EVOLUTION MINING LIMITED — Annual Report 2009

Oct 26, 2009

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CATALPA RESOURCES

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PRODUCER

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CORPORATE DIRECTORY

CONTENTS

DIRECTORS John Rowe Non Executive Chairman Bruce McFadzean Managing Director Barry Sullivan Non Executive Director Murray Pollock Non Executive Director Nigel Johnson Non Executive Director

COMPANY SECRETARY Graham Anderson Leonard Math

SENIOR MANAGEMENT Erik Palmbachs Chief Financial Officer (CFO) Stuart Pether General Manager Operations Adrian Pelliccia Manager Geology John Fraser Resident Manager Nick Winnall Manager Exploration

REGISTERED & PRINCIPAL OFFICE

Level 1, 9 Havelock Street West Perth WA 6005 Telephone (618) 9321 3088 Facsimile (618) 9321 8804 Email manager@catalparesources.com.au

	CONTENTS
SHARE REGISTRY	Profle	1
Security Transfer Registrars Pty Ltd	Chairman’s Report	2
770 Canning Highway Applecross WA 6153	Review of Operations	8
Telephone	Directors’ Report	24
(618) 9315 2333 Facsimile	Auditor’s Independence Declaration	36
(618) 9315 2233	Corporate Governance Statement	37
Email registrar@securitytransfer.com.au	Income Statements	41
AUDITORS	Balance Sheets	42
PKF	Statements of Changes in Equity	43
BGC Centre Level 7
28 The Esplanade	Cash Flow Statement	44
Perth WA 6000	Notes to the Financial Statements	45
Telephone
(618) 9278 2222	Independent Audit Report	79
Facsimile (618) 9278 2200	Directors’ Declaration	80
Email	ASX Additional Information	81
perth@pkf.com.au

STOCK EXCHANGE LISTING Securities in Catalpa Resources Limited are listed on:

Australian Stock Exchange Limited Home Branch – Perth

ASX Code – CAH, CAHO, CHOB

WEBSITE

www.catalparesources.com.au

CATALPA RESOURCES ANNUAL REPORT 2009

HIGHLIGHTS

• Edna May OrE rEsErvE incrEasEd by MOrE than 50% tO 817,000 OUNCES

• Edna May GOLd PrOJEct FEasibiLity study FinaLisEd with attractivE MarGins tO Fund FuturE GrOwth

• MOrE than a$106 MiLLiOn raisEd tO EnsurE Edna May GOLD PROJECT IS FULLY FUNDED THROUGH TO FIRST GOLD PRODUCTION IN MID 2010

• MininG and EnvirOnMEntaL aPPrOvaLs sEcurEd

• cOnstructiOn OF thE Edna May GOLd PrOJEct GOLd PrOcEssinG PLant and sitE EarthwOrks wELL advancEd

• attractivE MErGEr tErMs with LiOn sELEctiOn tO achiEvE a PLATFORM FOR GROWTH AND AN EARLY PRODUCTION AND CASH FLOW PROFILE BY DECEMBER 2009

COMPANY PROFILE

Perth-based Catalpa Resources Limited (ASX: CAH) is on the cusp of a new phase of development, following the successful raising of more than A$106M in debt and equity to advance its A$92M Edna May Gold Project to production in the June quarter 2010.

As part of the Edna May finance facility, Catalpa has sold forward 352,317 ounces of gold at an exceptional price of A$1,557.50 per ounce.

Catalpa plans to utilise Edna May’s solid annual cash operating margins to fund its growth and become Australia’s next mid tier gold producer.

In keeping with this strategy, Catalpa and its largest shareholder, Lion Selection Limited (ASX:LST), signed a Merger Implementation Agreement in June 2009 to bring together Lion Selection’s 47% shareholding in Catalpa’s 100% owned and operated 100, 000 ounces pa Edna May Gold Project in Western Australia and Lion Selection’s 30% stake in the Newcrest managed 100, 000 ounces pa Cracow Gold Project

in Queensland, under Catalpa’s experienced management team. As part of the merger, Catalpa will also acquire a pre-emptive right over Newcrest’s 70% stake in Cracow.

Following implementation of the merger, expected in the December quarter 2009, Catalpa will be a cashflow positive gold producer from its 30% stake in Cracow. From mid 2010 when production commences at the Edna May Gold Project Catalpa will produce more than 130, 000 ounces pa.

Catalpa has an experienced Board and management team that is committed to realising a timely production and cash flow profile at the Edna May Gold Project. With a buoyant outlook on the gold price, the Board believes that Catalpa presents a sound investment opportunity with significant upside potential.

Catalpa Resources has adopted best practice standards across all its activities, including its social, health and safety, environmental, management and corporate governance functions.

01

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CHAIRMAN’S
REPORT
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ANNUAL REPORT 2009

CATALPA RESOURCES

DEAR SHAREHOLDERS

No doubt 2010 will be remembered in Catalpa’s history as the year in which the Company achieved first gold production at its flagship Edna May Gold Project in Westonia, WA. It should be recorded however that it is the remarkable achievements in 2009 that have set Catalpa on a clear course to becoming one of Australia’s leading mid-tier gold producers.

FY2009 began with this vision clearly in our sights. With the re-naming of the Company as Catalpa Resources we set out to advance the Edna May Gold Project towards production by mid-2010.

Certainly the Australian gold price which traded between A$1,100 and A$1,500 per ounce for much of the year, was in our favour, and combined with the positive feasibility study completed in January 2009 for a very profitable six-year operation, provided the alchemy to turn Catalpa’s Edna May Gold Project from vision to reality.

The combination proved equally attractive to the market, and against the most challenging economic backdrop in several decades, Catalpa secured a A$67.5M project finance facility, including an unprecedented forward sold gold price of A$1,557.50 for 352,317 ounces over its first five years of production.

The debt facility was rapidly followed by A$31.4M Share Placement, and a well supported Share Purchase Plan for an additional A$7.5M, which all together raised more than A$106M, ensuring the A$92M Edna May Gold Project, construction program is fully funded to production in 2010.

By the end of the financial year, just two months after the successful funding process, considerable progress had been made on the project; the major project contractors were appointed and the accommodation village was constructed and is occupied by contractors undertaking the early earthworks, and process plant refurbishment activities on site.

Likewise, Catalpa recorded some significant exploration and resource optimisation achievements in 2009. During the year the Edna May Gold Project Reserve was increased by more than 50% from 544, 000 ounces to 817,000, some 61% of which is in the highest confidence, JORC ‘Proved’ category.

Catalpa has a clear strategy to increase the Edna May Ore Reserve to more than a million ounces by 2010, and further extend the life of mine beyond ten years. Exploration activities during 2009 underpin this potential.

The Edna May Underground Project yielded encouraging results from all six drill holes aimed at confirming the continuation of the Edna May high grade reef structure at depth, supporting Catalpa’s view that the project is prospective for an underground operation in the future.

Gold Project Reserve referred to previously and extend the project mine life beyond seven years, providing a significant boost to project cash operating margins.

In addition, a regional (infill) auger geochemical sampling programme has yielded positive results within 10 kilometres of Edna May and provide a number of exciting targets for follow up RAB drill testing. Towards the end of the financial year, a RAB drilling programme further extended the known strike of the Edna May Gneiss, the host rock for the gold mineralisation, to the West of the Greenfinch deposit.

We remain confident that the Edna May Gold Project provides Catalpa with a significant platform for growth, not only through exploration but also by delivering early cash flows to repay debt and fund potential acquisitions.

During the year the opportunity arose to negotiate mutually attractive merger terms with Catalpa’s largest shareholder, Lion Selection. Essentially, the merger will amalgamate Catalpa’s 100,000 ounces pa Edna May Gold Project (in which Lion Selection have a 46.9% shareholding) and Lion Selection’s 30% ownership of the Newcrest-managed 100,000 ounces pa Cracow Gold Project in Queensland, under Catalpa’s existing management.

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pa
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Since announcing the merger in June, the market has responded extremely positively, with shares in both Catalpa and Lion Selection increasing by more than 50%. The implied market support echoes the unanimous conviction of Catalpa and Lion Selection Directors, who intend to vote in favour of the merger, in the absence of a superior proposal.

This transaction is an innovative means to unlock value for both sets of shareholders. When finalised in the last quarter of the 2009 calendar year, the 30% stake in Cracow will yield Catalpa an immediate production and cash flow profile.

But for now, Catalpa’s experienced Board and management team remain focussed on achieving first gold production at Edna May, on schedule and within budget.

For the admirable progress towards this goal in the past year, I commend Catalpa’s Board of Directors, its management team, under the excellent leadership of Bruce McFadzean and each and every one of Catalpa’s employees and contractors, who without exception have risen to the challenge and workload wrought by our transition from explorer to producer.

Thank you also to our shareholders, long-standing and new, for your support as we progress, rapidly, towards a productive and profitable, midtier gold Company.

JOHN ROWE CHAIRMAN

Exploration and resource definition drilling at the Greenfinch deposit, along strike of the existing Edna May open pit, resulted in a maiden ore Reserve of 79,000 ounces as announced to market in April 2009. The Greenfinch ounces contribute to the 50% increase in the Edna May

03

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BOARD OF DIRECTORS

ANNUAL REPORT 2009

CATALPA RESOURCES

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JOHN ROWE BSC (HONS), ARSM, MAUSIMM nOn ExEcutivE chairMan

John Rowe brings a wealth of geological and business development skills to the Company. Mr Rowe has 39 years experience within the Nickel and Gold industries of Western Australia. He has held a variety of positions in mine management, exploration and business development and was previously employed as an Executive of Lion Ore in Australia.

Mr Rowe is also a Non Executive Director of Panoramic Resources Limited (PAN).

BRUCE MCFADzEAN DIP MINING MANAGING DIRECTOR

Mr McFadzean, a mining engineer, brings over 30 years of management, mining, processing and project “start up” experience to the organisation, half of which was gained in the employ of global resources brands, Rio Tinto and BHP Billiton. Mr McFadzean has broad commodity experience in gold, iron ore, diamonds and nickel/cobalt and in a wide range of roles including corporate, managerial, technical and operational.

Mr McFadzean is a non Executive director of venture Minerals Limited.

barry suLLivan bsc (hOns), arsM, FAUSIMM, MAICD nOn ExEcutivE dirEctOr

Mr Sullivan is an experienced and successful mining engineer with a career spanning 40 years. His initial mining experience was gained in the South African gold mining industry, followed by more than 20 years with Mount Isa Mines. In the final 5 years of his tenure with MIM, Mr Sullivan was Executive General Manager responsible for the extensive Mount Isa and Hilton operations. More recently, Mr Sullivan has been working with a number of smaller exploration and mining companies.

Mr Sullivan is a Non Executive Chairman of Exco Resources, Non Executive Director of Lion Mining also a Non Executive Director for Lion Selection.

NIGEL JOHNSON CA, CFTP (SNR), MAICD nOn ExEcutivE dirEctOr

Mr Johnson is a Charted Accountant with strong finance and management experience attained over a period of 36 years in both publicly listed and private companies and within a number of industries.

Mr Johnson has significant expertise in financial management, equity and debt raisings, treasury and financial risk management and strategic and business planning. Most recently, Mr Johnson was Chief Financial Officer for Straits Resource Limited, responsible for the financial, commercial and treasury activities of the Straits Group.

Mr Johnson is also a Non Executive Director of Matrix Composites and Engineering Limited.

MURRAY POLLOCK MAICD nOn ExEcutivE dirEctOr

Murray Pollock is a businessman with 40 years experience within the mineral resource sector, principally in drilling. Mr Pollock is a drilling and mine management services consultant for several companies.

05

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CATALPA NAME REFLECTS nEw visiOn

On 3 September 2008, following overwhelming shareholder approval, the Company changed its name and commenced trading as Catalpa Resources Limited on the Australia Securities Exchange (ASX) code CAH. The new name better reflects the Company’s forward-looking focus and direction, and the timing of the name change was opportune as the Company entered a new phase of development towards production at its Edna May Gold Project.

CORPORATE

FULLY UNDERWRITTEN RENOUNCEABLE RIGHTS ISSUE

On 3 October 2008 Catalpa undertook a fully underwritten renounceable rights issue, offering one new share and one free attaching option for every two shares held at an application price of 2 cents per share. The free attaching option with an exercise price of 10 cents each expire on 31 October 2011. The Rights Issue raised some A$3.5M before costs, to provide general working capital to fund the Company’s Edna May Gold Project Feasibility Study and ongoing exploration program. Shareholders who participated in the Rights Issue have had significant growth in their investment.

ExEcutivE aPPOintMEnts

Catalpa’s management team was strengthened considerably during the period under review, as the Company set out to appoint an experienced management team to oversee the transition from explorer to producer.

ANNUAL REPORT 2009

CATALPA RESOURCES

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BRUCE MCFADzEAN MANAGING DIRECTOR

Mr McFadzean, a mining engineer, brings over 30 years of management, mining, processing and project “start up” experience to the organisation, half of which was gained in the employ of global resources brands, Rio Tinto and BHP Billiton. Mr McFadzean has broad commodity experience in gold, iron ore, diamonds and nickel/cobalt and in a wide range of roles including corporate, managerial, technical and operational. Mr McFadzean is a Non Executive Director of venture Minerals Limited.

MR STUART PETHER GENERAL MANAGER OPERATIONS

Mr Stuart Pether was appointed as the Company’s General Manager Operations with effect from 12 January 2009. Mr Pether is an experienced Mining Engineer and holds a BEng (Mining). He has an impressive resume with over 20 years hands-on and technical experience in the resources sector.

MR ERIK PALMBACHS CHIEF FINANCIAL OFFICER

On 20 October 2008 Mr Erik Palmbachs joined Catalpa as the Company’s Chief Financial Officer. Mr Palmbachs is an experienced CFO with an MSc in Mineral Economics and a Bachelor of Business (Accounting). He is a member of the Australian Society of Accountants (AASA, CPA) and has an impressive resume with 29 years hands-on experience, much of which was gained in the resources sector.

ADRIAN PELLICCIA MANAGER GEOLOGY

Mr Adrian Pelliccia joined Catalpa on 23 March 2009 in the role of Manager Geology. Mr Pelliccia holds a B.Sc. Hons (Geology), a Postgraduate Diploma in Applied Finance and Investment and is a Member of the Australasian Institute of Mining and Metallurgy. He has worked in various operational, technical and corporate roles in his career within the gold and nickel industries of western australia and victoria.

NICK WINNALL MANAGER EXPLORATION

Mr Winnall holds a BSc (Hons) in Geology and is a Member of Australasian Institute of Mining and Metallurgy. Mr Winnall has 30 years of experience in his field, with 20 years experience as an exploration manager in Western Australia. Notably, Mr Winnall headed up the team in Meekatharra that found in excess of 3 million resource ounces of gold between 1992 and 1998. Mr Winnall is equally experienced in greenfield exploration and orebody extension, using numerous geophysical and geochemical techniques.

JOHN FRASER RESIDENT MANAGER

Mr John Fraser was appointed as the Resident Manager for the Company’s Edna May Gold Project, with effect from 23 August 2009. Mr Fraser is an experienced Metallurgist with a BSc (Engineering) in Metallurgy. He has more than 25 years of operational, managerial and commissioning experience.

07

EDNA MAY GOLD PROjECT BANKABLE FEASIBILITY STUDY

Towards the end of 2008 considerable management attention was given to finalising the revised Feasibility Study for Catalpa’s Edna May Gold Project. A number of positive changes occurred to the key inputs driving the economics of the project since it was previously assessed in 2006. The gold price increased by approximately 40% from 2007 and the Australian Dollar (A$) gold price was further buoyed by our currency’s weakening against the American Dollar. For much of 2009 gold traded between A$1,100 and A$1,500 per ounce.

In addition to a more favourable gold price, the Edna May Gold Project process plant flow sheet was redesigned with an increase in capacity from 2.2Mtpa (2006 Feasibility Study) to 2.8 – 3.2Mtpa. This step improvement in processing plant capacity positively impacted on production cost and economies of scale.

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At the same time, the Edna May orebody was reoptimized at a gold price of A$1,025 per ounce, which, combined with an improved cut back and mining strategy, significantly improved the Edna May Gold Project production profile.

ANNUAL REPORT 2009

CATALPA RESOURCES

KEY ASSUMPTIONS AND FINDINGS

During the December quarter the Feasibility Study (FS) was finalised and the financial model populated with study physicals, costs and revenues, outlining a 100,000 ounces per annum gold mining operation with very attractive annual cash operating margins based on the following key project assumptions:

• rEsOurcE OPtiMisEd at a$1,025 PEr OUNCE GOLD PRICE;

• Pit dEsiGnEd and rEcOnciLEd tO

• A$1,025 PER OUNCE OPTIMISED SHELL;

• PrOcEss PLant thrOuGhPut;

• yEar 1 – 2.7MtPa (raMP uP);

• yEar 2 – 2.8MtPa;

• yEar 3 Onward 3.2MtPa;

• PrOJEct caPitaL incLudinG 7

• MONTH PRE-STRIP, WORKING CAPITAL, ETC - A$92M INCLUDING CONTINGENCIES;

• PrOJEct cOnstructiOn schEduLE OF 12 MONTHS.

FEASIBILITY STUDY PROJECT PHYSICALS

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TOTAL MEASURED AND INDICATED
29.9MT MILL THROUGHPUT 2.8MT
MINERAL RESOURCE (0.5 G/T COG)
tOtaL OrE rEsErvE
19.1 MT MEtaLLurGicaL rEcOvEry ≈92%
(0.5 G/T COG)
% PrOvEd
64% rEcOvErEd OuncEs 676,000
OrE rEsErvE
STRIP RATIO TOTAL
2.1:1.0 MINE LIFE (POST PRE-STRIP) 5.8 YEARS
PROJECT (W:O)
STRIP RATIO POST
1.9:1.0 PROCESSING LIFE 5.8 YEARS
PRE-STRIP (W:O)
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• EXCLUDES INFERRED MINERAL RESOURCE 8.4MT

• ** PROCESS PLANT THROUGHPUT RAMPS UP TO 3.2MT IN YEAR 3

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Project capital and operating costs were compiled from written submissions from engineering and equipment suppliers, and other service providers at the peak of the mining boom in July 2008. These costs are now considered to be at the ‘high’ end of likely capital and operating cost estimates.

The FS outlined attractive average annual cash operating margins for the project. Feasibility Study – estimated revenue and operating costs:

• GOLd PricE OF a$1,200 PER OUNCE

• OPEratinG cOst a$430M

• cash OPEratinG MarGin

• (POST ROYALTY) A$343M

• avEraGE cash annuaL OPEratinG MARGIN A$54M

• avEraGE cash cOst PEr OuncE (PRE ROYALTY) A$636

PIT DESIGN AND MINING

The mine has a low ‘life of mine’ strip ratio below 1.9:1.0 after completion of the seven month pre-strip. The pit wall angles are derived from extensive geotechnical review where seven separate slope domains where applied to the pit designs.

The pit will be mined in four stages which have been designed based on three optimised gold price economic pit shells at A$600 per ounce, A$800 per ounce and A$1,025 per ounce. The low strip ratio nature of the Edna May deposit allows the mine to employ a single mining fleet for most of the mine life.

PROCESS PLANT

The process plant design and flow sheet provide for a conventional carbon in leach (CIL) process and SABC FF (SAG mill Ball mill pebble Crusher Feed Forward) circuit. The ore has been extensively tested and found to be metallurgically consistent with a typical metallurgical recovery of approximately 92%.

The process plant was purchased and transported from the Big Bell mine site to the Edna May site in 2007 with key plant components stored under cover in Perth. The process plant consists of a 2.0kW SAG mill and a 3.7kW Ball Mill along with other components necessary to reconstruct the plant.

As part of the plant upgrade to 2.8Mtpa the following changes to the process flow sheet were designed:

• iMPLEMEntatiOn OF ‘MinE tO MiLL’ OrE MANAGEMENT PROCESS;

• nEw PriMary crushEr, cOarsE OrE STORAGE AND RECONFIGURED RECLAIM;

• rEcOnFiGurEd PEbbLE ManaGEMEnt;

• 60% incrEasE in LEach and ABSORPTION CAPACITY; AND

• uPGradE tO Gravity circuit.

The mine and processing schedule will allow average annual gold production of more than 100,000 ounces recovered. The process plant has a twelve month construction period which commenced in July 2009, with first gold production scheduled in mid 2010.

PROJECT LOCATION

The Edna May Gold Project mine site is ideally positioned a few kilometres from the Westonia town, on the Eastern edge of Western Australia’s Wheatbelt. Westonia’s mining history dates back to the early 1900’s, and the town is wellserviced by established transport and power infrastructure. The town and mine site are within three hours drive from the major mining service centres of Perth and Kalgoorlie.

Catalpa is committed to operating in a sustainable and socially responsible manner. From the outset, Catalpa has forged close ties with the communities around the Edna May Gold Project, and in turn the project benefits from shared use of the Westonia town’s extensive social and recreational infrastructure for its employees and contractors.

09

EDNA MAY GOLD PROjECT PROjECT FINANCE

In March 2009, Catalpa secured a Project Finance Facility for the Edna May Gold Project from Macquarie Bank Limited. The facility comprises a secured loan of up to A$55M, a standby mezzanine facility of up to A$10M, a A$3.5M performance bond facility and a gold hedging facility.

Under the hedging facility, Catalpa has sold forward 352,317 ounces of gold at an achieved fixed flat forward price of A$1,557.50 per ounce for delivery from commencement of operations until the facility concludes in the 2015 financial year. This hedged component of 352,317 ounces of gold represents 23% of the Project’s present Mineral Resource.

The hedging facility considerably boosts the already robust project economics from the planned average annual cash operating margins (post royalty) as outlined in the 2008 Feasibility Study of A$54M per annum, to an impressive A$72M per annum based on an assumed average weighted hedge book and spot gold price of A$1,365[1] per ounce.

In conjunction with entering into the project finance commitment, Catalpa agreed to issue Macquarie Bank with options over fully paid ordinary shares in Catalpa. The number of options to be issued is equal to the amount provided under the mezzanine facility divided by the option exercise price of 7.5 cents (a 25% premium to the price at which Catalpa issues shares under the equity component of the project funding). Half of the options were issued within two months of signing of the Project Finance Facility with the balance to be issued following first draw down under the mezzanine facility if required.

Note 1. Average weighted hedge book and spot gold price is estimated from 352,317 ounces at A$1,557.50 per ounce and 323,684 ounces at A$1,155 per ounce.

UNDER THE HEDGING FACILITY, CATALPA HAS SOLD FORWARD 352,317 OUNCES OF GOLD AT an achiEvEd FixEd FLat FOrward PricE OF A$1,557.50 PER OUNCE

SHARE PLACEMENT

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On 31 March 2009, Catalpa successfully concluded a placement of 524,423,333 shares at 6 cents per share to raise gross proceeds of A$31.4M, which, together with the A$67.5M Project Finance Facility effectively finalized the financing required to commence development of the Edna May Gold Project.

Catalpa’s major shareholder, Lion Selection Limited provided strong support for the issue subscribing A$15M. The balance of the issue was well supported by a range of domestic and offshore investors which resulted in the addition of a number of new institutional investors to Catalpa’s share register.

The placement was made to institutional and sophisticated investors pursuant to Section 708 of the Corporations Act 2001 and was undertaken in two tranches; Tranche 1 – comprising 74.3M shares using the Company’s 15% placement capacity under Listing Rule 7.1, raising A$4.4M and Tranche 2 – comprising 450.1M shares placed as approved by Catalpa’s shareholders at an Extraordinary General Meeting on 8 May 2009, to raise A$27M.

SHARE PURCHASE PLAN

In recognition of its supportive shareholder base, in April 2009 Catalpa undertook a Share Purchase Plan (SPP). Under the SPP, each eligible shareholder was entitled to apply for up to A$5,000 worth of fully paid ordinary Catalpa shares at 6 cents per share (being the same price at which shares were offered under the placement). The SPP was managed by Austock Corporate Finance and sub-underwritten by Lion Selection and was strongly supported by Catalpa shareholders to raise A$7.5M.

In the three month period from 31 March to 30 June 2009, Catalpa raised more than A$106M in dept and equity to ensure that its flagship Edna May Gold Project project is fully funded through to planned production by mid 2010.

ANNUAL REPORT 2009

CATALPA RESOURCES

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PROPOSED MERGER WITH LION SELECTION

On 24 June 2009 Catalpa and its largest shareholder, Lion Selection Limited (ASX:LST), signed a Merger Implementation Agreement to establish Catalpa as a new Australian mid-tier gold producer. The proposed merger will bring together Catalpa’s 100% owned and operated 100,000 ounces pa Edna May Gold Project and Lion Selection’s 30% stake in the Newcrest managed, 100,000 ounces pa Cracow Gold Gold Project in Queensland, under Catalpa’s brand and experienced management team.

As part of the merger, Catalpa will also acquire a pre-emptive right over Newcrest’s 70% stake in Cracow. The Cracow Gold Gold Project is well managed and will continue to be operated by Newcrest Mining Limited (70%), the merger will not detract Catalpa’s management from its focus on advancing the Edna May Gold Project to production; on time and within budget.

The Cracow Gold Gold Project has a history of steady gold production of over 100,000 ounces pa for the past four years and, like the Edna May Gold Project, is considered to have considerable exploration upside.

Following implementation of the merger, expected in the December quarter of 2009, Catalpa will be a cashflow positive gold producer from its 30% stake in Cracow and, together with production from Edna May Gold Project commencing mid 2010, annual production will be increased to 130,000 ounces pa.

The merger will secure Catalpa’s position as one of Australia’s significant gold producers, and create an attractive new mid-tier gold investment option for investors seeking to capitalise on the buoyant outlook for gold. Following the merger, with the removal of Lion’s existing controlling shareholding, Catalpa expects to have greater share liquidity and a greater ability to attract new investors.

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BENEFITS TO CATALPA SHAREHOLDER

The proposed merger with Lion Selection will present significant benefits to Catalpa shareholders. Post merger, Catalpa shareholders will hold shares in a Company with the following key attributes:

• a mid-tier australian gold producer with diversified operations and immediate production profile

• significant cashflow to fund further growth

• continued focus on advancing the Edna May Gold Project to production by mid 2010

• Fully funded

• Experienced board and management team

• significant increase in size and scale of operations

• Mineral resources increased from 1.5M ounces to 1.7M ounces gold

• Ore reserves increased from 817,000 ounces to 887,000 ounces gold

• combined production of 130,000 ounces gold pa (once Edna May is at full production)

• two significant assets:

• the Edna May Gold Project in western australia which, when commissioned in mid 2010, is planned to produce at a rate in excess of 100,000 ounces pa with an estimated life of mine cash operating cost of A$636 per ounce (pre-royalty), a current mine life of 8 years and 352,317 ounces sold forward at a fixed flat price of A$1,557.50 per ounce; and

• 30% joint venture interest in cracow Gold Project in Queensland with a share of current production of around 30,000 ounces pa at a cash cost of <A$600 per ounce

• significant potential from both operations to add additional resources and Reserves through near mine exploration success; and

• Pre-emptive right over newcrest’s 70% interest in the cracow Gold Project.

The merger is unanimously recommended by both the Boards of Lion and Catalpa and each Director intends to vote their respective shareholdings in favour of the merger, in the absence of a competing proposal.

11

CAPITAL STRUCTURE POST MERGER

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• EDNA MAY • 100k ounces production • reserves 817k ounces • resources 1.5m ounces • 1st gold pour mid 2010

• EDNA MAY •100k ounces production CRACOW • 31k ounces production • reserves 817k ounces • reserves 70k ounces • resources 1.5m ounces • resources 211k ounces • 1st gold pour mid 2010 • Operating

Following the proposed merger Catalpa will have a capital structure more attractive to institutional investors with:

• a clean and open share register

• removal of ≈130M options

• (pre consolidation)

• removal of a large single shareholder (Lion Selection 46.9%)

• 145M shares and ≈15.8M options

• no single shareholder with more than

• 9.0% shareholding

MERGER TERMS AND CONDITIONS

The merger will be implemented via a Scheme of Arrangement of Lion shareholders, pursuant to which Catalpa will acquire all of the shares in Lion. Under the Scheme, Lion shareholders will receive one Catalpa share for each Lion share they hold (post Catalpa undertaking a 1 for 11 share consolidation). In conjunction with the Scheme, Lion will first undertake a demerger of its investment assets and undertake a 10 cents per share cash distribution to its shareholders.

MERGER TIMING

The merger is planned to be implemented in the last quarter of 2009:

• transaction announced 24 June 2009 • scheme booklet dispatched 12 October 2009 • catalpa shareholder meeting 17 november 2009 • Lion shareholder meeting 17 november 2009 • Expected merger completion december 2009

ANNUAL REPORT 2009

CATALPA RESOURCES

PROJECT STATUS

On 25 May 2009 Catalpa received official notification that Environmental Mining Approval had been recommended for its Edna May Gold Project, subject to the lodgement of bonds. The Department of Environment and Conservation Works Approval to commence construction at Edna May Gold Project, was received on 6 July 2009.

APPOINTMENT OF CONTRACTORS

In March 2009 Catalpa had provisionally appointed Perth-based, GR Engineering Services (GRES) as its major site construction service provider, and was therefore able to immediately formalise the appointment and commence site works at Edna May Gold Project, on receipt of the Department of Environment and Conservation Works Approval on 6 July 2009.

EDNA MAY GOLD PROjECT PROGRESS

GRES is responsible for the single largest capital component of the Edna May Gold Project, budget; namely the refurbishment and recommissioning of the 2.8 – 3.2Mtpa Edna May Gold Project, gold processing plant. Their appointment is in keeping with Catalpa’s commitment to using local services and labour, in support of the local economy where appropriate to do so.

UPDATED FINANCIAL MODEL

The Edna May Gold Project, 88-person accommodation village has been constructed and is occupied at near-full capacity by contractors engaged in early earthworks and processing plant refurbishment activities. The scoping, tendering and awarding of project related contracts are progressing according to plan.

Two important developments have occurred since the updated Feasibility Study was published in January 2009. The favourable forward sold gold price of A$1,557.50 for 352,317 ounces of gold, and the addition of 79,000 ounces of gold to the project Ore Reserve from the adjacent Greenfinch deposit, have both contributed significantly to the already robust project economics:

Gold Price per Ounce	A$1,365
Operating Cost	A$430M
Cash Operating Margin (post Royalty)2	A$457M
Average Cash Annual Operating Margin3	A$73M
Average Cash Cost per Ounce (pre royalty)	A$636

NOTE 2 Cash Operating Margin (post Royalty) is determined by the gold price per ounce (A$1,365) minus the Average Cash Cost per ounce (A$636) minus the royalty of 4.5% times the assumed spot gold price of A$1,155 per ounce (A$52 per ounce) times the FS Ore Reserve (676,000) NOTE 3 Average Cash Annual Operating Margin is determined by the Cash operating Margin (post Royalty) divided by the FS processing life (6.3 years).

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cataLPa’s Edna May GOLd PrOJEct viLLaGE is SITUATED IN A PICTURESQUE SETTING ON THE EDGE OF thE wEstOnia tOwn sitE. abOvE: thE viLLaGE DINING ROOM.

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PROJECT 2009 2010 2010
TIMEFRAME
Q3 Q4 Q3 Q4 Q3 Q4
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Construction
Commissioning
First Gold
Pre - Strip
Production Ramp Up
Full Production
Merger Finalised
Cracow Cashflow
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13

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EDNA MAY PROCESSING PLANT UNDER CONSTRUCTION
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SITE WORKS UNDERWAY

GRES has constructed offices, communications and other infrastructure on site and work is well advanced on the preliminary plant earthworks and refurbishment of the 2.8 – 3.2Mtpa Edna May Gold Project, processing plant stored on-site.

Subsequent to the close of the financial period, process plant site earthworks are almost complete and the process plant structural and concrete civil works are also well advanced, with the rafts for both the SAG and ball mills both under construction.

The refurbishment of mechanical plant components remains on schedule and within budget.

COMMUNITY BENEFITS

The development of Catalpa’s Edna May Gold Project, will have significant flow-on social benefits for the community including:

• greatly increased income to local government from royalties, letting of village-land and offices, and annual social investment - providing the opportunity to expand services and improve community infrastructure

• population growth and increased diversity in the local population

• growth for existing local business and new business opportunities

• job opportunities during construction

• ~130 direct full-time jobs for the current life-of-mine of eight years

• indirect jobs from the increased economic activity

KEY PERSONNEL

The appointment of key personnel to the Edna May Gold Project, is progressing on schedule and within budget, with a number of middle management appointments finalised.

COMMUNITY ENGAGEMENT

Catalpa is a responsible corporate citizen and is committed to operating in a sustainable manner in the interest of all its stakeholders including the local communities within which it operates. Catalpa is committed to utilizing local labour and services wherever possible, and to this end, has hosted a series of meetings in the communities surrounding the Edna May Gold Project, project location to consult with potential employees, service providers and other interested and affected parties.

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WOLFRAM STREET, WESTONIA
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CATALPA RESOURCES ANNUAL REPORT 2009

MINERAL RESOURCE AND ORE RESERVES

The Edna May and Greenfinch Mineral Resource was estimated using Hellman & Schofield MIK block modelling techniques within geologically and grade defined mineralisation envelopes and is reported based on a 0.5g/t Au cut-off grade in accordance with the Australasian JORC Code in the following table:

DRILL CORE FROM EDNA MAY

	Greenfnch MINERAL RESOURCE	Edna May Gold Project Mineral Resources Statement Reported to 0.5g/t Au cut-off Measured Indicated Total Measured & Indicated Inferred Total Measured, Indicated & inferred Million Tonnes Gold g/t 000 Ounces Million Tonnes Gold g/t 000 Ounces Million Tonnes Gold g/t 000 Ounces Million Tonnes Gold g/t 000 Ounces Million Tonnes Gold g/t 000 Ounces 0.70 1.26 30 2.00 1.15 70 2.70 1.18 100 0.50 1.2 20 3.20 1.19 120
	Edna May	16.60 1.15 620 13.30 1.13 480 29.90 1.14 1100 8.40 1.0 270 38.30 1.11 1370
	Total	17.30 1.17 650 15.30 1.11 550 32.60 1.14 1,200 8.90 1.0 290 41.50 1.11 1,490

EFFEctivE hOLdinGs

• catalpa resources Ltd owns 100% of Edna May Operations Pty Ltd which in turn owns 100% of the Edna May Gold Project.

MINERAL RESOURCE FOOTNOTES:

• the Mineral resource has been stated at a 0.5g/t au cut-off grade.

• the Mineral resources are estimates of recoverable tonnes and grades using Multiple indicator kriging with block support correction and assuming a smallest mining unit for ore selection.

• Measured and indicated resources lie in areas where drilling is available at a maximum of 25 x 25 metre spacing, inferred resources exist in areas of broader spaced drilling, generally peripheral to the Measured and Indicated panels.

• all Mineral resource figures are stated at the 30 June 2009 on a 100% basis, with depletion by production where relevant.

• there are no known environmental, permitting, legal, taxation, political or other relevant issues that would materially affect the estimates of the Mineral Resources.

• Mineral resources are inclusive of Ore reserves. the stated contained mineral resource metal ounces are considered insitu; beneficiation recovery factors have not been applied.

• due to rounding of figures small discrepancies may exist.

15

	statEMEnt OF Edna May OrE rEsErvEs – 30 JUNE 2009 Coffey Mining Pty Ltd played a key role in providing technical and study management skills in the 2008 FS which enabled an upgrade of Edna May Gold Project Ore Reserve to 817,000 contained ounces of gold. Extensions to project life and improvements to the already robust economics were achieved during the course of the fnancial year following the release in April 2009 of the maiden Greenfnch deposit Ore Reserve. The Greenfnch deposit, along strike from the Edna May open pit has 79,000 contained ounce of gold. This increase to the project Ore Reserve extends the mine life to eight years and at current gold prices presents a signifcant boost to the project revenue. The Edna May & Greenfnch Ore Reserve, which was estimated by Coffey Mining Pty Ltd using Whittle Software based on relevant mining Au cut-off grades in accordance with the Australian JORC Code, is summarised in the following table: Greenfnch Edna May Total OrE rEsErvE Edna May Gold Project Ore Reserve Statement Reported to 0.5g/t Au cut-off Proved Probable Total Proved and Probable Million Tonnes Gold g/t 000 Ounces Million Tonnes Gold g/t 000 Ounces Million Tonnes Gold g/t 000 Ounces 0.60 12.30 12.90 1.29 1.19 1.19 30 470 500 1.40 6.80 8.20 1.18 1.23 1.21 56 270 320 2.00 19.10 21.10 1.22 1.20 1.20 80 740 820
	Edna May
	Total

EFFEctivE hOLdinGs

• catalpa resources Ltd owns 100% of Edna May Operations Pty Ltd which in turn owns 100% of the Edna May Gold Project. OrE rEsErvE FOOtnOtEs

• a gold price of a$1,250 per ounce has been assumed in estimating the Greenfinch Ore reserve.

• a gold price of a$1,025 per ounce has been assumed in estimating the Edna May Ore reserve.

• the economic cut-off grade applied to the Ore reserve was 0.5g/t au.

• all Ore reserve figures are stated at the 30 June, 2009, with depletion by production where relevant.

• the Ore reserve figures are shown on a 100% basis.

• there are no known environmental, permitting, legal, taxation, political or other relevant issues that would materially affect the estimates of the Ore Reserves.

• due to rounding of figures small discrepancies may exist.

Additionally, project economics will be further improved from Catalpa’s ongoing exploration activities, with targeted Reserve growth to more than a million ounces beyond 2010.

COMPETENT PERSON’S STATEMENT

Catalpa’s reported Mineral Resource and Ore Reserve has been compiled by Mr Adrian Pelliccia. Mr Pelliccia is a Member of the Australian Institute of Mining and Metallurgy and a full time employee of Catalpa. He has sufficient experience, relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking, to qualify as a Competent Person as defined in the 2004 Edition of the JORC ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.’ Mr Pelliccia consents to the inclusion in the report of the matters based on their information in the form and context in which it appears.

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ANNUAL REPORT 2009

CATALPA RESOURCES

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SOUTHERN CROSS
WESTONIA GREENSTONE BELT
EDNA MAY SITE
WESTONIA TOWN SITE
PROJECT LOCATION
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REGIONAL
GEOLOGICAL
SETTING
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The Edna May Gold Project is surrounded by exploration tenure held 100% by Catalpa. Catalpa controls most of the under-explored Westonia Greenstone Belt that displays many geological similarities with the adjacent Southern Cross Greenstone Belt, which is host to several operating and historic gold mines that have produced in excess of 10M ounces of gold.

throughout the gneiss that generally follow the gneissic foliation but can cross cut to form stockworks and arcuate reefs. Gold is also associated with alteration selvedges consisting of diopside, amphibole, biotite and silica with minor associated sulphide minerals. Individual veins are generally less than 5cm thick but locally can be up to several metres wide. veining tends to be better developed in the footwall of the Edna May Gneiss and are generally sulphidic with the dominant sulphide being pyrrohtite and lesser amount of galena, pyrite, chalcopyrite, molybdenite and sphalerite. Scheelite and wolframite also occur.

The gold mineralisation is hosted in three en echelon tonalitic gneiss intrusions namely Edna May, Greenfinch and Golden Point. The intrusions are bound to the north by an ultramafic amphibolite and a mafic amphibolite to the south. The central Edna May gneiss forms a continuous but irregular body over a 1 kilometre strike with an average thickness of approximately 100 metres. The body of gneiss strikes to the WNW and dips at -70 degrees NNE.

Post-mineralised leucogranite and pegmatite dykes intrude the gneiss and in places stope out parts of the gold mineralisation.

Total oxidation occurs to about 30 metres depth on the western edge of the deposit increasing to 60 metres on the eastern flank.

Larger tonnage and lower grade mineralisation comprises swarms of thin sheeted quartz veins

17

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SURFACE PROJECTION OF
UNDERGROUND TARGETS
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OBLIQUE CROSS SECTION
LOOKING EAST
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ANNUAL REPORT 2009

CATALPA RESOURCES

E

W

EXPLORATION AND RESOURCE DEVELOPMENT

Catalpa’s 2009 exploration program focused on extending near mine ‘brownfields’ opportunities and testing regional ‘greenfields’ targets within Catalpa’s extensive 840km[2] tenement package along strike from the Edna May Gold Project.

During late 2008 Catalpa reported the results of drilling to test underground targets at the Edna May Gold Project. The program was designed to further test historical underground drilling intercepts interpreted to be potential extensions of the Edna May Reef at depth below the existing Mineral Resource. Previous intercepts at depth ~~are tabled below.~~

LONG SECTION OF EDNA MAY LOOKING SOUTH

~~HISTORICAL~~	~~DRILL HOLES INTERPRETED TO INTERSECT THE~~					~~EDNA MAY REEF~~
~~Hole ID~~	~~Local~~	~~Grid~~	~~Rl~~	~~Dip~~	~~Azi~~	~~Depth~~	~~Depth~~	~~Downhole~~	~~Grade~~
	North	East				From	To	Interval (m)	(g/t Au)
WDD041	9650	11650	1339	-90	0	284.0	287.0	3.0	15.0
WDD043	9656	11596	1339	-90	0	393.0	402.0	9.0	12.8
WDD043A	9656	11596	1339	-90	0	364.9	368.0	3.1	8.03
WDD050	9650	11700	1339	-90	0	339.0	344.0	5.0	11.7
WDD052	9664	11627	1339	-90	0	324.0	327.0	3.0	15.0
WDD052A	9664	11627	1339	-90	0	311.0	314.0	3.0	4.6
WDD054	9694	11576	1338	-90	0	400.0	415.0	15.0	6.1
WDD054A	9694	11576	1338	-90	0	407.0	413.0	6.0	11.8
WDD055	9739	11553	1338	-90	0	450.0	482.0	32.0	6.8
WDD055A	9739	11553	1338	-90	0	445.0	477.0	32.0	7.8
WDD079	9641	11589	1340	-83	122	347.4	349.8	2.4	6.0
WDD079B	9641	11589	1340	-83	122	330.8	334.0	3.2	4.4
WDD083	9802	11511	1339	-87	147	498.4	511.0	12.6	7.3

EDNA MAY UNDERGROUNDEDNA MAY UNDERGROUND

The 2008 drill program encountered visible gold in all holes drilled as well as numerous significant ore grade intercepts. The drilling to date is not sufficiently closely spaced to provide adequate confidence of the continuity of the reefs intersected in the deep drilling campaign, however, the Board of Catalpa is optimistic that future investigations could yield a coherent body of economic mineralisation. A decline was mined by Australian Consolidated Mines Ltd during the last phase of mining to a depth of approximately 260 metres below surface. This infrastructure is currently inaccessible, but may in future provide underground access from which to further investigate potential high grade underground mining targets.

19

A total of six diamond holes for 3,527 metres were drilled in 2008 to test the Edna May Reef to 600 metres depth:

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HIGH GRADE INTERCEPTS FROM 2008 SURFACE DRILLING
Hole ID Rl Dip Azi Depth Depth Downhole Grade Comments
North East From To Interval (m) Grade (g/t Au)
WDD144A 9851 11355 1340 -66.0 099 513.00 513.27 0.27 129.0 Narrow quartz vein
and 536.88 538.44 1.56 49.4 Significant High grade reef and
minor associated veins.
Probable Edna May Reef Intersection
and 542.38 543.00 0.62 99.1 Narrow quartz vein in interval
and 547.85 548.20 0.35 85.7 Quartz rich zone. No coherent vein margin
and 568.30 571.59 3.29 39.1 Quartz rich zone within pegmatite
Including 568.29 569.16 0.87 140.0 Quartz rich zone within pegmatite
WDD145 9855 11354 1340 -61.6 112 458.86 459.89 1.03 15.0 Small 10cm vein in interval
and 549.15 549.89 0.74 13.6 veined and sulphide rich EMG –
small 10cm vein
and 506.64 523.1 16.45 5.5 Complete Edna May Reef intercept including
5.03m zone of veined EMG.
Hangingwall reef section + veined
EMG 6.82m @ 10.81g/t
WDD146 9799 11358 1339 -61.6 112 412.07 412.45 0.38 70.1 Silicified quartz ric h zone with sulphides
and visible gold
and 495.79 496.6 0.81 9.4 Interval contains 10cm quartz vein
and 539.20 540.29 1.09 10.2 0.75m vein within the interval
WDD147 9785 11453 1348 -64.311 119 446.7 447.6 0.9 5.93 Edna May Reef – same style of Quartz lode
cut by pegmatite intrusive therefore
not complete intercept
and 464.29 464.79 0.50 49.5 40cm quartz vein with visible gold –
flatter dipping vein set -
35 degrees to 030
and 475.14 476.33 1.19 24.4 Irregular veining on the margin of
a pegmatite intrusive
WDD148 9798 11361 1340 -58.6 103 401.60 403.20 1.60 48.4 0.87m quartz vein plus additional
peripheral veining
and 489.35 489.86 0.51 12.1 0.34m quartz vein in interval
WDD149 9801 11359 1340 -56.2 113 479.95 481.20 1.25 31.3 Significant High grade reef and minor
associated veins. Possible Edna May
Reef or associated Intersection
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EDNA MAY UNDERGROUND

visible gold was observed in all the holes not only

in Edna May Reef positions but elsewhere in the host rock Edna May Gneiss. Gold mineralisation is associated with ‘stockworks’ of quartz-pyrrhititepyrite between the historically mined high grade quartz-gold sulphide reefs.

The results provide geological evidence supporting the interpretation of the continuation of the Edna May reef at depth; and the belief that Edna May Gold Project is prospective for underground mining at an appropriate point of time in the life of mine.

ANNUAL REPORT 2009

CATALPA RESOURCES

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GREENFINCH DEPOSIT

Gold mineralisation at Greenfinch is contained within the western continuation of the Edna May ~~Gneiss, subtly offset by a series of NNW trending~~ faults. The gneiss is 80 metres thick and is locally cut by a series of flat to moderately dipping leucogranite sills that are barren of gold and generally less than 10 metres thick.

An RC program of 49 holes for 4,295 metres defined the Greenfinch Mineral Resource of 3.19Mt @1.18g/t Au for 121,000 ounces which resulted in a maiden Ore Reserve of 2.0Mt @ 1.22 g/t Au for 79,000 ounces.

A follow up program of 14 RAB holes for 570 metres was drilled to determine the extent of the host gneiss lithology west along strike. The program defined an additional potentially mineralized zone of gneiss over a 400 metres strike length, containing shallow historical gold workings. Further RC drilling is planned to test both the downdip extensions to the resource which remains open at depth, and the extent of the host lithology along strike.

REGIONAL AUGER

This year’s auger drilling program has virtually ~~completed the wide spaced, frst pass geochemical~~ sampling of the company’s tenement block. The auger drilling campaign comprised 452 holes of largely ‘infill’ sampling as follow up to anomalies produced last year. The auger drilling was planned to provide more geochemical detail to last year’s anomalies’ data.

Some of these anomalies are new gold-incalcrete occurrences defined in ‘greenfields’ areas previously untested by RAB or RC drilling. The anomalies are widespread, robust and cohesive gold-in-calcrete/soil anomalies. Several anomalies are of large aerial extent covering up to 2.5 kilomtres by 2 kilomtres.

This year’s drilling confirmed and enhanced the previously defined anomalies and produced several ‘new highs’ for testing. The western line of anomalies produced a new high of 26.4 ppb gold. The central anomaly comprises a maximum value of 92.5 ppb gold. To the east auger drilling produced a value of 258 ppb gold located north and along strike of the untested historical workings of Colossus.

PLan rEviEw OF GrEEnFinch MINERALISATION AND SIGNIFICANT GOLD INTERCEPTS

Auger data from earlier campaigns is combined to produce geochemical contours in the entire tenement holdings. The distribution of auger anomalies often shows an alignment trending NNW parallel to the direction of the faults adjacent to the Edna May deposit, and probably closely related to its formation.

The shapes of the contours of the three large gold-in-calcrete anomalies in the west crudely resemble bedrock structures displayed in ultradetail aeromagnetics suggesting that the source of the anomalies is substantially bedrock related.

21

REGIONAL RAB TARGETS FROM GEOCHEMICAL TEST WORK

EXPLORATION AND rEsOurcE dEvELOPMEnt PLANNING

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EDNA MAY UPGRADE

MAGNETIC LOW TARGETS

Several ‘magnetic low’ targets are defined at geologically similar positions to the stratigraphic and structural position of the Edna May gold deposit. Most targets are situated within 4 kilometres of the known gold mineralisation at Edna May and Rutherfords Reward.

Over 4,000 metres of RC and diamond drilling commenced in July 2009 to upgrade the Inferred Resource below the final pit design with a view to expanding the existing Ore Reserve. The current Mineral Resource has only been estimated to 300 metres below surface and gold mineralisation remains open at depth.

HISTORICAL WORKINGS

GOLDEN POINT

RAB testing will be carried out on the western extensions of the Colossus historical workings. These workings remained untested until the company’s RAB drilling there last year. RAB drilling produced values up to 3m @ 0.59 g/t gold.

The Golden Point Gneiss is situated in the footwall amphibolite approximately 30 metres below the Edna May Gneiss on the south side of the pit. Its relationship to the Edna May Gneiss (EMG) is not fully understood however it remains a prospective host lithology and previous RC drilling delineated several narrow, high-grade intercepts including 3m @ 19.1 g/t Au from 69 metres in GPRC002.

JILBADJI

During the year Catalpa earned a 65% interest in the Jilbadji gold prospect in a joint venture with Image Resources. The Jilbadji prospect is located in E77/1132, 35 kilometres south of Southern Cross and four kilometres NNW of the Edwards Find gold deposit. It contains a series of soil values up to 47 ppb gold which straddle a magnetic lineament that extends NNW from the recent underground gold mining operations at Edwards Find.

Further RC and diamond drilling is planned to scope the extent of the gneissic unit and test for continuity of mineralization.

REGIONAL

Planning was undertaken in preparation for the following exploration activities scheduled to be undertaken in 2009/2010. The planning involved RAB testing. Follow up RAB and or RC drilling will be results driven.

A total of 600 RAB holes for approximately 11,000 metres is planned to test numerous targets.

AUGER ANOMALIES TARGETS

Shallow RAB drilling to test the weathered saprolite bedrock is planned as the first pass drilling test of the auger anomalies. In the four large, aerially extensive anomalies drilling is planned on 80 metres centres. Elsewhere RAB traverse are planned across the geochemical ‘peaks’ of the anomalies. This drilling will assist in defining zones for more detailed and deeper RAB or RC drilling.

ANNUAL REPORT 2009

CATALPA RESOURCES

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|||||
|---|---|---|---|
|PROPOSED PROJECT AND|
|INFRASTRUCTURE LAYOUT|TENEMENT HOLDINGS|
|Location|Tenement|Status|Percentage|
|BODALLIN|
|Bodallin SW|E 77/1165|Granted|100|
|BODALLIN SOUTH|
|Kent Road|E 77/1452|Granted|100|
|JILBADGIE|
|Jilbadgie East|E 77/1132|Granted|65|
|MINE|
|Paddock|M 77/110|Granted|100|
|Golden Point East|M 77/124|Granted|100|
|Mine|M 77/88|Granted|100|
|SANDFORD ROCKS|
|Sandford Rocks|E 77/1494|Granted|100|
|WESTONIA|
|Begley|E 77/1069|Granted|100|
|Westonia NE|E 77/1324|Granted|100|
|Westonia Belt|E 77/516|Granted|100|
|Westonia West|E 77/990|Granted|100|
|Westonia|L 77/18|Granted|100|
|Westonia NW|P 77/3712|Granted|100|
|West Westonia|P 77/3713|Granted|100|
|Westonia NE|P 77/3714|Granted|100|
|Bodallin|P 77/3875|Granted|100|
|Corsini Road|P 77/3876|Granted|100|
|Hitching Road|P 77/3877|Granted|100|
|Stoneman Road|P 77/3878|Granted|100|
|Kaolin Street|P 77/3879|Granted|100|

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23

DIRECTOR’S REPORT

The Directors of Catalpa Resources Limited submit herewith the annual report of the Company for the financial year ended 30 June 2009. In order to comply with the provisions of the Corporations Act 2001, the Directors Report as follows:

INFORMATION ABOUT THE DIRECTORS AND SENIOR MANAGEMENT

The names and particulars of the Directors of the Company during or since the end of the financial year are:

NAME PARTICULARS john Rowe John Rowe brings a wealth of geological and business development skills to the Company. Mr Rowe has 39 years BSc (Hons) ARSM, MAusIMM experience within the Nickel and Gold industry of Western Australia. He has held a variety of positions in mine management, exploration and business development and was previously employed as an Executive of Lion Ore (Non Executive Chairman) in Australia. Mr Rowe is also a Director of Panoramic Resources Limited (since 2006) and was a Non Executive Director of Perseverance Corporation Limited from 19 September 2007 to 18 February 2008. Mr Rowe has not held any other listed company directorships within the last 3 years. Bruce McFadzean Mr McFadzean, a mining engineer, brings over 30 years of management, mining, processing and project “start Dip Mining up” experience to the organisation, half of which was gained in the employ of global resources brands, Rio Tinto and BHP Billiton. Mr McFadzean has broad commodity experience in gold, iron ore, diamonds and nickel/cobalt (Managing Director) and in a wide range of roles including corporate, managerial, technical and operational. Mr McFadzean is a non Executive director of venture Minerals Limited. Mr McFadzean was Executive director of Territory Resources Limited from March 2007 to 17 April 2008. Mr McFadzean has not held any other listed company directorships within the last 3 years. Murray Pollock Mr Pollock is a businessman with over 40 years experience in the mineral services industry, principally in drilling. MAICD He is a consultant to several companies on drilling and mine management services. (Non Executive Director) Mr Pollock has not held any other listed company directorships within the last 3 years. Barry Sullivan Mr Sullivan is an experienced and successful mining engineer with a career spanning 40 years in the mining BSc(Min), ARSM, F AusIMM, industry. His initial mining experience was gained in the South African gold mining industry, followed by more than 20 years with Mount Isa Mines. In the final 5 years of his tenure with MIM, Mr Sullivan was Executive MAICD General Manager responsible for the extensive Mount Isa and Hilton operations. More recently, Mr Sullivan has (Non Executive Director) been working with a number of smaller exploration and mining companies.

Presently Mr Sullivan is a Non Executive Director and Chairman of Exco Resources Ltd, and a Non Executive Director of Lion Mining Ltd and Lion Selection Ltd (appointed 7 November 2008). Mr Sullivan was previously a Non Executive Director of Allegiance Mining Ltd. Mr Sullivan has not held any other listed company directorships within the last 3 years.

Nigel johnson Appointed 20 August 2008 CA, CFTP (Snr), MAICD Mr Johnson is a Chartered Accountant with strong finance and management experience attained over a period of (Non Executive Director) 36 years. This experience was gained from working in a number of countries for both publicly listed and private companies within a number of industries. Mr Johnson has significant expertise in financial management, equity and debt raisings, treasury and financial risk management and strategic and business planning. Most recently Mr Johnson was Chief Financial Officer for Straits Resources Limited, responsible for the financial, commercial and treasury activities of the Straits Group. Mr Johnson was a Non Executive Director of Tritton Resources Limited. Mr Johnson is also a Non Executive Director of Matrix Composites and Engineering Limited. Mr Johnson has not held any other listed company directorships within the last 3 years.

Chris Melloy Resigned 12 December 2008 Mr Melloy has 30 years experience in the mining industry in both operations and finance, including mine planning, operating and senior mine management roles, as well as mining analysis and (BE (Hons), MEngSc, GDipAppFin (Sec Inst), MAusIMM, research in the stock broking industry. ASIA He is an Executive Director of Lion Manager, the management company responsible for the operation of Lion Selection Group, as well as a non Executive Director of Austindo Resources Corporation NL (since 2001). Within (Non Executive Director) the last 3 years Mr Melloy has been a former Director of Exco Resources Limited. Mr Melloy has not held other listed company directorships within the last 3 years.

ANNUAL REPORT 2009

CATALPA RESOURCES

DIRECTOR’S REPORT CONTINUED

DIRECTORS’ SHAREHOLDINGS

The following table sets out each Director’s relevant interest in shares or options in shares of the Company as at the date of this report.

	Fully Paid Ordinary	Share
	Shares	Options
John Rowe	1,000,000	2,000,000
Bruce McFadzean	1,017,500	10,172,500
Murray Pollock	18,271,162	4,252,802
Barry Sullivan	-	1,000,000
Nigel Johnson	1,500,000	1,000,000

REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT

Information about remuneration of the Directors and senior management is set out in the remuneration report of this Directors’ report, on pages 28 to 35.

SHARE OPTIONS GRANTED TO DIRECTORS AND SENIOR MANAGEMENT

Information about share options granted to Directors and senior management during or since the end of the financial year is set out in the remuneration report of this Operationsirectors’ report, on pages 28 to 34.

COMPANY SECRETARIES

NAME PARTICULARS Graham Anderson Graham Anderson has a Bachelor of Business Degree and is a member of the Institute of Chartered Accountants. BBus, CA Graham commenced his career in 1983 with Ernst & Young before later moving to the national chartered accounting firms of Duesburys and Horwath as a Partner with particular responsibilities for providing a range of audit and related corporate services.

Graham has extensive experience and knowledge of the ASX Listing Rules and Corporations Act and has acted as Director and Company Secretary to a number of ASX listed entities. He has also been significantly involved in the IPO stage including due diligence process for Australis Aquaculture Ltd, Dynasty Metals Australia Ltd, Echo Resources Ltd, Pegasus Metals Ltd, Mamba Minerals Ltd and Iron Road Ltd in the past 3 years.

He is currently the Chairman and Company Secretary of APA Financial Services Ltd, Director and Company Secretary of Dynasty Metals Australia Ltd, Echo Resources Ltd, Pegasus Metals Ltd and Company Secretary of Apex Minerals NL, Mamba Minerals Ltd, Tectonic Resources NL and Iron Road Ltd.

Leonard Math Leonard Math graduated from Edith Cowan University, majoring in Accounting and Information Systems, in 2003 BBus, CA and is a member of the Institute of Chartered Accountants. In 2005 Leonard worked as an Auditor at Deloitte before joining GDA Corporate as a Senior Accountant.

His public company responsibilities include corporate compliance roles, including extensive liaison with ASX and ASIC, control and implementation of corporate governance, completion of annual financial reports and auditor liaison, and shareholder relations with registry and shareholders both retail and institutional.

25

DIRECTOR’S REPORT CONTINUED

PRINCIPAL ACTIVITIES

The Group’s principal activities during the course of the financial year were the development of the Edna May Gold Project near Westonia in Western Australia and exploration within the wider Westonia Greenstone Belt.

REVIEW OF OPERATIONS

During the year the Group has raised A$106M in debt and equity to advance its Edna May Gold Project at Westonia in Western Australia, with production expected to commence by second quarter 2010. As part of the debt funding Catalpa has entered into physical gold delivery contracts for 352,317 ounces of gold at a price of A$1,557.50 per ounce. Catalpa announced in June 2009 a proposed merger with Lion Selection to bring together Lion Selection’s 30% interest in the Cracow Gold Gold Project in Queensland with Catalpa’s existing gold mining operations. This merger is subject to shareholder approval and is not expected to be completed until early December 2009. The Group recognised a loss after tax for the year of A$6.814M [2008: A$2.292M].

CHANGES IN THE STATE OF AFFAIRS

The Company’s name was changed from Westonia Mines Limited to Catalpa Resources Limited on 29 August 2008 after shareholders’ approval at a General Meeting on 27 August 2008. Apart from the above, or as noted elsewhere in this report, no significant changes in the state of affairs of the Group occurred during the financial year.

SUBSEQUENT EVENTS

No matters or circumstances, besides those disclosed at note 30, have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

FUTURE DEVELOPMENTS

Over the next 12 months the Group will be focused on the development of the Edna May Gold Project with gold production expected to commence mid 2010. Other likely developments in the operations of the Group and the expected results of those operations in future financial years have not been included in this report as the inclusion of such information is likely to result in unreasonable prejudice to the Group. Accordingly this information has not been disclosed in this report.

DIVIDENDS

No dividends were paid or declared during the financial year. No recommendation for payment of dividends has been made.

ENVIRONMENTAL REGULATIONS

The Group is subject to significant environmental regulation in respect to its exploration activities. The Group aims to ensure the appropriate standard of environmental care is achieved, and in doing so, that it is aware of and is in compliance with all environmental legislation. The Directors of the Group are not aware of any breach of environmental legislation for the year under review.

ANNUAL REPORT 2009

CATALPA RESOURCES

DIRECTOR’S REPORT CONTINUED

SHARES UNDER OPTION

Details of unissued shares or interests under option as at the date of this report are:

Issuing entity	Number of shares	Class of shares	Exercise price	Expiry date
	under option		of option	of options
Catalpa Resources Limited	172,723,065	Ordinary	10 cents	31 Oct 2011
Catalpa Resources Limited	38,302,294	Ordinary	10 cents	30 Jun 2010
Catalpa Resources Limited	200,000	Ordinary	11 cents	22 Nov 2010
Catalpa Resources Limited	100,000	Ordinary	8 cents	29 April 2011
Catalpa Resources Limited	625,000	Ordinary	6 cents	23 Dec 2013
Catalpa Resources Limited	4,375,000	Ordinary	8 cents	23 Dec 2013
Catalpa Resources Limited	4,375,000	Ordinary	10 cents	23 Dec 2013
Catalpa Resources Limited	4,375,000	Ordinary	12 cents	23 Dec 2013
Catalpa Resources Limited	3,750,000	Ordinary	14 cents	23 Dec 2013
Catalpa Resources Limited	1,250,000	Ordinary	6 cents	11 Mar 2014
Catalpa Resources Limited	1,250,000	Ordinary	8 cents	11 Mar 2014
Catalpa Resources Limited	1,250,000	Ordinary	10 cents	11 Mar 2014
Catalpa Resources Limited	1,250,000	Ordinary	12 cents	11 Mar 2014
Catalpa Resources Limited	66,666,666	Ordinary	7.5 cents	25 May 2014

The holders of these options do not have the right, by virtue of the option, to participate in any share issue or interest issue of the Company. No options have been issued subsequent to the year end. No shares have been issued during or since the end of the financial year as a result of exercise of an option.

IMDEMNIFICATION OF OFFICERS AND AUDITORS

During the financial year the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company secretaries and all executive officers of the Company and of any related body corporate against a liability incurred as such a Director, Secretary or Executive Officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

The Company has entered into a Deed of Indemnity, Insurance and Access with each Director. In summary the Deed provides for:

• access to corporate records for each director for a period after ceasing to hold office in the company,

• the provision of directors and Officers Liability insurance, and

• indemnity for legal costs incurred by directors in carrying out the business affairs of the company.

Except for the above the Company has not otherwise, during or since the financial year, except to the amount permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor.

DIRECTORS’ MEETINGS

The following table sets out the number of Directors’ meetings and committee meetings held during the financial year and the number of meetings attended by each Director (while they were a Director or committee member). During the financial period 22 Board meetings and 2 audit committee meetings were held.

27

DIRECTOR’S REPORT CONTINUED

	Board of Directors	Board of Directors	Audit	Committee
Directors	Held	Attended	Held	Attended
John Rowe	22	22	2	2
Bruce McFadzean	22	22	-	-
Murray Pollock	22	22	2	2
Barry Sullivan	21	18	2	2
Nigel Johnson	21	20	2	2
Chris Melloy	8	6	-	-

NON-AUDIT SERVICES

Details of amounts paid or payable to the auditor for non-audit services provided during the period by the auditor are outlined in note 28 to the financial statements.

The Directors are satisfied that the provision of non-audit services during the period by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

The Directors are of the opinion that the services disclosed in note 28 to the financial statements do not compromise the external auditor’s independence, based on advice received from the Audit Committee, for the following reasons:

• All non-audit services have been reviewed to ensure they do not impact the integrity and objectivity of the auditor; and

• None of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.

AUDITOR’S INDEPENDENCE DECLARATION

The Auditor’s Independence Declaration is included on page 36 of the financial report.

REMUNERATION REPORT (AUDITED)

This remuneration report, which forms part of the Directors’ Report, sets out information about the remuneration of Catalpa Resources’ Directors and senior management for the financial year ended 30 June 2009. The prescribed details for each person covered by this report are detailed below under the following headings:

• Director and senior management details

• remuneration policy

• relationship between the remuneration policy and Company performance

• remuneration of Directors and senior management

• key terms of employment contracts

Director and senior management details

The following persons acted as Directors or senior management during or since the end of the financial year:

John Rowe Non Executive chairman Bruce McFadzean Managing Director Murray Pollock Non Executive Director Barry Sullivan Non Executive Director Nigel Johnson Non Executive Director (appointed 20 August 2008) Chris Melloy Non Executive Director (resigned 12 December 2008)

ANNUAL REPORT 2009

CATALPA RESOURCES

DIRECTOR’S REPORT CONTINUED

The term “senior management” is used in this remuneration report to refer to the following persons. These persons include the five members of senior management who received the highest remuneration during the year. Except as noted the named persons held their current positions for the whole of the financial year and since the end of the financial year:

Erik Palmbachs Chief Financial Officer (appointed 20 October 2008) Stuart Pether General Manager Operations (appointed 12 January 2009)

Graham Anderson Joint Company Secretary

Leonard Math Joint Company Secretary

REMUNERATION POLICY

The remuneration policy of Catalpa Resources Limited has been designed to align Director and Executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long term incentives based on key performance areas affecting the Group’s financial results. The Board of Catalpa Resources Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain high calibre Executives and Directors to run and manage the Group.

The remuneration policy, setting the terms and conditions for the Executive Directors and other Senior Executives, was developed by the Board. All Executives receive a base salary (which is based on factors such as length of service and experience) and superannuation. The Board reviews executive packages annually by reference to the Group’s performance, Executive performance and comparable information from industry sectors and other listed companies in similar industries.

The Board may exercise discretion in relation to approving incentives, bonuses and options. The policy is designed to attract and retain the highest calibre of Executives and reward them for performance that results in long term growth in shareholder wealth. Executives are also entitled to participate in the employee share and option arrangements.

Executive Directors and senior management receive a superannuation guarantee contribution required by the government, which is currently 9%, and do not receive any other retirement benefits. Some individuals, however, may choose to sacrifice part of their salary to increase payments towards superannuation. The Board policy is to remunerate Non Executive Directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the Non Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Non Executive Directors is subject to approval by shareholders at the Annual General Meeting (currently A$350,000). Fees for Non Executive Directors are not linked to the performance of the Group. However, to align Directors’ interests with shareholder interests, the Directors are encouraged to hold shares in the Company and are able to participate in employee option plans.

RELATIONSHIP BETWEEN THE REMUNERATION POLICY AND COMPANY PERFORMANCE

The remuneration policy has been tailored to increase goal congruence between shareholders and Directors and Executives. Currently, this is facilitated through the issue of options to Directors and employees under the employees and contractors option plan to encourage the alignment of personal and shareholder interests. Under this plan the options generally vest over a five year period and vesting is subject to persons remaining in employment with the Group. The Company believes this policy will be effective in increasing shareholder wealth. For details of Directors and senior management interests in options at year end, refer note 26. No component of Director or senior management salary is dependent on Company performance. The Group did not have a formal cash incentive or bonus scheme for the years ending 30 June 2008 or 30 June 2009.

REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT

The Directors and the Company Executives and group Executives received the following amounts as compensation for their services as Directors and Executives of the Company and/or the Group during the period:

29

DIRECTOR’S REPORT CONTINUED

YEAR ENDED 30 jUNE 2009

	Short-term	employee	benefts	Post-	employment
					benefts
Name	Cash salary	Other		Non-	Super-	Equity settled share	Total	% consisting
	and fees	services	monetary		annuation	-based payments		of options
	$	$		$	$	$	$	$
Directors
John Rowe	80,000	30,250		-	7,200	23,228	139,174	16%
Bruce McFadzean	370,000	-		7,346	33,300	116,142	519,266	21%
Murray Pollock	40,000	-		-	3,600	11,614	54,462	20%
Barry Sullivan	41,667	-		-	3,750	11,614	56,279	19%
Nigel Johnson (i)	34,564	11,375		-	3,111	11,614	59,912	18%
Chris Melloy (ii) (v)	17,934	-		-	-	-	17,934	-
Executives
Erik Palmbachs (iii)	148,077			5,383	13,327	36,586	189,291	12%
Stuart Pether (iv)	123,106	38,077		4,039	11,080	40,425	242,091	27%
Graham Anderson and
Leonard Math (vi)	66,000	-		-	-	-	66,000	-
TOTAL	921,348	79,702	16,768		75,368	251,223	1,344,409

(i) appointed 20 August 2008

(ii) resigned 12 December 2008

(iii) appointed 20 October 2008

(iv) appointed 12 January 2009

(v) These payments were made to Lion Manager, the management Company responsible for the operation of Lion Selection Group, for the services of Mr Chris Melloy as a Non Executive Director.

(vi) These payments are to GDA Corporate, a Company in which Graham Anderson is a Director and Leonard Math is an employee. The fees include accounting services provided to Catalpa Resources Limited.

ANNUAL REPORT 2009

CATALPA RESOURCES

DIRECTOR’S REPORT CONTINUED

YEAR ENDED 30 jUNE 2008

	Short-term	employee benefts		Post- employment
				benefts
Name	Cash salary	Other	Super-	Retirement	Share-based	Total	% consisting
	and fees	services	annuation	benefts	payments options		of options
	$	$	$	$	$	$	$
Directors
John Rowe	56,666	103,344	5,100	-	-	165,110	-
Bruce McFadzean (i)	23,492	-	2,114	-	-	25,660	-
Murray Pollock	40,000	-	3,600	-	-	43,600	-
Barry Sullivan (ii)	1,667	-	150	-	-	1,817	-
Chris Melloy (viii)	40,000	-	-	-	-	40,000	-
Mark Fitzpatrick (iii)	50,000	85,250	4,500	-	-	139,750	-
David Hatch (iv)	82,073	-	7,387	110,000	-	199,460	-
Executives
Graham Anderson and
Leonard Math (v) (ix)	56,500	-	-	-	-	56,500	-
John Fitzgerald (vi)	16,000	-	1,440	-	-	17,440	-
Rowan Johnston (vii)	57,994	-	5,169	50,000	-	113,163	-
TOTAL	424,392	188,594	29,460	160,000	-	802,446	-

(i) appointed 6 June 2008

(ii) appointed 16 June 2008

(iii) resigned 27 February 2008

(iv) resigned 28 September 2007

(v) appointed 2 August 2007

(vi) resigned 31 July 2007

(vii) resigned 14 September 2007

(viii) These payments were made to Lion Manager, the management company responsible for the operation of Lion Selection Group, for the services of Mr Chris Melloy as a Non Executive Director.

(ix) These payments are to GDA Corporate, a Company in which Graham Anderson is a Director and Leonard Math is an employee. The fees include accounting services provided to Catalpa Resources Limited.

No Director or member of senior management appointed during the period received a payment as part of consideration for agreeing to hold the position.

31

DIRECTOR’S REPORT CONTINUED

SHARE-BASED PAYMENTS GRANTED AS COMPENSATION IN THE CURRENT FINANCIAL YEAR

Employee share option plan

The Group has an ownership-based compensation scheme for Executives and senior employees of the Group. Each employee share option converts to one ordinary share of Catalpa Resources Limited on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of expiry. Refer to “Relationship between the remuneration policy and Company performance” above for details of the basis for granting options and vesting criteria. During the financial year the following share-based payment arrangements were in existence:

Option series	Grant date	Expiry Date	Weighted	Vesting date
			average fair
			value at grant
			date
			$
Nov 05 at 11 cents	22 Nov 2005	22 Nov 2010	0.02	vested at date of grant
Apr 08 at 8 cents	29 April 2008	29 April 2011	0.02	50% vested at date of grant
				50% vest on completion of care and maintenance program
Dec 08 at 6 cents	23 Dec 2008	23 Dec 2013	0.02	vests at date of grant
Dec 08 at 8 cents	23 Dec 2008	23 Dec 2013	0.02	3.75m vest at date of grant.
				0.625m vest on completion of Board endorsed fnance and
				funding package to commence construction of the Edna
				May process plant.
Dec 08 at 10 cents	23 Dec 2008	23 Dec 2013	0.02	3.25m exercisable upon completion of an update of the
				feasibility study for the Edna May open pit project.
				0.5m exercisable upon achievement of a balanced Board
				composition.
				0.625m exercisable upon the successful employment of
				the fnance and accounting team and implementation of
				project construction and operating cost managing system.
Dec 08 at 12 cents	23 Dec 2008	23 Dec 2013	0.02	3.75m exercisable upon the completion of fnancing (both
				debt and equity) for the Edna May open project.
				0.625m exercisable upon the successful commissioning of
				Edna May’s open pit project and the key parameters have
				been achieved.
Dec 08 at 14 cents	23 Dec 2008	23 Dec 2013	0.02	Exercisable upon the successful commissioning of Edna
				May’s open pit project and the key parameters have been
				achieved.
March 09 at 6 cents	11 Mar 2009	11 Mar 2014	0.04	vests at date of grant
March 09 at 8 cents	11 Mar 2009	11 Mar 2014	0.03	vest on completion of board endorsed fnance and fund-
				ing package to commence construction of the Edna May
				process plant.
March 09 at 10 cents	11 Mar 2009	11 Mar 2014	0.03	Exercisable upon the successful employment of the site
				operating team and implementation of project construction,
				production and cost management system.
March 09 at 12 cents	11 Mar 2009	11 Mar 2014	0.03	Exercisable upon the successful commissioning of Edna
				May Gold Project .

Further details of the employee share option plan are contained in note 25 to the financial statements.

CATALPA RESOURCES ANNUAL REPORT 2009

DIRECTOR’S REPORT CONTINUED

The following grants of share-based payment compensation to Directors and senior management relate to the current financial year. No options issued during the year were exercised or lapsed during the period.

Name	Option series	Number granted	Number vested	% of grant vested	% of grant forfeited
John Rowe
	Dec 08 at 8 cents	500,000	500,000	100	-
	Dec 08 at 10 cents	500,000	500,000	100	-
	Dec 08 at 12 cents	500,000	500,000	100	-
	Dec 08 at 14 cents	500,000	-	-	-
Bruce McFadzean
	Dec 08 at 8 cents	2,500,000	2,500,000	100	-
	Dec 08 at 10 cents	2,500,000	2,500,000	100	-
	Dec 08 at 12 cents	2,500,000	2,500,000	100	-
	Dec 08 at 14 cents	2,500,000	-	-	-
Murray Pollock
	Dec 08 at 8 cents	250,000	250,000	100	-
	Dec 08 at 10 cents	250,000	250,000	100	-
	Dec 08 at 12 cents	250,000	250,000	100	-
	Dec 08 at 14 cents	250,000	-	-	-
Barry Sullivan
	Dec 08 at 8 cents	250,000	250,000	100	-
	Dec 08 at 10 cents	250,000	250,000	100	-
	Dec 08 at 12 cents	250,000	250,000	100	-
	Dec 08 at 14 cents	250,000	-	-	-
Nigel Johnson
	Dec 08 at 8 cents	250,000	250,000	100	-
	Dec 08 at 10 cents	250,000	250,000	100	-
	Dec 08 at 12 cents	250,000	250,000	100	-
	Dec 08 at 14 cents	250,000	-	-	-
Stuart Pether
	March 09 at 6 cents	1,250,000	1,250,000	100	-
	March 09 at 8 cents	1,250,000	1,250,000	100	-
	March 09 at 10 cents	1,250,000	-	-	-
	March 09 at 12 cents	1,250,000	-	-	-
Erik Palmbachs
	Dec 08 at 6 cents	625,000	625,000	100	-
	Dec 08 at 8 cents	625,000	625,000	100	-
	Dec 08 at 10 cents	625,000	-	-	-
	Dec 08 at 12 cents	625,000	-	-	-

33

DIRECTOR’S REPORT CONTINUED

	Value of options granted	Value of options exercised	Value of options lapsed
	at the grant date	at the exercise date	at the date of lapse
	$	$	$
John Rowe	21,700	-	-
Bruce McFadzean	108,500	-	-
Murray Pollock	10,850	-	-
Barry Sullivan	10,850	-	-
Nigel Johnson	10,850	-	-
Erik Palmbachs	47,438	-	-
Stuart Pether	60,250	-	-

The value of options granted during the period is recognised in compensation over the vesting period of the grant, in accordance with Australian Accounting Standards.

Performance of Catalpa Resources Limited

The table below sets out summary information about the Consolidated Entity’s earnings and movements in shareholder wealth for the last 5 years.

30	june 2009	june 2009	30 june 2008	30 june 2007	30 june 2006	30 june 2005
		$	$	$	$	$
Revenue		364,821	594,905	387,038	427,088	384,031
Net loss before tax	(6,981,448)		(2,291,738)	(9,838,739)	(12,622,627)	(940,644)
Net loss after tax	(6,981,448)		(2,291,738)	(9,730,197)	(12,606,793)	(940,644)
30	june 2009		30 june 2008	30 june 2007	30 june 2006	30 june 2005
		$	$	$	$	$
Share price at start of year		0.05	0.07	0.19	0.08	0.20
Share price at end of year		0.10	0.05	0.07	0.19	0.08
Dividends		-	-	-	-	-
Basic and diluted earnings
per share (cents per share)		(1.30)	(0.67)	(3.5)	(5.6)	(0.9)

ANNUAL REPORT 2009

CATALPA RESOURCES

DIRECTOR’S REPORT CONTINUED

KEY TERMS OF EMPLOYMENT CONTRACTS

The details of service agreements of the key management personnel of Catalpa Resources Limited and the Group are as follows:

Bruce McFadzean, Managing Director

• term of agreement – 6 months notice of termination is required

• base salary, exclusive of statutory superannuation, of $370,000 to be reviewed annually by the board.

• the company will fully maintain Mr McFadzean’s motor vehicle. Fringe benefits tax associated with this vehicle will be at the Company’s expense.

• Payment of termination benefit on early termination by the employer, other than for gross misconduct, includes any accrued long service leave and annual entitlements, superannuation, retiring allowance, superannuation gratuity to the value of which does not exceed the maximum amount ascertained in accordance with the formula set out in section 200G of the Corporations Act 2001.

Erik Palmbachs, Chief Financial Officer

• term of agreement – 3 months notice of termination is required

• base salary, exclusive of statutory superannuation, of $210,000 to be reviewed annually by the board.

• • the company provides Mr Palmbachs with a motor vehicle. Fringe benefits tax associated with this vehicle will be at the

• Company’s expense.

• Payment of termination benefit on early termination by the employer, other than for gross misconduct, includes any accrued long

• service leave and annual entitlements, superannuation, retiring allowance, superannuation gratuity to the value of which does not exceed the maximum amount ascertained in accordance with the formula set out in section 200G of the Corporations Act 2001.

Stuart Pether, General Manager - Operations

• term of agreement – 3 months notice of termination is required

• base salary, exclusive of statutory superannuation, of $260,000 to be reviewed annually by the board.

• • the company provides Mr Pether with a motor vehicle. Fringe benefits tax associated with this vehicle will be at the

• Company’s expense.

• Payment of termination benefit on early termination by the employer, other than for gross misconduct, includes any accrued long service leave and annual entitlements, superannuation, retiring allowance, superannuation gratuity to the value of which does not exceed the maximum amount ascertained in accordance with the formula set out in section 200G of the Corporations Act 2001.

Signed in accordance with a resolution of the directors.

==> picture [115 x 62] intentionally omitted <==

Bruce McFadzean Managing Director Perth, 23 September 2009

35

AUDITOR’S INDEPENDENCE DECLARATION

==> picture [525 x 623] intentionally omitted <==

ANNUAL REPORT 2009

CATALPA RESOURCES

CORPORATE GOVERNANCE STATEMENT

Catalpa’s Directors are committed to high standards of corporate governance. This statement describes the Company’s corporate governance framework. As a listed entity, the Company is required to disclose the extent to which it has with the Australian Securities Exchange (“ASX”) Corporate Governance Council (“CGC”) revised (August 2007) “Principles of Good Corporate Governance and Best Practice Recommendations (2nd Edition)” (the Recommendations), unless otherwise stated. Details of the Company’s compliance with the Governance Recommendations are set out in the relevant sections of this statement. The key corporate governance practices of the Company are summarised on Catalpa’s website www.catalparesources.com.au under the ‘Corporate – Corporate Governance’ tab.

PRINCIPLE 1: LAY FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT PRIMARY ROLE OF THE BOARD

The board’s primary role is the protection and enhancement of long term shareholder value.

BOARD OPERATION

To ensure the Board is well equipped to discharge its responsibilities, the Board has adopted a Board Charter which details the functions and responsibilities of the Board and those delegated to management. The Board Charter can be assessed on the Company’s website. The Board has also established an Audit Committee, Nomination and Remuneration Committee and Risk Management Committee in which the relevant charters are available on the Company’s website.

BOARD PROCESSES

The Board is responsible for the overall Corporate Governance of the Company including the strategic direction, establishing goals for executive management and monitoring the achievement of these goals. The Board has established a framework for the management of the Company and its controlled entities, a framework which divides the functions of running the Company between the Board, the Managing Director and the Senior Executives. The Board has put in place a system of internal control, a pro-active business risk management process, and has the task of monitoring financial performance and the establishment of appropriate ethical standards. The Board packs for the Board meeting are prepared and circulated in advance. Senior Executives are invited into Board meetings and are regularly involved in Board discussions.

EVALUATION OF MANAGING DIRECTOR AND EXECUTIVE PERFORMANCE

The Managing Director and the Senior Executives are responsible for the day to day running of the Company. The Board has in place a performance appraisal and remuneration system for the Managing Director and Senior Executives designed to enhance performance. Management performance is reviewed on an annual basis. The criterion for the evaluation of the Managing Director and each executive is their performance against key performance indicators.

PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE

BOARD STRUCTURE

Details of the Directors in office at the date of this report, including their qualifications and experience are set out in the Directors’ Report. The Board currently comprises 5 Directors with each Director having their relevant expertise and experience with an emphasis on commercial, exploration, mining and project development.

Criteria considered when appointing a new Director include:

• quality of the individual;

• background of experience and achievement compatibility with other board members;

• credibility within the company’s scope of activities;

• intellectual ability to contribute; and

• the physical ability to undertake a director’s duties and responsibilities.

Directors are initially appointed by the full Board subject to election by shareholders at the next general meeting. Under the company’s constitution the tenure of a Director (other than Managing Director, and only one Managing Director where the position is jointly held) is subject to reappointment by shareholders not later than the third anniversary following his or her last appointment. There is no maximum age for Directors.

A Managing Director may be appointed for any period and on any terms the Directors think fit and, subject to the terms of any agreement entered into, the Directors may revoke any appointment.

DIRECTOR INDEPENDENCE

The Board at least annually, assesses the independence of its Non Executive Directors. This assessment may occur more than once each year if there is a change in circumstances that may impact upon the independence of a Non Executive Director. Individual Directors must not participate in assessing their own independence, and must provide to the Board all information relevant to the assessment. In assessing independence, the Board considers all circumstances relevant to determining whether the Non Executive Director is free from any interest and any business or other relationship which could, or could reasonably be perceived to materially interfere with that Director’s ability to exercise unfettered and independent judgment on Company issues. Directors are required to take into consideration any potential conflicts of interest when accepting appointments to other Boards.

37

CORPORATE GOVERNANCE STATEMENT CONTINUED

As at the date of this report the Board comprised of 5 Directors, 3 of whom are considered to be independent.

Name	First Appointed	Non-Executive	Independent
John Rowe	12 October 2006
	(appointed as Non Executive
	Chairman 30 January 2008)	Yes	Yes
Bruce McFadzean	6 June 2008	No	No
Murray Pollock	21 October 2000	Yes	Yes
Barry Sullivan	16 June 2008	Yes	No
Nigel Johnson	20 August 2008	Yes	Yes

THE CHAIRMAN

The Company’s Chairman, Mr John Rowe, is an independent, Non Executive Director. As Chairman, Mr Rowe is responsible for leadership of the Board and for the efficient organisation, integrity and conduct of the Board.

THE MANAGING DIRECTOR

The Managing Director is responsible for running the Company on a day to day basis pursuant to authority delegated by the Board and is responsible for the implementation of Board and corporate policy and planning in accordance with approved programmes and budgets. The Managing Director reports to the Board regularly and is under an obligation to make sure that all reports which he presents give a true and fair view of the Company’s operational, production activities, exploration and other activities and its current financial status.

The roles of Chairman and Managing Director are not exercised by the same individual.

BOARD COMMITTEES

The Board has established an Audit Committee comprised of all independent Directors. This committee is designed to consider specific matters and make recommendations to the Board. The Board considers the materials and the committee recommendations presented to them and make an independent assessment of the recommendations.

Membership of the audit committee as at the date of this report is set out in the Directors’ Report.

During the reporting period the functions to be performed by a Nomination and Remuneration Committee as suggested by the Governance Recommendations were performed by the full Board. Having regard to the number of Directors that comprised the Catalpa Board, the Board did not consider it appropriate to delegate these responsibilities to a committee.

The Board has established a Risk Management Committee comprised of the Managing Director and senior management. This committee is designed to:

• provide a structured risk management framework that will provide senior management and the board with comfort that the risks confronting the organisation are identified and managed effectively;

• create an integrated risk management process owned and managed by company personnel that is both continuous and effective; and

• ensure that the management of risk is integrated into the development of strategic and business plans, and the achievement of the Company’s vision and values;

PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION MAKING CODE OF CONDUCT

The Board has adopted a Board Code of Conduct that deals with:

• obligations under legislation;

• personal behaviour;

• conflict of interest;

• remuneration, expenses and other benefits;

• confidentiality, information and records; and

• transactions with director-related entities.

One of the Board’s key aims is to avoid conflicts of interest (both real and apparent) and to ensure that all Board issues receive proper consideration,

CATALPA RESOURCES ANNUAL REPORT 2009

CORPORATE GOVERNANCE STATEMENT CONTINUED

unfettered by outside influences. If a conflict does exist, there are various courses of action available, depending upon the significance of the conflict. In addition, all employees and contractors of the Company (including Directors) must observe the Company Code of Conduct. These policies provide guidance as to the standards of behaviour to be observed in pursuing the business objectives of the Company so as to ensure that Catalpa personnel act with integrity, professionalism and fairness at all times.

POLICY ON SHARE TRADING

The Company’s policy is that Directors, officers and employees are prohibited from dealing in the Company’s shares when they possess price sensitive information. The Board is to be notified when trading of shares in the Company by any Director or officer of the Company occurs. The Company Share Trading Policy can be assessed on the Company’s website.

PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING

• The Managing Director and Chief Financial Officer have made the following certifications to the Audit Committee and the Board: • that the company’s financial reports are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the Company and the Group and are in accordance with relevant legislation and accounting standards; and

• that the above statement is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

AUDIT COMMITTEE

Please refer to the Directors’ Report for a list of audit committee members, their qualifications, membership changes and member attendance at the Audit Committee meetings. The Managing Director, Chief Financial Officer, Company Secretary and external auditors are normally invited to attend each Audit Committee meeting. The Audit Committee assists the Board to discharge its responsibilities in the areas of:

• financial reporting;

• external audit;

• internal controls & risks; and

• • compliance.

As part of its role in financial reporting, the Audit Committee assesses whether the external reporting is consistent with committee members’ information and knowledge and is adequate for shareholder needs. Additionally, on an annual basis, the audit committee reviews the performance and independence of the external auditor.

PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE

Compliance procedures, to ensure timely and balanced disclosure of information in line with ASX Listing Rule disclosure requirements and Continuous Disclosure Guidelines, have been noted and adopted by the Company to ensure that all necessary steps are taken by the Company to meet its obligations under the Continuous Disclosure regime.

Directors consider, on an ongoing basis, how management information is presented to them and whether such information is sufficient to enable them to discharge their duties as Directors of the Company. Such information must be sufficient to enable the directors to determine appropriate operating and financial strategies from time to time in light of changing circumstances and economic conditions.

The Company’s Continuous Disclosure policy can be assessed on the Company’s website.

PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS

The Company is committed to complying with the continuous disclosure obligations of the Corporations Act and the ASX Listing Rules. The Company keeps shareholders and the market regularly informed through the annual, half year and quarterly reports. The releases include production figures, exploration activity and other required statutory information. The Company discloses material developments to the ASX and the media as required. From time to time, briefings are arranged to give analysts and others who advise shareholders an understanding of the Company’s activities. In conducting briefings the Company takes care to ensure that any price sensitive information released is made available to all shareholders (institutional and private) and the market at the same time. These announcements are lodged with the ASX and then posted on the Company’s website at www.catalparesources.com.au. The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification of the Company’s strategies and goals. Important issues are presented to shareholders as single resolutions. The Board is responsible to the shareholders and the shareholders are responsible for voting on the appointment of Directors. The Company also invites the external auditor to attend its Annual General Meeting and to be available to answer shareholders’ questions about the conduct of the audit and the preparation and content of the auditor’s report.

39

CORPORATE GOVERNANCE STATEMENT CONTINUED

PRINCIPLE 7: INTERNAL CONTROL AND RISK MANAGEMENT

The Board recognises the importance of managing risk and has established systems and procedures to assess, monitor and manage risk. A copy of the Company’s Risk Management Policy can be obtained from the Company’s website.

The management has designed a risk management and internal control system that seeks to:

• avoid the likelihood of unacceptable outcomes and costly surprises;

• provide greater openness and transparency in decision making and ongoing management processes;

• provide for a better understanding of issues associated with the company’s activities;

• comprise an effective reporting framework for meeting corporate governance requirements;

• allow an appropriate assessment of innovative processes to identify risks before they occur and allow informed judgement.

In addition, the Board requires the Managing Director and Cheif Financial Officer to state in writing that:

• the company’s risk management and internal control system to manage the company’s material risks are being managed effectively; and

• the company’s financial reports are founded on a sound system of risk management and internal control and that system is operating effectively in all material respects in relation to financial reporting risks.

Whilst high priority is given to the management of risk in the Company, current and potential investors are reminded that they are investors in a Company engaged in mineral production, exploration and development activities which by their very nature are high risk and where success may give rise to high rewards.

PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY

The Board is committed to ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to corporate and individual performance is defined.

BOARD REMUNERATION

The total annual remuneration paid to Non Executive Directors may not exceed the limit set by the shareholders at an annual general meeting (currently $350,000). The remuneration of the Non Executive Directors is fixed rather than variable.

EXECUTIVE REMUNERATION

The Nomination and Remuneration Committee provides recommendations and direction for the Company’s remuneration practices. The Committee ensures that a significant proportion of each executive’s remuneration is linked to his or her performance and the Company’s performance. Reviews on performance are conducted on an annual basis.

Further details in relation to Director and Executive remuneration are set out in the Remuneration Report in the Director’s Report.

ANNUAL REPORT 2009

CATALPA RESOURCES

INCOME STATEMENT

YEAR ENDED 30 jUNE 2009	Notes	Consolidated	Consolidated		Company
		2009	2008	2009	2008
		$	$	$	$
Revenue	5	263,929	263,321	263,929	263,321
Other income	6	75,287	10,699	75,287	10,699
Depreciation expense		(161,982)	(142,533)	(161,496)	(142,533)
Corporate expenses		(1,463,455)	(439,655)	(1,454,437)	(439,655)
Occupancy expenses	6	(231,790)	(203,183)	(231,790)	(203,183)
Employee and consultant expenses		(1,755,310)	(621,649)	(1,752,215)	(621,649)
Travel and accommodation expenses		(139,223)	(34,919)	(139,223)	(34,919)
Exploration, evaluation and development expenditure		(3,316,493)	(1,360,403)	(3,316,364)	(1,360,403)
Impairment of non-current assets		-	(84,301)	-	(84,301)
Finance costs		(110,390)	-	(110,390)	-
LOSS BEFORE TAX		(6,839,427)	(2,612,623)	(6,826,699)	(2,612,623)
INCOME TAX BENEFIT	7	25,605	320,885	25,605	320,885
NET LOSS ATTRIBUTABLE TO EQUITY
HOLDERS OF CATALPA RESOURCES LIMITED		(6,813,822)	(2,291,738)	(6,801,094)	(2,291,738)
Basic and diluted loss per share (cents per share)	19	(1.27)	(0.67)

Notes to the Financial Statements are included on pages 45 to 77.

41

BALANCE SHEET

AT 30 jUNE 2009	Notes		Consolidated		Company
		2009	2008	2009	2008
		$	$	$	$
CURRENT ASSETS
Cash and cash equivalents	24	32,296,718	2,799,198	32,296,718	2,799,198
Other receivables	8	838,981	78,004	838,981	78,004
Other fnancial assets	9	3,532,500	37,884	3,532,500	27,884
Prepayments	10	9,444	-	2,274	-
TOTAL CURRENT ASSETS		36,677,643	2,915,086	36,670,473	2,905,086
NON CURRENT ASSETS
Other fnancial assets	9	-	386,194	5,371,391	396,196
Property, plant and equipment	11	7,457,212	3,593,990	3,590,124	3,593,990
Exploration, evaluation and development expenditure	12	1,526,218	-	-	-
Borrowing costs	13	3,662,943	-	3,662,943	-
TOTAL NON CURRENT ASSETS		12,646,373	3,980,184	12,624,458	3,980,184
TOTAL ASSETS		49,324,016	6,895,270	49,294,931	6,895,270
CURRENT LIABILITIES
Trade and other payables	14	4,113,291	158,066	4,074,188	158,068
Borrowings	15	19,534	-	19,534	-
Provisions	16	107,578	55,208	104,868	55,208
TOTAL CURRENT LIABILITIES		4,240,403	213,274	4,198,590	213,274
NON-CURRENT LIABILITIES
Borrowings	15	65,534	-	65,534	-
Provisions	16	407,000	407,000	407,000	407,000
TOTAL NON-CURRENT LIABILITIES		472,534	407,000	472,534	407,000
TOTAL LIABILITIES		4,712,937	620,274	4,671,124	620,274
NET ASSETS		44,611,079	6,274,996	44,623,807	6,274,996
EQUITY
Issued capital	17	74,100,908	32,976,344	74,100,908	32,976,344
Reserves	18(a)	4,525,974	500,633	4,525,974	500,633
Accumulated losses	18(b)	(34,015,803)	(27,201,981)	(34,003,075)	(27,201,981)
TOTAL EQUITY		44,611,079	6,274,996	44,623,807	6,274,996

Notes to the Financial Statements are included on pages 45 to 77.

ANNUAL REPORT 2009

CATALPA RESOURCES

STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 30 jUNE 2009	Notes	Issued Capital	Reserves	Accumulated Losses	Total
Consolidated		$	$	$	$
AT 1 JULY 2007		30,088,089	498,673	(24,910,243)	5,676,519
Net income recognised directly in equity		-	-	-	-
Loss for the year		-	-	(2,291,738)	(2,291,738)
Total recognised income and expense			-	-(2,291,738)	(2,291,738)
Issue of shares (net of expenses)		2,888,255	-	-	2,888,255
Recognition of share based payments		-	1,960	-	1,960
AT 30 JUNE 2008		32,976,344	500,633	(27,201,981)	6,274,996
Net income recognised directly in equity		-	-	-	-
Loss for the year	18(b)	-	-	(6,813,822)	(6,813,822)
Total recognised income and expense		-	-	(6,813,822)	(6,813,822)
Issue of shares (net of expenses)	17	41,124,564	-	-	41,124,564
Share based payments	18(a)	-	4,025,341	-	4,025,341
AT 30 JUNE 2009		74,100,908	4,525,974	(34,015,803)	44,611,079
Company
AT 1 JULY 2007		30,088,089	498,673	(24,910,243)	5,676,519
Net income recognised directly in equity		-	-	-	-
Loss for the year		-	-	(2,291,738)	(2,291,738)
Total recognised income and expense		-	-	(2,291,738)	(2,291,738)
Issue of shares (net of expenses)		2,888,255	-	-	2,888,255
Recognition of share based payments		-	1,960	-	1,960
AT 30 JUNE 2008		32,976,344	500,633	(27,201,981)	6,274,996
Net income recognised directly in equity		-	-	-	-
Loss for the year	18(b)	-	-	(6,801,094)	(6,801,094)
Total recognised income and expense		-	-	(6,801,094)	(6,801,094)
Issue of shares (net of expenses)	17	41,124,564	-	-	41,124,564
Share based payments	18(a)	-	4,025,341	-	4,025,341
AT 30 JUNE 2009		74,100,908	4,525,974	(34,003,075)	44,623,807

Notes to the Financial Statements are included on pages 45 to 77.

43

CASH FLOW STATEMENT

AT 30 jUNE 2009	Notes	Consolidated	Consolidated		Company
		2009	2008	2009	2008
		$	$	$	$
cash FLOws FrOM OPEratinG activitiEs
Research and development grant received		25,605	320,885	25,605	320,885
Receipts from other debtors		-	35,904	-	35,904
Payments to suppliers and employees		(3,327,522)	(3,123,579)	(3,359,913)	(3,123,579)
Interest received		262,533	264,790	262,523	264,790
nEt cash OutFLOw FrOM OPEratinG activitiEs	24(b)	(3,039,384)	(2,502,000)	(3,071,785)	(2,502,000)
cash FLOws FrOM invEstinG activitiEs
Purchase of property, plant and equipment		(3,930,128)	(137,743)	(62,553)	(137,743)
Payment for project development		(1,526,218)	-		-
Transfer to term deposits		(3,121,306)	-	(3,121,306)	-
Proceeds received from release of tenement bonds		-	1,500,000	-	1,500,000
Payment for option to purchase mining equipment		-	(25,000)	-	(25,000)
nEt cash OutFLOw FrOM invEstinG activitiEs		(8,577,652)	1,337,257	(3,183,859)	1,337,257
cash FLOws FrOM FinancinG activitiEs
Proceeds from issues of ordinary shares net of expenses		41,124,564	2,888,255	41,124,564	2,888,255
Payment of loan to subsidiary		-	-	(5,361,391)	-
Repayment of borrowings		(10,008)	-	(10,008)	-
nEt cash inFLOw FrOM FinancinG activitiEs		41,114,556	2,888,255	35,753,164	2,888,255
nEt incrEasE (dEcrEasE) in cash and cash EQuivaLEnts		29,497,520	1,723,512	29,497,520	1,723,512
Cash and cash equivalents at the beginning of the fnancial year		2,799,198	1,075,686	2,799,198	1,075,686
CASH AND CASH EQuivaLEnts at thE End OF thE
FINANCIAL YEAR	24(a)	32,296,718	2,799,198	32,296,718	2,799,198

ANNUAL REPORT 2009

CATALPA RESOURCES

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009

1. GENERAL INFORMATION

Catalpa Resources is a listed public company, incorporated and operating in Australia.

2. SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law.

The financial report includes the separate financial statements of the Company and the consolidated financial statements of the Group.

Accounting Standards include Australian equivalents to International Financial Reporting Standards (“AIFRS”). Compliance with AIFRS ensures that the financial statements and notes of the Company and the group comply with International Financial Reporting Standards (IFRS). The financial statements were authorised for issue by the Directors on 23 September 2009.

BASIS OF PREPARATION

The financial statements have been prepared on the basis of historical cost. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian Dollars unless otherwise noted.

CRITICAL ACCOUNTING jUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of AIFRS management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Refer to Note 3 for a discussion of critical judgements in applying the entity’s accounting policies and key sources of estimation uncertainty.

ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2009 reporting periods. The Group’s and the Company’s assessment of these new standards and interpretations is set out below:

	Reference	Title	Details	Application date	Impact on the Group	Application
				of standard		date for Group
	AASB 8 and	Operating Segments	New standard replacing AASB	1 January 2009	AASB 8 is a disclosure standard so	1 July 2009
	AASB 2007-3	and consequential	114 Segment Reporting, which		will have no direct impact on the
		amendments to other	adopts a management reporting		amounts included in the Group’s
		Australian Accounting	approach to segment reporting.		fnancial statements, although it
		Standards			may have an impact on the Group’s
					segment disclosures.
	AASB 123	Borrowing Costs	The amendments to AASB 123	1 January 2009	These amendments to AASB 123	1 July 2009
	(revised) and	and consequential	require that all borrowing costs		require that all borrowing costs
	AASB 2007-6	amendments to other	associated with a qualifying asset		associated with a qualifying asset
		Australian Accounting	be capitalised.		be capitalised. The Group has no
		Standards			borrowing costs associated with
					qualifying assets and as such the
					amendments are not expected to
					have any impact on the Group’s
					fnancial report.

45

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS (CONTINUED)

	Reference	Title	Details	Application date	Impact on the Group	Application
				of standard		date for Group
	AASB 101	Presentation of	Introduces a statement of	1 January 2009	These amendments are only	1 July 2009
	(revised) and	Financial Statements	comprehensive income.		expected to affect the presentation
	AASB 2007-8	and consequential	Other revisions include impacts		of the Group’s fnancial report and
		amendments to other	on the presentation of items		will not have a direct impact on the
		Australian Accounting	in the statement of changes		measurement and recognition of
		Standards	in equity, new presentation		amounts disclosed in the fnancial
			requirements for restatements or		report. The Group has not determined
			reclassifcations of items in the		at this stage whether to present a
			fnancial statements, changes in		single statement of comprehensive
			the presentation requirements		income or two separate statements.
			for dividends and changes to the
			titles of the fnancial statements.
	AASB 2008-1	Amendments to	The amendments clarify the	1 January 2009	The Group has share-based payment	1 July 2009
		Australian Accounting	defnition of ‘vesting conditions’,		arrangements that may be affected
		Standard – Share-	introducing the term ‘non-vesting		by these amendments. However, the
		based Payments:	conditions’ for conditions other		Group has not yet determined the
		vesting conditions	than vesting conditions as		extent of the impact, if any.
		and Cancellations	specifcally defned and prescribe
			the accounting treatment of an
			award that is effectively cancelled
			because a non-vesting condition
			is not satisfed.
	AASB 3	Business	The revised standard introduces	1 July 2009	The Group has no current plans to	1 July 2009
	(revised)	Combinations	a number of changes to		enter into any business combinations
			the accounting for business		during the next fnancial year. The
			combinations, the most		Group has not yet assessed the
			signifcant of which allows entities		impact of early adoption, including
			a choice for each business		which accounting policy to adopt.
			combination entered into – to
			measure a non-controlling
			interest (formerly a minority
			interest) in the acquiree either at
			its fair value or at its proportionate
			interest in the acquiree’s net
			assets. This choice will effectively
			result in recognising goodwill
			relating to 100% of the business
			(applying the fair value option) or
			recognising goodwill relating to
			the percentage interest acquired.
			The changes apply prospectively.

ANNUAL REPORT 2009

CATALPA RESOURCES

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS (CONTINUED)

	Reference	Title	Details	Application date	Impact on the Group	Application
				of standard		date for Group
	AASB 2008 - 5	Amendments to	Makes amendments to 25 different	1 January	These amendments are not	1 July 2009
		Australian Accounting	Standards and is equivalent to the	2009	expected to have a material
		Standards arising	IASB Standard Improvements to IFRSs		impact on the Group’s
		from the Annual	issued in May 2008. The IASB’s annual		fnancial report.
		Improvements	improvements project provides a vehicle
		Process	for making non-urgent but necessary
			amendments to Standards. The
			amendments to some Standards result
			in accounting changes for presentation,
			recognition or measurement purposes,
			while some amendments that relate to
			terminology and editorial changes are
			expected to have no or minimal effect on
			accounting.
	AASB 2008-6	Amendments to	This Amending Standard:	1 January	The Group has share-based	1 July 2009
		Australian Accounting	• amends aasb 127 consolidated and	2009	payment arrangements that
		Standards - Cost of	Separate Financial Statements to remove		may be affected by these
		an Investment in a	the defnition of the ‘cost method’ and to		amendments. However,
		Subsidiary, Jointly	require the separate fnancial statements		the Group has not yet
		Controlled Entity or	of a new parent formed as the result		determined the extent of the
		Associate	of a specifc type of reorganisation to		impact, if any.
			measure the cost of its investment in
			the previous parent at the carrying
			amount of its share of the equity items
			of the previous parent at the date of the
			reorganisation
			• removes from aasb 118 revenue
			the requirement to deduct dividends
			declared out of pre-acquisition profts
			from the cost of an investment in a
			subsidiary, jointly controlled entity or
			associate. Therefore, all dividends from
			a subsidiary, jointly controlled entity or
			associate are recognised by the investor
			as income
			• implements consequential
			amendments to AASB 136 Impairment
			of Assets, introducing a new indicator
			of impairment for investments in
			subsidiaries, jointly controlled entities
			and associates where a dividend has
			been recognised
			• allow frst-time adopters to use a
			deemed cost of either fair value or the
			carrying amount under previous GAAP
			to measure the initial cost of investments
			in subsidiaries, jointly controlled entities
			and associates in the separate fnancial
			statements.

47

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS (CONTINUED)

	Reference	Title	Details	Application date	Impact on the Group	Application
				of standard		date for Group
	Amendments	Cost of an Investment	The main amendments of	1 January 2009	Recognising all dividends received	1 July 2009
	to International	in a Subsidiary, Jointly	relevance to Australian entities		from subsidiaries, jointly controlled
	Financial	Controlled Entity or	are those made to IAS 27		entities and associates as income
	Reporting	Associate	deleting the ‘cost method’ and		will likely give rise to greater income
	Standards		requiring all dividends from a		being recognised by the Company
			subsidiary, jointly controlled entity		after adoption of these amendments.
			or associate to be recognised		In addition, if the Group enters into
			in proft or loss in an entity’s		any group reorganisation establishing
			separate fnancial statements		new parent entities, an assessment
			(i.e., parent company accounts).		will need to be made to determine
			The distinction between pre-		if the reorganisation meets the
			and post-acquisition profts is		conditions imposed to be effectively
			no longer required. However,		accounted for on a ‘carry-over basis’
			the payment of such dividends		rather than at fair value.
			requires the entity to consider
			whether there is an indicator of
			impairment.
			AASB 127 has also been
			amended to effectively allow
			the cost of an investment
			in a subsidiary, in limited
			reorganisations, to be based on
			the previous carrying amount of
			the subsidiary (that is, share of
			equity) rather than its fair value.
	AASB 2008-1	mprovements to	The improvements project is	1 January	The Group has not yet determined	1 July 2009
		IFRSs	an annual project that provides	2009 except	the extent of the impact of the
			a mechanism for making	for amend-	amendments, if any.
			non-urgent, but necessary,	ments to IFRS
			amendments to IFRSs. The	5, which are
			IASB has separated the	effective from 1
			amendments into two parts: Part	July 2009.
			1 deals with changes the IASB
			identifed resulting in accounting
			changes; Part II deals with
			either terminology or editorial
			amendments that the IASB
			believes will have minimal impact.

ANNUAL REPORT 2009

CATALPA RESOURCES

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

(A) PRINCIPLES OF CONSOLIDATION SUBSIDIARIES

The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the consolidated entity, being the Company (the parent entity) and its subsidiaries as defined in Accounting Standard AASB 127 ‘Consolidated and Separate Financial Statements’. Catalpa Resources Limited and its subsidiaries together are referred to in this financial report as the Group or consolidated entity. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements. The consolidated financial statements include the information and results of each subsidiary from the date on which the Company obtains control and until such time as the Company ceases to control such entity. In preparing the Consolidated financial statements, all intercompany balances and transactions, and unrealised profits arising within the Consolidated Entity are eliminated in full.

Investments in subsidiaries are accounted for at cost in the individual financial statements of Catalpa Resources Limited.

(B) SEGMENT REPORTING

A business segment is identified for a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is identified when products or services are provided within a particular economic environment subject to risks and returns that are different from those of segments operating in other economic environments.

(C) REVENUE RECOGNITION

Revenue is recognised to the extent that it is probable that the economic benefit will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised.

Sale of gold

• Revenue from sales of gold is recognised when there has been a passing of the significant risks and rewards of ownership, which means the following: • the product is in a form suitable for delivery and no further processing is required by or on behalf of the consolidated entity;

• the quantity and quality (grade) of the product can be determined with reasonable accuracy;

• the product has been despatched to the customer and is no longer under the physical control of the consolidated entity;

• the selling price can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to the consolidated entity; and

• the costs incurred, or expected to be incurred, in respect of the transaction can be measured reliably.

Interest

Revenue is recognised as the interest accrues using the effective interest rate method (which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset).

(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 temporary differences and to unused tax losses. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

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 Company 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 tax 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.

49

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(E) LEASES

Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset’s useful life and the lease term.

Leases where a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases (note 21). 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.

(F) IMPAIRMENT OF ASSETS

At each reporting date, the Consolidated Entity reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Consolidated Entity estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cashgenerating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately.

(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 insignificant risk of changes in value, and bank overdrafts.

(H)TRADE AND OTHER RECEIVABLES

Receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written-off as incurred.

(I) INVESTMENTS AND OTHER FINANCIAL ASSETS CLaSSIfICatIon

The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.

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

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the balance sheet.

ANNUAL REPORT 2009

CATALPA RESOURCES

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (I) INVESTMENTS AND OTHER FINANCIAL ASSETS (CONTINUED)

(iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity. If the Group were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as available-for-sale. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the reporting date, which are classified as current assets.

(iv) available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

ReCognItIon and deReCognItIon

Regular purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss is initially recognised at fair value and transaction costs are expensed to the income statement. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the income statement as gains and losses from investment securities.

SubSequent meaSuRement

Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statement within other income or other expenses in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the income statement as part of revenue from continuing operations when the Group’s right to receive payments is established. Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in equity. Changes in the fair value of other monetary and non-monetary securities classified as available-for-sale are recognised in equity.

faIR vaLue

The fair values of quoted investments are based on last trade prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.

ImPaIRment

The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments classified as availablefor-sale are not reversed through the income statement.

(j) FAIR VALUE ESTIMATION

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the last trade price. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature.

51

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (K) PROPERTY, PLANT AND EQUIPMENT

Land is carried at historical cost. All plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

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. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the reporting period in which they are incurred. Land is not depreciated. Depreciation of plant and equipment is calculated using the straight line method to allocate their cost, net of their residual values, over their estimated useful lives. The rates vary between 10% and 33% per annum.

The assets’ 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.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement. When revalued assets are sold, it is Group policy to transfer the amounts included in other reserves in respect of those assets to retained earnings.

(L) EXPLORATION, EVALUATION AND DEVELOPMENT EXPENDITURE

Exploration and evaluation expenditure in relation to its mineral tenements is expensed as incurred. Where the Directors decide to progress the development in an area of interest all further expenditure incurred relating to the area is capitalised. Projects are advanced to development status and classified as mining properties when it is expected that further expenditure can be recouped through sale or successful development and exploitation of the area of interest. Such expenditure is carried forward up to commencement of production at which time it is amortised over the life of the economically recoverable reserves. All projects are subject to detailed review on an annual basis and accumulated costs written off to the extent that they will not be recoverable in the future.

(M) SITE RESTORATION

In accordance with the consolidated entity’s published environmental policy and applicable legal requirements, a provision for site restoration in respect of contaminated land is recognised when the land is contaminated.

The provision is the best estimate of the present value of the expenditure required to settle the restoration obligation at the reporting date, based on current legal requirements and technology. Future restoration costs are reviewed annually and any changes are reflected in the present value of the restoration provision at the end of the reporting period.

The amount of the provision for future restoration costs is capitalised and is depreciated in accordance with the policy set out in note 1(l). The unwinding of the effect of discounting on the provision is recognised as a finance cost.

(N) 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 are paid on normal commercial terms.

(O) BORROWINGS

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. Fess paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw-down of the facility, are recognised as prepayments and amortised on a straight-line basis over the term of the facility. Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of the financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or other expenses. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

(P) BORROWING COSTS

Borrowing costs incurred for the construction of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.

ANNUAL REPORT 2009

CATALPA RESOURCES

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(Q) EMPLOYEE BENEFITS

(i) Wages and salaries, annual leave and other employee benefits

Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, and long service leave.

Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. In determining the present value of future cash outflows, the market yield as at the reporting date on national government bonds, which have terms to maturity approximating the terms of the related liability, are used.

(ii) Share-based payments

The consolidated entity has an ‘Employee and Contractor Option Plan’ (“ECOP”) for employees, contractors and Executives (including Executive Directors) of the company.

The plan permits the Company, at the discretion of the Directors, to grant options over unissued ordinary shares of the Company to eligible Directors, members of staff and contractors as specified in the plan rules.

The options, issued for nil consideration, are granted in accordance with performance guidelines established by the directors of the Company. The options are issued for a specified period and each option is convertible into one ordinary share. The exercise price of the options, determined in accordance with the rules of the plan, is based on the market price of a share on invitation date, grant date, or another specified date after grant close. All options expire on the earlier of their expiry date or termination of the employee’s employment. Options do not vest until a specified period after granting and their exercise is conditional on the consolidated entity achieving certain performance hurdles. there are no voting or dividend rights attached to the options. voting rights will attach to the ordinary shares when the options have been exercised. the options cannot be transferred and will not be quoted on the ASX.

(R) 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. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration.

(S) EARNINGS PER SHARE

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit 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.

(T) 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 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.

53

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(U) SHARE BASED PAYMENTS

Equity-settled share-based payments are measured at fair value at the date of grant. Fair value is measured by use of the Black & Scholes option pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the consolidated entity’s estimate of shares that will eventually vest. For cash-settled share based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date.

(V) ROUNDING OF AMOUNTS

The company is a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest $1.

3. CRITICAL ACCOUNTING jUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY CRITICAL jUDGEMENTS IN APPLYING THE GROUP’S ACCOUNTING POLICIES

The following are the critical judgments (apart from those involving estimations which are dealt with below) that management has made in the process of applying the Group’s accounting policies and that have the most significant effects on the amounts recognised in the financial statements. Determination of mineral resources and ore reserves

The Group estimates its mineral resources and ore reserves in accordance with the Australian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves (the “JORC Code”). The information on mineral resources and ore reserves is prepared by or under the supervision of Competent Persons as defined in the JORC Code. The amounts presented are based on the mineral resources and ore reserves determined under the JORC Code.

There are numerous uncertainties inherent in estimating mineral resources and ore reserves and assumptions that are valid at the time of estimation which may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in the reserves being restated. Such changes in reserves could impact on depreciation and amortisation rates, asset carrying values and provisions for decommissioning and restoration.

Estimation for the provision for rehabilitation and dismantling

Provision for rehabilitation and dismantling property, plant and equipment is estimated taking into consideration facts and circumstances available at the balance sheet date. This estimate is based on the expenditure required to undertake the rehabilitation and dismantling, taking into consideration time value of money.

KEY SOURCES OF ESTIMATION UNCERTAINTY

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. Impairment of property, plant and equipment

The Group reviews for impairment of property, plant and equipment, in accordance with its accounting policy. The recoverable amount of these assets has been determined based on higher of the assets’ fair value less costs to sell and value in use. These calculations require the use of estimates and judgements.

Impairment of capitalised mine development expenditure

The future recoverability of capitalised mine development expenditure is dependent on a number of factors, including the level of proved, probable and inferred mineral resources, future technological changes which could impact the cost of mining, future legal changes (including changes to environment restoration obligations) and changes to commodity prices.

To the extent that capitalised mine development expenditure is determined not to be recoverable in the future, this will reduce profits and net assets in the period in which this determination is made.

4. SEGMENT INFORMATION DESCRIPTION OF SEGMENTS

The Group’s operations are in the mining industry in Australia.

ANNUAL REPORT 2009

CATALPA RESOURCES

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

	Consolidated	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$
5. REVENUE
Interest revenue	263,929	263,321	263,929	263,321
6.OTHER INCOME AND EXPENSES
(a) Other income:
- Other income	75,287	10,699	75,287	10,699
	75,287	10,699	75,287	10,699
(b) Loss before income tax
includes the following
specifc expenses:
Rental of premises under
operating lease	231,790	203,183	231,790	203,183
Consulting fees	536,373	151,970	536,373	151,970
Employee benefts:
- Salary and Wages	867,062	198,590	863,965	198,590
- Share based payments	252,059	1,960	252,059	1,960
- Superannuation	99,767	47,582	99,767	47,582

55

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

	Consolidated	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$
7.INCOME TAX
(a) Income tax expense/(beneft)
Research & design rebate	(25,605)	(320,885)	(25,605)	(320,885)
Deferred tax beneft on origination and
reversal of temporary differences	-	-	-	-
Total income tax beneft per income statement	(25,605)	(320,885)	(25,605)	(320,885)
(b) Numerical reconciliation of income tax beneft
to prima facie tax payable
Loss from continuing operations before income
tax beneft	(6,839,427)	(2,291,738)	(6,826,699)	(2,291,738)
Prima facie tax beneft at the Australian tax
rate of 30% (2008: 30%)	(2,051,828)	(687,521)	(2,048,010 )	(687,521)
Add tax effect of:
Non-deductible expenses	126,343	27,552	126,343	27,552
Effect of current year tax losses not recognised	1,925,485	348,209	1,921,667	348,209
Effect of reversal of temporary differences	-	375,216	-	375,216
	-	63,456	-	63,456
Less tax effect of:
Tax deductible equity raising costs	-	(63,456)	-	(63,456)
Research & design rebate	(25,605)	(320,885)	(25,605)	(320,885)
	(25,605)	(384,341)	(25,605)	(384,341)
Income tax (beneft)	(25,605)	(320,885)	(25,605)	(320,885)
(c) Amounts recognised directly in equity
Relating to equity raising costs	-	(267,102)	-	54,530
Deferred tax expense/(beneft) attributable to
entity recognised in equity	-	(267,102)	-	54,530

(d) Recognised deferred tax assets & liabilities	(d) Recognised deferred tax assets & liabilities
Consolidated & Company
			Assets			Liabilities		Net
		2009		2008	2009	2008	2009	2008
	$			$	$	$	$	$
Accruals & provisions	203,785			5,655	-	-	203,785	5,655
Mine properties	-			-	(457,805)	-	(457,805)	-
Depreciation	-			-	(979,494)	-	(979,494)	-
Prior year losses now recognised	1,233,996			-	-	-	1,233,996	-
Other items	-			-	(482)	(5,655)	(482)	(5,655)
	1,437,781			5,655	(1,437,781)	(5,655)	-	-

CATALPA RESOURCES ANNUAL REPORT 2009

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

7. INCOME TAX (CONTINUED)

(e) Movement in temporary differences

recognised during the year

(e) Movement in temporary differences recognised during the year
	Balance at	Recognised in	Recognised in	Balance at
	1 july 2008	income	equity	30 june 2009
	$	$	$	$
Accruals & provisions	5,655	198,130	-	203,785
Mine properties	-	(457,805)	-	(457,805)
Depreciation	-	(979,494)	-	(979,494)
Prior year losses now recognised	-	1,233,996	-	1,233,996
Other items	(5,655)	5,173	-	(482)
Net tax assets/(liabilities)	-	-	-	-
	Balance at	Recognised in	Recognised in	Balance at
	1 july 2007	income	equity	30 june 2008
	$	$	$	$
Accruals & provisions	3,699	1,956	-	5,655
Other items	(3,699)	(1,956)	-	(5,655)
Net tax assets/(liabilities)	-	-	-	-

(f) Unrecognised deferred tax assets

(f) Unrecognised deferred tax assets
	Consolidated			Company
	2009	2008	2009	2008
	$	$	$	$
Deferred tax assets at 30% have not been
recognised in respect of the following:
Deductible temporary differences	-	300,055	-	300,055
Tax losses	7,222,005	5,488,692	7,222,005	5,488,692
Capital losses	-	53,831	-	53,831
	7,222,005	5,842,578	7,222,005	5,842,578

No income tax is payable by the consolidated entity. The Directors have considered it prudent not to bring to account the future income tax benefit of income tax losses and exploration deductions until there is virtual certainty of deriving assessable income of a nature and amount to enable such benefit to be realised.

This future income tax benefit will only be obtained if:

(a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;

(b) the conditions for deductibility imposed by tax legislation continue to be complied with; and

(c) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.

57

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

	Consolidated	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$
8. OTHER RECEIVABLES
Government taxes receivable	719,992	56,468	719,992	56,468
Other receivables	118,989	21,536	118,989	21,536
	838,981	78,004	838,981	78,004
9 .OTHER FINANCIAL ASSETS
Current
Term deposits	-	37,884	-	27,884
Term deposits on tenements and
performance bonds(i)	3,507,500	-	3,507,500
Other deposits	25,000	-	25,000	-
	3,532,500	37,884	3,532,500	27,884
Non-current
Shares in unlisted controlled entity – at cost	-	-	2	2
Loan to controlled entity	-	-	5,371,387	10,000
Term deposits on tenements and performance bonds	-	386,194	-	386,194
	-	386,194	5,371,389	396,196
(i) The performance bonds will be replaced with a
bank guarantee subsequent to the year end and
the deposit monies returned to the Group. Up until
the date the bank guarantee is put in place the
Group cannot access these funds until the related
restoration works have been completed
10. PREPAYMENTS
Current
Prepaid expenses	9,444	-	2,274	-

ANNUAL REPORT 2009

CATALPA RESOURCES

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

11. PROPERTY, PLANT AND EQUIPMENT

Consolidated	Freehold Land	Plant and	Total
		Equipment
	$	$	$
Gross carrying amount
Balance at 1 July 2007	391,301	8,117,837	8,509,138
Additions	-	137,744	137,744
Increase in provision for rehabilitation to the land	83,000	-	83,000
Balance at 30 June 2008	474,301	8,255,581	8,729,882
Additions	-	4,025,204	4,025,204
Balance at 30 June 2009	474,301	12,280,785	12,755,086
Accumulated depreciation, amortisation and impairment
Balance at 1 July 2007	-	(4,909,058)	(4,909,058)
Depreciation charge	-	(142,533)	(142,533)
Impairment loss	(84,301)	-	(84,301)
Balance at 30 June 2008	(84,301)	(5,051,591)	(5,135,892)
Depreciation charge	-	(161,982)	(161,982)
Balance at 30 June 2009	(84,301)	(5,213,573)	(5,297,874)
Net book value
As at 30 June 2008	390,000	3,203,990	3,593,990
As at 30 June 2009	390,000	7,067,212	7,457,212

(i) During the previous year the Company carried out a valuation of the land. Based on an independent appraisal, concluded that the fair value for the land was $390,000, causing an impairment expense of $84,301 for the year after an additional $83,000 required to be provided to rehabilitate the land. (ii) Mine machinery includes the Big Bell Mill which had a carrying value at the beginning of the previous year of $2,850,000. During the previous year the Company carried out an impairment assessment of the Big Bell Mill. Based on an independent appraisal, the carrying value of the Big Bell Mill of $2,850,000 was appropriate. This impairment has not been reversed in the current year, as there is no objective evidence to support that the factors that lead to the impairment have reversed at year end.

(iii) Management have considered the existence of any impairment triggers that would require a review of the carrying value of cash generating units as required by AASB 136. No impairment triggers were noted.

59

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

11. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Parent	Freehold Land	Plant and		Total
		Equipment
	$	$		$
Gross carrying amount
Balance at 1 July 2007	391,301	8,117,837		8,509,138
Additions	-	137,744		137,744
Increase in provision for rehabilitation to the land	83,000	-		83,000
Balance at 30 June 2008	474,301	8,255,581		8,729,882
Additions	-	157,630		157,630
Balance at 30 June 2009	474,301	8,413,211		8,887,512
Accumulated depreciation, amortisation and impairment
Balance at 1 July 2007	-	(4,909,058)	(4,909,058)
Depreciation charge	-	(142,533)		(142,533)
Impairment loss	(84,301)	-		(84,301)
Balance at 30 June 2008	(84,301)	(5,051,591)	(5,135,892)
Depreciation charge	-	(161,496)		(161,496)
Balance at 30 June 2009	(84,301)	(5,213,087)	(5,297,388)
Net book value
As at 30 June 2008	390,000	3,203,990		3,593,990
As at 30 June 2009	390,000	3,200,124		3,590,124
	Consolidated			Company
	2009	2008	2009	2008
	$	$	$	$
12 .EXPLORATION, EVALUATION AND
DEVELOPMENT EXPENDITURE
Evaluation and development costs carried forward in
respect of mining areas of interest
Opening net book amount	-	-	-	-
Incurred during the year	1,526,218	-	-	-
Closing net book amount	1,526,218	-	-	-
13. BORROWING COSTS
Prepaid borrowing costs	3,662,943	-	3,662,943	-

Prepaid borrowing costs were paid to Macquarie Bank Limited as a fee for arranging finance for the Edna May Operations. The financing facility was executed after the year end (refer to note 30). In the year ending 30 June 2010, these costs will be reclassified against the loan, following the initial drawn down against this facility. The costs will be amortised over the life of the loan in accordance with the Company’s accounting policies (refer to note 2).

CATALPA RESOURCES ANNUAL REPORT 2009

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

	Consolidated	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$
14.TRADE AND OTHER PAYABLES
Trade payables	3,865,176	105,363	3,865,176	105,363
Other payables and accruals	248,115	52,703	209,012	52,705
	4,113,291	158,066	4,074,188	158,068
15. BORROWINGS
Secured at amortised cost
Current
Finance lease liabilities	19,534	-	19,534	-
Non-current
Finance lease liabilities	65,534	-	65,534	-
Secured by assets leased. The borrowings are
fxed interest rate debt with repayment periods not
exceeding 5 years. The current weighted average
effective interest rate on the fnance lease liabilities
is 6.6%.

16. PROVISIONS

16. PROVISIONS
Current
Employee benefts	107,578	55,208	104,868	55,208
Non-current
Site restoration	407,000	407,000	407,000	407,000
Movements in provision for site restoration
	Consolidated	Company
	$	$
Non-current
Carrying amount at start of year	407,000	407,000
Provisions made during the year		-
Provisions used during the year		-
Carrying amount at end of year	407,000	407,000

Site restoration

The provision includes the rehabilitation of the evaporative ponds at the Edna May Gold Project. Under certain conditions, Newmont Mining Corporation Ltd is responsible for some rehabilitation of mining tenements M77/88 and M77/110.

61

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

17. ISSUED CAPITAL

(a) Share capital

(a) Share capital
		2009		2008
	Number of shares	$	Number of shares	$
Ordinary shares fully paid	1,171,777,896	74,100,908	345,377,313	32,976,344
(b) Movements in ordinary share capital
		2009		2008
	Number of shares	$	Number of shares	$
Beginning of the fnancial year	345,377,313	32,976,344	307,002,051	30,088,089
Issued during the year:
− Issue of shares for drilling services	3,426,014	181,755	-	-
− First tranche of capital raising	74,229,332	4,453,760	-	-
− Second tranche of capital raising	450,194,007	27,011,640	-	-
− Placement of shares	172,723,071	3,454,462	38,375,256	3,070,020
− Issued on exercise of options	72,926	7,293	6	1
− Issued under share purchase plan	125,755,233	7,545,314	-	-
Less transaction costs	-	(1,529,660)	-	(181,766)
End of the fnancial year	1,171,777,896	74,100,908	345,377,313	32,976,344

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.

(c) Options on issue		Number of options
	2009	2008
Listed:
− Exercisable at 10 cents, on or before 31 October 2011	172,723,065	-
− Exercisable at 10 cents, on or before 30 June 2010	38,302,294	38,375,250
unlisted:
− Exercisable at 11 cents, on or before 22 Nov 2010	200,000	200,000
− Exercisable at 8 cents, on or before 29 April 2011	100,000	100,000
− Exercisable at 8 cents, on or before 23 December 2013	4,375,000	-
− Exercisable at 10 cents, on or before 23 December 2013	4,375,000	-
− Exercisable at 6 cents, on or before 23 December 2013	625,000	-
− Exercisable at 12 cents, on or before 23 December 2013	4,375,000	-
− Exercisable at 14 cents, on or before 23 December 2013	3,750,000-
− Exercisable at 6 cents, on or before 11 March 2014	1,250,000	-
− Exercisable at 8 cents, on or before 11 March 2014	1,250,000	-
− Exercisable at 10 cents, on or before 11 March 2014	1,250,00	-
− Exercisable at 12 cents, on or before 11 March 2014	1,250,000	-
− Exercisable at 7.5 cents, on or before 31 March 2014	66,666,666	-
Total options on issue at year end	300,492,025	38,675,250

Share options carry no rights to dividends and no voting rights. Further details of the employees and contractors share option plan are contained in note 26 to the financial statements

ANNUAL REPORT 2009

CATALPA RESOURCES

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

	Consolidated	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$
18.RESERVES AND
ACCUMULATED LOSSES
(a) Reserves
Share-based payments reserve
Balance at beginning of year	500,633	498,673	500,633	498,673
Borrowing costs	3,773,333	-	3,773,333	-
Employee share options	252,008	1,960	252,008	1,960
Balance at end of year	4,525,974	500,633	4,525,974	500,633
(b) Accumulated losses
Balance at beginning of year	(27,201,981)	(24,910,243)	(27,201,981)	(24,910,243)
Net loss for the year	(6,813,822)	(2,291,738)	(6,801,094)	(2,291,738)
Balance at end of year	(34,015,803)	(27,201,981)	(34,003,075)	(27,201,

(c) Nature and purpose of reserves

Share-based payments reserve

The share-based payments reserve is used to recognise the fair value of options issued.

19. LOSS PER SHARE

Consolidated	Consolidated
2009	2008
$	$

	2009 $	2008 $
(a) Reconciliation of earnings used in
calculating loss per share
Loss attributable to the ordinary
equity holders of the Company used in
calculating basic and diluted loss per share	(6,813,822)	(2,291,738)
	Number of	Number of
	shares	shares
(b) Weighted average number of shares used
as the denominator
Weighted average number of ordinary shares used
as the denominator in calculating basic and
diluted loss per share	537,659,736	343,699,704

(c) Information on the classification of options

As the Group has made a loss for the year 30 June 2009,all options on issue are considered antidilutive and have not been included in the calculation of diluted loss per share. The options could potentially dilute basic loss per share in the future.

20. DIVIDENDS

No dividends were paid during the financial year.

63

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

	Consolidated	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$
21.COMMITMENTS
(a) Exploration commitments
Within one year	693,100	579,200	693,100	579,200
Longer than 1 year, not longer than 5 years	-	-	-	-
	693,100	579,200	693,100	579,200

All of the company’s tenements are situated in the state of Western Australia.

In order to maintain an interest in the mining and exploration tenements in which the Company is involved, the Company is committed to meet the conditions under which the tenements were granted and the obligations of any joint venture agreements. The timing and amount of exploration expenditure commitments and obligations of the Company are subject to the minimum expenditure commitments required as per the Mining Act, as amended, and may vary significantly from the forecast based upon the results of the work performed which will determine the prospectivity of the relevant area of interest. These obligations are not provided for in the financial report.

No estimate has been given of expenditure commitments beyond 12 months as this is dependent on the Directors’ ongoing assessment of operations and, in certain circumstances, native title negotiations.

	Consolidated	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$
(b) Lease commitments: Group as lessee
Operating leases (non cancellable):
Minimum lease payments
within one year	136,013	88,000	136,013	88,000
later than one year but not later than fve years	55,527	113,520	55,527	113,520
Greater than fve years	42,260	-	42,260	-
	233,800	201,520	233,800	201,520

The property lease is a non-cancellable lease with a two-year term expiring on 30 September 2010, with rent payable monthly in advance. Contingent rental provisions within the lease agreement require the minimum lease payments to be increased by fixed amounts on the annual anniversary dates. The lease allows for subletting of all lease areas.

(c) Physical gold delivery commitment
	Gold for physical delivery	Contracted gold sale price	Value of committed sales
Consolidated	ounces	$	$
Within one year	19,624	1,557.50	30,564,380
later than one year but not later than fve years	295,453	1,557.50	460,168,048
Greater than fve years	37,240	1,557.50	58,001,300
	352,317	1,557.50	548,733,728

The counterparty to the physical gold delivery contracts is Macquarie Bank Limited (“MBL”). The contracts are settled on a quarterly basis by physical delivery of gold per MBL’s instructions. The contracts are accounted for as sale contracts with revenue recognised once the gold has been delivered to MBL or its agent. The Chief Financial Officer is responsible for monitoring gold production to assess if the physical delivery commitments will be met in any given quarter and reports the results of his review to the Managing Director on at least a monthly basis.

The physical gold delivery contract is considered a contract to sell a non-financial item, and is therefore out of the scope of AASB 139. As a result, no derivatives are required to be recognised.

The Company has no other gold sale commitments.

CATALPA RESOURCES ANNUAL REPORT 2009

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

	Consolidated	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$
21. COMMITMENTS (CONTINUED)
(d) Capital expenditure commitments
Plant and equipment
Within one year	52,200,000	-	-	-
Longer than 1 year, not longer than 5 years	-	-	-	-
	52,200,000	-	-	-

Capital expenditure commitments relate to a contract the Group has entered into for the construction of the Edna May Gold Treatment Plant. The total cost of the project is estimated to be $52.2M which includes a guaranteed maximum price component of $46M. Should the actual cost of the guaranteed maximum price component of the project be less, there is an under-run sharing arrangement between the Company and the contractor. An arrangement has been entered into to pay the contractor for work completed to date if the contract is terminated prior to completion. This commitment is fully funded by a loan facility with Macquarie Bank Limited (refer to note 30)

22. CONTINGENCIES

There are no material contingent liabilities or contingent assets of the Group at balance date.

23. SUBSIDIARIES

23. SUBSIDIARIES
Name	Country of Incorporation	Ownership	Interest
		2009	2008
Westonia Mines Minerals Pty Ltd	Australia	100%	100%
Edna May Operations Pty Ltd	Australia	100%	-

Edna May Operations Pty Ltd was incorporated on 31 March 2009.

65

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

	Consolidated	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$
24. CASH FLOW STATEMENT
(a) Reconciliation of cash and cash equivalents
Cash and cash equivalents as shown in the balance
sheets and the statements of cash fows	32,296,718	2,799,198	32,296,718	2,799,198
(b) Reconciliation of loss for the year to net cash
outfow from operating activities
Loss for the year	(6,813,822)	(2,291,738)	(6,801,094)	(2,291,738)
Non Cash Items:
Depreciation of non current assets	161,982	142,533	161,496	142,533
Share based payments	362,449	1,960	362,449	1,960
Exploration expenditure written off	-	-	-	-
Impairment loss on assets	-	84,301	-	84,301
(Increase)/decrease in assets:
(Increase)/decrease in other receivables	(748,093)	216,572	(758,093)	216,572
(Increase)/decrease in prepayments	(9,444)	9,017	(2,274)	9,017
(Increase)/decrease in value of assets	-	(83,000)	-	(83,000)
Increase/(decrease) in liabilities:
(Decrease)/increase in trade and other payables	3,955,175	(638,275)	3,916,072	(638,275)
(Decrease)/increase in provisions	52,370	56,630	49,660	56,630
Net cash outfow from operating activities	(3,039,383)	(2,502,000)	(3,071,784)	(2,502,000)

(c) Financing facilities

There were no financing facilities in place at 30 Jun 2009.

(d) Non-cash investing and financing activities

Except for vehicles acquired under finance lease (refer note 15), there were no non-cash investing and financing activities during the financial year.

ANNUAL REPORT 2009

CATALPA RESOURCES

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

25. FINANCIAL INSTRUMENTS

(a) Financial risk management objectives

The Group and the Parent are exposed to financial risk through the normal course of their business operations. The key risks impacting the Group and the Parent’s financial instruments are considered to be interest rate risk and credit risk. The Group’s financial instruments exposed to these risks are cash and short term deposits, receivables and trade payables.

The consolidated entity’s Managing Director and chief financial officer monitor the Group’s and the Company’s risks on an ongoing basis and report to the Board.

(b) Categories of financial instruments

The Group and the Company hold the following financial instruments

	Consolidated	Consolidated		Parent
	2009	2008	2009	2008
Financial assets
Cash and cash equivalents	32,296,718	2,799,198	32,296,718	2,799,198
Other receivables	838,981	78,004	838,981	78,004
Other fnancial assets	3,532,500	424,078	8,903,891	424,078
	36,668,199	3,301,280	42,039,590	3,301,282
Financial liabilities
Trade and other payables	4,113,291	158,066	4,074,188	158,068
Borrowings	85,068	-	85,068	-
	4,198,359	158,066	4,159,256	158,068

(c) Capital risk management

The Group and the Company’s objectives when managing capital are to safeguard the Group and the Company’s ability to continue as a going concern in order to provide future returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The management of the Group and the Company’s capital is performed by the Board.

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the consolidated entity defines as net operating income divided by total shareholders’ equity.

There were no changes in the consolidated entity’s approach to capital management during the year.

The Group and the Company operate primarily in Australia. The Group is not subject to any externally imposed capital requirements.

(d) Interest rate risk management

The Group and the Parent are exposed to interest rate risk as entities in the Group deposit funds at both short-term fixed and floating rates of interest and have fixed interest rate borrowings.

The sensitivity analyses below have been determined based on the exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. A 50 basis point increase or decrease represents management’s assessment of the possible change in interest rates.

At reporting date, had interest rates been 50 basis points higher or lower and all other variables were held constant, the Group’s net loss would decrease by $161,484 and reserves increase by $161,484 (2008: nil). This is mainly attributable to the Group’s exposure to interest rates on its variable rate deposits.

The Group’s sensitivity to interest rates has increased during the current period due to the increase in variable rate deposits.

67

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

25. FINANCIAL INSTRUMENTS (CONTINUED)

(e) Liquidity risk management

Prudent liquidity risk management implies maintaining sufficient cash and term deposits, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

Maturities of financial assets and liabilities

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements. The tables below have been drawn up based on the undiscounted cash flows (including both interest and principal cash flows expected) using contractual maturities of financial assets and the earliest date on which the Group and the Company can be required to pay financial liabilities. Amounts for financial assets include interest earned on those assets except where it is anticipated the cash flow will occur in a different period.

Consolidated	Weighted average	Less than 1	1 to 3	3 months to	1 to 5
	effective interest rate	month	months	1 year	years	5+years
	%	$	$	$	$	$
2009
financial assets
variable interest rate instruments	5.5	32,296,718	-	3,507,500	-	-
Non-interest bearing	-	838,981	-	25,000	-	-
		33,135,699	-	3,532,500	-	-
financial liabilities
Fixed interest rate instruments	10.37	1,484	3,047	15,003	65,534	-
Non-interest bearing		4,113,240	-	-	-	-
		4,114,724	3,047	15,003	65,534	-
2008
financial assets
variable interest rate instruments	7.12	2,799,198	-	-	-	-
Fixed interest rate instruments	6.16	-	-	35,000	386,194	-
Non-interest bearing	-	78,004	-	2,884	-	-
		2,877,202	-	37,884	386,194	-
Financial liabilities
Non-interest bearing	-	158,066	-	-		-
		158,066	-	-		-

ANNUAL REPORT 2009

CATALPA RESOURCES

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

25. FINANCIAL INSTRUMENTS (CONTINUED)

Company	Weighted average	Less than 1	1 to 3	3 months to	1 to 5
	effective interest rate	month	months	1 year	years	5+years
	%	$	$	$	$	$
2009
financial assets
variable interest rate instruments	2.9	32,296,718	-	3,507,500	-	-
Non-interest bearing	-	838,981	-	25,000	-	-
		33,135,699	-	3,532,500	-	-
financial liabilities
variable interest rate instruments	10.37	1,484	3,047	15,003	65,534
Non-interest bearing		4,074,137	-	-	-	-
		4,075,621	3,047	15,003	65,534	-
2008
financial assets
variable interest rate instruments	7.12	2,799,198	-	-	-	-
Fixed interest rate instruments	6.16	-	-	35,000	386,194	-
Non-interest bearing	-	78,004	-	2,884	-	-
		2,877,202	-	37,884	386,194	-
financial liabilities
Non-interest bearing	-	158,066	-	-	-	-
		158,066	-	-	-	-

(d) Commodity price risk

The Group’s future revenues are exposed to movements in the gold price. To address this risk the Group has put in place physical gold delivery contracts covering sales of 352,317ozs of gold at a price of $1,577.50 per ounce to be delivered over a period of approximately 6 years (refer to note 21). This represents approximately 24% of the Edna May resource.

(e) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Company or the Group. The Group’s potential concentration of credit risk consists mainly of cash deposits with banks. The Group’s short term cash surpluses are placed with banks that have investment grade ratings. The maximum credit risk exposure relating to the financial assets is represented by the carrying value as at the balance sheet date. The Company and the Group considers the credit standing of counterparties when making deposits to manage the credit risk. Considering the nature of the business at current, the Group believes that the credit risk is not material to the Group’s or Company’s operations.

(f) Fair value

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenues and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the financial statements.

The carrying amount of financial assets and financial liabilities recorded in the financial statements represents their respective net fair values, determined in accordance with the accounting policies disclosed in note 2 to the financial statements.

69

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

26. SHARE-BASED PAYMENTS

EMPLOYEES AND CONTRACTORS OPTION PLAN (“ECOP”)

An Employees and Contractors Option Plan (“ECOP”) has been established, approved by the Board on 18 April 2002 and at the Annual General Meeting on 5 June 2002. The plan permits the Company, at the discretion of the Directors, to grant options over unissued ordinary shares of the Company to eligible Directors, members of staff and contractors as specified in the plan rules.

The options, issued for nil consideration, are granted in accordance with performance guidelines established by the Directors of the Company. In exercising their discretion under the rules, the Directors will take into account matters such as the position of the eligible person, the role they play in the Company group, the nature or terms of their employment or contract and the contribution they make to the Company group as a whole.

The options are issued for a specified period and each option is convertible into one ordinary share. The exercise price of the options, determined in accordance with the rules of the plan, is based on the market price of a share on invitation date, grant date, or another specified date after grant close. All options expire on the earlier of their expiry date or termination of the employee’s employment. Options do not vest until a specified period after granting and their exercise is conditional on the achievement of certain performance hurdles.

there are no voting or dividend rights attached to the options. voting rights will attach to the ordinary shares when the options have been exercised. the options cannot be transferred and will not be quoted on the ASX.

Set out below are summaries of the options granted:

Option series	Number	Grant date	Expiry Date	Exercise	Weighted average fair value
				Price	value at grant date
				cents	cents
Issued under the eCoP
Mar 06 at 11 cents	200,000	Mar 06	22 Nov 10	11	2
Apr 08 at 8 cents	100,000	Apr 08	29 Apr 11	8	2
Dec 08 at 6 cents	625,000	Dec 08	23 Dec 13	6	2
Dec 08 at 8 cents	625,000	Dec 08	23 Dec 13	8	2
Dec 08 at 10 cents	4,375,000	Dec 08	23 Dec 13	10	2
Dec 08 at 12 cents	4,375,000	Dec 08	23 Dec 13	12	2
Dec 08 at 14 cents	3,750,000	Dec 08	23 Dec 13	14	2
Mar 09 at 6 cents	1,250,000	Jan 09	11 Mar 14	6	4
Mar 09 at 8 cents	1,250,000	Jan 09	11 Mar 14	8	3
Mar 09 at 10 cents	1,250,000	Jan 09	11 Mar 14	10	3
Mar 09 at 12 cents	1,250,000	Jan 09	11 Mar 14	12	3
Issued outside the eCoP
Dec 08 at 8 cents	3,750,000	Dec 08	23 Dec 13	8	2
May 09 at 7.5 cents	66,666,666	May 09	31 Mar 14	7.5	8

The weighted average remaining contractual life of share options issued as share-based payments and outstanding at the end of the financial year was 4.7 years (2008: 2.7 years), with exercise prices ranging from 6 to 14 cents.

ANNUAL REPORT 2009

CATALPA RESOURCES

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

26. SHARE-BASED PAYMENTS (CONTINUED)

The weighted average fair value of the options granted during the year as share-based payments was 4.9 cents (2008: 3.3 cents). Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects of non-transferability and exercise restrictions. Expected volatility is based on the historical share price volatility of Catalpa Resources Limited. The price was calculated by using the Black-Scholes European Option Pricing Model applying the following inputs:

Inputs into the model
Option series	Mar 06 at	Apr 08 at	Dec 08 at	Dec 08 at	Dec 08 at	Dec 08 at	Dec 08 at
	11 cents	8 cents	6 cents	8 cents	10 cents	12 cents	14 cents
Grant date share price
Exercise price (cents)	11	8	6	8	10	12	14
Expected volatility (%)	80	80	80	80	80	80	80
Option life (years)	5	5	5	5	5	5	5
Dividend yield	-	-	-	-	-	-	-
Risk-free interest rate (%)	4.25	4.25	4.25	4.25	4.25	4.25	4.25
Inputs into the model
Option series	Dec 08 at	Dec 08 at	Dec 08 at	Dec 08 at	May 09 at
	6 cents	8 cents	10 cents	12 cents	7.5 cents
Grant date share price
Exercise price (cents)	11	8	6	8	10
Expected volatility (%)	80	80	80	80	80
Option life (years)	5	5	5	5	5
Dividend yield	-	-	-	-	-
Risk-free interest rate (%)	4.25	4.25	4.25	4.25	4.25

71

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

26. SHARE-BASED PAYMENTS (CONTINUED)

The following reconciles the outstanding share options granted under the employee share option plan at the beginning and end of the financial year.

	2009			2008
	Number of options	Weighted average	Number of options		Weighted average
		exercise price			exercise price
		cents			cents
Outstanding at the beginning of the year	300,000	10.0	4,100,000		17.6
Granted	18,750,000	10.8	100,000		8.0
Exercised	-	10.0	-		-
Lapsed	-	-	(3,900,000)		17.6
Expired	-	-	-		-
Outstanding at year-end	19,050,000	10.8	300,000		10.0
Exercisable at year-end	15,167,188	10.8	-		10.0
Options issued as share-based payments
outside of the employee share option plan
Outstanding at the beginning of the year	-	-	-		-
Granted	70,416,666	7.5	-		-
Exercised	-	-	-		-
Lapsed	-	-	-		-
Expired	-	-	-		-
Outstanding at year-end	70,416,666	7.5	-		-
Exercisable at year-end	70,416,666	7.5	-		-

27. KEY MANAGEMENT PERSONNEL DISCLOSURES

(a) Details of key management personnel

(i) directors

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

John Rowe Non Executive Chairman Bruce McFadzean Managing Director Murray Pollock Non Executive Director Barry Sullivan Non Executive Director Nigel Johnson Non Executive Director (appointed 20 August 2008) Chris Melloy Non Executive Director (resigned 12 December 2008)

(ii) other Key management Personnel

The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year:

Erik Palmbachs Stuart Pether Graham Anderson Leonard Math

Chief Financial Officer (appointed 20 October 2008) General Manager – Operations (appointed 12 January 2009) Company Secretary Company Secretary

ANNUAL REPORT 2009

CATALPA RESOURCES

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

27. KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)

(b) Key management personnel compensation

	Consolidated	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$
Short-term benefts	1,017,818	612,986	1,017,818	612,986
Post employment benefts	75,368	29,460	75,368	29,460
Termination benefts	-	160,000	-	160,000
Share-based payments	252,059	-	252,059	-
	1,345,245	802,446	1,345,245	802,446

(c) Equity interests in related parties

Equity interests in subsidiaries

Details of the percentage ownership of subsidiaries are disclosed in note 23 to the financial statements.

(d) Transactions with key management personnel

Key management personnel compensation

Details of key management personnel compensation are provided in the Remuneration Report of the Directors’ Report designated as audited.

Loans to key management personnel

There were no loans to key management personnel during the period.

73

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

28. RELATED PARTY TRANSACTIONS

(a) Key management personnel equity holdings

(i) fully paid ordinary shares of Catalpa Resources Limited

			Received on		Balance at end
	Balance at start	Granted as	exercise of	Net other	of period or date
	of period	compensation	options	change	of resignation
	No	No	No	No	No
2009
directors
John Rowe	-	-	-	1,000,000	1,000,000
Bruce McFadzean	345,000	-	-	672,500	1,017,500
Murray Pollock	15,725,802	-	-	2,545,360	18,271,162
Barry Sullivan	-	-	-	-	-
Nigel Johnson (i)	-	-	-	1,500,000	1,500,000
Chris Melloy (ii)	1,504,688	-	-	-	1,504,688
executives
Erik Palmbachs (iii)	-	-	-	83,333	83,333
Stuart Pether (iv)	-	-	-	1,666,666	1,666,666
Graham Anderson	-	-	-	-	-
Leonard Math	-	-	-	-	-
2008
directors
John Rowe	-	-	-	-	-
Bruce McFadzean(v)	-	-	-	345,000	345,000
Murray Pollock	14,790,054	-	-	935,748	15,725,802
Barry Sullivan (vi)	-	-	-	-	-
Chris Melloy	1,337,500	-	-	167,188	1,504,688
Mark Fitzpatrick (vii)	812,500	-	-	-	812,500
David Hatch (viii)	559,168	-	-	69,897	629,065
executives
Graham Anderson (ix)	-	-	-	-	-
Leonard Math (ix)	-	-	-	-	-
John Fitzgerald (x)	-	-	-	-	-
Rowan Johnston (xi)	-	-	-	-	-

(i) appointed 20 August 2008 (ii) resigned 12 December 2008 (iii) appointed 20 October 2008 (iv) appointed 12 January 2009 (v) appointed 9 June 2008

(vi) appointed 16 June 2008 (vii) resigned 27 February 2008 (viii) resigned 28 September 2007 (ix) appointed 2 August 2008 (x) resigned 31 July 2007 (xi) resigned 14 September 2007

ANNUAL REPORT 2009

CATALPA RESOURCES

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

28. RELATED PARTY TRANSACTIONS (CONTINUED)

(ii) options

The numbers of options over ordinary shares in the Company held during the financial year by each Director of Catalpa Resources Limited and other key management personnel of the Group, including their personally related parties, are set out below:

Balance at Granted as Net other of period compensation exercised change No No No No	Balance at end Vested Vested Options of period or date Balance but not and vested during of resignation vested exercisable exercisable period No No No No No 2,000,000 1,500,000 - 1,500,000 1,500,000 10,172,500 7,672,500 - 7,672,500 7,500,000 4,252,802 3,067,054 - 3,067,054 750,000 1,000,000 750,000 - 750,000 750,000 1,000,000 750,000 - 750,000 750,000 167,188 167,188 - 167,188 - 2,500,000 1,250,000 - 1,250,000 1,250,000 5,000,000 2,500,000 - 2,500,000 2,500,000 - - - - - - - - - - - - - - - - - - - - 935,748 935,748 - 935,748 935,748 - - - - - 167,188 167,188 - 167,188 167,188 - - - - - 2,669,897 n/a n/a n/a n/a - - - - - - - - - - 1,000,000 n/a n/a n/a n/a 250,000 n/a n/a n/a n/a AT END OF PERIOD
2009 directors John Rowe - 2,000,000 - - Bruce McFadzean - 10,000,000 - 172,500 Murray Pollock 935,748 1,000,000 - 2,317,054 Barry Sullivan - 1,000,000 - - Nigel Johnson (i) - 1,000,000 - - Chris Melloy (ii) 167,188 - - -
executives Erik Palmbachs (iii) - 2,500,000 - - Stuart Pether (iv) - 5,000,000 - - Graham Anderson - - - - Leonard Math - - - -
2008 directors John Rowe - - - - Bruce McFadzean (v) - - - - Murray Pollock - - - 935,748 Barry Sullivan (vi) - - - - Chris Melloy - - - 167,188 Mark Fitzpatrick (vii) - - - - David Hatch (viii) 2,600,000 - - 69,897
executives Graham Anderson (ix) - - - - Leonard Math (ix) - - - - John Fitzgerald (x) 1,000,000 - - - Rowan Johnston (xi) 250,000 - - -

(i) appointed 20 August 2008

(ii) resigned 12 December 2008

(iii) appointed 20 October 2008

(iv) appointed 12 January 2009

(v) appointed 9 June 2008

(vi) appointed 16 June 2008

(vii) resigned 27 February 2008

(viii) resigned 28 September 2007

(ix) appointed 2 August 2008

(x) resigned 31 July 2007

(xi) resigned 14 September 2007

All options issued to key management personnel were made in accordance with the provisions of the employee share option plan. Further details of the employee share option plan and of share options granted during the period are contained in notes 25 and 26.

75

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

28. RELATED PARTY TRANSACTIONS (CONTINUED) TRANSACTIONS WITH OTHER RELATED PARTIES

Lion manager

The Company paid $17,934 (2008: $40,000) in lieu of Directors fees, and expense reimbursements totalling $nil (2008: $12,952), to Lion Manager, the management company responsible for the operation of Lion Selection Group Ltd, for the services of Mr Chris Melloy as a Non Executive Director. Mr Melloy is an Executive Director of Lion Manager. Lion Selection Group Ltd is a substantial shareholder in Catalpa Resources Limited. An amount of $ nil (2008: $10,000) was owing to Lion Manager at year end, included in trade and other payables. Payments were made at commercial rates.

gda Corporate

GDA Corporate, a company of which Mr Graham Anderson is a Director and Leonard Math is an employee, provided Company Secretarial, accounting and other corporate services to Catalpa Resources Limited during the year. The amount paid for the year was $66,000 (2008:$56,500).

John Rowe and associates

John Rowe and Associates, a company of which Mr John Rowe is a Director, provided external consultant services to Catalpa Resources Limited during the year based on commercial rates and on an arm’s length basis. Total consultant fees paid to John Rowe and Associates is $30,250 (2008:$103,344). An amount of $11,000 (2008: $10,227) was owing to John Rowe and Associates at year end, included in trade and other payables. Holmesdale Holdings Pty Ltd

Holmesdale Holdings Pty Ltd, a company of which Mr Mark Fitzpatrick is a Director, provided external consultant services to Catalpa Resources Limited during the previous year based on commercial rates and on an arm’s length basis. Total consultant fees paid to Holmesdale Holdings Pty Ltd is $nil (2008:$85,250).

glen Lorne Pty Ltd

Glen Lorne Pty Ltd, a company of which Mr Nigel Johnson is a Director, provided external consultant services to Catalpa Resources Limited during the year based on commercial rates and on an arm’s length basis. Total consultant fees paid to Glen Lorne Pty Ltd is $11,375 (2008:$nil).

Parent entity

The ultimate parent entity within the Group is Catalpa Resources Limited.

	Consolidated	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$
29. REMUNERATION OF AUDITORS
During the year the following fees were paid or
payable for services provided by the auditor of the
Company, its related practices and non-related
audit frms:
Audit services
Audit or review of fnancial reports	61,632	31,000	61,632	31,000
Tax advice and due diligence in relation to t
he proposed merger with Lion Selection	142,865	-	142,865	-
	204,497	31,000	204,497	31,000

ANNUAL REPORT 2009

CATALPA RESOURCES

NOTES TO THE FINANCIAL STATEMENTS 30 jUNE 2009 CONTINUED

30. EvEnts OccurrinG aFtEr thE baLancE shEEt datE

The following significant events have occurred subsequent to year end:

• construction of the Edna May Gold Project continued and as at the date of this report:

• the contract to construct the gold processing plant had been signed and preliminary works commenced;

• construction of the mining village had been completed; and

• earthworks for the gold processing plant had been completed.

• catalpa resources Limited (catalpa) and Lion selection Limited (Lion) announced on 24 June 2009 the proposed merger of catalpa and Lion’s gold assets. While the processing of the documentation associated with the merger is taking longer than anticipated, both Catalpa and Lion Selection remain committed to the successful conclusion of the merger process in Q4 2009. There is no change in any of the terms of the proposed merger, the demerger of Lion Selection Group, the 10¢ per share cash distribution by Lion or the termination of Lion Manager. The merger has the unanimous support of the directors of both Catalpa and Lion.

• in July 2009 catalpa was successful in obtaining credit approved project finance facility for the Edna May Gold Project with Macquarie Bank. Along with funds raised via equity raisings prior to 30 June 2009 the Edna May Gold Project is fully funded. The facility consists of: 1. A$55M secured project loan facility;

• up to A$10M mezzanine facility;

• A$3.5M performance bond facility; and

• gold hedging facility.

The merger of Lion Selection with Catalpa will result in a change in control of Catalpa which triggers a review event under the Macquarie Bank facility. Macquarie Bank has agreed to waive the review event subject to, and conditional upon, certain amendments being made to the syndicated facility agreement. The amendments are minor in nature and do not materially change the terms of the facility. As at the date of this financial report, the amendments have been agreed to.

No other matter or circumstance has arisen since 30 June 2009, which has significantly affected, or may significantly affect the operations of the Group, the result of those operations, or the state of affairs of the Group in subsequent financial years.

77

DIRECTORS’ DECLARATION

In the Directors’ opinion:

• (a) the financial statements and notes set out on pages 41 to 77 are in accordance with the Corporations Act 2001, including:

• (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

• (ii) giving a true and fair view of the Company’s and the consolidated entity’s financial position as at 30 June 2009 and of their performance for the financial year ended on that date; and

• (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and

• (c) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2

• (d) the audited remuneration disclosures set out on pages 5 to 10 of the Directors’ report comply with Accounting Standards AASB 124 Related Party Disclosures and the Corporations Regulations 2001.

The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001.

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

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Bruce McFadzean

Managing Director Perth, 23 September 2009

ANNUAL REPORT 2009

CATALPA RESOURCES

INDEPENDENT AUDITOR’S REPORT

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79

DIRECTORS’ DECLARATION

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28 to 34

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ANNUAL REPORT 2009

CATALPA RESOURCES

ASX ADDITIONAL INFORMATION

Additional information required by Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows. The information is current as at 30 September 2009.

(a) Distribution of equity securities

Analysis of numbers of equity security holders by size of holding:

		Ordinary shares	Listed Options (CAHO)	Listed Options (CAHOB)
		Number of holders	Number of holders	Number of holders
1	1,000	130	40	4
1,001	5,000	213	130	46
5,001	10,000	451	78	57
10,001	100,000	1,844	161	285
100,001	and over	773	40	101
		3,411	449	493

The number of shareholders holding less than a marketable parcel of shares is 195 with 183,649 shares.

(b) Twenty largest shareholders

The names of the twenty largest holders of quoted ordinary shares are:

		Listed ordinary shares
		Number of shares	Percentage of ordinary shares
1	Lion Selection Group Ltd	549,149,732	46.86%
2	HSBC Custody Nominees Australia Ltd	82,826,137	7.07%
3	ANz Nom Ltd	40,167,260	3.43%
4	National Nominees Ltd	39,700,113	3.39%
5	Reneagle Pty Ltd	19,027,682	1.62%
6	Goldrich Holdings Pty Ltd	16,000,000	1.37%
7	Nefco Nominees Pty Ltd	13,400,000	1.14%
8	Bennett Robert W & D G	10,755,677	0.92%
9	Springtide Cap Pty Ltd	10,000,000	0.85%
10	Prospect Cust Ltd	9,085,624	0.78%
11	Yandal Investments Pty Ltd	8,859,375	0.76%
12	Merrill Lynch Australia Nominees Pty Ltd	6,015,000	0.51%
13	Drummond Shay Margaret	5,533,572	0.47%
14	Geddes Angus William S	4,651,786	0.40%
15	Charlemagne Investments Pty Ltd	4,395,345	0.38%
16	Turner Philip S & J W	4,116,668	0.35%
17	Paul C & Melloy A C	3,632,970	0.31%
18	Centreline Drilling Pty Ltd	3,509,348	0.30%
19	Parkrange Nominees Pty Ltd	3,000,000	0.26%
20	Greenslade Holdings Pty Ltd	2,609,034	0.22%
		836,435,323	71.39%

Voting rights

All ordinary shares (whether fully paid or not) carry one vote per share without restriction.

81

ASX ADDITIONAL INFORMATION CONTINUED

(c) Substantial shareholders

The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are:

Number of Shares Lion Selection Group Ltd 549,149,732

Lion Selection Group Ltd

(d) Twenty largest option holders (CAHO) exercisable at $0.10 expiring 30 june 2010 The names of the twenty largest holders of quoted options are:

		Listed Options
		Number of options	Percentage of ordinary shares
1	Lion Selection Group Ltd	16,899,589	44.12%
2	Rubiton Pty Ltd	1,810,885	4.73%
3	HSBC Custody Nominees Australia Ltd	1,031,250	2.69%
4	Fortis Clearing Nominees Pty Ltd	1,018,432	2.66%
5	Evans Simon Robert	994,288	2.60%
6	Yandal Investments Pty Ltd	984,375	2.57%
7	Goldrich Holdings Pty Ltd	879,648	2.30%
8	Robert Macfadyen Pty Ltd	696,875	1.82%
9	Matchett Shane A & M A	639,863	1.67%
10	David E Perks & Assocs Pty Ltd	500,000	1.31%
11	Recht Alex & Helen	500,000	1.31%
12	Strange Kevin & Bonsu I	375,000	0.98%
13	Dalla Bosca John & J	367,341	0.96%
14	Bosch Katrina Alison	350,000	0.91%
15	Thorne Thomas S & C M	330,114	0.86%
16	Laguna Bay Cap Pty Ltd	304,757	0.80%
17	Rohde Beverley Megan	300,000	0.78%
18	Option Opportunity Fund Pty Ltd	280,000	0.73%
19	Cohen Seymour Bentley	268,250	0.70%
20	Parker Roger A A & M D	260,500	0.68%
		28,791,167	75.18%

ANNUAL REPORT 2009

CATALPA RESOURCES

ASX ADDITIONAL INFORMATION CONTINUED

(e) Twenty largest option holders (CAHOB) exercisable at $0.10 expiring 31 October 2011 The names of the twenty largest holders of quoted options are:

		Listed Options
		Number of options	Percentage of ordinary shares
1	Lion Selection Group Ltd	112,407,597	65.08%
2	Calliton Pty Ltd	4,905,250	2.84%
3	Parkrange Nominees Pty Ltd	3,500,000	2.03%
4	Goffacan Pty Ltd	3,000,000	1.74%
5	Rubiton Pty Ltd	2,296,687	1.33%
6	Drummond Shay Margaret	2,011,396	1.16%
7	Goldrich Holdings PL	2,000,000	1.16%
8	Geddes Angus William S	1,717,262	0.99%
9	Super 1136 Pty Ltd	1,500,000	0.87%
10	Goffacan Pty Ltd	1,500,000	0.87%
11	Reneagle Pty Ltd	1,425,894	0.83%
12	Custodial Services Ltd	1,100,000	0.64%
13	Burford Matthew	1,050,000	0.61%
14	Charlemagne Investments Pty Ltd	1,000,000	0.58%
15	Waldron Mark Andrew	698,164	0.40%
16	Sheard Kenneth	680,485	0.39%
17	Burg Brian	669,753	0.39%
18	Kwort Joseph & Fokas K A	600,000	0.35%
19	Little Gray William	525,000	0.30%
20	Resnik Mark	483,000	0.28%
		143,070,488	82.84%

83

ASX ADDITIONAL INFORMATION CONTINUED

(f) Schedule of interests in mining tenements

Location	Tenement	Percentage held / earning
WESTERN AUSTRALIA
BODALIN
Bodalin SW	E77/1165	Granted 100%
BODALIN SOUTH
Kent Road	E77/1452	Granted 100%
jILBADGIE
Jilbadgie East	E77/1132	65%
MINE
Paddock	M77/110	Granted 100%
Golden Point East	M77/124	Granted 100%
Mine	M77/88	Granted 100%
SANDFORD ROCKS
Sandford Rocks	M77/1494	Application 100%
WESTONIA
Begley	E77/1069	Granted 100%
Westonia N.E.	E77/1324	Granted 100%
Westonia Belt	E77/516	Granted 100%
Westonia West	E77/990	Granted 100%
Westonia	L77/18	Granted 100%
Westonia NW	P77/3712	Plainted 100%
West Westonia	P77/3713	Granted 100%
Westonia NE	P77/3714	Plainted 100%
Bodalin	P77/3875	Granted 100%
Corsini Road	P77/3876	Granted 100%
Hitching Road	P77/3877	Granted 100%
Stoneman Road	P77/3878	Granted 100%
Kaolin Street	P77/3879	Granted 100%

ANNUAL REPORT 2009

CATALPA RESOURCES

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85