EVOLUTION MINING LIMITED — Annual Report 2011

Sep 26, 2011

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Dear shareholder,

It has been a transformational year for Catalpa Resources Limited (Catalpa). FY2011 saw not only the significant improvement in our Edna May Gold Operations to end the year performing in line with our production targets, but was highlighted by Catalpa agreeing to a merger transaction that will position us to become one of Australia’s leading mid-tier, growth-focused and asset diversified gold companies.

I am pleased to present on behalf of Board of Directors Catalpa’s FY2011 Annual Report and Financial Statements. In light of the pending transaction, your Board of Directors has elected to produce this short-form annual report to comply with the relevant legal requirements for Catalpa, as we prepare to transition into the new merged company during FY2012.

Transformational Transaction

On 15 June 2011, Catalpa announced an all-scrip merger of equals with Conquest Mining Limited (“Conquest”) and the concurrent acquisition from Newcrest Mining Limited (“Newcrest”) of the remaining 70 per cent interest in the Cracow gold mine and 100 per cent interest in the Mt. Rawdon gold mine, to form the new company which, with Catalpa shareholder approval, will be called “Evolution Mining Limited”.

Evolution Mining Limited will have a portfolio of four producing mines (Pajingo, Cracow and Mt Rawdon in Queensland and Edna May in Western Australia) and the Mt Carlton development project in Queensland, providing a defined growth path. The combined operations are expected to produce 410,000 to 465,000 ounces of gold equivalent by FY2013, ranking the new company as a top 5 Australian gold producer by FY2011 gold production.

Evolution Mining Limited will have a proven entrepreneurial and experienced management team, with highly complementary skill sets and a strong mandate to grow the company. The new company will have a board of eight directors with Jake Klein as Executive Chairman and Bruce McFadzean as Managing Director and Chief Executive Officer.

As a Catalpa shareholder, you should have received the Explanatory Memorandum, dated 13 September 2011, as well as the Notice of Meeting for the Extraordinary General Meeting, to be held on 14 October 2011, providing further detail on the transaction.

The Catalpa Board of Directors unanimously supports the transaction and we look forward to updating you on the progress of the transaction, which is expected to complete in early November 2011.

Improved Operations

The Edna May Gold Operations has had an extended and challenging ramp up during the year as production was impacted by a series of events. The team at Edna May has worked hard to deal with these issues, and I would like to take the opportunity to commend their efforts which have culminated in steady state production being successfully achieved in the final quarter of FY2011.

Through expensing all costs associated with the ramp up, and the step change in production in the latter half of FY2011, we believe Catalpa begins FY2012 in a strong operational position and we look forward to delivering a significant increase in production and reduction in costs during the year.

Cracow continued to perform well throughout FY2011, with our 30 per cent interest in the project providing Catalpa with consistent cash flow. The Cracow Gold Operations have a history of producing more than 100,000 ounces of gold in each of the past five years and we believe Cracow has further exploration upside. We are therefore delighted to have reached agreement with Newcrest to acquire its 70 per cent interest in the project as part of our transaction with Conquest and Newcrest.

During the year, excellent progress was made in demonstrating the potential for a concurrent underground mining operation at Edna May, with the revised underground mineral resource released in

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the fourth quarter upgrading 60% of Inferred Resources to Indicated as targeted. We continue to target delivery of high grade feed from the underground to the Edna May processing plant in calendar year 2012.

Throughout our pursuit of growth and operational excellence, Catalpa continues to prioritise safety and corporate and social responsibility in its day-to-day operations, as well as strive to meet or exceed environmental commitments and maintain strong local community ties at all our sites.

In conclusion, FY2011 was a year of achievement for Catalpa at both the corporate and the operational level. As the proposed outgoing Chairman of Catalpa, I would like on behalf of Catalpa’s Board of Directors and shareholders to thank our management team and all of our employees, contractors and service providers for their contributions during this period, and for their ongoing commitment to Catalpa’s future.

Thank you also to our shareholders for your ongoing support. We are excited for the future of Catalpa and Evolution Mining Limited, and look forward to delivering on the new Company’s vision and maximising shareholder value in FY2012 and the coming years.

Yours faithfully

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Peter Maloney Chairman – Catalpa Resources Limited 27 September 2011

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CATALPA RESOURCES LIMITED

ABN 74 084 669 036

Annual Report

for the year ended 30 June 2011

Catalpa Resources Limited - Annual Report

Corporate Information

ABN 74 084 669 036

Directors

Peter Maloney (Non-Executive Chairman) Bruce McFadzean (Managing Director) John Rowe (Non-Executive Director) Murray Pollock (Non-Executive Director) Barry Sullivan (Non-Executive Director) Graham Freestone (Non-Executive Director)

Company Secretary

Erik Palmbachs and Paul Mason (Joint Company Secretaries)

Registered Office

Level 3, 1 Altona Street WEST PERTH WA 6005 Tel: (618) 6216 9700 Fax: (618) 9321 8804 Email: manager@catalparesources.com.au

Share Register

Link Market Services Limited Ground Floor 178 St Georges Terrace PERTH WA 6000 Tel: 1300 554 474 (toll free) Tel: (612) 8280 7111 Fax: (612) 9287 0303 Email: registrars@linkmarketservices.com.au

Auditors

Deloitte Touche Tohmatsu Level 14, Woodside Plaza 240 St George’s Terrace PERTH WA 6000 Tel: (618) 9365 7000

Internet Address

www.catalparesouces.com.au

Stock Exchange Listing

Catalpa Resources Limited shares (CAH) and options (CAHOB) are listed on the Australian Securities Exchange.

Catalpa Resources Limited – Annual Report

Contents

Directors' Report	1
Auditor’s Independence Declaration	23
Statement of Comprehensive Income	24
Statement of Financial Position	25
Statement of Changes in Equity	26
Statement of Cash Flows	27
Notes to the Financial Statements	28
Directors' Declaration	83
Independent Auditor’s Report	84
Corporate Governance Statement	86
ASX Additional Information	92

Catalpa Resources Limited – Annual Report

Directors’ Report

The Directors of Catalpa Resources Limited (“Catalpa” or “Company”) submit herewith the annual report of the Company for the financial year ended 30 June 2011. 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
Peter Maloney	Mr Maloney has broad commercial, financial and management expertise and
B Com MBA	experience. In a long career with WMC Resources, he held the positions of
(Non-Executive Chairman)	Treasurer, Executive Vice President Americas and Manager Commercial and Marketing – WA. He has also been Executive General Manager Finance at Santos, Chief Financial Officer at F H Faulding, Chief Financial Officer of Lion Selection and
	an owner and Executive Director of Lion Manager. Mr Maloney has also been a Non-
	Executive director of several companies and organisations, including Indophil
	Resources, Barra Resources and Chairman of Southern Health, the largest healthcare
	provider in Victoria.
	Mr Maloney holds a Bachelor of Commerce from the University of Melbourne and an
	MBA from University of Rochester. He has also completed the Advanced
	Management Program at Harvard Business School. Mr Maloney is a non executive
	director of Lion Selection Limited. Mr Maloney 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,
Dip Mining FAusIMM	processing and project "start up" experience to the organisation, half of which was
(Managing Director & CEO)	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
	McFadzean has not held any other listed company directorships within the last 3
	years.
John Rowe	Mr Rowe brings a wealth of geological and business development skills to the
BSc (Hons) ARSM,	Company. Mr Rowe has 40 years experience within the nickel and gold industries. He
MAusIMM	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 Director of Panoramic Resources Limited (since 2006) and
	Southern Cross Goldfields Limited (since April 2010). Mr Rowe has not held any other
	listed company directorships within the last 3 years.

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Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

Murray Pollock MAICD

(Non-Executive Director)

Mr Pollock is a businessman with over 40 years experience in the mineral services industry, principally in drilling. He is a consultant to several companies on drilling and mine management services.

Mr Pollock has not held any other listed company directorships within the last 3 years.

Barry Sullivan

BSc (Min), ARSM, F AusIMM, MAICD (Non-Executive Director)

Mr Sullivan is an experienced and successful mining engineer with a career spanning 40 years in the mining industry. His initial mining experience was gained in the South African gold mining industry, followed by more than 20 years with Mount Isa Mines Limited (“MIM”). 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.

Presently Mr Sullivan is a Non-Executive Director and Chairman of Exco Resources Limited. Mr Sullivan was previously a Non-Executive Director of Allegiance Mining Limited, Lion Mining Limited and Lion Selection Limited. Mr Sullivan has not held any other listed company directorships within the last 3 years.

Graham Freestone

B Ec (Hons)

(Non-Executive Director)

Mr Freestone has over 40 years experience in the natural resources industry. He has a broad finance, corporate and commercial background obtained in Australia and internationally through senior finance positions with the Shell Group, Acacia Resources Limited and AngloGold. He was Acacia Resources Limited’s Chief Financial Officer and Company Secretary from 1994 until 2001. From 2001 to 2009 he was a Non-Executive Director of Lion Selection Limited and its Audit Committee Chair. He became a Director and Chair of the Audit and Risk Committee of Catalpa Resources Limited in 2009.

Mr Freestone has not held any other listed company directorships within the last 3 years.

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Catalpa Resources Limited – Annual Report

Directors’ 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.

the date of this report.
	Fully Paid	Share	Performance
	Ordinary Shares	Options	Rights
Peter Maloney	1,379,579	-	-
Bruce McFadzean	171,619	1,284,774	160,000
John Rowe	95,695	181,820	-
Murray Pollock	1,839,492	301,554	-
Barry Sullivan	111,005	45,458	-
Graham Freestone	58,245	-	-

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 9 to 20.

Share options granted to Directors and senior management

No share options were granted to Directors or senior management during or since the end of the financial year, though the Board agreed after the year end to issue options to the Managing Director and senior management subject to shareholder approval (refer to “Subsequent Events” below).

Company secretaries

Name

Particulars

Erik Palmbachs

Erik Palmbachs Mr Palmbachs is the Company’s Chief Financial Officer. He holds an MSc in Mineral Economics and a Bachelor of Business (Accounting). Mr Palmbachs is a member of BBus (CPA), MSc (Min the Australian Society of Accountants (AASA, CPA) and a Fellow with the Institute of Econ), FCIS Chartered Secretaries and Administrators (FCIS). He has over 30 years experience Appointed 30 Decemberprimarily in the mining industry and has previously had roles senior roles within 2010 Territory Resources Limited and St Barbara Mines Limited.

Paul Mason

BE ACA ACIS

Appointed 30 December 2010

Mr Mason is the Company’s Financial Controller. He is a Chartered Accountant and holds a degree in Civil Engineering. He is a member of the Institute of Chartered Accountants in Australia and the Institute of Chartered Secretaries and Administrators (ACIS). He has over 16 years experience in the mining and construction industries in Australia and overseas and has previously held the position of Company Secretary for Mundo Minerals and Sino Gas & Energy.

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Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

PRINCIPAL ACTIVITIES

The Group’s principal activities during the course of the financial year were:

• the commissioning of the Edna May gold processing plant; production of 65,592 ounces of gold for the year ended 30 June 2011;

• resource definition and exploration drilling at Edna May Gold Operations;

• exploration within the wider Westonia Greenstone Belt;

• 30% joint venture partner in the Cracow Gold Operations in Queensland which produced 101,724 ounces (100%) of gold for the year ended 30 June 2011;

• resource definition drilling at Cracow Gold Operations; and

• exploration south of Western Field and at Cracow South.

The following significant changes to Catalpa’s activities occurred during the year:

• the completion of commissioning of the gold processing plant at the Edna May Gold Operations 1 October 2010.

REVIEW OF OPERATIONS

Corporate

On 3 February 2011, Catalpa announced it had successfully raised $23.4 million, before costs, through an institutional share placement at $1.55 per share. The cash was raised to fund projects at Edna May including improvements to plant and utility reliability, secondary crusher trials and to fund ongoing exploration and underground development at the Company’s Edna May Gold Operations.

On 13 May 2011 St Barbara Limited (St Barbara) announced an unsolicited takeover proposal for Catalpa via a scheme of arrangement comprising 50% script and 50% cash at a fixed ratio of 0.4535 St Barbara ordinary shares for each ordinary share in Catalpa plus $0.9613 cash per catalpa share (the St Barbara Proposal).

On 15th June 2011, Catalpa announced to the market that it had entered into a binding agreement to implement a merger of equals between Catalpa and Conquest Mining Limited (Conquest) along with the concurrent acquisition of Newcrest Mining Limited’s (Newcrest) interests in the gold mining and exploration projects at Cracow and Mt Rawdon (the Transaction). The Transaction is expected to create one of Australia’s leading midcap, growth focused and asset diversified gold producers. The Transaction is subject to a number of conditions, including approval of the Scheme by Conquest Shareholders and the Court and approval of the Share Issue to Newcrest by Catalpa Shareholders.

On 15 June 2011, concurrent with the announcement of the Conquest/Newcrest Transaction, Catalpa advised that it had formally terminated discussions with St Barbara in relation to its Proposal. In the process of considering whether to support the Conquest/Newcrest Transaction, the Board of Catalpa gave careful consideration to the St Barbara Proposal and the short and longer term potential it offered. For a number of reasons, including those outlined in the announcement of the Conquest/Newcrest Transaction, the Catalpa Board unanimously resolved that the best interests of Catalpa shareholders would be served by proceeding with the Conquest/Newcrest Transaction.

During the year, Catalpa announced the appointment of Mr. Erik Palmbachs and Mr. Paul Mason as joint Company Secretaries in place of Mr Anderson and Mr Math effective 30th December 2010.

Edna May Gold Operations

Catalpa has implemented a number of safety initiatives to continue to improve on safety awareness.

The processing plant achieved and sustained 2.8Mtpa as at April 2011 following an extended ramp-up to full production and produced 65,592 ounces of gold to realise gold sales revenue of $121.9 million or the year ended 30 June 2011.

Delayed ramp-up was due to periods of pit wall instability and plant/utility unreliability which were addressed during the period. Operating costs were subsequently above budget, with cash costs for the year of $1,121 per ounce.

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Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

Improvements included the construction of a new $3.9 million tailings thickener and the provision of additional bore field capacity.

Plant upgrade trials were undertaken in line with the Bankable Feasibility Study evaluating an upgrade of the plant to 3.1Mtpa in calendar year 2012. Tungsten studies were progressed evaluating the production of a scheelite concentrate and improved gold recoveries.

With a record quarter of gold production in June 2011, the Edna May Gold Operations demonstrated achievement of steady state operations following improvements to plant/utility reliability.

On 23 November 2010, the company reported a maiden underground Inferred Mineral Resource of 195,000 ounces. Further resource definition and exploration diamond drilling from surface was undertaken and incorporated in a revised Resource estimate of 166,000 ounces of gold reported on 17 May 2011 following an improved structural interpretation. Importantly, approximately 60% of this Resource was upgraded from Inferred to Indicated category.

Edna May drilling programmes continued to underpin the business case for underground development with further extensional and infill diamond drilling being completed during the period in preparation for a further upgrade of the underground Mineral Resource anticipated by mid-2012. New reefs have been identified and gold mineralisation has been intercepted up to 100 metres below the current Mineral Resource.

Drilling primarily targeted high priority areas for possible Resource expansion and upgrade for inclusion in underground mining studies with a view to establishing an underground mining operation.

Cracow Gold Operations

The Cracow Gold Operations continued its exemplary safety performance extending the number of Lost Time Injury (LTI) free days to 766 at the end of June 2011. Excellent standards in site hazard reporting continued to be used to improve procedures to make Cracow a safer place to work.

The Cracow Gold Operations continued to perform well and to provide consistent cash flow. Gold production for the year was 101,724 ounces of gold of which 30,517 ounces were attributable to Catalpa (30%) to realise gold sales revenue of $43.97 million.

Operating costs were above budget, with cash costs for the year of $602 per ounce impacted by higher mining costs and the processing of lower grade stockpiled ore. Catalpa’s share of the Cracow Gold Operations for the period delivered an operating cash flow surplus of $20.817 million.

Exploration activities focused on increasing the gold resource and ore reserve around the Cracow gold mine and the discovery of potential new deposits in the Cracow Goldfield.

During the period, Resource Definition drilling enabled the replacement of depleted mining Reserves. Exploration drilling extended the western epithermal field by several hundred metres to the south and a significant intercept was returned at the Bradshaw’s target at Golden Plateau.

Step-out drilling demonstrated continuity of the hydrothermal system to the south of the previously known Western Field epithermal vein corridors and drilling at Cracow South identified quartz vein structures continuing south of the traditional Cracow Goldfield.

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Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

Catalpa Mineral Resources and Ore Reserves

As at 30 June 2011, the total Mineral Resources after mining depletion are estimated at 2.032 million ounces of gold compared to 1.98 million ounces of gold in the 30 June 2010 estimate.

As at 30 June 2011, the total Ore Reserves after mining depletion are estimated at 1.0 million ounces of gold which compares to the 30 June 2010 estimate also of 1.0 million ounces as the increase in ore reserves have been offset by mining depletion.

Further information regarding Mineral Resources or Ore Reserves and the Competent Persons statement can be found under the Company website at www.catalparesources.com.au.

Operating Results

The consolidated profit of the Group before tax for the year ended 30 June 2011 is $3.955 million (2010: loss of $4.520 million). The profit before tax for the period included:

• Gold sales revenue of $121.87 million; and

• Gross profit of $20.11 million .

The Edna May gold processing plant was commissioned in September 2010, hence the current year’s results only incorporate gold production from the Edna May Gold Operations for the nine months beginning 1 October 2010. Prior to this date all revenue and expenses in respect of the Edna May Gold Operations were capitalised.

The Group acquired a 30% share in the Cracow Gold Operations as a result of the merger with Lion Selection Limited in December 2009. This is the first year the operating results of the Group include a full year’s contribution from the Cracow Gold Operations, with the prior year only including production from 10 December 2009 to 30 June 2010.

The consolidated loss of the Group after tax for the year ended 30 June 2011 is $2.303 million (2010: profit of $5.547 million). The loss after tax for the year included a tax expense of $6.258 million (2010: tax benefit of $10.067 million).

Financial Position

The Group held cash of $30.051 million at 30 June 2011 (2010: $35.113 million). The net assets of the Group increased from $138.728 million at 30 June 2010 to $159.994 million at 30 June 2011. The increase in net assets arose principally as a result of a capital raising during the year of $22.852 million net of expenses, the majority of which was applied to the development of the Edna May Gold Operations. As at the date of this report $47.522 million is outstanding against the debt facility with Macquarie Bank Limited (2010: $65 million).

CHANGES IN THE STATE OF AFFAIRS

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.

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Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

SUBSEQUENT EVENTS

Merger

The Company has negotiated a merger with Conquest Mining Limited (“Conquest”) along with the concurrent acquisition of Newcrest Mining Limited’s interests in the gold mining and exploration projects at Cracow and Mt Rawdon. The merger is subject to approval by Conquest shareholders and the issue of shares for the asset acquisitions is subject to approval by Catalpa shareholders at meetings scheduled to take place on 14 October 2011. If the Conquest shareholders approve the merger transaction Conquest will seek the approval of the transaction from the Federal Court. Subject to the approval of the merger, the acquisition of the Newcrest assets is expected to take place on 2 November 2011.

In the event of the implementation of the merger with Conquest the Directors have exercised their discretion such that all options and performance rights that have been issued to management that have not already vested under the Company’s ECOP and LTIP will vest. The non-conflicted directors have exercised their discretion such that upon implementation of the merger with Conquest, all options and performance rights issued under the Company’s ECOP and LTIP to the Managing Director and to some of the non-executive directors, that have not already vested will vest. This will result in the remaining value of the options and performance rights not yet amortised as at 30 June 2011 being expensed in the year ended 30 June 2012 rather than being expensed over the original vesting period.

Availability of Tax Losses

The availability of tax losses to offset future taxable income are dependent upon meeting the Continuity of Ownership Test (“CoT”) or the Same Business Test (“SBT”). In the event of the merger with Conquest proceeding the Company will need to assess whether the CoT or the SBT can be met in relation to losses arising in the periods ending before and up to 30 June 2009. There is therefore risk that tax losses of $19.533 million currently recognised as a deferred tax asset of $5.860 million may no longer be available to the Company and hence may need to be derecognised in the year ending 30 June 2012.

No other matter or circumstance has arisen since 30 June 2011, 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.

FUTURE DEVELOPMENTS

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 Company are not aware of any breach of environmental legislation for the year under review.

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Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

SHARES UNDER OPTION

Details of unissued shares or interests under option issued by Catalpa Resources Limited as at the date of this report are:

Number of shares	Class of shares	Exercise price of	Expiry date of
under option		option	options
4,974,315	Ordinary	$1.10	31 Oct 2011
56,819	Ordinary	$0.647	23 Dec 2013
375,004	Ordinary	$0.867	23 Dec 2013
375,004	Ordinary	$1.087	23 Dec 2013
397,731	Ordinary	$1.307	23 Dec 2013
340,912	Ordinary	$1.527	23 Dec 2013
113,637	Ordinary	$0.647	11 Mar 2014
113,637	Ordinary	$0.867	11 Mar 2014
113,637	Ordinary	$1.087	11 Mar 2014
113,637	Ordinary	$1.307	11 Mar 2014
6,060,606	Ordinary	$0.83	31 Mar 2014
679,000	Ordinary	$1.69	30 Jun 2015

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.

Details of shares issued during or since the end of the financial year as a result of exercise of options issued by Catalpa Resources Limited are:

Number of shares Amount paid for Amount unpaid issued Class of shares shares on shares 428,290 Ordinary $1.10 $nil

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.

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Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

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, three audit committee and four remuneration committee meetings were held.

Directors Peter Maloney1 Bruce McFadzean John Rowe Murray Pollock1 Barry Sullivan Graham Freestone	Board of Directors Audit Committee Remuneration Committee
	Held Attended Held Attended Held~~2~~ Attended 22 21 - - 2 2 22 22 - - - - 22 20 3 3 4 4 22 20 3 3 2 2 22 22 3 3 4 4 22 21 3 3 4 4

1 appointed to Remuneration Committee November 2010

2 meetings held while a member of the Remuneration Committee

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 31 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 31 to the financial statements do not compromise the external auditor’s independence, based on the Auditor’s representations and appraisal and 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 23 of the financial report.

ROUNDING OFF OF AMOUNTS

The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the directors’ report and the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated.

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Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

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 2011. 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

• Bonuses and share-based payments granted as compensation in the period up to the date of this report

• 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:

Peter Maloney Non-Executive Chairman Bruce McFadzean Managing Director & CEO John Rowe Non-Executive Director Murray Pollock Non-Executive Director Barry Sullivan Non-Executive Director Graham Freestone Non-Executive Director

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 and Joint Company Secretary Stuart Pether Chief Operating Officer Adrian Pelliccia Manager Business Development John Fraser General Manager – Edna May Gold Operations Paul Mason Joint Company Secretary (appointed 30 December 2010) Graham Anderson Joint Company Secretary (resigned 30 December 2010) Leonard Math Joint Company Secretary (resigned 30 December 2010)

Remuneration policy

The remuneration policy of Catalpa has been designed to align Director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific “at risk” short and long-term incentives based on key performance areas affecting the Group’s financial results. The Board of Catalpa 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 Remuneration Committee and approved 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, options and performance rights. 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 option, performance rights and bonus arrangements. The Company does not have a policy for limiting the exposure to risk for the Directors and senior management in relation to the securities issued as part of remuneration.

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Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

Remuneration policy (continued)

Directors and senior management receive a superannuation guarantee contribution required by Law, 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 $750,000 per annum). 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 have been 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 senior management. Currently, this is facilitated through:

• a Short Term Incentive Plan (“STIP”) to award bonuses based on achieving certain performance targets in respect of safety, production, cost and personnel behaviour;

• the issue of options and performance rights to executive Directors and employees under the Long Term Incentive Plan (“LTIP”) approved by shareholders on 23 November 2010; and

• discretionary bonuses based on performance.

Non-Executive Directors do not participate in the STIP or LTIP.

The purpose of these incentives is to encourage the alignment of employee and shareholder interests.

The Company believes this policy is effective in increasing shareholder wealth.

Details of bonuses paid are shown in the Remuneration Table on page 12, further information has been disclosed on page 14.

Both options and performance rights have been issued under the LTIP during the year. These options have an exercise period of five years and vest over a two or three year period. Vesting is subject to persons remaining in employment with the Group and the Company share price performance measured against the share price performance of a comparator group of peer companies over the vesting period. Performance rights vest over a two or three year period subject to gold production and actual share price performance.

Further information relating to the LTIP is disclosed on page 14.

For details of Directors and senior management interests in options at year end, refer note 30.

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	30 June	30 June	30 June	30 June
	2011	2010	2009	2008	2007
	$’000s	$’000s	$’000s	$’000s	$’000s
Revenue	123,496	23,029	264	595	387
Net profit/(loss) before tax	3,955	(4,520)	(6,840)	(2,292)	(9,839)
Net profit/(loss) after tax	(2,303)	5,547	(6,814)	(2,292)	(9,730)
Share price at start of year	$1.62	$1.10	$0.55	$0.77	$1.90
Share price at end of year	$1.36	$1.62	$1.10	$0.55	$0.77
Dividends	-	-	-	-	-
Basic earnings per share (cents
per share)	(1.37)	3.93	(13.97)	(7.37)	(38.5)

11

Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

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:

Year ended 30 June 2011

Name Directors Peter Maloney Bruce McFadzean John Rowe Murray Pollock Barry Sullivan Graham Freestone Executives Erik Palmbachs Stuart Pether Adrian Pelliccia John Fraser Paul Mason(i) Graham Anderson and Leonard Math(ii), (iii) TOTAL

Short-term employee benefits Post- employment benefits Cash salary and fees(v) Bonus(vi) Non- monetary(iv) Super- annuation Equity settled share-based payments Total $ $ $ $ $ $ 89,900 - - 45,600 - 135,500 447,453 408,293 43,739 40,446 162,215 1,102,146 89,000 - - 6,750 425 96,175 70,000 - - 6,300 213 76,513 75,000 - - 6,300 213 81,513 75,000 - - 6,750 - 81,750 258,026 57,967 11,834 24,049 70,347 422,223 300,963 84,728 11,887 23,336 79,685 500,599 185,917 33,640 - 15,956 36,293 271,806 268,202 46,485 7,859 24,199 50,876 397,621 172,508 10,631 - 15,888 14,357 213,384 42,000 - - - - 42,000

2,073,969 641,744 75,319 215,574 414,624 3,421,230

(i) Appointed 30 December 2010. Remuneration includes 12 month period for his role as financial controller. (ii) Resigned 30 December 2010.

(iii) These payments are to GDA Corporate, a company in which Graham Anderson is a Director and Leonard Math is an employee. The fees include company secretarial, accounting and other corporate services provided to the Company.

(iv) Non-monetary benefits relate to fully maintained vehicles provided by the Company.

(v) Included in these amounts are consulting services fees paid to Barry Sullivan of $5,000 and John Rowe of $14,000. Further information relating to fees paid to Directors and Executives is disclosed in Note 30.

(vi) Includes related superannuation

12

Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

Remuneration of Directors and senior management (continued)

Year ended 30 June 2010

Name Directors Peter Maloney(i) Bruce McFadzean John Rowe Murray Pollock Barry Sullivan Graham Freestone(i) Nigel Johnson(ii) Executives Erik Palmbachs Stuart Pether Adrian Pelliccia John Fraser(iii) Graham Anderson and Leonard Math(iv) TOTAL

Short-termemployee benefits Post- employment benefits Cash salary and fees(vi) Bonus Non- monetary(v) Super- annuation Equity settled share-based payments Total $ $ $ $ $ $ 31,014 - - 17,325 - 48,339 423,220 125,000 25,524 49,340 17,077 640,161 66,626 - - 5,204 3,416 75,246 40,000 - - 3,600 1,707 45,307 48,000 - - 3,600 1,707 53,307 22,174 - - 1,996 - 24,170 26,282 - - 1,604 1,724 29,610 233,206 93,750 11,834 29,860 10,466 379,116 274,192 93,750 7,565 33,115 19,750 428,372 170,000 37,500 - 18,675 - 226,175 205,714 71,875 - 24,983 - 302,572 84,000 - - - - 84,000

1,624,428 421,875 44,923 189,302 55,848 2,336,376

(i) Appointed 10 December 2009.

• (ii) Resigned 10 December 2009.

• (iii) Appointed 24 August 2009.

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

• (v) These relate to the fully maintained vehicle provided by the Company.

(vi)	Included in these	amounts are the following fees paid to Directors for consulting services
	John Rowe	$8,800
	Barry Sullivan	$8,000
	Nigel Johnson	$8,456

Further information relating to fees paid to Directors and Executives is disclosed in Note 30.

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

13

Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

Remuneration of Directors and senior management (continued)

	% of compensation for the year	% of compensation for the year
	relating to performance
	2011	2010
Bruce McFadzean	50.2	22.0
John Rowe(i)	0.5	4.3
Murray Pollock(i)	0.3	3.6
Barry Sullivan(i)	0.3	3.0
Erik Palmbachs	30.4	27.4
Stuart Pether	32.8	26.3
Adrian Pelliccia	25.7	16.6
John Fraser	24.5	23.8
Paul Mason	11.7	-

• (i) relates to options issued in December 2008

Bonuses and share-based payments granted as compensation in the period up to the date of this report

Bonuses

During the previous financial year the Managing Director and senior management were granted a construction bonus totalling $421,875. The construction bonus was awarded based on achieving certain key performance indicators, established prior to commencement of construction, under the following categories:

• Safety, measured by the All Injury Frequency Rate (AIFR);

• Cost of construction; and

• Time to complete.

A ramp-up bonus was awarded in August 2010. Mr John Fraser, Mr Adrian Pelliccia and Mr Paul Mason were the only members of senior management participating in this scheme and were awarded bonuses totalling $14,098. The ramp-up bonus was awarded based on achieving certain key performance indicators during the 3 month period from 1 May to 31 July 2010 under the following categories:

• safety, measured by the All Injury Frequency Rate (AIFR);

• ounces of gold production measured by refined ounces of gold production using a target based on forecast gold production based on the expected feed grades from stockpile and the expected ramp up tonnages;

• process plant milled tonnes. The target was based on the expected ramp up factors of 70% for May, 80% for June and 90% for July of the full production rate of 2.8 million tonnes per annum; and

• mining open pit movement measured from end of month volume surveys adjusted for remaining in pit blasted material swell factors.

The Company paid additional bonuses totalling $315,000, to the Managing Director, Chief Operating Officer, and Chief Financial Officer on 15 September 2010. This bonus was in recognition of the efforts that these key senior executives have made since joining the Company, in organizing its growth and development and the establishment of financing and organisation structures appropriate to the Company’s transition from an exploration company to a gold producer with two mining operations.

The Company introduced a Short-term Incentive Plan (“STIP”) for key executives with effect from 1 July 2010 providing market based “at risk” remuneration to key executives based on and supplementary to each executive’s Total Fixed Remuneration (TFR).

The STIP provides a cash bonus up to maximum percentage of TFR conditional on the achievement of annual production, cost, safety hurdles and personal behaviour. An STIP bonus totalling $312,646 was awarded to the Managing Director and executives at 30 June 2011 and paid after year end.

14

Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

Bonuses and share-based payments granted as compensation in the period up to the date of this report (continued)

Share-based payments

The Company has introduced a Long-term Incentive Plan (“LTIP”) for key executives with effect from 1 July 2010 providing market based “at risk” remuneration to key executives based on and supplementary to each executive’s Total Fixed Remuneration (TFR).

The LTIP provides equity based “at risk” remuneration up to maximum percentages of TFR set for each executive. The incentives are aimed at retaining and incentivizing key executives on a basis that is aligned with shareholder interests, and will be delivered to key executives via a combination of:

Options issued during the year under the LTIP have a term of 5 years and vest based on the Company’s Relative Total Shareholder Return (“RTSR”) relative to a comparator group of companies. Half of the options will be tested against RTSR at 30 June 2012 while the remaining half will be tested at 30 June 2013. At the date of this report the Comparator Group consisted of the following companies:

Kingsgate Consolidated Limited	Silver Lake Resources Limited
St Barbara Limited	Resolute Mining Limited
OceanaGold Corporation Limited	Ramelius Resources Limited
Regis Resources Limited	Norton Goldfields Limited
Focus Minerals Limited	Integra Mining Limited

The proportion of options that will vest will be determined based on the Company’s RTSR relative to the Comparator Group as follows:

RTSR Performance Less than 50thpercentile 50thpercentile Between 51stand 74thpercentile	Vesting Outcomes (% of total options granted) 0% 50% For each percentile over the 50than additional 2% will
	vest
At or above 75thpercentile	100%

Performance rights issued during the year convert to ordinary shares of the Company based on:

• the Company’s Absolute Total Shareholder Return (“ATSR”); or

• the Company’s actual gold production

Half of the performance rights will be tested at 30 June 2012 (“Tranche 1”) while the remaining half will be tested at 30 June 2013 (“Tranche 2”).

Half of Tranche 1 will be tested against ATSR by comparing the 30 day Volume Weighted Average Price (“VWAP”) at testing date compared to Company’s 30 day VWAP on issue date. The proportion of performance rights that vest and hence convert will be determined based on the following:

ATSR	% ofperformancerightsvesting
30%increaseinshare price	50%
>30%increase,< 40%increase	Prorata
40%increase	100%
The remaining half of Tranche 1 will be tested against the Company’s actual gold production. The proportion of performancerights thatvest andhence convertwillbe determined based onthefollowing:
Gold productionover vesting period	% ofperformancerightsvesting
200,000 ounces	50%
> 200,000 ounces,< 240,000 ounces	Prorata
> 240,000 ounces	100%

Half of Tranche 2 will be tested against ATSR by comparing the 30 day Volume Weighted Average Price (“VWAP”) at testing date compared to Company’s 30 day VWAP on issue date.

15

Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

Remuneration of Directors and senior management (continued)

The proportion of performance rights that vest and hence convert will be determined based on the following:

ATSR	% of performance rights vesting
45% increase in share price	50%
> 45% increase, < 60% increase	Pro rata
60%increase	100%

The remaining half of Tranche 1 will be tested against the Company’s actual gold production. The proportion of performancerights thatvest andhence convertwillbe determined based onthefollowing:	The remaining half of Tranche 1 will be tested against the Company’s actual gold production. The proportion of performancerights thatvest andhence convertwillbe determined based onthefollowing:
Gold productionover vesting period	% ofperformancerightsvesting
270,000 ounces	50%
> 270,000 ounces,<320,000 ounces	Prorata
>320,000 ounces	100%

In the event of a person becoming:

• the owner of 50% or more of the issued share capital of the Company; or

• entitled to acquire, hold or have an equitable interest in more than 50% of the issued share capital of the Company;

all options and performance rights that have not already vested will vest.

In the event of the implementation of the merger with Conquest Mining Limited (refer to “Subsequent Events” on page 7), all options and performance rights that have been issued that have not already vested under the Company’s ECOP and LTIP will vest.

Each employee share option converts to one ordinary share of Catalpa on exercise while each performance right converts to one ordinary share of Catalpa on vesting. No amounts are paid or payable by the recipient on receipt of the option or performance right. The options and performance rights 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.

During the year no Directors or senior management exercised options that were granted to them as part of their compensation. The following options were converted in the previous year. Each option converted into one ordinary share of Catalpa Resources Limited.

		No of ordinary
		shares of Catalpa			Value of options
	No of options	Resources Limited		Amount	exercised at the
Name	exercised	issued	Amount paid	unpaid	exercise date
Barry Sullivan	45,456	45,456	$45,000	-	$23,182

No grants of share-based payment compensation to Directors and senior management lapsed in the current financial year.

% of bonus awarded and paid during the year

Bruce McFadzean	64.8%
Erik Palmbachs	15.8%
Stuart Pether	32.5%
Adrian Pelliccia	12.0%
John Fraser	13.0%
Paul Mason	37.9%

16

Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

Remuneration of Directors and senior management (continued)

During the financial year the following share-based payment arrangements were in existence: Options

Series	Exer-	Grant	Expiry	Weighted	Vesting date
	cise	date	Date	average fair
	price			value at
				grant date
Nov 05	$1.137	22 Nov 05	22 Nov 10	$0.22	Vested at date of grant
Apr 08	$0.867	29 Apr 08	29 Apr 11	$0.37	50% vested at date of grant
					50% vested on completion of care and	maintenance
					program
Dec 08	$0.647	23 Dec 08	23 Dec 13	$0.24	Vested at date of grant
Dec 08	$0.867	23 Dec 08	23 Dec 13	$0.22	340,909 vested at date of grant.
					56,818 vested on completion of Board endorsed
					finance and funding package to	commence
					construction of the Edna May process plant.
Dec 08	$1.087	23 Dec 08	23 Dec 13	$0.20	295,460 vested upon completion of an	update of the
					feasibility study for the Edna May open	pit project.
					45,454 vested upon achievement of	a balanced
					Board composition.
					56,818 vested upon the successful employment of
					the finance team and implementation of project
					construction and operating cost	management
					system.
Dec 08	$1.307	23 Dec 08	23 Dec 13	$0.18	340,909 vested upon the completion	of financing
					(both debt and equity) for the Edna May open
					project.
					56,818 vested upon the successful commissioning
					of Edna May’s open pit project.
Dec 08	$1.527	23 Dec 08	23 Dec 13	$0.10	Vested upon the successful commissioning of Edna
					May’s open pit project.
Mar 09	$0.647	11 Mar 09	11 Mar 14	$0.15	Vested at date of grant
Mar 09	$0.867	11 Mar 09	11 Mar 14	$0.14	Vested on completion of Board endorsed finance
					and funding package to commence construction of
					the Edna May process plant.
Mar 09	$1.087	11 Mar 09	11 Mar 14	$0.12	Vested upon the successful employment of the site
					operating team and implementation of project
					construction, production and cost	management
					system.
Mar 09	$1.307	11 Mar 09	11 Mar 14	$0.11	Vested upon the successful commissioning of the
					Edna May Gold Operations.
Jul 10	$1.69	1 Jul 10	30 Jun 15	$0.98	Vest upon meeting certain ATSR	performance
					criteria measured at 30 June 2012. (refer page 14)
Jul 10	$1.69	1 Jul 10	30 Jun 15	$0.98	Vest upon meeting certain ATSR	performance
					criteria measured at 30 June 2013. (refer page 14)

17

Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

Remuneration of Directors and senior management (continued)

Performance Rights

Series	Exer-	Grant	Expiry	Weighted	Vesting date
	cise	date	Date	average fair
	price			value at
				grant date
Gold	-	1 Jul 10	30 Jun	$0.86	Vest upon achieving certain gold production targets
Jun 12			12		over a period ending 30 June 2012. (refer page 15)
ATSR	-	1 Jul 10	30 Jun	$0.92	Vest upon meeting certain ATSR performance criteria
Jun 12			12		measured at 30 June 2012 (refer page 15)
Gold	-	1 Jul 10	30 Jun	$0.74	Vest upon achieving certain gold production targets
Jun 13			13		over a period ending 30 June 2013. (refer page 15)
ATSR	-	1 Jul 10	30 Jun	$0.72	Vest upon meeting certain ATSR performance criteria
Jun 13			13		measured at 30 June 2013 (refer page 15)

Further details of the plans under which the options and performance rights were issued are contained in note 28 to the financial statements.

18

Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

Remuneration of Directors and senior management (continued)

The following details of share-based payment compensation to Directors and senior management relate to granting and vesting of options and performance rights during the current financial year. No performance rights converted during the year.

Name	Share-based payment series	Number granted	Number vested1	% of grant	% of grant	% of compensation for the year consisting of:	% of compensation for the year consisting of:
				vested	forfeited
						Options	Performance
							rights
Bruce
McFadzean	Dec 08 at $1.527	-	227,272	100	-	19.8%	7.3%
	July 10 at $1.69	360,000	-	-	-
	Gold Right 12	80,000	-	-	-
	Abs TSR Right 12	80,000	-	-	-
John Rowe	Dec 08 at $1.527	-	45,454	100	-	0.5%	-
Murray Pollock	Dec 08 at $1.527	-	22,727	100	-	0.3%	-
Barry Sullivan	Dec 08 at $1.527	-	22,727	100	-	0.3%	-
Erik Palmbachs	Dec 08 at $1.087	-	56,818	100	-	15.9%	13.0%
	Dec 08 at $1.307	-	56,818	100	-
	July 10 at $1.69	110,000	-	-	-
	Gold Right 12	55,000	-	-	-
	Abs TSR Right 12	55,000	-	-	-
Stuart Pether	Mar 09 at $1.087	-	113,636	100	-	15.2%	12.4%
	Mar 09 at $1.307	-	113,636	100	-
	Jul 10 at $1.69	125,000	-	-	-
	Gold Right 12	62,500	-	-	-
	Abs TSR Right 12	62,500	-	-	-
Adrian Pelliccia	Jul 10 at $1.69	34,000	-	-	-	7.7%	15.0%
	Gold Right 12	40,000	-	-	-
	Abs TSR Right 12	40,000	-	-	-
John Fraser	Jul 10 at $1.69	50,000	-	-	-	7.9%	14.4%
	Gold Right 12	55,000	-	-	-
	Abs TSR Right 12	55,000	-	-	-
Paul Mason	Gold Right 12	22,000	-	-	-	-	11.5%
	Abs TSR Right 12	22,000	-	-	-

1 all granted in previous financial years

19

Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

Remuneration of Directors and senior management (continued)

	Value of	Value of	Value of	Value of	Value of	Value of
	options	options	options	rights	rights	rights
	granted	exercised at	lapsed at	granted	converted at	lapsed at
	at the	the exercise	the date	at the	the conver-	the date
	grant date	date	of lapse	grant date	sion date	of lapse
	$	$	$	$	$	$
Bruce McFadzean	351,000	-	-	129,600	-	-
Erik Palmbachs	107,250	-	-	89,100	-	-
Stuart Pether	121,875	-	-	101,250	-	-
John Fraser	48,750	-	-	89,100	-	-
Adrian Pelliccia	33,150	-	-	64,800	-	-
Paul Mason	-	-	-	35,640	-	-

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

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 and CEO

• Term of agreement – 3 months notice of termination is required by either party.

• In the event of a successful takeover bid being made for the Company or a successful merger, where the officer is demoted from his current position (other than for cause), or is requested to assume responsibilities not reasonably consistent with the officer’s contracted position domiciled in WA, Mr McFadzean has the right to give notice of termination of his agreement and the Company is obliged to pay a termination payment the equivalent of 12 months total fixed remuneration plus other existing contracted entitlements, within 14 days of giving notice.

• Total package of $535,000, inclusive of all entitlements though excluding bonuses and share-based payments, to be reviewed annually by the Board.

• The Company provides Mr McFadzean 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, 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 and Joint Company Secretary

• Term of agreement – 3 months notice of termination is required by either party.

• In the event of a successful takeover bid being made for the Company or a successful merger, where the officer is demoted from his current position (other than for cause), or is requested to assume responsibilities not reasonably consistent with the officer’s contracted position domiciled in WA, Mr Palmbachs has the right to give notice of termination of his agreement and the Company is obliged to pay a termination payment the equivalent of 12 months total fixed remuneration plus other existing contracted entitlements, within 14 days of giving notice.

• Total package of $310,000, inclusive of all entitlements though excluding bonuses and share-based payments, 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, 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.

20

Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

Key Terms of Employment Contracts (continued)

Stuart Pether, Chief Operating Officer

• Term of agreement – 3 months notice of termination is required by either party.

• In the event of a successful takeover bid being made for the Company or a successful merger, where the officer is demoted from his current position (other than for cause), or is requested to assume responsibilities not reasonably consistent with the officer’s contracted position domiciled in WA, Mr Pether has the right to give notice of termination of his agreement and the Company is obliged to pay a termination payment the equivalent of 12 months total fixed remuneration plus other existing contracted entitlements, within 14 days of giving notice.

• Total package of $350,000, inclusive of all entitlements though excluding bonuses and share-based payments, 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, superannuation gratuity to a value which does not exceed the maximum amount ascertained in accordance with the formula set out in section 200G of the Corporations Act 2001.

Adrian Pellicia, Manager Business Development

• Term of agreement – 3 months notice of termination is required by either party.

• Total package of $220,000, inclusive of all entitlements though excluding bonuses and share-based payments, to be reviewed annually by the Board.

• 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, superannuation gratuity to a value which does not exceed the maximum amount ascertained in accordance with the formula set out in section 200G of the Corporations Act 2001.

John Fraser, General Manager – Edna May Gold Operations

• Term of agreement – 3 months notice of termination is required by either party.

• Total package of $310,000 inclusive of all entitlements though excluding bonuses and share-based payments, to be reviewed annually by the Board.

• 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, superannuation gratuity to a value which does not exceed the maximum amount ascertained in accordance with the formula set out in section 200G of the Corporations Act 2001.

Paul Mason, Joint Company Secretary

• Term of agreement – 1 month notice of termination is required by either party.

• Total package of $196,216 inclusive of all entitlements though excluding bonuses and share-based payments, to be reviewed annually by the Board.

• 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, superannuation gratuity to a value which does not exceed the maximum amount ascertained in accordance with the formula set out in section 200G of the Corporations Act 2001.

21

Catalpa Resources Limited – Annual Report

Directors’ Report (continued)

The Directors’ report is signed in accordance with a resolution of Directors made pursuant to s.982(2) of the Corporations Act 2001.

On behalf of the Directors.

==> picture [71 x 34] intentionally omitted <==

Bruce McFadzean Managing Director Perth, 26 September 2011

==> picture [124 x 28] intentionally omitted <==

Peter Maloney

Non-Executive Chairman

22

==> picture [130 x 25] intentionally omitted <==

Deloitte Touche Tohmatsu ABN 74 490 121 060

Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

The Board of Directors Catalpa Resources Limited Level 3, No. 1 Altona Street West Perth, WA 6005

Tel: +61 (0) 8 9365 7000 Fax: +61 (8) 9365 7001 www.deloitte.com.au

26 September 2011

Dear Board Members

Catalpa Resources Limited

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Catalpa Resources Limited.

As lead audit partner for the audit of the financial statements of Catalpa Resources Limited for the financial year ended 30 June 2011, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit ; and

• (ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

DELOITTE TOUCHE TOHMATSU

Chris Nicoloff Partner Chartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited

23

Catalpa Resources Limited – Annual Report

Statement of Comprehensive Income

Statement of Comprehensive Income
YEAR ENDED 30 JUNE 2011 Notes	Consolidated 2011 2010 $’000s $’000s
Gold sales revenue Cost of sales 6(a) Gross profit Exploration and evaluation costs expensed as incurred Operating profit/(loss) Other revenue 5 Administrative costs 6(b) Business combination expenses Finance costs 6(c) Profit/(loss) before tax Income tax (expense)/benefit 7 NET (LOSS)/PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF CATALPA RESOURCES LIMITED Other comprehensive income Fair value gain on available for sale financial asset net of tax TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO EQUITY HOLDERS OF CATALPA RESOURCES LIMITED Basic earnings/(loss) per share (cents per share) 19 Diluted earnings/(loss) per share (cents per share) 19	121,870 22,274 (101,757) (18,350)
	20,113 3,924 (2,631) (1,009)
	17,482 2,915 1,626 755 (9,900) (5,809) - (2,311) (5,253) (70)
	3,955 (4,520) (6,258) 10,067
	(2,303) 5,547 157 -
	(2,146) 5,547
	(1.37) 3.93 (1.37) 3.77

Notes to the Financial Statements are included on pages 28 to 81.

24

Catalpa Resources Limited – Annual Report

Statement of Financial Position

AT 30 JUNE 2011

AT 30 JUNE 2011 Notes	Consolidated 2011 2010 $’000s $’000s
CURRENT ASSETS Cash and cash equivalents 26(a) Other receivables 8 Prepayments Inventories 10 Mine development 12 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Other receivables 8 Other financial assets 9 Property, plant and equipment 11 Mine development 12 Deferred tax asset 7 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 13 Income tax payable Borrowings 14 Provisions 15 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings 14 Provisions 15 TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 17 Reserves 18(a) Accumulated losses 18(b) TOTAL EQUITY	30,051 35,113 2,542 1,114 177 244 18,099 10,117 1,255 1,619
	52,124 48,207
	864 - 784 560 103,367 85,006 60,526 68,919 13,134 19,325
	178,675 173,810
	230,799 222,017
	19,496 15,697 - 289 15,133 22,566 1,716 1,564
	36,345 40,116
	29,620 38,612 4,840 4,561
	34,460 43,173
	70,805 83,289
	159,994 138,728
	185,465 162,613 5,301 4,584 (30,772) (28,469)
	159,994 138,728

Notes to the Financial Statements are included on pages 28 to 81.

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Catalpa Resources Limited – Annual Report

Statement of Changes in Equity

YEAR ENDED 30 JUNE 2011 Note Consolidated	Issued Capital Share-based payments reserve Investment revaluation reserve Accumulated Losses Total $’000s $’000s $’000s $’000s $’000s
BALANCE AT 30 JUNE 2009 Profit for the year Total comprehensive income for the year Issue of shares (net of expenses) Recognition of share based payments BALANCE AT 30 JUNE 2010 Loss for the year Other comprehensive income for the year: Fair value gain on available for sale financial asset Related income tax Total comprehensive income for the year Issue of shares (net of expenses) 17(b) Recognition of share based payments BALANCE AT 30 JUNE 2011	74,101 4,526 - (34,016) 44,611
	- - - 5,547 5,547
	- - - 5,547 5,547
	88,512 - - - 88,512 - 58 - - 58
	162,613 4,584 - (28,469) 138,728
	- - - (2,303) (2,303) - - 224 - 224 - - (67) - (67)
	- - 157 (2,303) (2,146)
	22,852 - - - 22,852 - 560 - - 560
	185,465 5,144 157 (30,772) 159,994

Notes to the Financial Statements are included on pages 28 to 81.

26

Catalpa Resources Limited – Annual Report

Statement of Cash Flows

Statement of Cash Flows
YEAR ENDED 30 JUNE 2011 Notes	Consolidated 2011 2010 $’000s $’000s
CASH FLOWS FROM OPERATING ACTIVITIES Proceeds from sale of gold Payments to suppliers and employees Cash generated from operations Interest received Interest paid Income tax paid NET CASH INFLOW FROM OPERATING ACTIVITIES 26(b) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of gold capitalised 26(e) Payments to suppliers and employees capitalised 26(e) Purchase of property, plant and equipment Interest paid and capitalised as property, plant and equipment Payment for mine development Transfer (to)/from term deposits Payment to acquire financial assets Net cash inflow from business combination 23 NET CASH OUTFLOW FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issues of ordinary shares net of expenses Proceeds from borrowings Repayment of borrowings Payment of loan facility fee NET CASH INFLOW FROM FINANCING ACTIVITIES NET DECREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the financial year CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR 26(a)	121,870 22,274 (96,675) (18,603)
	25,195 3,671 1,626 742 (4,362) (70) - (543)
	22,459 3,800
	21,481 - (21,873) - (22,990) (69,164) (1,921) (588) (6,486) (20,623) (865) 3,533 - (560) - 2,896
	(32,654) (84,506)
	22,852 20,829 - 63,875 (17,719) (82) - (1,100)
	5,133 83,522
	(5,062) 2,816 35,113 32,297
	30,051 35,113

Notes to the Financial Statements are included on pages 28 to 81.

27

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements

30 JUNE 2010

1. General information

Catalpa Resources Limited is a listed public company, incorporated and operating in Australia. The address of its registered office and principal place of business are disclosed in the introduction to the annual report. The principal activities of the Company and its subsidiaries (“the Group”) are described on page 4 of the Directors’ Report.

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.

Accounting Standards include Australian equivalents to International Financial Reporting Standards (“AIFRS”). Compliance with AIFRS ensures that the financial statements and notes of the Group comply with International Financial Reporting Standards (IFRS).

The financial statements were authorised for issue by the Directors on 27 September 2011.

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.

The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the directors’ report and the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated.

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

The following new and revised Standards and Interpretations have been adopted in the current period, though have had no effect on the amounts reported in these financial statements.

28

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

New or revised requirement	Effective for annual reporting periods beginning on or after	More information	Impact on Group
AASB 107:Statement of Cash Flows The amendments (part of AASB 2009-5_Further_ Amendments to Australian Accounting Standards arising from the Annual Improvements Project) specify that only expenditures that result in a recognised asset in the statement of financial position can be classified as investing activities in the statement of cash flows.	Beginning 1 January 2010	This has been adopted for the year ending 30 June 2011.	There was no impact on adoption.
AASB 2009-5: Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project. Amendments are made to AASB 5, 8, 101, 107, 117, 118, 136 & 139.	Beginning 1 January 2010	This has been adopted for the year ending 30 June 2011.	There was no impact on adoption.
AASB 2009-8: Amendments to Australian Accounting Standards – Group Cash-settled Share-based Payment Transactions AASB 2. The amendments clarify the scope of AASB 2 by requiring an entity that receives goods or services in a share-based payment arrangement to account for those goods or services no matter which entity in the group settles the transaction, and no matter whether the transaction is settled in shares or cash. The amendments incorporate the requirements previously included in Interpretation 8 and Interpretation 11 and as a consequence these two Interpretations are superseded by the amendments.	Beginning 1 January 2010	This has been adopted for the year ending 30 June 2011.	There was no impact on adoption.
AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project Amends a number of pronouncements as a result of the IASB's 2008-2010 cycle of annual improvements to provide clarification of certain matters.	Beginning 1 July 2010	This has been adopted for the year ending 30 June 2011.	There was no impact on adoption.

29

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

New or revised requirement	Effective for annual reporting periods beginning on or after	More information	Impact on Group
AASB 2009-10: Amendments to Australian Accounting Standards – Classification of Rights Issues. Clarifies that rights options or warrants to acquire a fixed number of an entities own equity instruments for a fixed amount in any currency are equity instruments if the entity offers the rights, options or warrants pro rata to all existing owners of the same class of its own non- derivative equityinstruments.	Beginning 1 February 2010	This has been adopted for the year ending 30 June 2011.	There was no impact on adoption.
Interpretation 19: Extinguishing Financial Liabilities with Equity Instruments. Requires the extinguishment of a financial liability by the issue of equity instruments to be measured at fair value (preferably using the fair value of the equity instrument issued) with the difference between the fair value of the instrument and the carrying value of the liability extinguished being recognised in profit or loss. The Interpretation does not apply where the conversion terms were included in the original contract (such as in the case of a convertible debt) or to common control transactions.	Beginning 1 July 2010	This has been adopted for the year ending 30 June 2011.	There was no impact on adoption.

30

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

The following Australian Accounting Standards and Interpretations have recently been issued or amended but are not yet effective and have not been adopted by the group for the year ended 30 June 2010.

New or revised requirement	Effective for annual reporting periods beginning on or after	More information	Impact on Group
AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project Amends a number of pronouncements as a result of the IASB's 2008-2010 cycle of annual improvements.	Beginning 1 January 2011	This will be adopted for the year ending 30 June 2012.	Management does not anticipate any impact on adoption.
AASB 9: Financial Instruments and AASB 2009- 11: Amendments to Australian Accounting Standards arising from AASB 9 [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 & 1038 and Interpretations 10 & 12]. AASB 9 simplifies the classifications of financial assets into two categories: � Those carried at amortised cost; and � Those carried at fair value. Simplifies requirements related to embedded derivatives that exist in financial assets that are carried at amortised cost, such that there is no longer a requirement to account for the embedded derivative separately. Removes the tainting rules associated with held- to-maturity assets. Investments in unquoted equity instruments (and contracts on those investments that must be settled by delivery of the unquoted equity instrument) must be measured at fair value. However, in limited circumstances, cost may be an appropriate estimate of fair value.	Beginning 1 January 2013.	This will be adopted for the year ending 30 June 2014.	Management does not anticipate any impact on adoption.

31

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

New or revised requirement	Effective for annual reporting periods beginning on or after	More information	Impact on Group
AASB 10Consolidated Financial Statements Requires a parent to present consolidated financial statements as those of a single economic entity, replacing the requirements previously contained in AASB 127_Consolidated_ and Separate Financial Statements_and INT-112 _Consolidation - Special Purpose Entities. The Standard identifies the principles of control, determines how to identify whether an investor controls an investee and therefore must consolidate the investee, and sets out the principles for the preparation of consolidated financial statements. The Standard introduces a single consolidation model for all entities based on control, irrespective of the nature of the investee (i.e. whether an entity is controlled through voting rights of investors or through other contractual arrangements as is common in 'special purpose entities'). Under AASB 10, control is based on whether an investor has: � Power over the investee � Exposure, or rights, to variable returns from its involvement with the investee, and � The ability to use its power over the investee to affect the amount of the returns.	Beginning 1 January 2013	This will be adopted for the year ending 30 June 2014.	Management does not anticipate any impact on adoption.

32

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

New or revised requirement	Effective for annual reporting periods beginning on or after	More information	Impact on Group
AASB 11Joint Arrangements Replaces AASB 131_Interests in Joint Ventures_. Requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations and then account for those rights and obligations in accordance with that type of joint arrangement. Joint arrangements are either joint operations or joint ventures: � Ajoint operationis a joint arrangement whereby the parties that have joint control of the arrangement (joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint operators recognise their assets, liabilities, revenue and expenses in relation to its interest in a joint operation (including their share of any such items arising jointly) � Ajoint ventureis a joint arrangement whereby the parties that have joint control of the arrangement (joint venturers) have rights to the net assets of the arrangement. A joint venturer applies the equity method of accounting for its investment in a joint venture in accordance withAASB 128 Investments in Associates and Joint Ventures(2011). Unlike AASB 131, the use of 'proportionate consolidation' to account for joint ventures is not permitted	Beginning 1 January 2013	This will be adopted for the year ending 30 June 2014.	Management does not anticipate any impact on adoption.

33

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

New or revised requirement	Effective for annual reporting periods beginning on or after	More information	Impact on Group
AASB 12Disclosure of Interests in Other Entities Requires the extensive disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on its financial position, financial performance and cash flows. In high-level terms, the required disclosures are grouped into the following broad categories: � Significant judgements and assumptions- such as how control, joint control, significant influence has been determined � Interests in subsidiaries- including details of the structure of the group, risks associated with structured entities, changes in control, and so on � Interests in joint arrangements and associates- the nature, extent and financial effects of interests in joint arrangements and associates (including names, details and summarised financial information) � Interests in unconsolidated structured entities - information to allow an understanding of the nature and extent of interests in unconsolidated structured entities and to evaluate the nature of, and changes in, the risks associated with its interests in unconsolidated structured entities. AASB 12 lists specific examples and additional disclosures which further expand upon each of these disclosure objectives, and includes other guidance on the extensive disclosures required.	Beginning 1 January 2013	This will be adopted for the year ending 30 June 2014.	Management does not anticipate any impact on adoption.

34

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

New or revised requirement	Effective for annual reporting periods beginning on or after	More information	Impact on Group
AASB 13Fair Value Measurement and related AASB 2011-8Amendments to Australian Accounting Standards arising from AASB 13 Replaces the guidance on fair value measurement in existing AASB accounting literature with a single standard. The AASB defines fair value, provides guidance on how to determine fair value and requires disclosures about fair value measurements. However, AASB 13 does not change the requirements regarding which items should be measured or disclosed at fair value. AASB 13 applies when another AASB requires or permits fair value measurements or disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements). With some exceptions, the standard requires entities to classify these measurements into a 'fair value hierarchy' based on the nature of the inputs: � Level 1- quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date � Level 2- inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly � Level 3- unobservable inputs for the asset or liability. Entities are required to make various disclosures depending upon the nature of the fair value measurement (e.g. whether it is recognised in the financial statements or merely disclosed) and the level in which it is classified.	Beginning 1 January 2013	This will be adopted for the year ending 30 June 2014.	Management does not anticipate any impact on adoption.

35

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

New or revised requirement	Effective for annual reporting periods beginning on or after	More information	Impact on Group
AASB 2009-12: Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052]. AASB 2009-12 makes amendments to a number of Standards and Interpretations. In particular, it amends AASB 8 Operating Segments to require an entity to exercise judgement in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. It also makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRSs by the IASB.	Beginning 1 January 2011	This will be adopted for the year ending 30 June 2012.	Management does not anticipate any impact on adoption.
Revised AASB 124: Related Party Disclosures (December 2009): Related Party Disclosures (December 2009). Simplifies the definition of a related party, clarifying its intended meaning and eliminating inconsistencies from the definition of a related party.	Beginning 1 January 2011	This will be adopted for the year ending 30 June 2012.	Management does not anticipate any impact on adoption.
AASB 2010-5 ‘Amendments to Australian Accounting Standards’	Beginning 1 January 2011	This will be adopted for the year ending 30 June 2012.	Management does not anticipate any impact on adoption.
AASB 2010-6 ‘Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets’	Beginning 1 July 2011	This will be adopted for the year ending 30 June 2012.	Management does not anticipate any impact on adoption.
AASB 2010-8 ‘Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets’	Beginning 1 January 2012	This will be adopted for the year ending 30 June 2013.	Management does not anticipate any impact on adoption.

36

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

(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 (“Group”), 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.

(b) Joint venture arrangements

The Group has an interest in a joint venture that is a jointly controlled operation. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. A jointly controlled operation involves use of assets and other resources of the venturers rather than establishment of a separate entity. The Group recognises its interest in the jointly controlled operation by recognising its interest in the assets and the liabilities of the joint venture. The Group also recognises the expenses that it incurs and its share of the income that it earns from the sale of goods or services by the jointly controlled operation.

(c) Business combinations

Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with AASB 139 in profit or loss. If the contingent consideration is classified as equity, it shall not be remeasured.

(d) 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.

(e) 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.

37

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

(f) 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, reevaluates 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.

(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 statement of financial position.

(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 noncurrent 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 profit or loss. 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 other comprehensive income are included in profit or loss 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 profit or loss 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 profit or loss as part of revenue when the Group’s right to receive payments is established.

38

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

(f) Investments and other financial assets (continued)

Changes in the fair value of monetary securities denominated in a foreign currency and classified as availablefor-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.

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 profit or loss. Impairment losses recognised in profit or loss on equity instruments classified as available-for-sale are not reversed through the income statement.

(g) 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.

(h) Inventories

Gold in solution form, gold dore, refined gold bullion, stockpiled ore and work in progress are physically measured or estimated and valued at the lower of cost and net realisable value. Cost represents the weighted average cost and includes direct costs and an appropriate portion of fixed and variable production overhead expenditure, including depreciation and amortisation, incurred in converting materials into finished goods.

Materials and supplies are valued at the lower of cost and net realisable value. Any provision for obsolescence is determined by reference to specific stock items identified. A regular and ongoing review is undertaken to establish the extent of surplus items and a provision is made for any potential loss on their disposal.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.

39

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

(i) Deferred mining expenditure

The Group defers mining costs incurred during the production stage of its operations as part of determining the cost of inventories. This is generally the case where there are fluctuations in deferred mining costs over the life of the mine and the effect is material. The amount of mining cost deferred is based on the ratio obtained by dividing the amount of waste tonnes mined by the quantity of ore tonnes. Mining costs deferred in the year are deferred to the extent that the current year waste to ore ratio exceeds the life of mine waste to ore ratio. Deferred mining costs are then charged against reported profits to the extent that, in subsequent years, the current year ratio falls below the life of mine ratio. The life of mine ratio is based on the economically recoverable reserves of the operation.

The life of mine ratio is a function of an individual mine’s design and therefore changes to that design will generally result in changes to the ratio. Changes in other technical or economic parameters that impact reserves will also have an impact on the life of mine ratio even if they do not affect the mine’s design. Changes to the life of mine ratio are accounted for prospectively.

Underground mining operations occur progressively on a level by level basis. In these operations an estimate is made of the life of level average underground mining cost per tonne of ore mined to expense underground mining costs in profit or loss. Underground mining costs incurred during the year are deferred to the extent that the actual cost per tonne of ore mined on a level in the year exceeds the life of level average.

Deferred mining costs are included in the statement of financial position as mine development and form part of the total investment in the relevant cash-generating unit to which they relate, which is reviewed for impairment in accordance with the accounting policy on Impairment. The release of deferred mining costs is included in cost of sales.

(j) 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 profit or loss 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 profit or loss.

40

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

(k) 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 mine development 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.

(l) 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 in-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 (cash-generating 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.

(m) 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.

(n) 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 profit or loss over the period of the borrowings using the effective interest method.

Borrowings are removed from the statement of financial position 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.

(o) 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.

41

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

(p) 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 profit or loss 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.

(q) Royalties

State government royalties and other royalties payable under existing agreements are payable on production and are therefore recognised on delivery of gold dore to the refinery.

(r) 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 short-term employee benefits 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

A Long Term Incentive Plan (“LTIP”) was established and approved at the Annual General Meeting on 23 November 2011. The plan permits the Company, at the discretion of the Directors, to grant both options and performance rights over unissued ordinary shares of the Company to eligible Directors and members of staff as specified in the plan rules.

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

The plans permit the Company, at the discretion of the Directors, to grant options and performance rights over unissued ordinary shares of the Company to eligible Directors, members of staff and contractors as specified in the plan rules. The options and performance rights, issued for nil consideration, are granted in accordance with performance guidelines established by the Directors of the Company.

The options and performance rights are issued for a specified period and each option and performance right 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 and performance rights do not vest until a specified period after granting and their vesting is conditional on the consolidated entity achieving certain performance hurdles. There are no voting or dividend rights attached to the options or performance rights. Voting rights will attach to the ordinary shares when the options have been exercised or performance rights vested. The options and performance rights cannot be transferred and will not be quoted on the ASX.

42

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

(s) 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 as mine development. The unwinding of the effect of discounting on the provision is recognised as a finance cost.

(t) 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.

(u) Treasury shares

The Company’s own equity instruments, that were held as a result of the merger with Lion Selection Limited (treasury shares), were deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments. The Company’s holding of treasury shares was cancelled with shareholder approval during the previous year.

(v) 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.

43

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

(w) 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.

Revenue from the sale of gold produced during the processing plant commissioning phase is credited to the cost of the processing plant and not recognised as revenue.

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).

(x) Income tax

The income tax expense or benefit 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 other comprehensive income or equity are also recognised directly in other comprehensive income or equity.

44

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

2. Significant accounting policies (continued)

(y) 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 statement of financial position.

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.

(z) 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 or the Monte Carlo Simulation 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.

45

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

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.

Deferred mining expenditure

The Group defers mining costs incurred during the production stage of its operations which are calculated in accordance with accounting policy Note 2(i).

Recovery of deferred tax assets

Deferred tax assets are recognised for tax losses and deductible temporary differences as management considers that it is probable that future taxable profits will be available to utilise those tax losses and temporary differences.

Share-based payments

The Group measures the cost of equity settled transactions with employees by reference to the fair value of equity instruments at the date at which they are granted. The fair value is determined by an external valuer an option pricing model or the Monte Carlo Simulation model.

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 the 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.

46

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

4. SEGMENT INFORMATION

Description of segments

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

The Group has identified its operating segments based on the internal reports that are reviewed and used by the Managing Director and the management team (the chief operating decision makers) in assessing performance and in determining the allocation of resources.

The Group’s two mine sites are each treated as separate operating segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.

Segment performance is evaluated based on operating profit or loss, which is measured on the same basis as profit or loss in the consolidated financial statements.

Year ended 30 June 2011 Revenue External sales Total segment revenue Interest revenue Total revenue per the statement of comprehensive income Segment result Interest revenue Corporate expenses Finance costs Net profit before tax per the statement of comprehensive income Other segment information Depreciation and amortisation 30 June 2011 Segment assets Deferred tax asset Total assets per the statement of financial position Segment liabilities Deferred tax liability Total liabilities per the statement of financial position	Edna May Gold Operations Cracow Mining Joint Venture Unallocated items $’000s $’000s $’000s	Total $’000s
	77,900 43,970 -	121,870
	77,900 43,970 -	121,870 1,626
	10,310 7,172 -
		123,496
		17,482 1,626 (9,900) (5,253)
	6,438 13,837 77
		3,955
		20,352
	158,793 56,071 3,229	218,093 13,740
	63,012 5,795 1,998
		231,833
		70,805 -
		70,805

Segment assets held by the Edna May Gold Operations have materially increased from those disclosed in the 30 June 2010 annual report due to the transfer of cash to the Edna May Gold Operations previously held by the parent entity and disclosed as unallocated. There has also been continued plant construction and mine development work carried out at the Edna May Gold Operations during the period.

47

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

4 SEGMENT INFORMATION (continued)

Year ended 30 June 2010 Revenue External sales Total segment revenue Interest revenue Total revenue per the statement of comprehensive income Segment result Interest revenue Corporate expenses Expense of business acquisition Finance costs Net loss before tax per the statement of comprehensive income 30 June 2010 Segment assets Deferred tax asset Total assets per the statement of financial position Segment liabilities Deferred tax liability Total liabilities per the statement of financial position	Edna May Gold Operations Cracow Mining Joint Venture Unallocated items $’000s $’000s $’000s	Total $’000s
	- 22,274 -	22,274 755
	- 22,274 -
	(1,009) 3,924 -
		23,029
		2,915 755 (5,809) (2,311) (70)
	119,139 64,121 19,432
		(4,520)
		202,692 19,325
	77,771 4,372 1,146
		222,017
		83,289 -
		83,289

48

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

	2011 2010 $’000s $’000s
5. OTHER REVENUE Interest revenue 6. OTHER EXPENSES (a) Cost of sales - Mining - Processing - Amortisation and depreciation - Royalty - Other (b) Administrative costs Expenses in relation to proposed merger with Conquest Mining Limited Other administrative expenses (c) Finance costs Interest expense Amortisation of borrowing costs The Edna May gold processing plant was commissioned in September 2010. Prior to this date finance costs related to the funding of the Edna May gold processing plant were capitalised. (d) Profit before income tax includes the following specific expenses: Rental of premises under operating lease - Minimum lease payments Depreciation not included in cost of sales Employee benefits: - Salary and wages - Share based payments - Superannuation (defined contribution plans)	1,626 755
	41,360 5,525 33,020 3,724 20,275 6,806 4,851 606 2,251 1,689
	101,757 18,350
	974 - 8,926 5,809
	9,900 5,809
	4,384 70 869 -
	5,253 70
	215 186 77 180 13,187 3,059 560 58 1,185 299

49

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

30 JUNE 2011
	2011 2010 $’000s $’000s
7. INCOME TAX (a) Income tax benefit Adjustments in respect of prior periods Deferred tax benefit on origination and reversal of temporary differences Total income tax expense/(benefit) per income statement (b) Numerical reconciliation of income tax benefit to prima facie tax payable Profit/(loss) from continuing operations before income tax benefit Prima facie tax benefit at the Australian tax rate of 30% (2010: 30%) Add tax effect of: Non-deductible expenses Adjustments in respect of prior periods Less tax effect of: Temporary differences not previously recognised Tax losses not previously recognised Income tax expense/(benefit)	2,394 - 3,864 (10,067)
	6,258 (10,067)
	3,955 (4,520)
	1,186 (1,356) 2,678 23 2,394 - - (184) - (8,550)
	6,258 (10,067)

(c) Recognised deferred tax assets & liabilities

	Assets Liabilities Net 2011 2010 2011 2010 2011 2010 $’000s $’000s $’000s $’000s $’000s $’000s
Accruals & provisions Mine development Depreciation Inventory Tax losses recognised Other items	2,890 1,783 - (9) 2,890 1,774 6,268 15,183 (2,967) (8,013) 3,301 7,170 - - (325) (325) (325) (325) - - (1,561) (733) (1,561) (733) 6,290 8,980 - - 6,290 8,980 2,539 2,459 - - 2,539 2,459
	17,987 28,405 (4,853) (9,080) 13,134 19,325

50

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

7. INCOME TAX (cont’d)

(d) Movement in temporary differences

recognised during the year

(d) Movement in temporary differences recognised during the year
	Balance at 1 July 2010 Recognised in income Recognised in Equity Balance at 30 June 2011 $’000s $’000s $’000s $’000s
Accruals & provisions Mine development Depreciation Inventory Prior year losses now recognised Other items Net tax assets/(liabilities)	1,774 1,316 - 3,090 7,170 (3,869) - 3,301 (325) - - (325) (733) (828) - (1,561) 8,980 (2,690) - 6,290 2,459 (187) 67 2,339
	19,325 (6,258) 67 13,134
	Balance at 1 July 2009 Recognised in income Recognised on acquisition of subsidiary Balance at 30 June 2010 $’000s $’000s $’000s $’000s
Accruals & provisions Mine development Depreciation Inventory Prior year losses now recognised Other items Net tax assets/(liabilities)	204 1,320 250 1,774 (459) 1,008 6,621 7,170 (979) 979 (325) (325) - (509) (224) (733) 1,234 7,746 - 8,980 - (477) 2,936 2,459
	- 10,067 9,258 19,325

(e) Unrecognised deferred tax assets

(e) Unrecognised deferred tax assets
	2011 2010 $’000s $’000s
Deferred tax assets at 30% have not been recognised in respect of the following: Tax losses	- -
	- -

No income tax is payable by the consolidated entity. The deferred tax assets arising from the tax losses have been recognised.

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.

As at the date of this report the Company is in negotiations with Conquest Mining Limited to merge the two companies. In the event the merger proceeds there is significant risk that the tax losses recognised as a deferred tax asset will not be available to the Company and will need to be derecognised in the year ended 30 June 2012 (refer Note 32).

51

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

7. INCOME TAX (cont’d)

Tax consolidation

The Company and its 100% owned controlled entities have formed a tax consolidated group. Members of the Consolidated Entity have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly owned controlled entities on a pro-rate basis. The agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At balance date, the possibility of default is remote. The head entity of the tax consolidated group is Catalpa Resources Limited.

Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the allocation of current taxes to members of the tax consolidated group. Deferred taxes are allocated to members of the tax consolidated group in accordance with a group allocation approach which is consistent with the principles of AASB 112 Income Taxes.

In this regard the Company has incurred a liability from controlled entities in respect of taxable profits in 2011 of $0.014 million (2010: benefit of $12.137 million) as of the balance date. The nature of the tax funding agreement is such that no tax consolidation contributions by or distributions to equity participants are required.

	2011 2010 $’000s $’000s
8. OTHER RECEIVABLES Current Government taxes receivable Other receivables No receivables are past due and all are due to be received within 60 days. Non-current Term deposits (refer Note 21) Deposit 9. OTHER FINANCIAL ASSETS Non-current Available for sale investments carried at fair value Shares in Renaissance Minerals Limited(i)	2,104 1,006 438 108
	2,542 1,114
	760 - 104 -
	864 -
	784 560

(i) Fair value is based on the ASX closing price of shares at balance date

52

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

30 JUNE 2011
	2011 2010 $’000s $’000s
10. INVENTORIES Current Ore stockpiles Gold in circuit and in transit Consumables	5,650 1,163 7,246 7,039 5,203 1,915
	18,099 10,117

The cost of inventories recognised as an expense during the period in respect of continuing operations was $101.76 million (2010: 9.25 million)

11. PROPERTY, PLANT AND EQUIPMENT

	Freehold Land Plant and Equipment Total $’000s $’000s $’000s
Gross carrying amount Balance at 30 June 2009 Additions Borrowing cost capitalised Acquisition through business combination Balance at 30 June 2010 Additions Transferred from mine development Reclassified Borrowing cost capitalised Balance at 30 June 2011 Accumulated depreciation, amortisation and impairment Balance at 1 July 2009 Depreciation charge Balance at 30 June 2010 Reclassified Depreciation charge Balance at 30 June 2011 Net book value As at 30 June 2010 As at 30 June 2011	474 12,281 12,755 - 70,939 70,939 - 3,283 3,283 - 4,980 4,980
	474 91,483 91,957
	54 20,837 20,891 - 4,687 4,687 (63) 63 - - 1,921 1,921
	465 118,991 119,456
	(84) (5,214) (5,298) - (1,653) (1,653)
	(84) (6,867) (6,951)
	84 (84) - - (9,138) (9,138)
	- (16,089) (16,089)
	390 84,616 85,006
	465 102,902 103,367

53

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

	2011 2010 $’000s $’000s
12. MINE DEVELOPMENT Evaluation and development costs carried forward in respect of mining areas of interest Current Opening net book amount Acquisition through business combination Movement during the year Closing net book amount Non-current Opening net book amount Acquisition through business combination Transferred to property, plant and equipment Amortisation charge Incurred during the year Closing net book amount	1,619 - - 1,959 (364) (340)
	1,255 1,619
	68,919 1,526 - 47,891 (4,687) - (10,556) (5,796) 6,850 25,298
	60,526 68,919

	2011 2010 $’000s $’000s
13. TRADE AND OTHER PAYABLES Trade payables Accrued interest on borrowings Other payables and accruals	18,256 14,498 515 670 725 529
	19,496 15,697

Credit terms are generally 30 days from the end of the month an invoice is received. The Group has financial risk management policies in place to ensure all payables are paid within the pre-agreed credit terms.

54

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

30 JUNE 2011
	2011 2010 $’000s $’000s
14. BORROWINGS Current Secured at amortised cost Bank loan1 Less: borrowing costs Finance lease liabilities2 Non-current Secured at amortised cost Bank loan1 Less: borrowing costs Finance lease liabilities2	16,000 23,500 (1,152) (1,151) 285 217
	15,133 22,566
	31,522 41,500 (2,301) (3,454) 399 566
	29,620 38,612

• 1 Secured by

• a fixed and floating charge over all assets and undertakings of the Group, excluding its interest in the Cracow Gold Operations;

• a mortgage over the Edna May Gold Operations tenements; and

• a fixed charge over the Company’s proceeds account and gold account.

• Interest was charged during the period at an average rate of 10.0% pa.

Macquarie Bank Limited (“Macquarie”) have placed covenants over the bank loan based on production levels and operating costs. The Company has complied with these covenants or in certain cases Macquarie has waived compliance during the period.

• 2 Secured by the assets leased. In the event of default the assets revert to the lessor. Interest on finance leases is charged at rates between 7.5% and 9.5% pa.

15. PROVISIONS

Current Employee benefits Non-current Long service leave Site restoration Movements in provision for site restoration Carrying amount at start of year Acquisition through business combination Provisions made during the year Provisions used during the year Carrying amount at end of year	1,716 1,564
	501 141 4,339 4,420
	4,840 4,561
	4,420 407 507 - 3,506 (81) -
	4,339 4,420

The Group recognises that it has an obligation to restore its mine sites to their original condition at the end of the life of mine. Mine rehabilitation costs are provided for at the present value of future expected expenditure when the liability is incurred. Although the ultimate cost to be incurred is uncertain, the Group has estimated its costs based on feasibility and engineering studies using current restoration standards and techniques and has used a discount rate of 11.4% (2010: 11.4%) to determine its present value. When this liability is recognised a corresponding asset is also recognised as part of the development costs of the mine and is amortised across the same useful life.

55

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

16. OBLIGATIONS UNDER FINANCE LEASES

Finance leases relate to motor vehicles and communications equipment with lease terms of 3 years. The Group has options to purchase the assets for a nominal amount at the conclusion of the lease arrangements. The Group’s obligations under finance leases are secured by the lessors’ title to the leased assets.

	Minimum Lease Payments 2011 2010 $’000s $’000s	Present Value of Minimum Lease Payments 2011 2010 $’000s $’000s
Not later than one year Later than one year and not later than five years Later than five years Less future finance charges Present value of minimum lease payments Included in financial statements as: - Current borrowings - Non-current borrowings	358 276 424 603 - -	285 217 399 566 -
	782 879 (49) (96)	684 783 - -
	733 783	684 783
		285 217 399 566
		684 783

56

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

17. ISSUED CAPITAL

(a) Share capital

(a) Share capital
	2011 2010 Number of shares $’000s Number of shares $’000s
Ordinary shares fully paid (b) Movements in ordinary share capital	178,095,822 185,465 162,749,311 162,613
	2011 2010 Number of shares $’000s Number of shares $’000s
Beginning of the financial year Issued during the year: �Placement of shares �Issued on exercise of options �Issued under entitlement offer �Issued as part of loan facility fee �Compensation payments to option holders �Shares issued as consideration for acquisition of subsidiaries �One for eleven share consolidation �Cancellation of treasury shares Less transaction costs net of tax End of the financial year	162,749,311 162,613 1,171,777,896 74,101 15,121,448 23,438 7,590,910 10,020 225,063 248 2,085,700 2,086 - - 8,006,681 10,008 - - 500,000 742 - (8) - (88) - - 88,029,353 154,932 - - (1,065,318,526) - - - (49,922,703) (87,864) - (826) - (1,324)
	178,095,822 185,465 162,749,311 162,613

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.

57

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

17. ISSUED CAPITAL (continued)

(c) Options on issue at 30 June Exercise price Expiry date	Number of options 2011 2010
Listed: $1.10 31 Oct 2011 Unlisted: $1.137 22 Nov 2010 $0.647 23 Dec 2013 $0.867 23 Dec 2013 $1.087 23 Dec 2013 $1.307 23 Dec 2013 $1.527 23 Dec 2013 $0.647 11 Mar 2014 $0.867 11 Mar 2014 $1.087 11 Mar 2014 $1.307 11 Mar 2014 $0.83 31 Mar 2014 $1.69 30 Jun 2015 Total options on issue at year end	5,177,542 5,402,605 - 18,182 56,819 56,819 375,004 375,004 375,004 375,004 397,731 397,731 340,912 340,912 113,637 113,637 113,637 113,637 113,637 113,637 113,637 113,637 6,060,606 6,060,606 679,000 -
	13,917,166 13,481,411

Share options carry no rights to dividends and no voting rights. Further details of the employee options are contained in note 28 to the financial statements.

(c) Performance rights on issue at 30 June Vesting date	Number of performance rights 2011 2010
Gold right 2012 30 June 2012 Gold right 2013 30 June 2013 Absolute total shareholder return 2012 30 June 2012 Absolute total shareholder return 2013 30 June 2013	287,750 - 287,750 - 287,750 - 287,750 -
	1,151,000 -

Performance rights carry no rights to dividends and no voting rights. Further details of the employee performance rights are contained in note 28 to the financial statements.

58

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

30 JUNE 2011
	Consolidated 2011 2010 $’000s $’000s
18. RESERVES AND ACCUMULATED LOSSES (a) Reserves Share-based payments reserve Balance at beginning of year Employee share options and performance rights Balance at end of year Investment revaluation reserve Balance at beginning of year Net gain arising on revaluation of available-for-sale financial assets Income tax relating to gain arising on revaluation of available-for- sale financial assets Balance at end of year (b) Accumulated losses Balance at beginning of year Net (loss)/profit for the year Balance at end of year	4,584 4,526 560 58
	5,144 4,584
	- - 224 - (67) -
	157 -
	5,301 4,584
	(28,469) (34,016) (2,303) 5,547
	(30,772) (28,469)

(c) Nature and purpose of reserves

Share-based payments reserve

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

Investment revaluation reserve

The investments revaluation reserve represents accumulated gains and losses arising on the revaluation of available-for-sale financial assets that have been recognised in other comprehensive income, net of amounts reclassified to profit or loss when those assets have been disposed of or are determined to be impaired.

59

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

19. EARNINGS PER SHARE

19. EARNINGS PER SHARE
	2011 2010
Basic earnings per share (cents) Diluted earnings per share (cents) (a) Basic earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: (Loss)/profit for the year attributable to owners of the Company Weighted average number of ordinary shares for the purposes of calculating basic earnings per share (b) Diluted loss per share The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share are as follows: (Loss)/profit for the year attributable to owners of the Company Weighted average number of ordinary shares for the purposes of calculating basic earnings per share Shares deemed to be issued for no consideration in respect of: - Vested options Weighted average number of ordinary shares for the purposes of calculating diluted earnings per share The following potential ordinary shares are anti-dilutive and are therefore excluded from the weighted average number of ordinary shares for the purposes of diluted earnings per share: - Vested options - Performance-based options with vesting conditions not met at year-end - Performance rights with conversion conditions not met at year-end - Options with an exercise price above the average market price of ordinary shares for the year	(1.37) 3.93 (1.37) 3.77 $’000s $’000s (2,303) 5,547
	Number of shares Number of shares 168,728,054 141,225,758
	$’000s $’000s (2,303) 5,547
	Number of shares Number of shares 168,728,054 141,225,758 - 5,935,070
	168,728,054 147,160,828
	5,718,785 - 679,000 - 1,151,000 - - 340,912
	7,548,785 340,912

60

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

20. COMMITMENTS

20. COMMITMENTS
	2011 2010 $’000s $’000s
(a) Exploration commitments Within one year Longer than 1 year, not longer than 5 years	871 838 50 50
	921 888

All of the Group’s tenements are situated in 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 for Western Australian tenements and two years for Queensland tenements as this is dependent on the directors' ongoing assessment of operations and, in certain circumstances, native title negotiations.

(b) Lease commitments: Group as lessee

Operating leases (non-cancellable): Minimum lease payments: within one year later than one year but not later than five years Greater than five years	351 27 1,551 - - -
	1,902 27

The property lease is a non-cancellable lease with a five-year term expiring on 30 June 2016, with rent payable monthly in advance.

(c) Physical gold delivery commitments

(c) Physical gold delivery commitments
Consolidated Within one year later than one year but not later than five years Greater than five years	Gold for physical delivery Contracted gold sale price ounces $ 62,159 1,573.00 224,177 1,573.00 - - 286,336 1,573.00	Value of committed sales $’000s 97,776 352,631 -
		450,407

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 and the Board of Directors 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.

61

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

20. COMMITMENTS (continued)

30 JUNE 2011 20. COMMITMENTS (continued)
(d) Capital expenditure commitments Plant and equipment Within one year Longer than 1 year, not longer than 5 years	2011 2010 $’000s $’000s - 629 - -
	- 629

Capital expenditure commitments at the end of the previous year related to a contract the Group had entered into for the construction of the Edna May gold treatment plant.

(e) Other contracts

(i) Contract to supply and operate mobile mining equipment to the Edna May Gold Operations

A termination fee is payable by the Group if this contract is terminated with less than 6 months notice. The maximum termination fee payable is $2.8 million. No termination fee is payable if the Group provides more than 6 months notice.

(ii) Contract to supply electricity to the Edna May Gold Operations

The Group have entered into a 3 year contract to purchase electricity for the Edna May Gold Operations. Supply of electricity under the contract commenced during February 2010. The Group has an obligation under the contract to purchase a minimum amount of electricity each year and has provided a bank guarantee of $1.2 million to the electricity provider to cover the cost of failing to meet any obligations under the contract, including any shortfall in electricity usage.

(iii) Contract to supply mining services to the Cracow Mining Joint Venture

The Cracow Mining Joint Venture is required to pay for the demobilisation of mining equipment and the mining work force should mining operations at the Cracow Gold Operations cease. The Group’s share of the estimated maximum amount that would be payable is $0.45 million.

21. CONTINGENCIES

Contingent liabilities

Bank guarantees

The Group has provided the following bank guarantees:

• $1.2 million to the electricity provider to the Edna May Gold Operations to cover the cost of failing to meet any obligations under the contract, including any shortfall in electricity usage (refer note 20(e)).

• $3.5 million to the State of Western Australia to cover the cost of site restoration.

• $0.3 million bond for leased premises.

The Cracow Gold Operations, of which the Group has a 30% share (refer note 24), has bank guarantees of:

• $2.1 million (Group’s share $0.6 million, 2009:nil) in favour of the State of Queensland to cover the cost of site restoration; and

• $4.4 million (Group’s share $1.3 million, 2009: nil) in favour of the electricity provider to cover the cost of infrastructure constructed by the service provider should the service no longer be required. The value of the guarantee decreases over time, reducing to nil in 2034.

Cross charge

The obligations of the Group to make payments under the Cracow Mining Joint Venture Agreement are secured by registered cross charges over the assets of the Cracow Gold Operations given in favour of the other joint venture participant.

Payroll facility

The Group has set up a term deposit of $760,000 as security for a payroll facility (refer note 8). There were no other material contingent assets or liabilities as at period end.

62

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

22. SUBSIDIARIES

The parent entity is Catalpa Resources Limited. Details of the Company’s subsidiaries are as follows:

Details of the Company’s subsidiaries	are as follows:
Name	Country of Incorporation	Ownership	Interest
		2011	2010
Westonia Mines Minerals Pty Ltd	Australia	100%	100%
Edna May Operations Pty Ltd	Australia	100%	100%
Lion Selection Pty Ltd	Australia	100%	100%
AuSelect Pty Ltd	Australia	100%	100%
Lion Mining Pty Ltd	Australia	100%	100%
Sedgold Pty Ltd	Australia	100%	100%
Fernyside Pty Ltd	Australia	100%	100%

63

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

23. ACQUISITION OF SUBSIDIARIES

During December 2009, the Group completed a merger with Lion Selection Limited. As part of the merger the Group acquired a 100% interest in Lion Selection Pty Ltd which in turn has a 100% interest in: AuSelect Pty Ltd; Lion Mining Pty Ltd; Sedgold Pty Ltd; and Fernyside Pty Ltd.

The above subsidiaries collectively hold a 30% interest in the Cracow Gold Operations (refer to note 24). The Cracow Gold Operations is an underground gold mine which produced 102,759 ozs of gold for the year ended 30 June 2010. This acquisition will increase gold production for the Group assisting the Group to transition to a mid-tier gold producer. The Group’s share of production in the year ended 30 June 2010 since acquisition date was 17,321 ozs.

The consideration transferred consisted of 88,029,353 shares with a fair value of $1.76 each based on the quoted price of the shares of Catalpa at the date of exchange. Acquisition-related costs amounting to $2.311 million have been excluded from the consideration and have been recognised as an expense in the period.

Assets acquired and liabilities assumed at the date of acquisition

The Group has recognised the fair values of the identifiable assets and liabilities of the acquired subsidiaries as follows:

Current assets Cash Trade and other receivables Financial assets Inventories Exploration, evaluation and development Total current assets Non-current assets Property, plant and equipment Exploration, evaluation and development Deferred tax asset Total non-current assets Total assets Current liabilities Trade and other payables Income tax payable Provisions Total current liabilities Non-current liabilities Provisions Deferred tax liabilities Total non-current liabilities Total liabilities Fair value of identifiable net assets Acquisition date fair value of consideration transferred Shares issued at fair value	Fair value at acquisition date Carrying value $’000s $’000s 2,896 2,896 248 248 87,864 85,236 3,434 3,434 1,959 1,959
	96,401 93,773
	4,980 4,980 47,891 34,848 9,258 -
	62,129 39,828
	158,530 133,601
	1,511 1,511 833 833 747 747
	3,091 3,091
	507 507 - 2,629
	507 3,136
	3,598 6,227
	154,932 154,932

64

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

23. ACQUISITION OF SUBSIDIARIES (continued)

Net cash inflow arising from the acquisition

Consideration paid in cash Cash and cash equivalent balances acquired	$’000s - 2,896
	2,896

Impact of acquisition on the results of the Group

The acquired subsidiaries contributed revenues of $22.384 million and a net profit after tax of $2.879 million to the consolidated entity for the period from 1 December 2009 to 30 June 2010. Had the acquisition of the subsidiaries been effected at 1 July 2009, the revenue of the Group for the year ended 30 June 2010 would have increased by $15.151 million and the net profit after tax for the year would have increased by $1.419 million.

24. JOINTLY CONTROLLED OPERATION

The Group owns a 30% interest in the Cracow Gold Operations located in Queensland. Newcrest Mining Limited own the other 70% and manage the operation. Each joint venture partner is responsible for selling their share of gold produced.

The Group’s interest, as a venturer, in assets employed in the Cracow Gold Operations is detailed below. The amounts are included in the consolidated financial statements under their respective asset categories as a result of the proportionate consolidation of the Cracow Gold Operations:

Share of joint venture operation’s assets and liabilities Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Share of joint venture revenue, expenses and results Revenue - interest Expenses Loss before income tax Share of joint venture capital commitments	CONSOLIDATED June 2011 June 2010 $’000s $’000s
	5,929 5,892 27,223 22,898
	33,152 28,790
	5,297 3,676 572 435
	5,869 4,111
	27,283 24,679
	57 110 (26,888) (15,200)
	(26,831) (15,090)
	- -

Each joint venture partner is responsible for selling their share of gold production, hence the joint venture does not generate any revenue from gold sales

65

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

25. PARENT ENTITY INFORMATION

The following details information related to the parent entity, Catalpa Resources Limited, at 30 June 2011. The information presented here has been prepared using consistent accounting policies as presented in Note 2.

Financial Position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Financial Performance Profit/(loss) for the year Other comprehensive income Total comprehensive income	2011 2010 $’000 $’000 1,807 18,666 156,872 129,372
	158,679 148,038
	1,962 2,999 9,012 8,439
	10,974 11,438
	147,705 136,600
	185,465 162,613 5,301 4,584 (43,061) (30,597)
	147,705 136,600
	(12,984) 3,406 157 -
	(12,827) 3,406

Catalpa Resources Limited has provided a guarantee to Macquarie Bank Limited in respect of the loan to Edna May Operations Pty Ltd (refer note 14).

Catalpa Resources Limited had no commitments to purchase property, plant and equipment or other contingent liabilities at year end.

66

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

26. CASH AND CASH EQUIVALENTS

26. CASH AND CASH EQUIVALENTS
Notes	2011 2010 $’000s $’000s
(a) Reconciliation of cash and cash equivalents Cash and cash equivalents as shown in the balance sheets and the statements of cash flows Cash at call (i) Group’s share of cash and cash equivalents held by joint venture 24 Restricted use cash and cash equivalents balance (ii) Short-term deposits (i) This balance includes $7 million which is available for use with prior permission from Macquarie Bank Limited under the terms of the bank loan (refer note 14). (ii) These funds are restricted for use on certain capital and operational expenditure incurred by the Edna May Gold Operations as agreed with the bank loan provider. These funds are expected to be fully utilised within 12 months. (b) Reconciliation of profit for the year to net cash outflow from operating activities (Loss)/profit for the year Non-cash items: Depreciation and amortisation of non-current assets Share based payments Amortisation of borrowing costs Interest paid and capitalised Interest expense capitalised as bank loan principal Transfers to Investing Activities: Proceeds from sale of gold capitalised Payments to suppliers and employees capitalised (Increase)/decrease in assets: (Increase)/decrease in other receivables (Increase)/decrease in prepayments (Increase)/decrease in inventories Increase/(decrease) in liabilities: (Decrease)/increase in trade and other payables (Decrease)/increase in provisions (Decrease)/increase in deferred tax balance Net cash inflow from operating activities (c) Financing facilities The amount of bank loan facility used at year end is as follows: Amount used Amount unused	13,788 24,964 2,221 1,111 14,042 - - 9,038
	30,051 35,113
	(2,303) 5,547 20,275 8,118 560 58 869 - 1,921 - 22 - (21,481) - 21,874 - (1,428) (13) 67 (235) (7,982) (543) 3,799 84 431 851 5,835 (10,067)
	22,459 3,800
	47,522 65,000 - -
	47,522 65,000

(d) Non-cash investing and financing activities

During the current financial year the Group entered into the following non-cash investing and financing activities which are not reflected in the consolidated statement of cash flows:

• The Group acquired $120,000 of equipment under a finance lease (2010: $568,000)

• As part of a revision of the repayment plan of the Group’s bank loan, $22,000 of accrued interest was capitalised into the bank loan (2010: nil).

67

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

26. CASH AND CASH EQUIVALENTS (continued)

(e) Cash flows relating to capitalised operating revenue and expenses

Revenue and expenses relating to the commissioning phase of the Edna May Gold Operations have been capitalised as part of the cost of this development and hence the associated cash flows have been classified as cash flows from investing activities.

27. FINANCIAL INSTRUMENTS

(a) Financial risk management objectives

The Group is exposed to financial risk through the normal course of its business operations. The key risks impacting the Group’s financial instruments are considered to be interest rate risk and credit risk. Management of these risks is governed by the Company’s Treasury and Risk Management Policy approved by the Board. 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 risks on an ongoing basis and report compliance with the Policy to the Board on a regular basis.

(b) Categories of financial instruments

The Group holds the following financial instruments

Financial assets Cash and cash equivalents Receivables Available for sale financial asset Financial liabilities Amortised cost	2011 2010 $’000s $’000s 30,051 35,113 3,407 1,114 784 560
	34,242 36,787
	67,703 81,769

The carrying values of the financial assets and liabilities noted above approximate their fair value at balance date. The available for sale financial asset is valued at the closing market value of shares on the balance date (refer note 9).

(c) Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’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’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. The gearing ratio of the Group at balance date is 29.6% (2010: 47.4%) There were no changes in the consolidated entity’s approach to capital management during the year.

The Group operates in Australia. Except for the restricted use deposits described in note 26(a) the Group is not subject to any externally imposed capital requirements.

(d) Interest rate risk management

The Group is 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 and floating 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.

68

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

27. FINANCIAL RISK MANAGEMENT (cont’d)

At reporting date, had interest rates been 50 basis points higher/lower and all other variables were held constant, the Group’s net loss would increase/decrease by $87,000 (2010: increase/decrease by $149,000) and equity decrease/increase by $87,000 (2010: increase/decrease by $149,000). This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings. The rates on these borrowings are generally fixed for three to six month terms and rolled over at the interest rate prevailing on maturity date. Given the relatively short terms these rates are considered variable. The Group’s sensitivity to interest rates has changed compared to the previous year due to a decrease in the variable rate borrowings as a result of loan repayments.

(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 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.

Weighted average effective interest rate 2011 % Financial assets Variable interest rate instruments 4.8% Non-interest bearing n/a Financial liabilities Variable interest rate instruments 10.1% Fixed interest rate instruments 9.1% Non-interest bearing n/a 2010 Financial assets Variable interest rate instruments 4.6% Non-interest bearing n/a Financial liabilities Variable interest rate instruments 10% Fixed interest rate instruments 9.1% Non-interest bearing n/a	Less than 1 month 1 to 3 months 3 months to 1 year 1 to 5 years 5+ years $’000s $’000s $’000s $’000s $’000s 30,051 - 799 - - 3,326 - - 104
	33,377 - 799 104
	- 7,195 13,133 44,207 - 27 54 242 412 - 19,496 - - - -
	19,523 7,249 13,375 44,619 -
	35,151 - - - - 1,674 - - - -
	36,825 - - - -
	154 4,779 24,381 47,725 - 23 46 207 602 - 9,101 6,885 - - -
	9,278 11,710 24,588 48,327 -

69

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

27. FINANCIAL RISK MANAGEMENT (cont’d)

(f) Commodity price risk

The Group’s future revenues are exposed to movements in the gold price. To address this risk, as at year end, the Group has in place physical gold delivery contracts covering sales of 286,336ozs of gold at a price of $1,573.00 per ounce to be delivered over a period of approximately 4 years (refer to note 20(c)). This represents approximately 15% of the Edna May resource. 61,050 ounces of gold (2010:4,679 ounces) were delivered into these contracts during the period.

(g) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to 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 up to maximum limits established for each bank under the Group’s risk management policy. The maximum credit risk exposure relating to the financial assets is represented by the carrying value as at the balance sheet date. The Group considers the credit standing of counterparties when making deposits to manage the credit risk.

(h) 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 approximates their respective fair values, determined in accordance with the accounting policies disclosed in note 2 to the financial statements.

70

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

28. SHARE-BASED PAYMENTS

Long Term Incentive Plan (“LTIP”)

An LTIP was established and approved at the Annual General Meeting on 23 November 2011. The plan permits the Company, at the discretion of the Directors, to grant both options and performance rights over unissued ordinary shares of the Company to eligible Directors and members of staff as specified in the plan rules.

Employees and Contractors Option Plan (“ECOP”)

An ECOP was established and approved at the Annual General Meeting on 27 November 2008. 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. No further options will be issued under this plan.

Details of options and performance rights issued under the LTIP and ECOP

The options and performance rights, 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 Group, the nature or terms of their employment or contract and the contribution they make to the Group as a whole.

The options and performance rights are issued for a specified period and each option or performance right 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 and performance rights expire on the earlier of their expiry date or termination of the employee’s employment subject to Director discretion.

Options and performance rights do not vest until a specified period after granting and their exercise is conditional on the achievement of certain performance hurdles based on actual gold production at the Edna May Gold Operations and total shareholder return.

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

Set out below are summaries of the options granted and in existence during the current and prior reporting periods:

71

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

28. SHARE-BASED PAYMENTS (cont’d)

Options

ptions
Option series	Number	Grant date	Expiry Date	Exercise	Weighted average
				Price	fair value at grant
					date
Issued under the
LTIP
Jul 10	679,000	Jul 10	30 Jun 15	$1.69	$0.98
Issued under the
ECOP
Nov 05	18,182	Nov 05	22 Nov 10	$1.137	$0.22
Dec 08	56,819	Dec 08	23 Dec 13	$0.647	$0.24
Dec 08	56,819	Dec 08	23 Dec 13	$0.867	$0.22
Dec 08	397,731	Dec 08	23 Dec 13	$1.087	$0.20
Dec 08	397,731	Dec 08	23 Dec 13	$1.307	$0.18
Dec 08	340,912	Dec 08	23 Dec 13	$1.527	$0.10
Mar 09	113,637	Mar 09	11 Mar 14	$0.66	$0.15
Mar 09	113,637	Mar 09	11 Mar 14	$0.88	$0.14
Mar 09	113,637	Mar 09	11 Mar 14	$1.10	$0.12
Mar 09	113,637	Mar 09	11 Mar 14	$1.32	$0.11
Issued outside the
LTIP or ECOP
Dec 08	340,912	Dec 08	23 Dec 13	$0.867	$0.22
Mar 09	6,060,606	May 09	31 Mar 14	$0.83	$0.62

The weighted average remaining contractual life of share options issued as share-based payments and outstanding at the end of the financial year was 2.8 years (2010: 3.7 years), with exercise prices ranging from $0.647 to $1.69.

Performance Rights

Series	Number	Grant Date	Expiry Date	Exercise	Weighted average
				Price	fair value at grant
					date
Gold Jun 12	295,250	1 Jul 10	30 Jun 12	-	$0.86
ATSR Jun 12	295,250	1 Jul 10	30 Jun 12	-	$0.92
Gold Jun 13	295,250	1 Jul 10	30 Jun 13	-	$0.74
ATSR Jun 13	295,250	1 Jul 10	30 Jun 13	-	$0.72

There were no performance rights granted or on issue during the year ended 30 June 2010.

72

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

28. SHARE-BASED PAYMENTS (cont’d)

The weighted average fair value of the options granted during the year as share-based payments was 98 cents. No options were granted during the previous year. The price for the “Jul 10” was calculated using the Binomial Model, while the price for all other series was calculated by using the Black-Scholes European Option Pricing Model. The following inputs were applied:

Inputs into the model
Option series and	Nov 05	Apr 08	Dec 08	Dec 08	Dec 08	Dec 08	Dec	08
	at	at	at	at	at	at	at
grant date share price	$1.137	$0.867	$0.647	$0.867	$1.087	$1.307	$1.527
Exercise price (cents)	110	88	66	88	110	132	154
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	Mar 09	Mar 09	Mar 09	Mar 09	Mar 09	Jul 10
	at	at	at	at	at	at
Grant date share price	$0.647	$0.867	$1.087	$1.307	$0.88	$1.69
Exercise price (cents)	66	88	110	132	83	169
Expected volatility (%)	80	80	80	80	80	80
Option life (years)	5	5	5	5	5	3.6
Dividend yield	-	-	-	-	-	-
Risk-free interest rate (%)	4.25	4.25	4.25	4.25	4.25	4.76

The weighted average fair value of the performance rights granted during the year as share-based payments was $1.31. No performance rights were granted during the previous year. The price was calculated using a Monte Carlo Simulation model. The Monte Carlo Simulation model is a computerbased technique where a large number of iterations is performed based on probabilities determined by a specific probability distribution function. The Monte Carlo Simulation model is used to determine the probability of the absolute return performance hurdles being achieved.

The performance rights have no exercise price and vesting occurs in two equal tranches after two or three years. Expected volatility for the ATSR performance hurdle is based on the volatility of the Company and a peer group of companies.

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Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

28. SHARE-BASED PAYMENTS (cont’d)

The following reconciles the share options and performance rights issued as share-based payments outstanding at the beginning and end of the financial year.

	2011 2010 Number of options or rights Weighted average exercise price Number of options or rights Weighted average exercise price
Options issued aspart of the LTIP
Outstanding at the beginning of the year Granted Exercised Lapsed Expired Outstanding at year-end Exercisable at year-end Options issued aspart of the ECOP	- - - - 679,000 $1.69 - - - - - - - - - - - - - -
	679,000 $1.69 - -
	- - - -
Outstanding at the beginning of the year One for eleven share consolidation Granted Exercised(i) Lapsed Expired Outstanding at year-end Exercisable at year-end Options issued as share-based payments outside of the LTIP or ECOP	1,700,015 $1.18 19,050,000 $0.10 - - (17,318,182) - - - - - - - (31,803) $0.96 - - - - (18,182) $1.137 - -
	1,681,183 $1.18 1,700,015 $1.18
	1,681,183 $1.18 1,700,015 $1.18
Outstanding at the beginning of the year one for eleven share consolidation Granted Exercised Lapsed Expired Outstanding at year-end Exercisable at year-end Performance rights issued aspart of the LTIP	6,378,791 $0.83 70,416,666 $0.075 - - (64,015,148) - - - - - - - (22,727) $0.867 - - - - - - - -
	6,378,791 $0.83 6,378,791 $0.83
	6,378,791 $0.83 6,378,791 $0.83
Outstanding at the beginning of the year - - - - Granted 1,181,000 - - - Exercised - - - - Lapsed (30,000) - - - Expired - - - - Outstanding at year-end 1,151,000 - - - Exercisable at year-end - - - - (i)includes 9,074 options exercised in the previous financial year by an employee who is not a director or a member of senior management	- - - - 1,181,000 - - - - - - - (30,000) - - - - - - -
	1,151,000 - - -
	- - - -

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Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

29. 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:

Peter Maloney	Non-Executive Chairman
Bruce McFadzean	Managing Director
John Rowe	Non-Executive Director
Murray Pollock	Non-Executive Director
Barry Sullivan	Non-Executive Director
Graham Freestone	Non-Executive Director

(ii) Senior Management

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	Chief Financial Officer and Joint Company Secretary
	(appointed Joint Company Secretary 30 December 2010)
Stuart Pether	Chief Operating Officer
Adrian Pelliccia	Manager Business Development
John Fraser	General Manager – Edna May Gold Operations
Paul Mason	Joint Company Secretary (appointed 30 December 2010)
Graham Anderson	Joint Company Secretary (resigned 30 December 2010)
Leonard Math	Joint Company Secretary (resigned 30 December 2010)

(b) Directors and senior management

The aggregate compensation made to Directors and senior management is set out below:

(b) Directors and senior management The aggregate compensation made to Directors and senior management is set out below:
	2011 2010 $ $
Short-term benefits Post employment benefits Termination benefits Share-based payments	2,791,032 2,091,226 215,574 189,302 - - 414,624 55,848
	3,421,230 2,336,376

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Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

30. RELATED PARTY TRANSACTIONS

Parent entity

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

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

(a) Equity interests in related parties

Equity interests in subsidiaries

Details of the percentage ownership of subsidiaries are disclosed in note 22 to the financial statements.

(b) Transactions with Directors and senior management

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 Directors and senior management

There were no loans to Directors or senior management during the period.

76

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

30 RELATED PARTY TRANSACTIONS (continued)

(c) Director and senior management personal equity holdings

(i) Fully paid ordinary shares of Catalpa Resources Limited.

	Balance at start	Received on	Net other	Balance at end
	of period or on	exercise of	change	of period or
	date of	options		date of
	appointment			resignation
	No	No	No	No
2011
Directors
Peter Maloney	1,379,579	-	-	1,379,579
Bruce McFadzean	97,369	-	74,250	171,619
John Rowe	95,695	-	-	95,695
Murray Pollock	1,839,492	-	-	1,839,492
Barry Sullivan	111,005	-	-	111,005
Graham Freestone	58,245	-	-	58,245
Executives
Erik Palmbachs	11,576	-	-	11,576
Stuart Pether	175,516	-	-	175,516
Adrian Pelliccia	16,932	-	(16,932)	-
John Fraser	-	-	-	-
Paul Mason (v)	10,000	-	-	10,000
Graham Anderson (vi)	-	-	-	-
Leonard Math (vi)	-	-	-	-
2010
Directors
Peter Maloney (i)	165,847	-	1,213,732	1,379,579
Bruce McFadzean	92,500	-	4,869	97,369
John Rowe	90,909	-	4,786	95,695
Murray Pollock	1,661,014	85,0691	93,409	1,839,492
Barry Sullivan	-	45,4562	65,549	111,005
Graham Freestone (i)	55,332	-	2,913	58,245
Nigel Johnson (ii)	136,363	-	-	136,363
Executives
Erik Palmbachs	7,575	-	4,001	11,576
Stuart Pether	151,515	-	24,001	175,516
Adrian Pelliccia (iii)	-	-	16,932	16,932
John Fraser (iv)	-	-	-	-
Graham Anderson	-	-	-	-
Leonard Math	-	-	-	-

(i) appointed 10 December 2009

(ii) resigned 10 December 2009

(iii) appointed as an executive May 2010

(iv) appointed 24 August 2009

(v) appointed 30 December 2010

(vi) resigned 30 December 2010

1 options converted were listed options that were acquired by Mr Pollock and not received as a sharebased payment.

2 options converted were unlisted options received as a share-based payment.

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Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

30. 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 start of period Granted as compen- sation Exer- cised Net other change No No No No 2011 Directors Peter Maloney - - - - Bruce McFadzean 924,774 360,000 - - John Rowe 181,820 - - Murray Pollock 301,554 - - Barry Sullivan 45,458 - - Graham Freestone - - - - Executives Erik Palmbachs 227,276 110,000 - - Stuart Pether 454,548 125,000 - - Adrian Pelliccia - 34,000 - - John Fraser - - - - Paul Mason (v) - - - - Graham Anderson (vi) - - - - Leonard Math (vi) - - - - 2010 Directors Peter Maloney (i) - - - - Bruce McFadzean 924,774 - - - John Rowe 181,820 - - Murray Pollock 386,623 - (85,069)1 - Barry Sullivan 90,914 - (45,456)2 - Graham Freestone (i) - - - - Nigel Johnson (ii) 90,914 - - - Executives - Erik Palmbachs 227,276 - - - Stuart Pether 454,548 - - - Adrian Pelliccia (iii) John Fraser (iv) Graham Anderson - - - - Leonard Math - - - -

At end of period Balance at year end or resigna- tion date Balance vested Vested and exercise- able Options vested during period No No No No - - - - 1,284,774 924,774 924,774 227,274 181,820 181,820 181,820 45,456 301,554 301,554 301,554 22,731 45,458 45,458 45,458 22,728 - - - - 337,276 227,276 227,276 56,819 579,548 454,548 454,548 113,637 34,000 - - - - - - - - - - - - - - - - - - - - - - - 924,774 697,500 697,500 - 181,820 136,364 136,364 - 301,554 278,823 278,823 - 45,458 22,730 22,730 - - - - - 90,914 90,914 90,914 22,728 227,276 170,457 170,457 56,818 454,548 340,911 340,911 113,637 - - - - - - - -

(i) appointed 10 December 2009

(ii) resigned 10 December 2009

(iii) appointed as an executive May 2010

(iv) appointed 24 August 2009

(v) appointed 30 December 2010

(vi) resigned 30 December 2010

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Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

30. RELATED PARTY TRANSACTIONS (continued)

• 1 options converted were listed options that were acquired by Mr Pollock and not received as a share-based payment.

2 options converted were unlisted options received as a share-based payment.

3

• balances have been adjusted for the one for eleven share consolidation undertaken in December 2009.

No options were vested but not exercisable during the current or prior year.

All options issued to key management personnel were made in accordance with the provisions of the Long Term Incentive Plan (“LTIP”) or the employees and contractors share option plan (“ECOP”). Further details of the LTIP and ECOP and of share options granted during the period are contained in notes 28.

In the event of the implementation of the merger with Conquest the Directors have exercised their discretion such that all options and performance rights that have been issued that have not already vested under the Company’s ECOP and LTIP will vest (refer Note 32).

(ii) Performance rights

The numbers of performance rights 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 start of period Granted as compen- sation Con- verted Net other change No No No No 2011 Directors Peter Maloney - - - - Bruce McFadzean - 160,000 - - John Rowe - - - Murray Pollock - - - Barry Sullivan - - - Graham Freestone - - - - Executives Erik Palmbachs - 110,000 - - Stuart Pether - 125,000 - - Adrian Pelliccia - 80,000 - - John Fraser - 110,000 - - Paul Mason (v) - 44,000 - - Graham Anderson (vi) - - - - Leonard Math (vi) - - - -

At end ofperiod Balance at year end Balance vested Vested and exercise- able Vested during period No No No No - - - - 160,000 - - - - - - - - - - - - - - - - - - - 110,000 - - - 125,000 - - - 80,000 - - - 110,000 - - - 44,000 - - - - - - - - - - -

All performance rights issued to key management personnel were made in accordance with the provisions of the LTIP. Further details of the LTIP and of performance rights granted during the period are contained in notes 28.

There were no performance rights on issue in the previous year.

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Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

30. RELATED PARTY TRANSACTIONS (continued)

(d) Transactions with other related parties

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 period up to the date of their resignation as Joint Company Secretaries was $42,000 (2010:$84,000).

Bruce McFadzean

During the previous year the Company acquired a vehicle from Mr McFadzean in an arm’s length transaction for $90,000. Mr McFadzean continues to have use of the vehicle.

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 $14,000 (2010:$8,800).

BJK Sullivan and Associates Pty Ltd

BJK Sullivan and Associates Pty Ltd, a company of which Mr Barry Sullivan 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 BJK Sullivan and Associates is $5,000 (2010:$8,000).

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Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

30 JUNE 2011
	2011 2010 $ $
31. REMUNERATION OF AUDITORS Amounts received, or due and receivable by the former auditors, PKF Chartered Accountants, for audit or review of the financial report: Taxation services Audit services Non-audit services in relation to: �merger with Lion Selection �advice in respect of entitlement offer �valuation advice Amounts received, or due and receivable by the current auditors, Deloitte Touche Tohmatsu, for audit or review of the financial report: Audit services: �Audit or review of financial reports Non-audit services in relation to: �proposed merger with Conquest Mining Limited �advice on corporate strategy	- 61,489 - 52,024 - 89,686 - 34,591 - 1,749
	- 239,539 98,425 46,126 26,000 - 84,983 -
	209,408 285,665

During the previous financial year the auditor was PKF Chartered Accountants, post 30 June 2010, the auditor of the Group changed to Deloitte Touche Tohmatsu.

81

Catalpa Resources Limited - Annual Report

Notes to the Financial Statements (continued)

30 JUNE 2011

32. EVENTS AFTER THE REPORTING PERIOD

Merger

The Company has negotiated a merger with Conquest Mining Limited (“Conquest”) along with the concurrent acquisition of Newcrest Mining Limited’s interests in the gold mining and exploration projects at Cracow and Mt Rawdon. The merger is subject to approval by Conquest shareholders and the issue of shares for the asset acquisitions is subject to approval by Catalpa shareholders at meetings scheduled to take place on 14 October 2011. If the Conquest shareholders approve the merger transaction Conquest will seek the approval of the transaction from the Federal Court. Subject to the approval of the merger, the acquisition of the Newcrest assets is expected to take place on 2 November 2011.

In the event of the implementation of the merger with Conquest the Directors have exercised their discretion such that all options and performance rights that have been issued to management that have not already vested under the Company’s ECOP and LTIP will vest. The non-conflicted directors have exercised their discretion such that upon implementation of the merger with Conquest, all options and performance rights issued under the Company’s ECOP and LTIP to the Managing Director and to some of the non-executive directors, that have not already vested will vest. This will result in the remaining value of the options and performance rights not yet amortised as at 30 June 2011 being expensed in the year ended 30 June 2012 rather than being expensed over the original vesting period.

Availability of Tax Losses

The availability of tax losses to offset future taxable income are dependent upon meeting the Continuity of Ownership Test (“CoT”) or the Same Business Test (“SBT”). In the event of the merger with Conquest proceeding the Company will need to assess whether the CoT or the SBT can be met in relation to losses arising in the periods ending before and up to 30 June 2009. There is therefore risk that tax losses of $19.533 million currently recognised as a deferred tax asset of $5.860 million may no longer be available to the Company and hence may need to be derecognised in the year ending 30 June 2012.

No other matter or circumstance has arisen since 30 June 2011, 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.

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Catalpa Resources Limited - Annual Report

Directors’ Declaration

The Directors declare that:

• (a) In the Directors opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;

• (b) In the Directors’ opinion, the attached financial statements and notes thereto are in accordance with, the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity;

• (c) In the Directors’ opinion, the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board as stated in note 2 to the financial statements; and

• (d) The Directors have been given the declarations required by section 295A of the Corporations Act 2001.

.

Signed in accordance with a resolution of the Directors made pursuant to s295(5) of the Corporations Act 2001.

On behalf of the Directors

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Bruce McFadzean

Managing Director Perth, 26 September 2011

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Peter Maloney

Non-Executive Chairman

83

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Deloitte Touche Tohmatsu ABN 74 490 121 060

Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

Independent Auditor’s Report to the members of Catalpa Resources Limited

Tel: +61 (0) 8 9365 7000 Fax: +61 (8) 9365 7001 www.deloitte.com.au

Report on the Financial Report

We have audited the accompanying financial report of Catalpa Resources Limited, which comprises the statement of financial position as at 30 June 2011, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity for the year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising Catalpa Resources Limited and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages 24 to 83.

Directors’ Responsibility for the Financial Report

The directors of Catalpa Resources Limited are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that the financial statements comply with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control, relevant to the entity’s preparation of the financial report that gives a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

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

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited

84

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Auditor’s Independence Declaration

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

Opinion

In our opinion:

• (a) the financial report of Catalpa Resources Limited is in accordance with the Corporations Act 2001 , including:

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

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

• (b) the financial statements also comply with International Financial Reporting Standards as disclosed in Note 2.

Report on the Remuneration Report

We have audited the Remuneration Report included in page 10 to 21 of the directors’ report for the year ended 30 June 2011. The directors of Catalpa Resources Limited are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion the Remuneration Report of Catalpa Resources Limited for the year ended 30 June 2011, complies with section 300A of the Corporations Act 2001 .

DELOITTE TOUCHE TOHMATSU

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Chris Nicoloff Partner Chartered Accountants Perth, 26 September 2011

85

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 complied with the Australian Securities Exchange (“ASX”) Corporate Governance Council (“CGC”) revised (August 2007) “Principles of Good Corporate Governance and Best Practice Recommendations (2[nd] 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 accessed on the Company’s website.

The Board has also established an Audit and Risk Committee and Remuneration 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 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 six Directors with each Director having their relevant expertise and experience with an emphasis on commercial, exploration, mining, financial and project development.

Criteria considered when appointing a new Director include:

• quality of the individual;

• background of experience and achievements and 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.

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Catalpa Resources Limited - Annual Report

Corporate Governance Statement (continued)

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 NonExecutive 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.

As at the date of this report the board comprised of six Directors, five of whom are considered to be independent.

independent.
Name	First Appointed	Non-Executive	Independent
Peter Maloney	10 December 2009	Yes	Yes
Bruce McFadzean	6 June 2008	No	No
John Rowe	12 October	Yes	Yes
	2006
Murray Pollock	21 October	Yes	Yes
	2000
Barry Sullivan	16 June 2008	Yes	Yes
Graham Freestone	10 December	Yes	Yes
	2009

The Chairman

The Company’s Chairman, Mr Peter Maloney, is an independent, Non-Executive Director. As Chairman, Mr Maloney 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, exploration and other activities and its current financial status.

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

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Catalpa Resources Limited - Annual Report

Corporate Governance Statement (continued)

Board Committees

The Board has established an Audit and Risk Committee comprised of four 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 and Risk Committee as at the date of this report is set out in the Directors’ Report.

The Board has established a Remuneration Committee comprised of four 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.

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

In addition to the Audit and Risk Committee the Board has established a Risk Management Committee

comprised of the Managing Director and senior management 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, 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 accessed on the Company’s website.

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Corporate Governance Statement (continued)

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 and Risk Committee

Please refer to the Directors’ Report for a list of Audit and Risk Committee members, their qualifications, membership changes and member attendance at the Audit and Risk Committee meetings. The Managing Director, Chief Financial Officer, Company Secretary and external auditors are normally invited to attend each Audit and Risk Committee meeting.

The Audit and Risk Committee assists the Board to discharge its responsibilities in the areas of:

• financial reporting;

• external audit;

• � internal controls and risks;

• compliance; and

• risk assessment.

As part of its role in financial reporting, the Audit and Risk 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 and Risk 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 accessed on the Company’s website.

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Corporate Governance Statement (continued)

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.

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 Chief 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 contain inherent risk and where success may give rise to high rewards.

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Corporate Governance Statement (continued)

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 $750,000). The remuneration of the Non-Executive Directors is fixed rather than variable.

Executive Remuneration

The 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 Directors Report.

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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 22 September 2011.

(a) Distribution of equity securities

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

	Ordinary shares Number of holders Number of shares
1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over The number of shareholders holding less than a marketable parcel of shares are:	2,141 994,657 3,040 7,863,596 1,099 7,933,120 1,132 29,009,456 94 132,498,220
	7,506 178,299,049
	756 67,564

(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 NATIONAL NOMINEES LIMITED 2 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 3 JP MORGAN NOMINEES AUSTRALIA LIMITED 4 J P MORGAN NOMINEES AUSTRALIA LIMITED 5 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA 6 COGENT NOMINEES PTY LIMITED 7 CITICORP NOMINEES PTY LIMITED 8 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 9 MR MARK GARETH CREASY 10 BRISPOT NOMINEES PTY LTD 11 RENEAGLE PTY LTD 12 MR DAVID GEORGE METFORD 13 BAINPRO NOMINEES PTY LIMITED 14 GOLDRICH HOLDINGS PTY LTD 15 A & L WAIT SUPERANNUATION PTY LIMITED 16 EQUITAS NOMINEES PTY LIMITED 17 THE AUSTRALIAN NATIONAL UNIVERSITY 18 YANDAL INVESTMENTS PTY LTD 19 PRANJIP ROAD PTY LTD 20 UBS NOMINEES PTY LTD	27,894,924 15.65% 25,551,170 14.33% 14,028,125 7.87% 6,632,435 3.72% 6,515,355 3.65% 5,869,429 3.29% 5,353,493 3.00% 4,159,581 2.33% 3,423,687 1.92% 2,896,934 1.62% 1,959,703 1.10% 1,775,000 1.00% 1,619,651 0.91% 1,611,070 0.90% 1,005,264 0.56% 1,000,000 0.56% 1,000,000 0.56% 937,277 0.53% 835,003 0.47% 812,541 0.46%
	114,880,642 64.43%

Voting rights

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

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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:

Corporations Act 2001 are:
	Number of Shares
Van Eck Associates Corporation	14,386,445
Orbis Investment Management (Australia) Pty Ltd	8,964,836
UBS AG	8,920,168

(d) Distribution of equity securities (listed options)

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

(d) Distribution of equity securities (listed options) Analysis of numbers of equity security holders by size of holding:
	Listed Options Number of holders Number of options
1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over The number of optionholders holding less than a marketable parcel of shares are:	11 43,801 64 340,695 39 299,417 130 1,666,867 86 2,623,535
	330 4,974,315
	67 26,393

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ASX Additional Information (continued)

(e) Twenty largest option holders

The names of the twenty largest holders of quoted options are:

(e) Twenty largest option holders The names of the twenty largest holders of quoted options are:
	Listed Options Number of options Percentage of ordinary shares
1 CALLITON PTY LTD 2 ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD 3 31 MAY PTY LTD 4 MRS SHAY MARGARET DRUMMOND 5 GOLDRICH HOLDINGS PTY LTD 6 MR ROGER ADRIAN ALDRED PARKER & MRS MARGARET DENISE PARKER 7 T H XX HOLDINGS PTY LTD 8 MR ANGUS WILLIAM SCOTT GEDDES 9 RENEAGLE PTY LTD 10 RUBITON PTY LTD 11 CHARLEMAGNE INVESTMENTS PTY LTD 12 MR SIMON ROBERT EVANS & MRS KATHRYN MARGARET EVANS 13 MR MARK ANDREW WALDRON & MRS LYNETTE CAROL WALDRON 14 MR MARK RESNIK 15 MR NICKOLAS STRONG 16 MR JOSEPH KWORT & MS KATHY ANN FOKAS 17 MR ADRIAN ROBERT NIJMAN & MRS JENNY ANN NIJMAN 18 K C MEDIA PTY LIMITED 19 MR GARY WILLIAM LITTLE 20 MINT FINANCIAL GROUP PTY LTD	707,118 14.22% 555,236 11.16% 208,030 4.18% 182,855 3.68% 181,819 3.66% 156,265 3.14% 138,896 2.79% 132,092 2.66% 129,627 2.61% 127,687 2.57% 103,910 2.09% 97,082 1.95% 77,470 1.56% 63,638 1.28% 57,000 1.15% 54,546 1.10% 50,000 1.01% 50,000 1.01% 47,728 0.96% 39,519 0.79%
	3,160,518 63.54%

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ASX Additional Information (continued)

(f) Schedule of interests in mining tenements

tenements
Location	Tenement	Percentage held / earning
WESTERN AUSTRALIA
BODALIN
Bodallin SW	E77/1165	EMO 100%
BODALIN SOUTH
Kent Road	E77/1452	EMO 100%
JILBADGIE
Jilbadgie East	E77/1132	EMO 65%
MINE
Paddock	M77/110	EMO 100%
Golden Point East	M77/124	EMO 100%
Mine	M77/88	EMO 100%
SANDFORD ROCKS
Sandford Rocks	M77/1494	EMO 100%
WESTONIA
Begley	E77/1069	EMO 100%
Westonia N.E.	E77/1324	EMO 100%
Westonia Belt	E77/516	EMO 100%
Westonia West	E77/990	EMO 100%
Westonia	L77/18	EMO 100%
West Westonia	P77/3713	EMO 100%
		holder: Robert Harrison
Westonia NE	P77/3714	100%

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