FMR RESOURCES LIMITED — Annual Report 2011

Sep 29, 2011

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ABN 29 107 371 497

ANNUAL REPORT For the year ended 30 June 2011

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Contents to Financial Report

Letter from the Chairman and Managing Director	2
Corporate Information	3
Directors’ Report	4
Statement of Financial Position	13
Statement of Comprehensive income	14
Statement of Changes in Equity	15
Statement of Cash Flows	16
Notes to the Financial Statements	17
Directors’ Declaration	34
Independent Audit Report to the members of Orrex Resources Ltd	35
Auditor’s Independence Declaration	37
Corporate Governance Statement	38
ASX Additional Information	43

Annual Report | 30 June 2011

Page 1

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LETTER FROM THE CHAIRMAN AND MANAGING DIRECTOR

For the year ended 30 June 2011

Dear Shareholder,

On behalf of the Directors of Orrex Resources Ltd (“Orrex” or the “Company”), we are pleased to present to shareholders the Company’s Annual Report for the period ending 30 June 2011.

Orrex has achieved a great deal in the past 12 months. In November 2010, Orrex listed on the Australian Stock Exchange with its initial public offering being significantly oversubscribed. We successfully raised $4 million in funding and commenced exploration on the Company’s Golden Mile South and Barlee Projects.

The Company completed, among other exploration activities, three aircore drill programs at the Golden Mile South Project. These programs delineated the Lakeside Prospect confirming a northeast trending gold mineralised alteration zone which is up to 75 m wide and at least 400m in strike (open to the north and south). The Directors are pleased with the results at the Lakeside Prospect and Orrex has commenced planning an RC drill program to further test the zone of mineralisation.

Orrex continues to focus on identifying, acquiring and exploring projects with the potential for the discovery of high quality mineral deposits with significant growth potential.

We believe that a strong basis for exploration success is to explore in the vicinity of existing mines. Fortunately, our flagship property, (the Golden Mile South Project) is a large, under-explored and highly prospective tenement package in close proximity to other gold mines in the Kalgoorlie area. Previous exploration work left many geochemical anomalies and structural targets either untested or incompletely explored. This work has the considerable benefit of developing a knowledge base that has facilitated the delineation of the current exploration targets which we believe have potential for significant discoveries. Our follow-up exploration work, to date, has bolstered this belief.

In addition, gold continues to trade at record highs and we believe the macro environment remains supportive of a strong gold price. This provides significant upside opportunity if a good gold discovery is made at the Golden Mile South Project which is close to Kalgoorlie infrastructure. This remains the Orrex Board’s prime target for growth. We are also continually reviewing opportunities for strategic acquisitions locally and internationally.

Implementation of the Orrex strategy is driven by a board and management team with corporate, exploration and development track records. We are taking a disciplined commercial and technical approach to maximise the value of the Company’s assets and to increase shareholder value. Orrex’s capital structure will also provide leverage to shareholders upon exploration success.

Accordingly, Orrex provides a unique investment opportunity with the combination of:

• a robust cash position,

• exciting projects with the potential for discovery of large scale gold deposits,

• an experienced board and management team committed to success in exploration and acquisition, and

• • a tight capital structure.

On behalf of the Board, we would like to thank our employees, consultants and contractors for their efforts and achievements during the year. We would also like to acknowledge the support of our suppliers and our shareholders for their continued confidence in the Company.

Yours sincerely,

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Mark Stowell Chairman

Sonja Felderhof Managing Director

Annual Report | 30 June 2011

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CORPORATE INFORMATION

This annual report covers Orrex Resources Ltd as an individual entity. The company’s functional and presentation currency is AUD ($).

A description of the company’s operations and of its principal activities is included in the review of operations and activities in the directors’ report on pages 4 to 10. The directors’ report is not part of the financial report.

Directors

Mark Stowell (Chairman) Sonja Felderhof (Managing director, Chief Executive Officer Appointed: 18 April 2010) David Frances (Non-Executive Director) Christopher Stephens (Non-Executive Director)

Company Secretary

Jonathan Asquith

Registered office

20 Howard Street Perth WA 6000 Australia

Principal place of business

20 Howard Street Perth WA 6000 Australia

Telephone: +61 8 9486 4862 Facsimile: +61 8 9481 2394 Website: www.orrexresources.com Email: info@orrexresources.com

Auditors Bankers Stantons International Bank of Western Australia Level 1, 1 Havelock Street Bank West Tower West Perth WA 6005 St Georges Terrace Australia Perth WA Share Registrar Solicitors Security Transfer Registrars Johnson Winter Slattery 770 Canning Highway Level 1,London House Applecross 216 St Georges Terrace WA 6153 Perth WA

Annual Report | 30 June 2011

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DIRECTORS’ REPORT

Your directors submit their report for the year ended 30 June 2011.

Directors

The names and details of the company’s directors in office during the financial year and until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated.

Names, qualifications, experience and special responsibilities

Mr MARK STOWELL B. Bus, CA (Non-executive Chairman)

Mr Stowell has over 20 years of corporate finance and business management experience in a large variety of roles. His initial senior role was as a manager in Corporate Finance at Arthur Andersen.

Mark was a founder and board member for seven years of Anvil Mining Limited, now a significant Africa based copper mining company. In 2004, he was a joint founder and director of Incremental Petroleum Ltd, an ASX listed company that was subject of an on market takeover in 2009. Mr Stowell is Chairman of Mawson West Ltd (“Mawson”), a Toronto Stock Exchange listed copper producer operating in the Democratic Republic of Congo. Mr Stowell is also a non executive director of Incremental Oil and Gas Ltd and Kula Gold Limited. During the past three years Mr Stowell has also been a director of Incremental Petroleum Ltd.

Ms SONJA FELDERHOF B. Eng (Mining), MBA, LLB (Managing Director)

Ms Felderhof worked as a mining engineer in Canada before completing an MBA and Law Degree. After being called to the Ontario Bar Association, she worked as a securities and commercial transaction lawyer for the mining team at Fasken Martineau DuMoulin LLP in Toronto. Sonja is a member of the Law Society of Upper Canada. In 2004, she became an investment banker for Investec Bank Limited. In this role she worked in London, Johannesburg and Sydney providing mining project finance (debt, equity and hedging) primarily to the junior to mid-tier mining sector internationally.

Ms. Felderhof has also worked in General Manager - Business Development roles where she developed growth strategies and managed joint ventures, mergers and acquisitions, debt and equity financing, hedging and offtake arrangements. Ms Felderhof has not held any other public company directorships during the past three years.

Mr DAVID FRANCES BSc (Hons) (Non-executive Director)

Mr Frances is a graduate of the University of Western Australia and has 20 years of experience in multi-commodity exploration, project evaluation, acquisition, finance, development and mining in Austral-Asia (including China), Africa, North America, and Canada. David is currently the Managing Director of Mawson, a Toronto Stock Exchange listed copper producer operating in the Democratic Republic of Congo. Apart from being the managing director of Mawson, Mr Frances has not held any other public company directorships during the past three years.

Dr CHRISTOPHER STEPHENS BSc (Hons), PhD (Non-executive Director)

Dr Stephens is a geologist with 30 years professional experience in the exploration, mining and academic sectors. He is an independent consulting geologist, providing project review and corporate strategy to junior exploration companies and operating the area of independent technical reports. He is also a Director of Kings Park Capital, a private risk capital company.

Between 2005 and 2007, he was Chief Geologist, and for a period acting Managing Director, at Abra Mining Limited, where he advanced the >90Mt Abra lead-copper-silver-gold deposit to pre-feasibility status. Prior to his position with Abra Mining Limited, Christopher was Manager Geology for RSG Global Pty Ltd (now Coffey Mining). He was responsible for RSG Global's specialist geological consulting providing project evaluation in Australasia, Africa, Asia and Eastern Europe. Previous to this, Christopher was Chief Geologist at Central Norseman Gold Corporation. Mr Stephens has not held any other public company directorships during the past three years.

Annual Report | 30 June 2011

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Directors’ interests in the shares and options of the company

As at the date of this report, the direct interests of the directors in the shares and options of Orrex Resources Ltd were:

Director	Ordinary Shares	Options $0.30	Options $0.25
		11.4.2015	30.11.2012
M Stowell	2,000,000	1,000,000	895,000
S Felderhof	2,240,000	2,000,000	1,120,000
D Frances	150,000	1,000,000	75,000
C Stephens	30,000	1,000,000	15,000

Principal Activities

The principal activity during the year of the Company was mineral exploration. There has been no significant change in the nature of this activity during the year.

Review of operations

Orrex listed on the Australian Securities Exchange on 30 November 2010 and raised total capital of $4 million. The Company operates as a mineral explorer in Western Australia and has two gold exploration projects, the Golden Mile South Project and the Barlee Project.

Golden Mile South Project, Eastern Goldfields, WA (ORX 95-100%)

Orrex owns 95 to 100% interest in the tenements comprising the Golden Mile South Project. It is the Company’s flagship project and represents an opportunity for discovery of various styles of large gold deposits. It is a large tenement package of approximately 100km[2] (25 km[2] of which is under application). It is located in the heart of the Kalgoorlie region approximately 5 kilometres southeast of the Kalgoorlie Super Pit and 5 kilometres north of the New Celebration/Jubilee gold mine. The proximity of the Golden Mile South Project to Kalgoorlie makes exploration relatively cheap given easy access to infrastructure and facilities.

There are currently ten target areas delineated for drilling and exploration. Orrex advanced the Golden Mile South Project by completing three aircore drill programs consisting of regional and infill lines over three target areas. A number of anomalous results which strengthened target potential were intersected within weathered bedrock samples and in transported cover. In particular, the Lakeside Prospect has been progressed with the latest program extending and confirming a northeast trending gold mineralised alteration zone. This zone is up to 75 m wide and at least 400m in strike (open to the north and south). There also appears to be a correlation between gold mineralisation and the intersection of a NNW trending shear zone and the alteration zone.

Of note was the presence of a 4 metre composite returning 69.3g/t Au in drill hole 11LKA484; repeat assays returned results of 12.0 g/t Au and 8.2 g/t Au which may indicate a significant nugget gold effect. This hole also contained iron gravel unlike other holes which may indicate it is free gold from a source deposit in the vicinity. The sample consisted primarily of weathered bedrock material, however it sampled over the transported / bedrock interface. A program of 1 metre re-samples is being undertaken to establish whether the source of the gold is from within the weathered bedrock or has been transported.[1]

Based on results of earlier programs, Orrex has commenced planning an RC drill program to further test the zone of mineralisation.

1 The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr. John Bartlett, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr. Bartlett is the principal of Ore(plus) Geology Solutions Pty Ltd and a consultant to the company. He has sufficient experience which is relevant to the style of mineralisation and type of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr. Bartlett consents to their inclusion in the report of the matters based on his information in the form and context in which it appears.

Annual Report | 30 June 2011

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Barlee Project, Central Yilgarn Craton, WA (ORX 90%)

The Company also owns 90% interest in the Barlee Project. It is located in the Central Yilgarn Craton approximately 130 km east of Paynes Find and 30 km south of Youanmi. It is comprised of approximately 687km[2] (105km[2] of which is under application) of greenfields exploration terrain with potential for gold and base metal deposits.

The Company commenced its first pass auger sampling program at the Barlee Project in December 2010. The program covered priority target areas that were identified through a review of magnetic data and historical anomalous soil sampling. Further geophysical analysis is being completed and this information will be used to design a RAB program covering priority target areas.

Operating Results for the year

The Company’s operating loss after income tax for the year was $806,180 (2010 - $674,924). The Company’s basic loss per share for the year was 2.78 cents (2010: loss 5.55 cents). The increase in operating loss in comparison with prior year is caused by an increase in the scale of exploration activities undertaken.

Review of Financial Condition

Liquidity and capital resources

The statement of cash flows shows that there was an increase in cash and cash equivalents in the year ended 30 June 2011 of $2,983,804 (2010: increase $208,987).

Asset and capital structure

The Company has no debt or borrowings other than usual trade creditors paid on normal commercial terms.

Share issues during the year and to the date of this report

During the year the Company issued the following shares

Date	$ per share	Number
16/11/2010	0.20	20,175,000
28/02/2011	0.20	10,000

Share options

At the date of this report, the unissued ordinary shares of the company under option are as follows:

Date of Expiry	Exercise Price	Number under option
11 April 2015	30 cents	5,000,000
30 November 2012	25 cents	15,529,783

Dividends

The directors do not recommend that a dividend be paid. Since the end of the previous financial year, no dividend has been paid.

Risk management

The Company takes a proactive approach to risk management. The Board is responsible for ensuring that risks, and also opportunities are identified on a timely basis and that the Company’s objectives and activities are aligned with the risks and opportunities identified by the Board. The Company has an Audit and Risk Charter.

The Company believes it is crucial for all Board members to be part of this process and as such the Board has not established a separate risk management committee and the Board as a whole acts in that role.

Annual Report | 30 June 2011

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Significant changes in the state of affairs

During the year the company issued share capital for proceeds of $3,655,691 and commenced the listing of its shares on the Australian Securities Exchange.

Except for the foregoing, there were no significant changes in the state of affairs of the Company during the financial year.

Proceedings on behalf of the Company

No person has applied to Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.

Environmental regulation and performance

The Company’s activities are subject to environmental regulations under either Commonwealth or State legislation. However, the Board believes that the Company has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to the Company.

Significant events after the balance date

There have been no significant events after the balance date.

Likely developments and expected results

The Company will continue to focus on mineral exploration and development opportunities.

Indemnification and insurance of directors and officers

The Company has entered into a Deed of Indemnity (Deed) with each Director and the Company Secretary (officers). Under the Deed, the Company indemnifies the officers to the maximum extent permitted by law and the Constitution against legal proceedings, damage, loss, liability, cost, charge, expense, outgoing or payment (including legal expenses on a solicitor/client basis) suffered, paid or incurred by the officers in connection with the officers being an officer of the Company, the employment of the officer with the Company or a breach by the Company of its obligations under the Deed.

The Company has not provided any insurance or indemnification for the Auditor of the Company.

Remuneration Report (Audited)

The remuneration report outlines the director remuneration and executive remuneration arrangements of the Company in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report, key management personnel (KMP) of the Company are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly, including any director (whether executive or otherwise) of the parent company, and includes the five executives in the Parent and the Company receiving the highest remuneration.

For the purposes of this report, the term ‘executive’ encompasses the chief executive, senior executives, general managers and secretaries of the Parent and the Company.

Details of key management personnel (including the five highest paid executives of the Company

• The key management personnel of Orrex Resources Ltd during the financial year were: • Mark Stowell (Chairman)

• Sonja Felderhof (Managing Director)

• David Frances (Non-Executive Director)

• Christopher Stephens (Non-Executive Director)

• Jonathan Asquith (Company Secretary)

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No cash remuneration was paid to Company directors or executives of Orrex Resources Ltd during the previous financial year. The company granted options to directors during the previous year.

Remuneration Policy

The performance of the Company depends on the quality of its key management and personnel. To prosper the Company must attract, motivate and retain highly skilled directors and executives. To this end the Company embodies the following principles in its remuneration policy:

• Provide competitive rewards to attract high calibre executives;

• Link executive rewards to share holder value;

• Significant proportion of executive compensation ‘at risk’, dependent upon meeting pre-determined targets;

• Establishing demanding, appropriate performance hurdles in relation to variable executive compensation.

• The Company does not have a remuneration committee. All remuneration matters are dealt with by the full Board.

Non Executive Director Remuneration

Non Executive Directors’ fees are determined within an aggregate fee pool limit, which is periodically recommended for approval by shareholders. The current fee pool limit is $300,000.This amount is separate from any specific tasks that the Directors may take on for the Company.

Senior Executive Remuneration Policy

The Company is committed to remunerating its senior executives in a manner that is market-competitive and consistent with best practice as well as supporting the interests of shareholders. Consequently, under the Senior Executive Remuneration Policy the remuneration of senior executive may be comprised of the following:

• fixed salary that is determined from a review of the market and reflects core performance requirements and expectations;

• a performance bonus designed to reward actual achievement by the individual of performance objectives and for materially improved Company performance;

• participation in any share/option scheme with thresholds approved by shareholders;

• statutory superannuation.

By remunerating senior executives through performance and long-term incentive plans in addition to their fixed remuneration the Company aims to align the interests of senior executives with those of shareholders and increase Company performance.

The objective behind using this remuneration structure is to drive improved Company performance and thereby increase shareholder value as well as aligning the interests of executives and shareholders.

The Board may use its discretion with respect to the payment of bonuses, stock options and other incentives.

The Company has entered into an employment agreement (“the Employment Agreement”) with Ms Sonja Felderhof pursuant to which Ms Felderhof was appointed to act as managing director of the Company.

Pursuant to the Employment Agreement, the Company will provide to Ms Felderhof an annual salary component of $200,000 per annum plus statutory superannuation. The Board will review the salary annually.

The Company is also required to reimburse Ms Felderhof for any expenses incurred by her in the course of her employment and any additional reasonable expenses incurred by her during the performance of her duties and functions.

The Employment Agreement may be terminated by Ms Felderhof by providing three months notice in writing. On termination of the Employment Agreement in these circumstances, Ms Felderhof is thereupon entitled to the salary payable to her for a 3 month period thereafter (or in the event of a redundancy or corporate reconstruction event, for a 12 month period thereafter).

The Employment Agreement may be terminated immediately by the Company in certain circumstances, for example, in the case of serious misconduct or gross negligence. The Employment Agreement may also be terminated by the Company as of right by providing 3 months notice in writing. On termination of the Employment Agreement in these circumstances, Ms Felderhof will be entitled to salary up to and including the date of termination.

Directors fees became payable with effect from 16 June 2010 on Orrex achieving an ASX listing.

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Remuneration of key management personnel and the five highest paid executives of the Company June 2011

	Short Term	Post Employment	Equity
	Salary & Fees Non Monetary Benefits Other Benefits (i)	Super- annuation	Options Total Total Performance Related Value of Options as % Remuneration
Directors	$ $ $	$	$ $ % %
M Stowell	30,963 - -	2,787	- 33,750 - -
D Frances	24,083 - -	2,167	- 26,250 - -
S Felderhof	133,333 - 2,711	12,000	- 148,044 - -
C Stephens	24,083 - -	2,167	- 26,250 - -
J Asquith	- - -	-	- - - -
Total	212,462 - 2,711	19,121	- 234,294 - -

• (i) Leave accrual movement is shown as Other Benefits

Remuneration of key management personnel and the five highest paid executives of the Company June 2010

	Short Term	Equity
	Salary & Fees Non Monetary Benefits	Options (i) Total Total Performance Related Value of Options as % of Remuneration
Directors	$ $	$ $ % %
M Stowell	- -	53,400 53,400 100% 100%
D Frances	- -	53,400 53,400 100% 100%
S Felderhof (ii)	- -	106,800 106,800 100% 100%
C Stephens (iii)	- -	53,400 53,400 100% 100%
J Asquith (iv)	- -	- - - -
G Zamudio (iv)	- -	- - - -
Total	- -	267,000 267,000 - -

• (i) Options have been issued to directors as part of the remuneration philosophy of the company. The value of the options has been calculated using the Black-Scholes model.

• (ii) Appointed Managing Director, Chief Executive Officer – 18 April 2010

• (iii) Appointed Non- Executive Director- 18 April 2010

• (iv) Resigned as Non- Executive Director – 18 April 2010

Analysis of movements in options

There was no movement during the reporting period options over ordinary shares in the Company held. The Options held by each Company director and key management personnel are detailed below:

Purchased options:

				Exercise		First	Last
		Purchase	Purchase	Price Per	Expiry	Exercise	Exercise
At 30 June 2011	No.	Date	Price	Option	Date	Date	Date
Directors			$	$
M Stowell	895,000	05/05/11	0.005	0.25	30/11/12	05/05/11	30/11/12
D Frances	75,000	05/05/11	0.005	0.25	30/11/12	05/05/11	30/11/12
S Felderhof	1,120,000	05/05/11	0.005	0.25	30/11/12	05/05/11	30/11/12
C Stephens	15,000	05/05/11	0.005	0.25	30/11/12	05/05/11	30/11/12
J Asquith	195,000	05/05/11	0.005	0.25	30/11/12	05/05/11	30/11/12
Total	2,300,000

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Granted options:

Terms and Conditions for each Grant	Vested
At 30 June 2010 and 30 June 2011 No. Grant Date Fair Value Per Option at Grant Date (Note 7 ) Exercise Price Per Option (Note 7) Expiry Date First Exercise Date Last Exercise Date	No. %
Directors $ $
M Stowell 1,000,000 11/04/10 0.0534 0.30 11/04/15 12/04/10 11/04/15	1,000,000 100%
D Frances 1,000,000 11/04/10 0.0534 0.30 11/04/15 12/04/10 11/04/15	1,000,000 100%
S Felderhof 2,000,000 11/04/10 0.0534 0.30 11/04/15 12/04/10 11/04/15	2,000,000 100%
C Stephens 1,000,000 11/04/10 0.0534 0.30 11/04/15 12/04/10 11/04/15	1,000,000 100%
J Asquith - - - - - - -	- -
-Total 5,000,000	5,000,000

Included in the above tables are options held by related parties of directors and key management personnel.

No directors or key personnel owned purchased options at 30 June 2010.

During the year there were no shares issued on the exercise of compensation options.

No options were issued or exercised during the previous reporting period.

Committee Memberships

The company does not have a Remuneration, Nomination or Audit Committee as these roles are undertaken by the full Board.

Corporate governance

In recognising the need for high standards of corporate behavior and accountability, the directors’ support and have, where currently considered appropriate given the size and nature of the Company, adhered to the best practice recommendations set by the ASX Corporate Governance Council.

Directors’ Meetings

The number of meetings of directors held during the year and the numbers of meetings attended by each director were as follows:

	DIRECTORS	MEETINGS
Directors	Held	Attended
M Stowell	4	4
S Felderhof	4	4
D Frances	4	4
C Stephens	4	4

Directors’ benefits

No director of the company has received or become entitled to receive a benefit because of a contract that the director or a firm of which the director is a member or an entity in which the director has substantial financial interest made with the company or an entity that the company controlled, or a body corporate that was related to the company, when the contract was made or when the director received, or became entitled to receive the benefit, other than a benefit included in the aggregate amount of emoluments received or due and receivable by the directors shown in Note 6 to the Financial Statements.

Number of Employees

The number of employees, including directors, at 30 June 2011 is 4 (2010:4)

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Auditor Independence and Non-Audit Services

Auditor Independence Declaration to the Directors of Orrex Resources Ltd

The auditor’s independence declaration for the year ended 30 June 2011 has been received and is to be found on page 37.

Non-Audit Services

During the year the following fees were paid or payable for non-audit services provided by the auditor of the Company, its related practices and non-related audit firms:

Other Assurance Services Related practices of Stantons International Total remuneration for other assurance services $1,950 (2010:$5825)

This report is signed in accordance with a resolution of the directors, made pursuant to Section 298(2) of the Corporations Act 2001.

On behalf of the directors

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S Felderhof Managing Director 30 August 2011

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STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2011

Notes Current Assets Cash and cash equivalents 9 Trade and other receivables 10 Total Current Assets Non Current Assets Exploration assets 11 Total Non Current Assets Total Assets Current Liabilities Trade and other payables 12 Provisions 13 Loan 14 Total Current Liabilities Total Liabilities Net Assets Equity Contributed Equity 15 Reserves 16 Accumulated Losses 17 Total Equity	2011 $ 3,195,526 53,332 3,248,858 601,825 601,825 3,850,683 124,853 2,711 - 127,564 127,564 3,723,119 5,993,453 344,649 (2,614,983) 3,723,119	2010 $ 211,722 46,948
		258,670
		572,025
		572,025
		830,695
		33,824 - 7,912
		41,736
		41,376
		788,959
		2,330,762 267,000 (1,808,803)
		788,959

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

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STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011

Notes Revenue 4(a) Consulting fees Exploration expenses 4(b) Cost of surrendered tenements 4(b) Wages, salaries and related costs Share based payments 4(b) Other expenses Loss before income tax Income tax expense 5 Loss for the year Loss attributable to members of the entity Other comprehensive income Other comprehensive income/(loss) for the year Total comprehensive income/(loss) for the year Total comprehensive income/(loss) for the year attributable to members of the entity Basic and diluted loss per share attributable to ordinary equity holders of the entity (cents) 18	2011 $ 127,326 - (580,176) - (234,295) - (119,035) (806,180) - (806,180) (806,180) - (806,180) (806,180) (2.78)	2010 $ 330 (33,515) (135,511) (138,095) (69,937) (267,000) (31,196)
		(674,924) -
		(674,924)
		(674,924)
		-
		(674,924)
		(674,924)
		(5.55)

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2011

At 1 July 2009 Loss attributable to members of the entity Other comprehensive income Total comprehensive income/(loss) for the year Issue of share capital Cost of issue of share capital Shares issued on capitalising parent company loan account Share based payment At 30 June 2010 At 1 July 2010 Loss attributable to members of the entity Other comprehensive income Total comprehensive income/(loss) for the year Issue of share capital and options Cost of issue of share capital At 30 June 2011

Issued capital Accumulated losses Other reserves Total equity $ $ $ $ 310,351 (1,133,879) - (823,528) - (674,924) - (674,924) - - - - - (674,924) - (674,924) 252,000 - - 252,000 - - - - 1,768,411 - - 1,768,411 - - 267,000 267,000 2,330,762 (1,808,803) 267,000 788,959 2,330,762 (1,808,803) 267,000 788,959 (806,180) - (806,180) - - - - - (806,180) - (806,180) 4,036,999 - 77,649 4,114,648 (374,308) - - (374,308) 5,993,453 (2,614,983) 344,649 3,723,119

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

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STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2011

Notes Cash flows from operating activities Payments to suppliers and employees Interest received Other revenue Net cash used in operating activities 19 Cash flows from investing activities Purchase of mining tenements Net cash used in operating activities Cash flows from financing activities Net proceeds from issue of shares and options Repayment of borrowings Net cash provided by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of year Cash and cash equivalents at end of year 9	2011 $ (838,536) 98,283 3,143 (737,110) (22,800) (22,800) 3,751,626 (7,912) 3,743,714 2,983,804 211,722 3,195,526	2010 $ (43,343) 330 -
		(43,013)
		-
		-
		252,000 -
		252,000
		208,987 2,735
		211,722

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

Annual Report | 30 June 2011

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

1. CORPORATE INFORMATION

The financial report of Orrex Resources Ltd (the Company) for the financial year ended 30 June 2011 was authorised for issue in accordance with a resolution of the directors on 30 August 2011.

Orrex Resources Ltd is a company limited by shares incorporated in Australia.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant policies that have been adopted in the preparation of this financial report are:

(a) Basis of preparation

The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards including Australian Interpretations. The financial report has also been prepared on a historical cost basis and accrual accounting and, except where stated, does not take into account changing money values or current valuations of non-current assets. The financial report is presented in Australian dollars.

(b) Statement of compliance

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

New Accounting Standards and Interpretations

The following new standards and amendments to standards are mandatory for the financial year beginning 1 July 2010.

• AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project (AASB 5, 8, 101, 107, 117, 118, 136, and 139)

• AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project (AASB 3, 7, 121, 128, 131, 132 and 139)

• AASB Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments and AASB 2009-13 Amendments to Australian Accounting Standards arising from Interpretation 19.

The adoption of these standards did not have any impact in the current period or any prior period and is unlikely to affect future periods.

New Accounting Standards and Interpretations that are not yet mandatory

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2011 reporting periods. The Company’s assessment of the impact of these new standards and interpretations is set out below.

• (i) AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013)

AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until 1 January 2013 but is available for early adoption. When adopted, the standard is not expected to impact on the Company’s accounting for financial assets as it does not have any available for sale assets other than equity investments. There will be no impact on the Company’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the group does not have any such liabilities. The Company has decided not to early adopt AASB 9.

• (ii) Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective from 1 January 2011)

Annual Report | 30 June 2011

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment clarifies and simplifies the definition of a related party. The Company will apply the amended standard from 1 July 2011. When the amendments are applied, the Company will need to disclose any transactions between its subsidiaries and its associates. However, there will be no impact on any of the amounts recognised in the financial statements.

• (iii) AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements (effective from 1 July 2013)

On 30 June 2010 the AASB officially introduced a revised differential reporting framework in Australia. Under this framework, a two-tier differential reporting regime applies to all entities that prepare general purpose financial statements. Orrex Resources Ltd is listed on the ASX and is not eligible to adopt the new Australian Accounting Standards – Reduced Disclosure Requirements. The two standards will therefore have no impact on the financial statements of the entity.

(c) Income Tax

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences:

• except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised:

• except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.

Annual Report | 30 June 2011

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

(d) Investments and other financial assets

Financial assets in the scope of AASB 139 Financial Instrument: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held to maturity investments, or available-for-sale assets. When financial assets are recognised initially, they are measured at fair value, plus in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Company determines the classification of its financial assets after initial recognition and when allowed and appropriate re-evaluates this designation at each financial year-end.

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

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

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

(ii ) Held- to- maturity investments

Non derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to maturity when the Company has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are included in this classification. Investments that are intended to be held-to-

maturity, such as bonds, are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are integral part of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through amortisation process.

(iii) Loans and receivables

Loans and receivables including loan notes and loans to key management personnel are non-derivative financial assets with fixed determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains or losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

(iv)Available-for-sale investments

Available-for-sale investments are those non-derivative financial assets that are designated as available-for-sale or are not classified as any of the three preceding categories. After initial recognition available-for-sale investments are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss.

The fair values of the investments that are actively traded in the organised financial markets are determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments with no active market fair values are determined using valuation techniques. Such techniques include: using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible and keeping judgemental inputs to a minimum.

(e) Interest in a jointly controlled operation

A joint venture is a contractual agreement 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 the establishment of a separate entity. The Company recognises its interest in the jointly controlled operation by recognising the assets that it controls and the liabilities that it incurs. The Company 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.

Annual Report | 30 June 2011

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

(f) Plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows: Plant and equipment-over 5 to 10 years.

Impairment

The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cashgenerating units are written down to their recoverable amount. The recoverable amount of plant and equipment is the greater 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.

(g) Exploration and evaluation expenditure

Expenditure incurred during exploration and the early stages of evaluation of new areas of interest is written off as incurred.

Costs of acquisition of exploration areas of interest are carried forward where right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest or, where exploration and evaluation activities in the area of interest have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

When an area of interest is abandoned or the directors decide that it is not commercial, any accumulated costs in respect of that area are written off in the financial period the decision is made. Each area of interest is also reviewed at the end of each accounting period and accumulated costs written off to the extent that they will not be recoverable in the future.

(h) Development properties

Where projects have advanced to the stage that directors have made a decision to mine, they are classified as development properties. When further development expenditure is incurred in respect of a development property, such expenditure is carried forward as part of the cost of that development property only when substantial future economic benefits are established. Otherwise such expenditure is classified as part of the cost of production or written off where production has not commenced.

(i) Goodwill

Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the acquirer's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Goodwill is not amortised.

Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the combination's synergies.

Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates.

Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised.

Annual Report | 30 June 2011

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation.

Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

(j) Cash and cash equivalents

Cash and short-term deposits in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

(k) Share-based payment transactions

The Company provides benefits to employees (including directors) of the Company in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares ('equity-settled transactions').

The plan in place that provides these benefits is the Employee Share Option Plan (ESOP), which provides benefits to directors and employees. The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by the company using the Black-Scholes option valuation model.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Orrex Resources Ltd (`market conditions').

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (`vesting date').

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Company, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

(l) Recoverable amount of assets

At each reporting date, the Company assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Company makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset's value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate

Annual Report | 30 June 2011

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

cash inflows that are largely independent of those from other assets or group of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

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.

(m) Foreign currency translation

(i) Functional and presentation currency

Both the functional and presentation currency of Orrex Resources Ltd is Australian dollars ($).

(ii) Transactions & balances

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at balance date.

All exchange differences in the financial report are taken to profit or loss with the exception, where applicable, of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign operation.

These are taken directly to equity until the disposal of the net investment, at which time they are recognised in profit or loss. On disposal of a foreign operation, the cumulative amount recognised in equity relating to that particular foreign operation is recognised in profit or loss. Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

(n) Impairment of assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets and the assets value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

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. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is carried as a revaluation decrease).

(o) Trade and other payables

Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of those goods and services.

(p) Share capital

Ordinary share capital is recognised at the fair value of the consideration received by the company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

Annual Report | 30 June 2011

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

(q) Trade and other receivables

Debtors are carried at amounts due. The recoverability of debts is assessed at balance date and specific provision is made for any doubtful accounts.

(r) Employee leave benefits

Wages, salaries, annual leave and sick leave.

Liabilities for wages and salaries, including non-monetary benefits and annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employee’s services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for nonaccumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

(s) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expenses.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(t) Revenue recognition

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

Revenue is recognised as the interest accrues (using the effective interest 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.

Dividends

Revenue is recognised when the shareholders' right to receive the payment is established.

(u) Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to include any costs of servicing equity (other than dividends) and preference share dividends divided by the average weighted number of ordinary shares adjusted for any bonus element.

Diluted earnings per share is calculated as net profit attributable to members of the parent adjusted for:

• Costs of servicing equity (other than dividends) and preference share dividends;

• The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses and;

• Other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and

• dilutive potential ordinary shares, adjusted for any bonus element.

(v) Comparatives

Where necessary, comparatives have been reclassified and repositioned for consistency with current year disclosures.

Annual Report | 30 June 2011

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

In applying the Company’s accounting policies management continually evaluates judgements, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Company. All judgements, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from the judgements, estimates and assumptions. Significant judgements, estimates and assumptions made by management in the preparation of these financial statements are outlined below:

(i) Significant accounting judgements

Impairment of non-financial assets other than goodwill

The Company assesses impairment of all assets at each reporting date by evaluating conditions specific to the Company and to the particular asset that may lead to impairment, including economic and political environments. If an impairment trigger exists the recoverable amount of the asset is determined. This involves value in use calculations, which incorporate a number of key estimates and assumptions.

Share based payment transactions

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity.

The Company measures the cost of cash-settled share-based payments at fair value at the grant date using the BlackScholes formula taking into account the terms and conditions upon which the instruments were granted.

Allowance for impairment loss on receivables

Where receivables are outstanding beyond the normal trading terms, the likelihood of the recovery of these receivables is assessed by management.

Evaluation of capitalised and evaluation expenditure

The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Company decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors that could impact future recoverability include the level of reserves and resources, future technological changes, which could impact the cost of mining, future legal changes and changes to commodity prices. To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable, profits and net assets will be reduced in the period in which determination is made.

Annual Report | 30 June 2011

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

4. Revenues and Expenses Revenue and expenses from continuing operations Loss from ordinary activities before income tax includes the following items of revenue and expense. (a) Revenue Interest revenue: Bank interest (b) Expenses Exploration expenditure expensed Share based payments Cost of surrendered tenements Unrecognised temporary differences Deferred tax assets (at 30%) Accruals Provisions Capital raising costs Carry forward revenue tax losses Deferred tax liabilities (at 30%) Capitalised tenement acquisition cost 5. Income tax Numerical reconciliation of income tax expense to prima facie tax payable Loss from ordinary activities before income tax loss Prima facie tax recoverable on loss from ordinary activities Tax effect of amounts which are not deductible (taxable) in calculating taxable income Entertainment Share based payments Movement in unrecognised temporary differences Provisions Capital raising costs Capitalised costs written off Tax effect of current year tax losses for which no deferred tax asset has been recognized Income tax expense	2011 $ 127,326 127,326 (580,176) - - 6,000 813 85,445 876,052 968,310 180,548 (806,180) (241,854) 650 - (241,204) 3,000 813 (21,361) - 258,752 -	2010 $ 330 330 (135,511) (267,000) (138,095) 3,000 - - 617,300 620,300 171,608 (674,924) (202,477) 80,100 (122,377) 3,000 - - 41,429 77,948 -

The Company has $2,920,173 in income tax losses.

The deferred tax asset and deferred tax liability have not been brought to account as it is unlikely they will arise unless the Company generates sufficient revenue to utilise them.

Annual Report | 30 June 2011

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

6. Directors’ and executives’ disclosure

The aggregate compensation of key management of the company is set out below.

Compensation by category-Key Management Personnel Short term Post-employment Share-Based Payments	2011 $ 215,173 19,121 - 234,294	2010 $ - - 267,000
		267,000

Related Party Transactions

Specific transactions with directors and director-related entities:

• Fees of $59,806 (2010:$7,912) paid to Mawson West Ltd, of which Mr Stowell and Mr Frances are directors, for the provision of office, technical, corporate and secretarial services on normal commercial terms and conditions;

• During the prior year the parent company Mawson West Ltd advanced $260,010 for the company’s activities and on 9 June 2010 converted a loan of $1,768,411 into 124,995 shares.

Shareholdings of Key Management Personnel - June 2011

	Balance 1	Granted as		On Exercise	Net Change Other	Balance 30 June
	July 2010	Remuneration		of Options		2011
30 June 2011	Ord	Ord		Ord	Ord	Ord
Directors
M Stowell	300,000		-	-	1,587,187	1,887,187
S Felderhof	2,100,000		-	-	140,000	2,240,000
D Frances	50,000		-	-	100,000	150,000
C Stephens	30,000		-	-	-	30,000
J Asquith	200,000		-	-	200,000	400,000
Total	2,680,000		-	-	2,027,187	4,707,187

Shareholdings of Key Management Personnel - June 2010

	Balance	Granted as	On Exercise	Net Change	Balance
	1 July 2009	Remuneration	Of Options	Other	30 June 2010
30 June 2010	Ord	Ord	Ord	Ord	Ord
Directors
M Stowell	-	-	-	300,000	300,000
S Felderhof	-	-	-	2,100,000	2,100,000
D Frances	-	-	-	50,000	50,000
C Stephens	-	-	-	30,000	30,000
J Asquith	-	-	-	200,000	200,000
G Zamudio	-	-	-	-	-
Total	-	-	-	2,680,000	2,680,000

Annual Report | 30 June 2011

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

Option holdings of Key Management Personnel - June 2011

	Balance	Granted as		Purchase	Balance
	1 July 2010	Remuneration		of Options (i)	30 June 2011
Directors
M Stowell	1,000,000		-	895,000	1,895,000
S Felderhof	2,000,000		-	1,120,000	3,120,000
D Frances	1,000,000		-	75,000	1,075,000
C Stephens	1,000,000		-	15,000	1,015,000
J Asquith	-		-	195,000	195,000
Total	5,000,000		-	2,300,000	7,300,000

(i) Purchased options pursuant to prospectus dated 29 March 2011.

Option holdings of Key Management Personnel - June 2010

	Balance	Granted as	Purchase	Balance
	1 July 2009	Remuneration	of Options (i)	30 June 2010
Directors
M Stowell	-	1,000,000	-	1,000,000
S Felderhof	-	2,000,000	-	2,000,000
D Frances	-	1,000,000	-	1,000,000
C Stephens	-	1,000,000	-	1,000,000
J Asquith	-	-	-	-
Total	-	5,000,000	-	5,000,000

Included in the above tables are options held by related parties of directors and key management personnel.

7. Share based payment plans

During the previous year the Company granted to Directors 5,000,000 unlisted options, at an exercise price of 30 cents each and expiring on 11 April 2015. The fair value of the options at the grant date (12 April 2010) was 5.34 cents per option vesting immediately. The fair value of the options has been calculated using the Black-Scholes option pricing model as follows:

s:
Weighted average exercise price:	30 cents
Weighted average life of options:	5.0 years
Underlying share price:	20 cents
Expected volatility:	70%
Risk free interest rate:	5.2%
Discount for non tradability	50%

Summary of options granted under share incentive arrangements

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options granted under share incentive arrangements during the year.

Outstanding at the beginning of the year Granted during the year Exercised during the year Expired during the year Outstanding at end of year	2011 2011 2010 2010 No. WAEP No. WAEP
	5,000,000 0.30 - - - - 5,000,000 0.30 - - - - - - - -
	5,000,000 0.30 5,000,000 0.30

Exercisable options granted under share incentive arrangements at 30 June 2011 are 5,000,000.

Annual Report | 30 June 2011

Page 27

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

The weighted average remaining contractual life for the share options granted under share incentive arrangements outstanding at 30 June 2011 is 3.78 years (2010:4.78). The fair value of options granted and expensed during the previous year was $267,000.

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of options granted were incorporated into the measurement of fair value. The fair value of the options is expensed over the vesting period.

8. Auditors remuneration The auditor of Orrex Resources Ltd is Stantons International Amounts received or due and receivable by Stantons International Other services: Investigating Accountants Report 9. Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise the following at 30 June Cash at bank and on hand 10. Trade and other receivables Trade and other receivables Deferred capital raising costs 11. Exploration Assets Costs brought forward Expenditure during the year Cost of new tenements Cost of surrendered tenements Expenditure written off Costs carried forward		2011 $ 18,033 1,950 19,983 3,195,526		2010 $ 10,000 5,825 15,825 211,722 211,722 3,965 42,983 46,948 682,119 163,512 - (138,095) (135,511) 572,025
		3,195,526
		53,332 -
		53,332
		572,025 580,176 29,800 - (580,176)
		601,825

The ultimate recoupment of acquisition costs carried forward is dependent on the successful development commercial exploitation or sale of the respective tenements. Some of the economic entity’s exploration properties are subject to claim(s) under native title. As a result, exploration properties or areas within the tenements may be subject to exploration and/or mining restrictions.

12. Trade and other payables Trade payables and accruals	2011 $ 124,853	2010 $ 33,824

Trade payables are non interest bearing payables and are normally settled on 30 day terms.

13. Provisions Leave provision	2,711	-

Annual Report | 30 June 2011

Page 28

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

14. Loan Balance at the start of the year Payments made on behalf of the Company and corporate charges Repayment Repaid by way of share issue (Note 15) Balance at the end of the year	2011 $ 7,912 59,806 (67,718) - -	2010 $ 1,508,401 267,922 - (1,768,411)
		7,912

In the previous year a loan was provided by the Parent entity, Mawson West Ltd. Mawson West Ltd currently holds a 32.7% interest in the Company.

15. Contributed Equity 36,660,000 Fully paid ordinary shares (2010: 16,475,000) Movement in ordinary shares on issue At start of the year Issue of 20,000,000 shares pursuant to prospectus Issue of 150,000 shares in lieu of capital raising costs Issue of 35,000 shares in lieu of payments for tenements Capitalisation of parent company loan Share placement Share placement Less capital raising costs Movement in share option reserve At 1 July 2010 Premium on issue of options At 30 June 2011	5,993,453 2,330,762 4,000,000 29,999 7,000 - - - 6,367,761 (374,308) 5,993,453 267,000 77,649 344,649	2,330,762 310,351 - - - 1,768,411 2,000 250,000
		2,330,762 -
		2,330,762
		267,000 -
		267,000

Share Options

At 30 June 2011 there were the following options over unissued fully paid ordinary shares on issue:

• 5,000,000 unlisted options exercisable at 30 cents per option before 11 April 2015.

• 15,529,783 unlisted options exercisable at 25 cents per option before 30 November 2012 issued at $0.005 each.

|Annual Report | 30 June 2011
Movement in share options on issue
At 1 July 2009
Options granted to directors
At 30 June 2010
At 1 July 2010
Options purchased by shareholders
At 30 June 2011|Annual Report | 30 June 2011
Movement in share options on issue
At 1 July 2009
Options granted to directors
At 30 June 2010
At 1 July 2010
Options purchased by shareholders
At 30 June 2011|-
267,000
267,000
267,000
77,649
344,649|Page 29
-
5,000,000
5,000,000
5,000,000
15,529,783
20,529,783|
|---|---|---|---|
||Annual Report | 30 June 2011|||

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

16. Reserves Share Option Reserve 17. Accumulated Losses Movements in accumulated losses were as follows: Balance at beginning of year Net loss for the year Balance at end of year 18. Loss per share Basic loss per share amounts are calculated by dividing net loss for the year attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. The following reflects the income and share data used in the basic loss per share computations: Net loss attributable to equity holders of the Company Basic Loss per share The weighted average number of ordinary shares on issue during the financial year used in the calculation of basic loss per share 19. Reconciliation of net loss after tax to net cash flows from operations Net loss Adjustments for: Parent company loan account Provisions Share based payments Exploration written off Changes in net assets and liabilities: (Increase)/decrease in assets: Current receivables Increase/(decrease) in liabilities: Current operating payables Cash used in operating activities		2011 2010 $ $ 344,649 267,000 344,649 267,000 (1,808,803) (1,133,879) (806,180) (674,924) (2,614,983) (1,808,803) (806,180) (674,924) 2011 2010 Cents per share Cents per share (2.78) (5.55) No. No. 28,970,260 12,146,648 2011 2010 $ $ (806,180) (674,924) - 267,922 2,711 - - 267,000 - 110,094 (6,384) (46,929) 72,743 33,824 (737,110) (43,013)	2010 $ 267,000
			267,000
			(1,133,879) (674,924)
			(1,808,803)

Annual Report | 30 June 2011

Page 30

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

Non-cash Transactions

• During the year the Company issued 150,000 shares in lieu of capital raising costs ($29,999) and 35,000 shares in lieu of payment for acquisition of tenements ($7,000).

• During the previous year, the company granted 5,000,000 unlisted options to directors at an exercise price of 30 cents. The fair value of the options has been calculated using the Black-Scholes pricing model, refer to Note 7.

• During the previous year the Company converted an inter-company loan of $1,768,411 into shares by issuing 124,995 shares to the Parent entity.

20. Commitments and contingencies

In order to maintain current rights of tenure to exploration tenements, the Company is required to perform minimum exploration work to meet the minimum expenditure commitments as specified by the State Government. These obligations are subject to renegotiations when application for a mining lease is made and at other times. The obligations will be met from normal working capital of the company. The minimum exploration tenement commitments will be reduced should the Company enter into a joint venture on the tenements or extinguished should the tenement be abandoned because the directors decide that the project is not commercial.

The Company has certain minimum obligations in pursuance of the terms and conditions of mining tenement licences in the forthcoming year. Whilst these obligations are capable of being varied from time to time, in order to maintain current rights of tenure to mining tenements, the company will be required to outlay in 2011/12 amounts of approximately $717,889. These are expected to be fulfilled in the normal course of operations.

21. Segment Reporting

The Company operates solely in Western Australia in exploration.

22. Related Party Disclosures

From 1 July 2010 to 16 November 2010 the ultimate parent entity was Mawson West Ltd. During that period the parent entity met expenses of the company totalling $59,806. The loan account with Mawson West was settled on 24 February 2011.

During the previous year the ultimate parent entity was Mawson West Ltd. During the previous year the parent entity met expenses of the company totalling $260,010 by way of loan account transactions. The Company also issued 124,995 ordinary shares to the parent entity in settlement of a loan account amount of $1,768,411, and was charged corporate fees totalling $7,912 by the parent entity. The loan was interest-free and had no fixed terms of repayment.

23. Events after the balance sheet date

There has not been any matter or circumstance, other than that referred to in the financial statements or notes thereto, that has arisen after the end of the financial year, that has significantly affected, or may significantly affect, the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years.

24. Financial Risk Management

The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Company.

The Company takes a proactive approach to risk management. The Board is responsible for ensuring that risks, and also opportunities are identified on a timely basis and that the Company’s objectives and activities are aligned with the risks and opportunities identified by the Board. The Board provides policies for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity.

(a)Market Risk

Interest Rate Risk

The Company is exposed to interest rate risk as it invests funds at floating interest rates.

(b) Credit Risk

There are no significant concentrations of credit risk within the Company.

Credit risk is managed on a Company basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposure relating to outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted.

Annual Report | 30 June 2011

Page 31

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

The Company does not have any exposure to any derivative financial instruments.

Credit risk further arises in relation to financial guarantees given to certain parties. Such guarantees are only provided in exceptional circumstances and are subject to specific board approval.

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised below.

(c) Fair Values

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

The Company does not have any financial investments traded in active markets.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments.

Average Interest Rate % 2011 Financial Assets Cash and cash equivalents 5.30% Trade and other receivables Financial Liabilities Trade and other payables Net financial assets/(liabilities)	Variable Interest Rate Fixed Interest Rate Maturity Less than 1 Year Fixed Interest Rate Maturity 1-5 Years Non Interest Bearing Total $ $ $ $ $ 117,732 3,077,494 - 300 3,195,526 - - 53,332 53,332
	117,732 3,077,494 53,632 3,248,858
	- - - 124,853 124,853
	117,732 3,077,494 - (71,221) 3,124,005

Annual Report | 30 June 2011

Page 32

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NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2011

Average Interest Rate % 2010 Financial Assets Cash and cash equivalents 4.5% Trade and other receivables Financial Liabilities Trade and other payables Loan Net financial assets/(liabilities)	Variable Interest Rate Fixed Interest Rate Maturity Less than 1 Year Fixed Interest Rate Maturity 1-5 Years Non Interest Bearing Total $ $ $ $ $ 211,722 - - - 211,722 - - - 3,965 3,965
	211,722 3,965 215,687
	- - - 33,824 33,824 - - - 7,912 7,912
	- - - 41,736 41,736
	211,722 - - (37,771) 173,951

(d) Reconciliation of net financial assets to net assets

Net financial assets as above Non-financial assets & liabilities - Provisions - Deferred capital raising cost - Exploration expenditure Net Assets per Statement of Financial Position	2011 $ 3,124,005 (2,711) - 601,825 3,723,119	2010 $ 173,951 42,983 572,025
		788,959

( e) Interest rate risk management

The Company is subject to interest rate risk exposure through its cash and cash equivalents. These are at floating interest rates.

Interest rate sensitivity

The sensitivity analyses below have been determined based on exposure to interest rates applicable to cash and cash equivalents at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the year. A 1% increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates for cash and cash equivalents.

At the reporting date, if interest rates had been 1% higher or lower and all other variables were held constant, the Company’s net loss after tax in relation to interest on cash and cash equivalents would increase / decrease by $31,952 (2010 - $2,117).

(f) Foreign Exchange Risk

The Company has no foreign currency denominated financial assets and financial liabilities.

Annual Report | 30 June 2011

Page 33

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DIRECTORS’ DECLARATION

In accordance with a resolution of the directors of Orrex Resources Ltd, I state that:

1. In the opinion of the directors

2. a) The financial statements, and the additional disclosures included in the directors’ report designated as audited and notes of the Company as set out on pages 13 to 33 are in accordance with the Corporations Act 2001, including;

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

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

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

3. b) There are grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

4. This declaration has been made after receiving the declarations required to be made to the directors in accordance with sections 295A of the Corporations Act 2001 for the financial year ended 30 June 2011.

On behalf of the Board

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Sonja Felderhof Director Sydney 30 August 2011

Annual Report | 30 June 2011

Page 34

Stantons International Audit and Consulting Pty Ltd (ABN 84 144 581 519) trading as

Level 1, 1 Havelock St West Perth WA 6005 Australia PO Box 1908 West Perth WA 6872 Australia

t: +61 8 9481 3188 f: +61 8 9321 1204 w: www.stantons.com.au e: info@stantons.com.au

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Chartered Accountants and Consultants

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

Report on the Financial Report

We have audited the accompanying financial report of Orrex Resources Limited, which comprises the statement of financial position as at 30 June 2011, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration.

Directors’ responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In note 2(b), the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report of the company, comprising the financial statements and notes, complies 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. These Auditing 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 and fair presentation of the financial report 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.

Our audit did not involve an analysis of the prudence of business decisions made by directors or management.

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

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 .

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35

Liability limited by a scheme approved under Professional Standards Legislation

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Auditor’s opinion

In our opinion:

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

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

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

• (b) the financial report of the Company also complies with International Financial Reporting Standards as disclosed in note 2(b).

Report on the Remuneration Report

We have audited the remuneration report included in pages 7 to 9 of the directors’ report for the year ended 30 June 2011. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards

Auditor’s opinion

In our opinion the remuneration report of Orrex Resources Limited for the year ended 30 June 2011 complies with section 300 A of the Corporations Act 2001.

STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company)

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John Van Dieren Director

West Perth, Western Australia 30 August 2011

36

Stantons International Audit and Consulting Pty Ltd (ABN 84 144 581 519) trading as

Level 1, 1 Havelock St West Perth WA 6005 Australia PO Box 1908 West Perth WA 6872 Australia

t: +61 8 9481 3188 f: +61 8 9321 1204 w: www.stantons.com.au e: info@stantons.com.au

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Chartered Accountants and Consultants

30 August 2011

Board of Directors Orrex Resources Limited Level 1, 20 Howard Street PERTH WA 6000

Dear Directors

RE: ORREX 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 Orrex Resources Limited.

As Audit Director for the audit of the financial statements of Orrex Resources Limited for the 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

STANTONS INTERNATIONAL AUDIT AND CONSULTING PTY LTD (Trading as Stantons International) (An Authorised Audit Company)

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John Van Dieren Director

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37

Liability limited by a scheme approved under Professional Standards Legislation

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CORPORATE GOVERNANCE STATEMENT

The Company has adopted comprehensive systems of control and accountability as the basis for the administration of corporate governance. The Board is committed to administering the policies and procedures with openness and integrity, pursuing the true spirit of corporate governance commensurate with the Company’s needs. To the extent they are applicable, the Company has adopted the Eight Essential Corporate Governance Principles and Best Practice Recommendations as published by ASX Corporate Governance Council ( Recommendations ). Such policies include the Board Charter, Code of Business Conduct, Board Committee Charters, Continuous Disclosure and Trading Policy.

As the Company’s activities develop in size, nature and scope, the size of the Board and the implementation of additional corporate governance structures will be given further consideration.

Recommendation

1. Lay solid foundation for management and oversight

2. 1.1. Establish and disclose the respective roles and responsibilities of board and management.

Orrex has a Board Charter which sets out: a) the tasks and activities of the Board; b) the matters specifically reserved for Board decision-making, the authority delegated to the CEO, the accountability of the CEO for that authority, and guidance on management of the relationship between the Board and the CEO; and c) the boundaries on CEO actions.

• 1.2. Disclose the process for evaluating the performance of senior executives.

The performance requirements of senior executives are linked to achievement of the corporate objective and systems of evaluation for performance of senior executives are based on key performance indicators.

• 1.3. Provide the information indicated in the Guide to reporting on Principle 1.

A performance evaluation of senior executives has not occurred during the Reporting Period as the Company listed at the end of November 2010. The Company intends to complete performance evaluations consistent with the end of each calendar year.

1. Structure the Board to add value

2.1. A majority of the board should be independent directors.

Due to the size and scale of the Company, the Board is currently not made up of a majority of independent directors. The Board has been structured such that its composition and size will enable it to effectively discharge its responsibilities and duties. Each Director has the relevant experience and specific expertise relevant to the Company’s business and level of operations. Furthermore, the Board considers that in the current phase of the Company’s growth, the Company’s shareholders are better served by directors who have a vested interest in the Company. The Board intends to reconsider its composition as the Company’s operations evolve, and may appoint additional independent directors as it deems appropriate.

2.2. The chairperson should be an independent director.

Due to the size and scale of the Company, the Chairperson, Mark Stowell, is not currently independent. This recommendation will be satisfied at the appropriate time in the Company’s future.

• 2.3. The roles of chairperson and chief executive officer should not be exercised by the same individual.

Sonja Felderhof is the chief executive officer and is not the chairperson.

Annual Report | 30 June 2011

Page 38

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Recommendation

2.4. The board should establish a nomination committee.

The full Board considers the matters and issues that would fall to the nomination committee. The Company has adopted a Nomination and Remuneration Committee Charter setting out the Board processes to raise issues that would otherwise be considered by the nomination committee. The Board considers that at this stage, no efficiencies or other benefits would be gained by establishing a separate nomination committee. The Board intends to reconsider the requirement for and benefits of a separate nomination committee as the Company’s operations grow and evolve.

2.5. Disclose the process for evaluating the performance of its board, its committees and individual directors.

The Board Charter sets out that the Board should conduct performance evaluations of the Board as a whole, its committees and individual directors having regard to the collective nature of board work and the operation of the governance processes established in the Board Charter. The Board will conduct such evaluations as they consider appropriate.

2.6. Provide the information indicated in the Guide to reporting on Principle 2.

Skills, Experience, Expertise and term of office of each Director

A profile of each director containing their skills, experience, expertise and term of office is set out in the Directors’ Repo The terms of office for Mark Stowell and David France are not in the Directors’ Report; thus, they are set out here. M Stowell has been a director since 30 November 2004 and David Frances has been a director since 2 June 2006.

Identification of Independent Directors

Dr. Christopher Stephens is an independent director. He is a non-executive director and is free of any business or other relationship that could materially interfere with the independent exercise of his judgment. He is not a substantial shareholder of the Company.

Statement concerning availability of Independent Professional Advice .

Directors may, with the consent of the Chairman, seek independent advice at the expense of Orrex on any matter connected with the discharge of their responsibilities.

Performance Evaluation

A performance evaluation of the board and individual directors has not occurred during the Reporting Period as the Company listed at the end of November 2010. The Company intends to complete performance evaluations consistent with the end of each calendar year.

Selection and ( Re)Appointment of Directors

The composition of the Board is reviewed regularly to ensure appropriate mix of skill and expertise to achieve the corporate objective. Directors are selected by their ability to contribute to the on-going effectiveness of the Board, to exercise sound business judgment, to commit the necessary time to fulfill the requirements of the role effectively and to contribute to the development of the strategic direction of the Company. New directors are engaged through a letter of appointment.

Each director, other than the Managing Director (MD), must not hold office (without re-election) past the third annual general meeting (AGM) of the Company following the meeting of that director’s last election or re-election. However, a director appointed to fill a casual vacancy or as an addition to the Board must not hold office (without re-election) past the next AGM. The current size of the Board requires two directors (other than the MD) to retire from office at the upcoming AGM. A director who retires at an AGM is eligible for re-election at that meeting. Re-appointment of directors is not automatic.

3. Actively promote ethical and responsible decision-making

3.1. Establish a code of conduct and disclose the code or a summary of the code.

Orrex has a Code of Business Conduct which sets out accountabilities of the Board, Managers, Supervisors and Employees. It covers issues such as behaviour, conflict of interest, discrimination and harassment, corrupt conduct, health, safety, environment and community, fair dealing, insider trading, responsibilities to investors, reporting matters of concern and breaches of the code of conduct.

Annual Report | 30 June 2011

Page 39

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Recommendation

• 3.2. Establish a policy concerning diversity and disclose the policy or a summary of the policy.

The Code of Business Conduct provides that Managers should understand and apply the principles of Equal Employment Opportunity. There is not a stand-alone policy on diversity.

• 3.3. Disclose in each annual report the measurable objectives for achieving gender diversity and progress towards achieving them.

Given the above, the Company does not have objectives to report for achieving gender diversity.

• 3.4. Companies should disclose in each annual report the proportion of women in the whole organisation, women in senior executive roles and women on the board.

The proportion of women in the Company’s organisation is 20% including CFO/Co Sec, CEO, and directors; 50% in senior executive roles including CFO/Co Sec and CEO and 25% on its Board.

• 3.5. Provide the information indicated in Guide to reporting on Principle 3.

This information has been provided Recommendations 3.1 – 3.4.

1. Safeguard integrity in financial reporting

2. 4.1. The board should establish an audit committee.

The audit committee role is undertaken by the full Board given that the efficiencies gained for larger boards are not gained in a board of this size.

• 4.2. Structure the audit committee so that it consists of only non-executive directors, a majority of independent directors, an independent chairperson, who is not chairperson of the board, at least three members.

Due to the size and scale of the operations of the Company, the full Board undertakes the role of audit committee. As the size and composition of the full Board evolves the Company will consider the size and composition of the audit committee having regard to the Recommendations.

• 4.3. The audit committee should have a formal charter.

The Board has adopted an Audit & Risk Committee Charter outlining the role of the audit committee.

• 4.4. Provide the information indicated in Guide to reporting on Principle 4.

The Board held two meetings during the Reporting Period during which all members of the Board attended to the functions of the audit committee.

Details of each of the director’s qualifications are set out in the Directors’ Report.

The Board is responsible for the initial appointment of the external auditor. If the appointment of a new external auditor is required, a formal tendering process will occur and the appointment will be considered by the Board in conjunction with senior management. The appointment will be ratified by shareholders at the next general meeting after the appointment has been made. The Board/Committee shall review and assess the independence of the external auditor, including but not limited to any relationships with the Company or any other entity that may impair or appear to impair the external auditor's judgment or independence in respect of the Company.

Annual Report | 30 June 2011

Page 40

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Recommendation

1. Make timely and balanced disclosure

2. 5.1. Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.

The Company has a Continuous Disclosure Policy which outlines continuous disclosure legal obligations, continuous disclosure guidelines and specific issues relating to continuous disclosure including authorised spokespersons, media, roadshows, market speculation, trading halts, web-based communications and periods prior to release of financial results.

• 5.2. Provide the information indicated in Guide to reporting on Principle 5.

This policy is described on the Company’s website.

1. Respect the rights of shareholders

2. 6.1. Design a communications policy to promote effective communication with shareholders and encourage effective participation at general meetings and disclose their policy or summary of the policy.

The Company’s Continuous Disclosure Policy covers communication including web-based communication. The Company has a web-site which is used to complement official release of information to the market. All relevant announcements and related information, media communications and email alerts are used to facilitate effective communications with shareholders.

• 6.2. Provide the information indicated in Guide to reporting on Principle 6.

This policy is described on the Company’s website.

1. Recognise and manage risk

2. 7.1. Establish policies for the oversight and management of material business risks and disclose a summary of those policies.

The Company has an Audit & Risk Committee Charter. The Board is responsible for implementing and overseeing the Company's risk management policies. The Board identifies and assesses the Company’s risks; regularly reviews and updates the Company’s risk profile and oversees the management risk system. In addition, the following risk management measures have been adopted by the Board:

• the Board has established authority limits for management which, if exceeded, will require prior Board approval; and

• the Board has adopted a corporate governance manual which contains other policies to assist the Company to establish and maintain its governance practices.

• 7.2. The Board should require management to design and implement the risk management and internal control system to manage the Company’s material business risks and report when managed effectively. The Board should disclose that management has reported to it as to the effectiveness of managing its material business risks.

The Company’s material business risks are managed by senior executives through risk management and internal control systems. The Managing Director reports on the management of these risks at Board meetings confirming whether the risks identified are being managed effectively.

Annual Report | 30 June 2011

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Recommendation

• 7.3. The Board should disclose whether it has received assurance from the CEO or CFO that the declaration provided in accordance with s. 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

The Managing Director and the Chief Financial Officer have provided a declaration to the Board in accordance with section 295A of the Corporations Act and have assured the Board that such declaration 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 risk.

7.4. Provide the information indicated in Guide to reporting on Principle 7.

The Board has received the assurance indicated under Recommendation 7.3 from the Managing Director and the Chief Financial Officer. The Board receives reports on management of risks at its Board meetings.

1. Remunerate fairly and responsibly

2. 8.1. The board shall establish a remuneration committee.

Due to the size and scale of the Company, the full Board undertakes the role of Remuneration Committee. The Company has a Remuneration &Nomination Charter.

• 8.2. Structure the remuneration committee with a majority of independent directors, chaired by an independent chair, and has at least three members.

As indicated above, due to the size and scale of the Company, the full Board undertakes the role of Remuneration Committee. As the size and composition of the full Board evolves the Company will consider the appropriateness of the current size and composition of the remuneration committee having regard to the Recommendations.

• 8.3. Clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives.

Non-executive directors are remunerated at a fixed fee for time, commitment and responsibilities. Remuneration for non-executive directors is not linked to individual performance. Pay and rewards for executive directors and senior executives consists of a base salary and performance incentives. Long term performance incentives may include options granted at the discretion of the Board and subject to obtaining the relevant approvals. Executives are offered a competitive level of base pay at market rates and are reviewed annually to ensure market competitiveness.

8.4. Provide the information indicated in the Guide to reporting on Principle 8.

Details of remuneration, including the Company’s policy on remuneration, are contained in the “Remuneration Report” which forms part of the Directors’ Report.

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ASX ADDITIONAL INFORMATION

Distribution of holders

Distribution of holders
1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over Total Holders	Fully Paid Ordinary Shares Options 1 - 8 63 104 14 180 95 41 18
	334 190

The number of holders of less than a marketable parcel of fully paid ordinary shares is 3 based on a market price of $0.185 on 15 September 2011. The number of holders of less than a marketable parcel of options is 3 based on an exercise price of $0.25.

Voting Rights of Securities

Every shareholder of Orrex ( Shareholder ) present in person or by proxy at a meeting of Shareholders has one vote on a vote taken by a show of hands, and on a poll, every Shareholder who is present in person or by proxy has one vote for every fully paid Share held. A poll may be demanded at a meeting in the manner permitted by the Corporations Act.

Options do not carry any voting rights.

Substantial Shareholders

As at 31 August 2011, the substantial holders disclosed to the Company were:

Registered Holder	Beneficial Owner	No. of Shares		% of Issued	Number of	% of Issued
				Shares	Options	Options
Mawson West Ltd	n/a	11,975,000		32.6%	5,987,500	29.2%
Sonja Felderhof	n/a	2,240,000		6.1%	2,120,000	10.3%
Ascot Park Enterprises Pty Ltd	Mark Stowell	2,000,000		5.4%	1,895,000	9.2%
Merchant Holdings Pty Ltd

Top 20 Holders of Shares

As at 31 August 2011, the top twenty holders of shares in Orrex were:

Registered Holder	No. of Shares	% of Issued Shares
Mawson West Ltd	11,975,000	32.6%
Sonja Felderhof	2,240,000	6.1%
Jonathan Fogarty	1,500,000	4.1%
Ascot Park Enterprises Pty Ltd	1,350,000	3.7%
Clodene Pty Ltd	1,189,879	3.2%
Paul Jacobs	1,002,639	2.7%
Egmont Pty Ltd	720,000	2.0%
Flue Holdings Pty Ltd	610,000	1.7%
Daniel Wise	610,000	1.7%
JP Morgan Nominees Australia Ltd	570,000	1.6%
Fonomes Pty Ltd	554,590	1.5%
Two Tops Pty Ltd	505,000	1.4%
Merchant Holdings Pty Ltd	500,000	1.4%
John Phun	500,000	1.4%
Foo Der Rong	500,000	1.4%
Linear A Pty Ltd	350,000	1.0%
Roslyndale Nominees Pty Ltd	287,500	0.8%
JP Morgan Nominees Australia Ltd	280,000	0.8%
Jariana Holdings Pty Ltd	275,000	0.8%
Fernland Holdings Pty Ltd	205,000	0.6%

ASX Listing Rule 4.10.19

In accordance with Listing Rule 4.10.19, the Company states that it has used the cash and assets in a form readily convertible to cash that it had at the time of admission in a way consistent with its business objectives, which are exploration at the Golden Mile South and Barlee Projects and evaluation of projects in Australia and overseas.

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List of Interests in Tenements

Tenement	Status	Location by Project	**Registered Holder **	Interest
P26/3433	Granted	Golden Mile South	Orrex	100%
P26/3434	Granted	Golden Mile South	Orrex	100%
P26/3828	Application	Golden Mile South	n/a	n/a
P26/3439	Granted	Golden Mile South	Orrex	100%
P26/3440	Granted	Golden Mile South	Orrex	100%
P26/3441	Granted	Golden Mile South	Orrex	100%
P26/3442	Granted	Golden Mile South	Orrex	100%
P26/3825	Application	Golden Mile South	n/a	n/a
P26/3826	Application	Golden Mile South	n/a	n/a
P26/3827	Application	Golden Mile South	n/a	n/a
P26/3651	Granted	Golden Mile South	Orrex	95%
P26/3652	Granted	Golden Mile South	Orrex	95%
P26/3653	Granted	Golden Mile South	Orrex	95%
P26/3654	Granted	Golden Mile South	Orrex	95%
P26/3655	Granted	Golden Mile South	Orrex	95%
P26/3656	Granted	Golden Mile South	Orrex	95%
P26/3657	Granted	Golden Mile South	Orrex	95%
P26/3658	Granted	Golden Mile South	Orrex	95%
P26/3659	Granted	Golden Mile South	Orrex	95%
P26/3660	Granted	Golden Mile South	Orrex	95%
P26/3661	Granted	Golden Mile South	Orrex	95%
P26/3662	Granted	Golden Mile South	Orrex	95%
P26/3663	Granted	Golden Mile South	Orrex	95%
P26/3763	Application	Golden Mile South	n/a	n/a
P26/3641	Granted	Golden Mile South	Orrex	100%
P26/3642	Granted	Golden Mile South	Orrex	100%
P26/3643	Granted	Golden Mile South	Orrex	100%
P26/3644	Granted	Golden Mile South	Orrex	100%
P26/3645	Granted	Golden Mile South	Orrex	100%
P26/3716	Granted	Golden Mile South	Orrex	100%
P26/3717	Granted	Golden Mile South	Orrex	100%
P26/3718	Granted	Golden Mile South	Orrex	100%
P26/3719	Granted	Golden Mile South	Orrex	100%
P26/3720	Granted	Golden Mile South	Orrex	100%
P26/3721	Granted	Golden Mile South	Orrex	100%
P26/3722	Granted	Golden Mile South	Orrex	100%
P26/3723	Granted	Golden Mile South	Orrex	100%
P26/3724	Granted	Golden Mile South	Orrex	100%
P26/3725	Granted	Golden Mile South	Orrex	100%
P26/3726	Granted	Golden Mile South	Orrex	100%
P26/3863	Application	Golden Mile South	n/a	n/a
P26/3864	Application	Golden Mile South	n/a	n/a
P26/3865	Application	Golden Mile South	n/a	n/a
P26/3866	Application	Golden Mile South	n/a	n/a
P26/3867	Application	Golden Mile South	n/a	n/a
P26/3868	Application	Golden Mile South	n/a	n/a
P26/3869	Application	Golden Mile South	n/a	n/a
P26/3870	Application	Golden Mile South	n/a	n/a
P26/3871	Application	Golden Mile South	n/a	n/a
P26/3872	Application	Golden Mile South	n/a	n/a
P26/3873	Application	Golden Mile South	n/a	n/a
P26/3672	Granted	Golden Mile South	Orrex	100%
P26/3673	Granted	Golden Mile South	Orrex	100%
P26/3674	Granted	Golden Mile South	Orrex	100%
P26/3727	Granted	Golden Mile South	Orrex	100%
P26/3728	Granted	Golden Mile South	Orrex	100%
P26/3729	Granted	Golden Mile South	Orrex	100%

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Tenement	Status	Location by Project	**Registered Holder **	Interest
E57/625	Granted	Barlee	Orrex	90%
E57/815	Granted	Barlee	Orrex	90%
E57/816	Granted	Barlee	Orrex	90%
E57/822	Granted	Barlee	Orrex	90%
E57/825	Granted	Barlee	Orrex	90%
E57/879	Application	Barlee	n/a	n/a
E57/884	Application	Barlee	n/a	n/a

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ASX-ORX

ORREX RESOURCES LTD T+61 (0)8 9486 4862 F+61 (0)8 9481 2394 www.orrexresources.com Level 1, 20 Howard Street, Perth, WA, 6000 Australia