing Rule 7.1A

The effect of Agenda Item 4 will be to permit the Company to issue the Equity Securities under Listing Rule 7.1A during the Additional Placement Period (as defined below) without using the Company’s 15% placement capacity under Listing Rule 7.1.

Equity Securities issued under the Additional 10% Placement Capacity must be in the same class as an existing quoted class of Equity Securities of the Company. As at the date of this Notice the Company has Shares on issue.

Based on the number of Shares on issue at the date of this Notice the Company has 114,194,360 Shares on issue and therefore, subject to Shareholder approval being sought under Agenda Item 4, 11,419,436 Equity Securities will be permitted to be issued in accordance with Listing Rule 7.1A. Shareholders should note that the calculation of the number of Equity Securities permitted to be issued under the Additional 10% Placement Capacity is a moving calculation and will be based on the formula set out in Listing Rule 7.1A at the time of issue of the Equity Securities. The table on the page below demonstrates various examples as to the number of Equity Securities that may be issued under the Additional 10% Placement Capacity.

The resolution the subject of Agenda Item 4 is a special resolution, requiring approval of 75% of the votes cast by Shareholders present and eligible to vote (in person, by proxy, by attorney or, in the case of a corporate Shareholder, by a corporate representative) in order to be passed.

Specific information required by Listing Rule 7.3A

The following information in relation to the Shares to be issued is provided to Shareholders for the purposes of Listing Rule 7.3A:

(a) The Equity Securities will be issued at an issue price of not less than 75% of the volume weighted average price for the Company's Equity Securities over the 15 Trading Days immediately before:
(i) the date on which the price at which the Equity Securities are to be issued is agreed; or
(ii) if the Equity Securities are not issued within 5 Trading Days of the date in paragraph (i) above, the date on which the Equity Securities are issued.
(b) If the resolution the subject of Agenda Item 4 is approved by Shareholders and the Company issues Equity Securities under the Additional 10% Placement Capacity, the existing Shareholders' economic and voting interests in the Company will be diluted. There is also a risk that:
(i) the market price for the Company's Equity Securities may be significantly lower on the date of the issue of the Equity Securities than on the date of the Meeting; and
(ii) the Equity Securities may be issued at a price that is at a discount to the market price for the Company's Equity Securities on the issue date or the Equity Securities.

The table below shows the dilution of existing Shareholders of the issue of the maximum number of Equity Securities under the Additional 10% Placement Capacity using different variables for the number of ordinary securities for variable “A” (as defined in Listing Rule 7.1A) and the market price of Shares. It is noted that variable “A” is based on the number of ordinary securities the Company has on issue at the time of the proposed issue of Equity Securities.

The table shows:

(i) examples of where variable “A” is at its current level, and where variable “A” has increased by 15% and by 100%;
(ii) examples of where the issue price of ordinary securities is the current market price as at close of trade on 17 October 2012 (current market price), where the issue price is halved, and where it is doubled; and
(iii) the dilutionary effect will always be 10% if the maximum number of Equity Securities that may be issued under the Additional 10% Placement Capacity are issued.

ABN 47 109 815 796

EXPLANATORY STATEMENT

4. Approval of Additional 10% Placement Capacity (Continued)

	Number of Shares issued and funds raised under the Additional 10% Placement Capacity and dilution effect		Dilution
		$0.09 Issue Price at half the current market price	$0.18 Issue Price at current market price	$0.36 Issue Price at double the current market price
Variable ‘A’



	Shares issued	11,419,436	11,419,436	11,419,436
Current Variable A 114,194,360 Shares
	Funds raised	$1,027,749	$2,055,498	$4,110,996
	Dilution	10%	10%	10%

15% increase in current Variable A 131,323,514 Shares	Shares issued	13,132,351	13,132,351	13,132,351
	Funds raised	$1,181,911	$2,363,823	$4,727,646
	Dilution	10%	10%	10%
100% increase in current variable A 228,388,720 Shares	Shares issued	22,838,872	22,838,872	22,838,872
	Funds raised	$2,055,498	$4,110,996	$8,221,993
	Dilution	10%	10%	10%

Note: this table assumes:

(i) No Options are exercised before the date of the issue of the Equity Securities;
(ii) The Company issues the maximum number of Equity Securities under the Additional 10% Placement Capacity and the Equity Securities issues consists only of Shares;
(iii) The table does not show an example of dilution that may be caused to a particular Shareholder by reason of placements under the 10% Placement Facility, based on that Shareholders holding at the date of the Annual General Meeting;
(iv) The table shows only the effect of issues of Equity Securities under Listing Rule 7.1A, not under the 15% placement capacity under Listing Rule 7.1.
(c) Approval of the Additional 10% Placement Capacity will be valid from the date of the Annual General Meeting and will expire on the earlier of:
(i) the date that is 12 months after the date of the Annual General Meeting; and
(ii) the date of the approval by Shareholders of a transaction under Listing Rules 11.1.2 (a significant change to the nature or scale of activities) or 11.2 (disposal of main undertaking),

(Additional Placement Period).

(d) The Company may seek to issue the Equity Securities for the following purposes:
(i) cash consideration. If Equity Securities are issued for cash consideration, the Company intends to use the funds to advance its exploration programs and general working capital purposes; or
(ii) non-cash consideration for the acquisition of new assets. If Equity Securities are issued for non-cash consideration, the Company will comply with the minimum issue price limitation under Listing Rule 7.1A.3 in relation to such issue and will release the valuation of the non-cash consideration to the market.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

4. Approval of Additional 10% Placement Capacity (Continued)

The Company will comply with the disclosure obligations under Listing Rules 7.1A.4 and 3.10.5A upon issue of any Equity Securities.

(e) The Company’s allocation policy for the issue of Equity Securities under the Additional 10% Placement Capacity will be dependent on the prevailing market conditions at the time of the proposed placement(s). Securities allotted pursuant to the allocation policy will be determined following consideration of a number of factors including, but not limited to, the following matters:
(i) the ability of the Company to raise funds at the time of the proposed issue of Equity Securities;
(ii) the dilutionary effect of the proposed of the issue of the Equity Securities on existing Shareholders at the time of proposed issued of Equity Securities;
(iii) the financial situation and solvency of the Company; and
(iv) advice from its professional advisers, including corporate, financial and broking advisers (if applicable).

At the date of this Notice, the Company has not formed an intention as to whether the securities will be offered to existing security holders, or to any class or group of existing security holders, or whether the securities will be offered exclusively to new investors that have not previously been security holders of the Company. The Company will give consideration before making any placement of securities under Listing Rule 7.1A whether the raising of any funds under such placement could be carried out in whole, or in part, by an entitlements offer to existing security holders.

The allottees under the Additional 10% Placement Capacity have not been determined as at the date of this Notice but will not include related parties (or their associates) of the Company.

(f) The Company has not previously obtained Shareholder approval under Listing Rule 7.1A.
(g) A voting exclusion statement is included in the Notice. At the date of the Notice, the Company has not determined its allocation policy for the issue of Equity Securities under the Additional 10% Placement Capacity. The Company has not approached, and has not yet determined to approach, any particular existing security holders or an identifiable class of existing security holders to participate in an offer under the Additional 10% Placement Capacity, and therefore no Shareholder will be excluded from voting on Agenda Item 4.

Directors Recommendation

The Board recommends Shareholders vote in favour of Agenda Item 4.

5. Adoption of the Encounter Resources Limited Employee Share Option Plan

as an Ordinary Resolution

Agenda Item 5 seeks Shareholder approval for the adoption of an Employee Share Option Plan (Plan) in accordance with Exception 9 of ASX Listing Rule 7.2.

The Directors considered that it was desirable to establish a revised option plan under which employees may be offered the opportunity to subscribe for Options to acquire Shares in the Company in order to increase the range of potential incentives available to them and to strengthen links between the Company and its employees and accordingly adopted the Encounter Resources Limited Employee Share Option Plan ( Plan ) on 27 September 2012.

The Plan is designed to provide incentives to the employees and Directors of the Company and to recognise their contribution to the Company's success. Under the Company's current circumstances the Directors consider that the incentives to employees and Directors are a cost effective and efficient incentive for the Company as opposed to alternative forms of incentives such as cash bonuses or increased remuneration. To enable the Company to secure employees and Directors who can assist the Company in achieving its objectives, it is necessary to provide remuneration and incentives to such personnel. The Plan is designed to achieve this objective, by encouraging continued improvement in performance over time and by encouraging personnel to acquire and retain significant shareholdings in the Company.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

5. Adoption of the Encounter Resources Limited Employee Share Option Plan (Continued)

The Plan replaces the existing employee share option plan that was first approved by Shareholders on 17 November 2006 and last ratified and approved by Shareholders on 30 November 2009. A key difference between the Plan and the Company’s existing employee share option plan as it incorporates the facility for Participants to undertake a ‘cash less exercise’, whereby, in lieu of paying the aggregate exercise price to purchase the Shares, the Board may, in its sole and absolute discretion, permit a Participant to elect to receive a reduced number of Shares, in lieu of payment of cash or other consideration.

The number of Shares received will be determined in accordance with the following formula:

==> picture [75 x 25] intentionally omitted <==

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

B ( C − D )
A =
C
----- End of picture text -----

where:

A = the number of Shares (rounded down to the nearest whole number) to be issued to the Participant;

B = the number of Shares otherwise issuable upon the exercise of the Option or portion of the Option being exercised;

C = the Market Value of one Share determined as of the date of delivery to the Company Secretary; and

D = the exercise price.

For example, if a Participant holds 50 Options (which have vested and are therefore capable of exercise), each with an exercise price of $1.00 and they elect to exercise all of their Options by paying the exercise price, they would pay $50 and receive 50 Shares. However, if the Participant elects their rights under the cashless exercise facility, and the Market Value of one Share prior to exercise is $1.50, the Participant will pay no cash and receive 16 Shares (being 50($1.50 - $1.00)/$1.50 = 16.67, rounded down to 16 Shares.

Shareholder approval is required if any issue of Options pursuant to the Plan is to fall within the exception to the calculation of the 15% limit imposed by Listing Rule 7.1 on the number of securities which may be issued without Shareholder approval. Accordingly, Shareholder approval is sought for the purposes of Listing Rule 7.2 Exception 9(b) which provides that Listing Rule 7.1 does not apply to an issue of securities under an employee incentive scheme that has been approved by the holders of ordinary securities within three years of the date of issue. This is the first time the Company is seeking Shareholder approval of the Plan.

Prior Shareholder approval will be required before any Director or related party of the Company can participate in the Plan.

Under the Plan, the Board may offer to eligible employees of the Company, the opportunity to subscribe for such number of Options in the Company as the Board may decide and on the terms set out in the rules of the Plan. Options granted under the Plan will be offered to participants in the Plan on the basis of the Board’s view of the contribution of the eligible person to the Company.

In accordance with the requirements of Listing Rule 7.2 Exception 9(b), the following information is provided:

(a) a copy of the terms and conditions of the Plan is attached at Schedule 1 to this Explanatory Statement; no Options have previously been issued to date under the Plan which has been tabled in the Notice for Shareholder approval;
(b) as at the date of this Notice a total of 3,725,000 Options have been issued to employees pursuant to the terms of previously approved employee incentive plans, 1,900,000 of these Options have been issued since the last Shareholder approval on 30 November 2009;
(c) as at the date of this Notice a total of 375,000 Options have been cancelled in respect of Options previously issued under approved employee incentive plans;
(d) as at the date of this Notice a total of 1,475,000 Shares have been issued pursuant to the exercise of Options previously issued under approved employee incentive plans; and
(e) A voting exclusion statement has been included for the purposes of Agenda Item 5.

If Agenda Item 5 is passed, the Company will be able to issue Shares under the Plan without impacting on the Company’s ability to issue up to 15% of its total ordinary securities without Shareholder approval in any 3 year period.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

6. Approval of Amendment to Terms and Conditions of Existing Options on Issue

as an Ordinary Resolution

For the purposes of Listing Rule 26.23.4, Agenda Item 6 seeks to amend the terms of all Options on issue, but not yet exercised, at the date of this Notice of Meeting.

The resolution attaching to Agenda Item 6 does not seek approval for the issuing of further Options, nor does it seek to amend the vesting period, the exercise price or the expiry date or increase the number of securities to be received on exercise of any Option already on issue at the date of this Notice of Meeting.

The proposed amendment to the terms and conditions of Options on issue at the date of this Notice of Meeting is to introduce a cashless exercise election, consistent with the terms of the cash less exercise provisions included in the Plan for which approval is sought under Agenda Item 5.

The proposed amendment to the terms and conditions of those Options on issue will enable an optionholder to undertake a ‘cash less exercise’, whereby, in lieu of paying the aggregate exercise price to purchase the Shares, the Board may, in its sole and absolute discretion, permit an optionholder to elect to receive a reduced number of shares, in lieu of payment of cash or other consideration.

The number of shares received, under the cashless exercise facility will be determined in accordance with the following formula:

==> picture [75 x 25] intentionally omitted <==

where:

A = the number of Shares (rounded down to the nearest whole number) to be issued to the optionholder;

B = the number of Shares otherwise issuable upon the exercise of the Options or portion of the Options being exercised;

C = the Market Value of one Share determined as of the date of delivery to the Company Secretary; and

D = the Exercise Price.

For example, if an optionholder holds 50 Options (which have vested and are therefore capable of exercise), each with an Exercise Price of $1.00 and they elect to exercise all of their Options by paying the Exercise Price, they would pay $50 and receive 50 Shares. However, if the optionholder elects their rights under the Cashless Exercise, and the Market Value of one Share prior to exercise is $1.50, the optionholder will pay no cash and receive 16 Shares (being 50($1.50 - $1.00)/$1.50 = 16.67, rounded down to 16 Shares.

The proposed cashless exercise amendments will:

a) Not alter the fundamental entitlements of option holders;
b) Not make any other amendment to the terms and conditions of Options on issue, beyond the introduction of the cash less exercise facility;
c) Offer an alternative tool for an optionholder to manage the exercise of their Options from a cash flow perspective and potentially reduce the number of Shares offered for sale, as an optionholder will have an alternative to selling a portion of the Shares issued on exercise of the Options to fund the exercise;
d) Offer no overall economic advantage to an optionholder, in that the net benefit to be received by the optionholder would be the same as if they had exercised their Options by paying the exercise price and receiving a larger number of Shares; and
e) Result in a lesser number of Shares being issued upon exercise of Options, which is for the benefit of the Company, with less dilution for Shareholders.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

6. Approval of Amendment to Terms and Conditions of Existing Options on Issue (Continued)

If the Resolution the subject of Agenda Item 6 is approved then all Options on issue at the date of this Notice of Meeting, being 8,025,000 Options, would be subject to the cash less exercise provisions which are consistent with the terms of the Plan for which approval is sought under Agenda Item 5.

The Options on issue at the date of this Notice of Meeting are exercisable at various dates and various exercise prices as follows:

as follows:
Number of Options Granted	Exercise Price	Expiry Date
500,000	53.5 cents	30 November 2012
400,000	55 cents	30 November 2012
400,000	70 cents	30 November 2012
200,000	30 cents	30 June 2013
5,425,000	135 cents	22 November 2014
550,000	80 cents	30 September 2015
550,000	40 cents	31 May 2016

Of the 8,025,000 Options on issue as at the date of this Notice:

a) a total of 1,875,000 Options have been issued pursuant to the terms of previously approved employee incentive plans;
b) a total of 5,600,000 Options have been issued to Directors of the Company following Shareholder approval at previous Shareholder Meetings; and
c) 550,000 Options have been issued pursuant to Listing Rule 7.1.

Listing Rule 6.23.4

Shareholder approval is being sought to approve the amendment of terms of Options already on issue as at the date of the Notice of Meeting, so that the Company will satisfy the requirements of Listing Rule 6.23.4.

Listing Rule 6.23.4 provides that a change to the terms of Options, which is not prohibited under the Listing Rules, can only be made if holders of ordinary securities approve the change.

The proposed amendments to the terms and conditions of the Options on issue at the date of the Notice of Meeting do not have the effect of reducing the exercise price, increasing the period for exercise or increasing the number of securities to be received on exercise, of those Options.

Corporations Act - Chapter 2E

Shareholder approval is not being sought under Chapter 2E of the Corporations Act to approve the amendment to the terms and conditions of those Options on issue to the Company’s Directors, Mr Peter Bewick and Dr Jon Hronsky.

The Directors (with the exception of Mr Bewick and Dr Hronsky) consider that the proposed changes to the Options on issue to Mr Bewick and Dr Hronsky are being made on an arms-length basis in accordance with Section 2E of the Corporations Act because it is the same amendment made to all other Options on issue, and that the amendment does not offer any more of an economic benefit to the Directors than any other optionholder, as there is no difference to the net benefit obtainable from the exercise of Options by electing to use the cash less exercise provisions contemplated by the amendment.

For the above reasons Shareholder approval is not considered to be required under Chapter 2E of the Corporations Act.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

6. Approval of Amendment to Terms and Conditions of Existing Options on Issue (Continued)

Directors’ Recommendation

The Board (excluding Mr Bewick and Dr Hronsky) considers that the amendments to the terms of the Options on issue at the date of this Notice of Meeting, but not yet exercised, are generally beneficial to the Company. In particular, the Board considers that the benefit to the Company of having to issue fewer Shares upon any exercise of Options under the cashless exercise facility outweighs the negative aspect of the cashless exercise facility, which is that the Company will not receive any subscription funds for Shares to be issued upon exercise of Options.

Agenda Items 7 and 8

The following information relates to the proposed issue of Options to Directors of the Company, Mr Peter Bewick and Dr Jon Hronsky as contemplated by Agenda Items 7 and 8 of the Notice of Meeting.

7. Approval of the Grant of Options to Directors – Mr Peter Bewick and Dr Jon Hronsky

Agenda items 7 and 8 seek Shareholder approval to allow the Company to issue 1,500,000 Options to Mr Peter Bewick, Executive Director (or his nominee) and 500,000 Options to Dr Jonathan Hronsky, one of the Non-Executive Directors of the Company, (or his nominee).

The number of Incentive Options to be granted to each of the Participating Directors has been determined based upon a consideration of:

(a) the remuneration / fees of the Participating Directors;
(b) the Directors’ wish to ensure that the remuneration / fees offered is competitive with market standards. The Directors have considered the proposed number of Incentive Options to be granted will ensure that the Participating Directors’ overall remuneration / fees is in line with market standards; and
(c) incentives to attract and ensure continuity of service of Directors who have appropriate knowledge and expertise.

Listing Rule 10.11 and Corporations Act Chapter 2E

Listing Rule 10.11 provides that a Company must not issue equity securities (including options) to a related party of the company, such as a director, without the Company obtaining its shareholders approval. If shareholder approval is given under Listing Rule 10.11, Listing Rule 7.2, Exception 14 provides that approval is not required under Listing Rule 7.1.

The grant of Options to Mr Bewick and Dr Hronsky, and the potential allotment and issue of Shares pursuant to the same will constitute the giving of a financial benefit to a related party of the Company, for which Shareholder approval is usually required pursuant to Section 208 of the Corporations Act.

There are various exceptions to the requirement for Shareholder approval. This includes, in accordance with Section 211 of the Corporations Act, where the benefit is remuneration to a related party as an officer or employee of the Company, and to give the remuneration would be reasonable given:

the circumstances of the Company in giving the remuneration; and
the related party’s circumstances (including the responsibilities involved in the office or employment)

The Board is of the view that the exception in Section 211 of the Corporations Act is relevant to the financial benefits to be granted to Mr Bewick and Dr Hronsky under their engagement as Officers of the Company. Further, the Board believes that the financial benefits available to Mr Bewick and Dr Hronsky pursuant to the proposed grant of Options are commensurate with the responsibilities and performance levels expected of them.

Accordingly, the Company is not seeking the approval of Shareholders under Section 208 of the Corporations Act.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

7. Approval of the Grant of Options to Directors – Mr Peter Bewick and Dr Jon Hronsky (Continued)

The following information is provided to Shareholders to allow them to assess the proposed resolution:

(a) The related party to whom the proposed resolution would permit the financial benefit to be given.

Subject to Shareholder approval, the Incentive Options will be granted to Mr Peter Bewick, Executive Director and Dr Jonathan Hronsky, Non-Executive Director, or their respective nominees.

(b) Nature of the Financial Benefit

The proposed financial benefit to be given is the grant of 1,500,000 unlisted options to Mr Bewick and 500,000 unlisted options to Dr Hronsky, for no consideration, to subscribe for fully paid ordinary shares in the capital of the company.

The exercise price and expiry date of the Incentive Options are as follows:

Director	Number of Options	Exercise Price	Expiry Date
Peter Bewick	750,000	150% of the market closing Share price on the day prior to grant of the Options	4 years from the date of grant of the Options
	750,000	200% of the market closing Share price on the day prior to grant of the Options	5 years from the date of grant of the Options
Jon Hronsky	500,000	150% of the market closing Share price on the day prior to grant of the Options	4 years from the date of grant of the Options

The Incentive Options will have an expiry dates as disclosed in the table above and will be issued in accordance with terms and conditions consistent with those terms and conditions set out in Schedule 1 of this Explanatory Statement.

The Directors of the Company (having obtained an independent valuation of the Incentive Options by HLB Mann Judd Corporate (WA) Pty Ltd) consider the indicative theoretical value attributable to the Incentive Options at a valuation date of 5 October 2012 to be as follows, notwithstanding that the Incentive Options will not be issued until after 30 November 2012 being the date of the Annual General Meeting of the Shareholders of the company.

of the company.
Director	Exercise Price	Expiry Date	Theoretical Value
Peter Bewick	36.75 cents	5 October 2016	15.5 cents per Option
	49.0 cents	5 October 2017	16.1 cents per Option
Jon Hronsky	36.75 cents	5 October 2016	15.5 cents per Option

The Black and Scholes option valuation methodology was used by HLB Mann Judd Corporate (WA) Pty Ltd as a basis for the calculations using the following assumptions:

The share price of a fully paid Share as at the valuation date of 5 October 2012 was $0.245.

The risk free interest rate used was 2.52% (based on the 5 year Reserve Bank treasury bond rates respectively as at 5 October 2012).

A volatility factor of 100% was used to value the options as determined using the daily closing share prices for the last 12 months.

The Black and Scholes option pricing model assumes that the Incentive Options the subject of the valuation can be sold on a secondary market. The terms and conditions of the proposed Incentive Options state that the Incentive Options shall not be listed for official quotation on ASX. In addition, the Incentive Options are not transferable. Accordingly, in determining the indicative value of the Incentive Options HLB Mann Judd Corporate (WA) Pty Ltd has applied a 30% discount to the theoretical value of attributed to the Black and Scholes option pricing model.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

7. Approval of the Grant of Options to Directors – Mr Peter Bewick and Dr Jon Hronsky (Continued)

Based on the above assumptions, the value of the 2,000,000 Incentive Options using the indicative values attributed is as follows:

Director	Theoretical Value per Option (cents)	Discount (%)	Indicative value per Option (cents)	Number of Options issued	Total value ($)
Peter Bewick	15.5	30%	10.9	750,000	$81,750
	16.1	30%	11.3	750,000	$84,750
Jon Hronsky	15.5	30%	10.9	500,000	$54,500

Any change in the variables applied in the Black and Scholes calculation between the date of the valuation and the date the Incentive Options are granted would have an impact on their value.

(c) Directors Recommendation

Messrs Chapman and Robinson and Dr Hronsky (who have no interest in the outcome of Agenda Item 7) recommend that Shareholders vote in favour of Agenda Item 7 as they believe the issue of the Incentive Options to Mr Bewick (or his nominee) is in the best interests of the Company because the Incentive Options provide Mr Bewick with an incentive to enhance the future value of the Company’s Shares for the benefit of all Shareholders, and also an appropriate way to retain Mr Bewick’s professional services at reasonable market rates. Mr Bewick declines to make a recommendation on Agenda Item 7 because he has a material personal interest in the outcome of the Resolution, on the basis that he (or his nominee) is to be granted Incentive Options should the Resolution be passed.

Messrs Chapman, Robinson and Bewick (who have no interest in the outcome of Agenda Item 8) recommend that Shareholders vote in favour of Agenda Item 8 as they believe the issue of the Incentive Options to Dr Hronsky is in the best interests of the Company because the Incentive Options provide Dr Hronsky with an incentive to enhance the future value of the Company’s Shares for the benefit of all Shareholders, and also an appropriate way to retain Dr Hronsky’s professional services at reasonable market rates. Dr Hronsky declines to make a recommendation on Agenda Item 8 because he has a material personal interest in the outcome of the Resolution, on the basis that he (or his nominee) is to be granted Incentive Options should the Resolution be passed.

(d) Directors Interest

Mr Bewick has a personal interest in the outcome of the resolution the subject of Agenda Item 7.

Dr Hronsky has a personal interest in the outcome of the resolution the subject of Agenda Item 8.

With the exception of Mr Bewick and Dr Hronsky, no other Director has a personal interest in the outcome of the resolutions.

(e) Terms and Conditions of Options

The terms and conditions of the Incentive Options proposed to be granted to the Participating Directors will be subject to the same terms and conditions of the Encounter Resources Limited Share Option Plan, which are included at Schedule 1

The Incentive Options will also have the following specific terms:

the key terms, as set out in Section 7(b) above; and
the benefit of the cashless exercise facility on the terms and conditions set out in Schedule 1.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

7. Approval of the Grant of Options to Directors – Mr Peter Bewick and Dr Jon Hronsky (Continued)

(f) Other information reasonably required by the members to make a decision and that is known to the Company or any of its Directors

The Incentive Options form part of the Company’s long term incentive for employees and are to be granted in addition to the total fixed remuneration/fees set out below. The exercise price of the Incentive Options is linked to improved share price performance. Importantly, this provides ongoing incentive to increase shareholder value over time and the exercise price reflects levels in excess of the current market price of the Company’s Shares.

Exercise of the Incentive Options is allowable immediately after issue, but only likely to occur if there is sustained upward movement in the Company’s Share price.

The number of Incentive Options to be issued to Mr Bewick and Dr Hronsky has been determined based on the reasons outlined in the director’s recommendation to shareholders at item (c). The number of Incentive Options has also been determined having regard to less tangible issues such as alignment of interests to the Company.

The Incentive Options shall be granted free to Mr Bewick and Dr Hronsky (or their respective nominees) and will be issued within one month of the date of the meeting.

If the Incentive Options proposed to be granted to Mr Bewick and Dr Hronsky (or their nominee) under Agenda Items 7 and 8 are exercised, the Company’s issued Share capital would increase by a maximum of 2,000,000 Shares to a total of issued Share capital of 116,194,360 Shares (assuming no other Shares are issued or outstanding Options are exercised), and will represent a maximum of approximately 1.72% of the total issued capital of the Company on a fully diluted basis. The maximum dilution stated is calculated based on all of the Incentive Options being exercised by payment of the exercise price in full.

The Incentive Options proposed to be granted under Agenda Items 7 and 8 are subject to cashless exercise provisions consistent with those provisions the subject of the Encounter Resources Limited Employee Share Option Plan. Should Mr Bewick or Dr Hronsky elect to utilize the cash less exercise provisions this would result in a lesser number of shares to be issued, and a reduction in the funds receivable by the Company, on the exercise of the Incentive Options.

As at 17 October 2012 the issued capital of the Company comprised the following Shares and Options:

114,194,360	Ordinary fully paid shares.

Number of Options	Exercise Price	Expiry Date
500,000	53.5 cents	30 November 2012
400,000	55 cents	30 November 2012
400,000	70 cents	30 November 2012
200,000	30 cents	30 June 2013
5,425,000	135 cents	22 November 2014
550,000	80 cents	30 September 2015
550,000	40 cents	31 May 2016

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

7. Approval of the Grant of Options to Directors – Mr Peter Bewick and Dr Jon Hronsky (Continued)

(f) Other information reasonably required by the members to make a decision and that is known to the Company or any of its Directors (cont’d)

The following table sets out Mr Bewick’s and Dr Hronsky’s current interest in Shares and Options in the Company:

Company:
Director	Relevant Interest in Shares	Relevant Interest in Options
		Number of Options	Exercise Price	Expiry Date
Peter Bewick	4,975,000	400,000	50 cents	30 November 2012
		400,000	70 cents	30 November 2012
		3,500,000	135 cents	22 November 2014
Jon Hronsky	Nil	500,000	53.5 cents	30 November 2012
		800,000	135 cents	22 November 2014

Details of the nature and amount of each major element of the emoluments of Mr Bewick and Dr Hronsky for the financial year ended 30 June 2012, as detailed in the 2012 Annual Report is as follows:

Director	Base Remuneration $	Superannuation $	Value of Options / Other $	Total $
Peter Bewick	260,000	23,400	Nil	283,400
Jon Hronsky	50,000	4,500	Nil	54,500

The market price of the Company’s Shares during the term of the Options will ordinarily determine whether or not option holders exercise their Options.

If the market price of the Company’s Shares is in excess of the exercise price of the Options it is likely that the Options will be exercised. A benefit would accrue on the exercise of the Options by the payment of the amount determined under this Notice and the sale of the Shares for an amount in excess of these amounts.

In the 12 months preceding the date of this Notice the highest and lowest market prices of the Company’s Shares were as follows:

Shares were as follows:
	Date	Price
Highest price	7 December 2011	73 cents
Lowest Price	28 June 2012	15 cents

The closing market price of the Company’s Shares on the day before the date of this Notice was:

Date	Closing price of Company’s shares on ASX
17 October 2012	18 cents

All Shares issued pursuant to the exercise of Incentive Options under Agenda Items 7 and 8 will rank pari passu with the existing Shares on issue.

There is no other information known to the Directors that is reasonably required by Shareholders to make a decision whether or not it is in the Company’s interest to pass the Resolutions of Agenda Items 7 and 8.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

7. Approval of the Grant of Options to Directors – Mr Peter Bewick and Dr Jon Hronsky (Continued)

(f) Other information reasonably required by the members to make a decision and that is known to the Company or any of its Directors (cont’d)

Information requirements pursuant to Listing Rule 10.13

In addition, the following information is provided in accordance with the notice requirements of Listing 10.13:

(a) the Incentive Options will be granted to the Participating Directors, or their nominees, as noted in section 7(a) above;
(b) the maximum number of Incentive Options to be granted is 2,000,000 Options:
under Agenda Item 7, 1,500,000 Incentive Options will be issued to Mr Bewick or his nominee and under Agenda Item 8, 500,000 Incentive Options will be issued to Dr Hronsky or his nominee. Details of the terms of the Incentive Options are as noted in section 7(e) above;
(c) The Incentive Options will be granted within 1 month after the date of the Annual General Meeting;
(d) the Incentive Options will be granted for no consideration. As such, no funds will be raised by the grant of the Incentive Options;
(e) a voting exclusion applies to Resolutions 6 and 7 on the terms set out in the Notice of Meeting.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

Definitions

Annual General Meeting means the annual general meeting of the Company.

Accounting Standards has the meaning given to that term in the Corporations Act.

Additional 10% Placement Capacity has the meaning set out on page 2 of the Explanatory Statement.

Additional Placement Period has the meaning set out in Section 4(c) of the Explanatory Statement.

Annual General Meeting or Meeting means the annual general meeting the subject of the Notice.

Annual Report means the annual report of the Company for the year ended 30 June 2012.

ASX means ASX Limited ABN 98 008 624 691 and, where the context permits, the Australian Securities Exchange operated by ASX Limited.

Board means the board of Directors.

Closely Related Party has the meaning given to that term in the Corporations Act.

Company means Encounter Resources Limited ACN 47 109 815 796.

Constitution means the constitution of the Company.

Corporations Act means the Corporations Act 2001 (Cth).

Director means a director of the Company.

Equity Securities has the meaning as in the Listing Rules.

Explanatory Statement means this Explanatory Statement accompanying the Notice.

Key Management Personnel has the meaning given to that term in the Accounting Standards and broadly includes those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, including any Director (whether executive or otherwise) of the Company.

Incentive Options means the Options the subject of Agenda Items 7 and 8.

Listing Rules means the listing rules of the ASX.

Market Value means the value of Shares as determined by the volume weighted average trading price of Shares sold on the ASX over the last 5 trading days immediately before the relevant date.

Notice or Notice of Meeting means the notice of annual general meeting accompanying this Explanatory Statement.

Option means an option to acquire a Share.

Participant means a participant in the Plan.

Participating Directors means Mr Peter Bewick and Dr Jon Hronsky.

Remuneration Report means the remuneration report set out in the Director’s report section of the Company’s annual financial report for the year ended 30 June 2012.

Restricted Voter means Key Management Personnel and their Closely Related Parties.

Resolution means a resolution the subject of this Notice.

Share means an ordinary fully paid share in the capital of the Company;

Shareholder means a holder of a Share.

Trading Day means a day determined by ASX to be a trading day in accordance with the Listing Rules.

WST means Australian Western Standard Time.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

S C H E D U L E 1 – T E RM S A N D C O N DI T I ON S O F EM P L O Y EE S H A R E O P TI O N P L AN

The following is a summary of the key terms and conditions of the Plan to be adopted by Shareholders pursuant to Agenda Item 5 and the Options to be issued to Participating Directors pursuant to Agenda Items 7 and 8:

General
1.1 No monies will be payable for the grant of the options.
1.2 A certificate will be issued for the options.
1.3 The options will not be listed for Official Quotation.
1.4 The options are not transferable.
1.5 Each option shall carry the right to subscribe for one Share upon exercise of the option.
1.6 The options shall expire at 5.00pm WST on the Expiry date.
1.7 Subject to clauses 1.6, 2 and 3, the options may be exercised by the Optionholder at any time, but subject to the prior satisfaction of the Exercise Conditions (if any). The Board may, at its discretion, by notice to the Optionholder adjust or vary the terms of an option, subject to the requirements of the Listing Rules. No adjustment or variation will be made without the consent of the Optionholder if such adjustment or variation would have a materially prejudicial effect upon the Optionholder (in respect of their outstanding options) except as otherwise by the rules of the Plan.
1.8 Options may only be exercised by delivery to the Company Secretary (at a time when the options may be exercised) of:
- (a) the certificate for the options or, if the certificate for the options has been lost or destroyed, a declaration to that effect, accompanied by an indemnity in favour of the Company against any loss, costs or expenses which might be incurred by the Company as a consequence of its relying on the declaration that the certificate has been lost or destroyed;
- (b) a notice in the form of Schedule 2 addressed to the Company and signed by the Optionholder stating that the Optionholder exercises the options and specifying the number of options which are exercised; and
- (c) subject to clause 1.10, payment to the Company of an amount equal to the Exercise Price multiplied by the number of options which are being exercised unless there is no exercise price payable in respect of the options to be exercised. Unless clause 1.10 applies, the notice is only effective (and only becomes effective) when the Company has received value for the full amount of the Exercise Price (for example, if the Exercise Price is paid by cheque, by clearance of that cheque) by the Expiry Date and subject to the options the subject of the notice vesting in accordance with any Exercise Conditions stipulated in these terms and conditions.
1.9 In lieu of paying the aggregate Exercise Price to purchase Shares under clause 1.9(c), the Optionholder may elect to receive, without payment of cash or other consideration, upon surrender of the applicable portion of exercisable Options to the Company, a number of Shares determined in accordance with the formula included in the Employee Share Option Plan (a Cashless Exercise):
1.10 Options may be exercised in one or more parcels of any size, provided that the number of Shares issued upon exercise of the number of options in any parcel is not less than a Marketable Parcel. An exercise of only some options shall not affect the rights of the Optionholder to the balance of the options held by the Optionholder.
1.11 The Company shall allot the resultant Shares and deliver the holding statements within 10 Business Days of the exercise of the option.
1.12 Shares allotted pursuant to an exercise of options shall rank, from the date of allotment, equally with existing Shares of the Company in all respects.
1.13 The Company shall, in accordance with the Listing Rules, make application to have Shares allotted pursuant to an exercise of options listed for Official Quotation, if the Company is listed on the ASX at the time.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

S C H E D U L E 1 – T E RM S A N D C O N DI T I ON S O F EM P L O Y EE S H A R E O P TI O N P L AN ( C ON TI N U ED )

Lapse of Options
2.1 Unless clause 2.2, 2.3 or 2.4 applies, the options will lapse immediately and all rights in respect of the options will be lost:
- (a) if the Eligible Participant ceases to be an employee or director of, or to render services to, a member of the Group for any reason whatsoever (including without limitation resignation or termination for cause) and the Exercise Conditions have not been met; or
- (b) the Exercise Conditions are unable to be met; or
- (c) the Expiry Date has passed; or
- (d) the deadline provided for in clause 2.4 has passed,

whichever is earlier.

2.2 If the term of an option would otherwise expire outside a Trading Window applicable to the Eligible Participant or the Optionholder, then the term of such Option shall be extended to the close of business on the 10th Business Day during the next Trading Window applicable to the Eligible Participant or the Optionholder.
2.3 If the Eligible Participant dies, becomes Permanently Disabled, resigns employment on the basis of retirement from the workforce or is made redundant by the relevant member of the Group, prior to the Expiry Date of any options granted to the Optionholder (Ceasing Event) the following provisions apply.
(a) the Optionholder or the Optionholder’s legal personal representative, where relevant, may exercise those options which at that date:
- (i) have become exercisable;
- (ii) have not already been exercised; and
- (iii) have not lapsed, in accordance with clause 2.3(c);
(b) at the absolute discretion of the Board, the Board may resolve that the Optionholder, or the Optionholder 's legal personal representative, where relevant, may exercise those Options which at that date:
- (i) have not become exercisable; and
- (ii) have not lapsed,

in accordance with clause 2.3(c) and, if the Board exercises that discretion, those unexercisable options will not lapse other than as provided in clause 2.3(c);

(c) the Optionholder or the Optionholder’s legal personal representative (as the case may be) must exercise theo referred to in clause2.3(a) and, where permitted, clause 2.3(c), not later than the first to occur of:
- (i) the Expiry Date of the options in question; and
- (ii) the date which is 6 months after the Ceasing Event provided that in the case of options referred to in clause2.3(b), all Exercise Conditions have been met at that time (unless the Board decides to waive any relevant Exercise Conditions, in its absolute discretion); and
(d) options which have not been exercised by the end of the period specified in clause 2.3(c) lapse immediately at the end of that period and all rights in respect of those options will thereupon be lost.
2.4 Where the Eligible Participant ceases to be an employee or director of, or to render services to, a member of the Group, for any reason whatsoever (including without limitation resignation or termination for cause), prior to the Expiry Date in relation to the options (Ceasing Date) and the Exercise Conditions have been met, the Optionholder will be entitled to exercise options for a period of up to 1 month after the Ceasing Date, after which the options will lapse immediately and all rights in respect of those options will be lost.

ENCOUNTER RESOURCES LIMITED ABN 47 109 815 796

EXPLANATORY STATEMENT

S C H E D U L E 1 – T E RM S A N D C O N DI T I ON S O F EM P L O Y EE S H A R E O P TI O N P L AN ( C ON TI N U ED )

Change in Control Event
(a) On the occurrence of a Change of Control Event, the Board may in its sole and absolute discretion determine that unvested options will vest despite the non-satisfaction of any Exercise Conditions and become exercisable in accordance with clause 3(b), with such vesting deemed to have taken place immediately prior to the effective date of the Change of Control Event, regardless of whether or not the employment, engagement or office of the Eligible Participant is terminated or ceases in connection with the Change of Control Event.
(b) Whether or not the Board determines to accelerate the vesting of any options, the Company shall give written notice of any proposed Change of Control Event to the Optionholder. Upon the giving of any such notice the Optionholder shall be entitled to exercise, at any time within the 14-day period following the giving of such notice, all or a portion of those options granted to the Optionholder which are then vested and exercisable in accordance with their terms, as well as any unvested Options which shall become vested and exercisable in connection with the completion of such Change of Control Event. Unless the Board determines otherwise (in its sole and absolute discretion), upon the expiration of such 14 day period, all rights of the Optionholder to exercise any outstanding options, whether vested or unvested, shall terminate and all such options shall immediately lapse, expire and cease to have any further force or effect, subject to the completion of the relevant Change of Control Event.
Participation Rights
4.1 The Optionholder is not entitled to participate in any new issue of securities to existing holders of Shares in the Company unless:
- (a) the Optionholder has become entitled to exercise the options under clauses 1.6, 2 or 3; and
- (b) the Optionholder does so before the record date for the determination of entitlements to the new issue of securities and participates as a result of being a holder of Shares.

The Company must give the Optionholder, in accordance with the Listing Rules, notice of any new issue of securities before the record date for determining entitlements to the new issue.

4.2 In the event of a bonus issue of Shares being made pro ‑ rata to shareholders (Bonus Issue), the number of Shares issued to an Optionholder on exercise of each option will include the number of Shares that would have been issued to the Optionholder if the option had been exercised prior to the record date for the Bonus Issue (Bonus Shares). No adjustment will be made to the Exercise Price. The Bonus Shares must be paid up by the Company out of the profits or reserves (as the case may be) in the same manner as was applied in the Bonus Issue and upon issue rank pari passu in all respects with the other Shares of that class on issue at the date of issue of the Bonus Shares.
4.3 If the Company makes a pro rata issue of securities (except a bonus issue) to the holders of Shares the Exercise Price shall be reduced according to the formula specified in the Listing Rules.
4.4 If, prior to the expiry of any options, there is a reorganisation (including a consolidation, subdivision, reduction or return) of the issued capital of the Company, then the rights of a Participant (including the number of options to which each Optionholder is entitled and the Exercise Price) will be changed to the extent necessary to comply with the Listing Rules applying to a reorganisation of capital at the time of the reorganisation.
4.5 If, prior to the expiry of any options, a resolution for a members’ voluntary winding up of the Company is proposed (other than the purpose of a reconstruction or amalgamation) the Board may, in its absolute discretion, give written notice to Optionholder of the proposed resolution. Subject to the Exercise Conditions, the Optionholder may, during the period referred to in the notice, exercise their options.
4.6 The options will not give any right to participate in dividends until Shares are allotted pursuant to the exercise of the relevant options.

AI assistant

ENCOUNTER RESOURCES LIMITED — Annual Report 2012

64856_rns_2012-10-25_d7d70b2f-a3a9-43d0-bd1a-295128e780c0.pdf

Corporate Directory

Directors

Company Secretary

principal and registered office

Auditor

Share registry

Stock exchange listing

Contents

ASX Code

competent Persons statement

Company Information

letter from the Chairman & Managing Director

Dear Fellow Shareholder,

exploration Review

paterson province

YEnEEnA ProJEct

BM7 copper Discovery

exploration Review continued

BM7 copper Discovery continued

BM7 copper Discovery continued

BM1 copper Discovery

exploration Review continued

BM1 copper Discovery continued

BM1 copper Discovery continued

BM6 Prospect

BM2 Prospect

BM2 Prospect continued

t4 Prospect

t4 Prospect continued

t4 Prospect continued

BM5 target

Yilgarn District

cALcrEtE urAnIuM rEsourcEs

HILLVIEW (e51/1127 – 83% encounter, 17% Avoca)

LAKE WAY soutH (e53/1232 – 60% encounter, 40% Avoca uranium rights only)

BELLAH BorE EAst (elA53/1685 – 100% encounter)

DArLot EAst ProJEct – Gold (elA 37/1148 – 100% encounter)

Bangemall Basin

BEYonDIE (encounter – 100%)

exploration Review continued

Hillview Qualifying statement

Bellah Bore East Qualifying statement

Lake Way Qualifying statement

Summary of Tenements

Introduction

explanation for Departures from Best practice recommendations

Corporate Governance Council recommendation 1

Lay Solid Foundations for Management and Oversight

Role of the Board of Directors

Board Processes

Evaluation of Senior Executive Performance

Corporate Governance Council recommendation 2

Board Composition

Independent Chairman

Roles of Chairman and Chief Executive Officer

Nomination Committee

Evaluation of Board Performance

Education

Independent Professional Advice and Access to Information

Corporate Governance Council recommendation 3

Promote Ethical and Responsible Decision Making

Code of Conduct

Guidelines for Trading in Company Securities

Diversity

Corporate Governance Statement continued

Corporate Governance Council recommendation 4

Safeguarding Integrity in Financial Reporting

Audit Committee

Financial reporting

Corporate Governance Council recommendation 5

Make Timely and Balanced Disclosure

Continuous Disclosure

Corporate Governance Council recommendation 6

Respect the Rights of Shareholders

Communications

Corporate Governance Council recommendation 7

Recognise and Manage Risk

ENCOUNTER RESOURCES LIMITED Annual Report 2012