FORTUNA METALS LTD — Interim / Quarterly Report 2012

Mar 15, 2012

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FRONTIER RESOURCES LTD

A.B.N. 96 095 684 389

INDEX TO CONSOLIDATED INTERIM FINANCIAL REPORT

HALF-YEAR ENDED 31 DECEMBER 2011

	Page
DIRECTORS’ REPORT	1
AUDITORS’ INDEPENDENCE DECLARATION	2
INDEPENDENT REVIEW REPORT TO THE MEMBERS	3-4
DIRECTORS’ DECLARATION	5
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	6
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	7
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	8
CONSOLIDATED STATEMENT OF CASH FLOWS	9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	10-14

This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2011 and any public announcements made by Frontier Resources Ltd during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001 .

FRONTIER RESOURCES LTD & ITS CONTROLLED ENTITIES A.B.N. 96 095 684 389

DIRECTORS’ REPORT

Your directors present their report on the consolidated entity consisting of Frontier Resources Ltd and the entities it controlled at the end of, or during, the half-year ended 31 December 2011.

DIRECTORS

The following persons were directors of Frontier Resources Ltd during the whole of the halfyear and up to the date of this report:

Peter A. McNeil Graham J. Fish Warren J. Staude Hugh David Swain

RESULTS AND DIVIDENDS

The consolidated entity loss after income tax for the half-year is $5,329,641 (2010: $1,608,955). There is no dividend paid or recommended.

The result for the half-year was significantly affected by expenditure of $3,891,772 (2010: $1,147,665) in respect of exploration expenditure.

REVIEW OF OPERATIONS

During the half-year the Group:

• (i) Raised $90,000 from the exercise of unlisted options; and

• (ii) Continued its exploration activities in Papua New Guinea and Tasmania, particularly the Andewa Gold Project. Details of the exploration activities can be found in the Company announcements.

AUDITORS’ INDEPENDENCE DECLARATION

A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 immediately follows this report.

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

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Peter A. McNeil Managing Director

15 March 2012

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38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia

Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au

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15 March 2012

The Directors Frontier Resources Limited Level 4, 66 Kings Park Road WEST PERTH WA 6005

Dear Sirs,

DECLARATION OF INDEPENDENCE BY CHRIS BURTON TO THE DIRECTORS OF FRONTIER RESOURCES LIMITED

As lead auditor for the review of Frontier Resources Limited for the half-year ended 31 December 2011, I declare that to the best of my knowledge and belief, there have been:

• no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• no contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of Frontier Resources Limited and the entities it controlled during the period.

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Chris Burton Director

BDO Audit (WA) Pty Ltd Perth, Western Australia

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

Tel: +8 6382 4600 38 Station Street Fax: +8 6382 4601 Subiaco, WA 6008 www.bdo.com.au PO Box 700 West Perth WA 6872 Australia

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INDEPENDENT AUDITOR’S REVIEW REPORT TO THE MEMBERS OF FRONTIER RESOURCES LIMITED

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Frontier Resources Limited, which comprises the statement of financial position as at 31 December 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the halfyear ended on that date, notes comprising a statement of accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the disclosing entity and the entities it controlled at the half-year’s end.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the disclosing entity are responsible for the preparation of the half-year 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 half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the disclosing entity’s financial position as at 31 December 2011 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Frontier Resources Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

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

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

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Basis for Qualified Conclusion

As at 31 December 2011 property, plant and equipment with a net book value of $1,929,285 in relation to the company’s drill rigs were held in a remote location in Papua New Guinea. Access to the location of these assets is limited. As a result of this we have been unable to obtain sufficient assurance over the physical existence and condition of these assets. Accordingly, we are unable to and do not express any assurance in respect of the existence and the recoverability of these items of property, plant and equipment as at 31 December 2011. Had we been able to complete our review of property, plant and equipment, matters might have come to our attention indicating that adjustments might be necessary to the half-year financial report.

Qualified Conclusion

Except for the adjustments to the half-year financial report that we might have become aware of had it not been for the situation described above, based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the half-year financial report of Frontier Resources Limited is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001 .

BDO Audit (WA) Pty Ltd

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Chris Burton Director

Perth, Western Australia Dated this 15[th] day of March 2012

FRONTIER RESOURCES LTD & ITS CONTROLLED ENTITIES A.B.N. 96 095 684 389

DIRECTORS’ DECLARATION

In the directors’ opinion:

• (a) the financial statements and notes set out on pages 6 to 14 are in accordance with the Corporations Act 2001 , including:

• (i) complying with AASB 134 Interim Financial Reporting, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

• (ii) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and of its performance, as represented by the results of its operations, changes in equity and its cash flows, for the half-year ended on that date; and

• (b) there are reasonable grounds to believe that Frontier Resources Ltd will be able to pay its debts as and when they become due and payable.

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

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Peter A. McNeil Managing Director

15 March 2012

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FRONTIER RESOURCES LTD & ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 31 DECEMBER 2011

Notes Continuing Operations Revenue 2 Interest income 2 Other income 2 Exploration expenditure written off Gross employee benefit expense Share based payments expense Administration and insurance Corporate compliance and shareholder relations Depreciation Office rental, communications and consumables Loss on disposal of plant and equipment Loss on foreign exchange Other expenses Loss from continuing operations Income tax expense Loss after income tax Other comprehensive income Movement in Foreign Currency Reserve Total comprehensive income for the half year attributable to owners of Frontier Resources Limited Loss per share for loss attributable to the ordinary equity holders of Frontier Resources Limited Basic and diluted loss per share	Half-year 2011 $ 2010 $ 41,929 6,531 125,173 114 6,794 28,849
	173,896 35,494 (3,891,772) (1,147,665) (95,820) (72,867) (881,287) (107,256) (106,876) (67,476) (69,166) (66,294) (395,614) (70,437) (51,102) (15,375) - (72,389) - (8,443) (11,900) (16,247)
	(5,329,641) (1,608,955) - -
	(5,329,641) (1,608,955) 208,574 (43,305)
	(5,121,067) (1,652,260)
	Cents Cents (1.80) (0.76)

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

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FRONTIER RESOURCES LTD & ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2011

Notes ASSETS Current Assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-Current Assets Trade and other receivables Plant and equipment 5 Mineral exploration and development expenditure Total Non-Current Assets Total Assets LIABILITIES Current Liabilities Trade and other payables Total Current Liabilities Total Liabilities Net Assets EQUITY Contributed equity 4 Reserves 6 Accumulated losses Total Equity	31-Dec-11 $ 30-Jun-11 $ 3,034,132 8,287,285 60,042 711,323
	3,094,174 8,998,608
	326,154 104,537 3,025,453 1,164,880 2,176,872 2,176,872
	5,528,479 3,446,289
	8,622,653 12,444,897
	537,374 209,838
	537,374 209,838
	537,374 209,838
	8,085,279 12,235,059
	30,588,737 30,498,737 1,880,493 790,632 (24,383,951) (19,054,310)
	8,085,279 12,235,059

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

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FRONTIER RESOURCES LTD & ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2011

Consolidated Entity Balance at 30 June 2010 Total comprehensive income Transactions with equity holders Shares issued during the period Share based payments Balance at 31 December 2010 Balance at 30 June 2011 Total comprehensive income Transactions with equity holders Options exercised during the period Share based payments Balance at 31 December 2011	$ $ $ $ $ Contributed Equity Accumulated Losses Share Based Payment Reserve Foreign Exchange Reserve Total
	18,452,527 (14,705,086) 894,880 (438,233) 4,204,088
	- (1,608,955) - (43,305) (1,652,260) 1,772,156 - - - 1,772,156 - - 107,256 - 107,256
	20,224,683 (16,314,041) 1,002,136 (481,538) 4,431,240
	30,498,737 (19,054,310) 1,251,462 (460,830) 12,235,059
	- (5,329,641) - 208,574 (5,121,067) 90,000 - - - 90,000 - - 881,287 - 881,287
	30,588,737 (24,383,951) 2,132,749 (252,256) 8,085,279

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

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FRONTIER RESOURCES LTD & ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF YEAR ENDED 31 DECEMBER 2011

Notes Cash Flows from Operating Activities Cash receipts in the course of operations Interest received Payments to suppliers and employees not included as part of exploration and evaluation activities below Exploration and evaluation activities Net cash (outflow) from operating activities Cash Flows From Investing Activities Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Payment of security deposits Proceeds from return of security deposits Net cash (outflow)/inflow from investing activities Cash Flows from Financing Activities Proceeds from issue of shares (net of share issue costs) Net cash inflow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the half-year Cash and cash equivalents at end of the half-year	Half-year 2011 $ 2010 $ 43,562 37,090 125,173 114 (180,345) (239,350) (3,583,103) (873,627)
	(3,594,713) (1,075,773)
	(1,575,568) (1,273) 48,745 - (221,617) - - 46,600
	(1,748,440) 45,327
	90,000 1,772,156
	90,000 1,772,156
	(5,253,153) 741,710 8,287,285 1,197,008
	3,034,132 1,938,718

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

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FRONTIER RESOURCES LTD & ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2011

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The half-year consolidated financial report is a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standard AASB 134: Interim Financial Reporting.

These interim financial report is intended to provide users with an update on the latest annual financial statements of Frontier Resources Limited and its controlled entities. As such, it does not contain information that represents relatively insignificant changes occurring during the half-year within the Group. It is therefore recommended that these financial statements be read in conjunction with the annual financial statements for the year ended 30 June 2011 and any public announcements made by Frontier Resources Limited and its controlled entities during the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001.

The half-year financial report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.

The same accounting policies and methods of computation have been followed in these interim financial statements as were applied in the most recent annual financial statements.

Basis of Preparation and Going Concern Basis

The consolidated entity incurred a loss for the half year of $5,329,641 (2010: half-year loss of $1,608,955) and had a net operating cash outflows of $3,594,713 for the six months ended 31 December 2011 (31 December 2010: net operating cash outflow $1,075,773).

At 31 December 2011 the consolidated entity had cash assets of $3,034,132 (30 June 2011: $8,287,285), working capital of $2,556,800 (30 June 2011: $8,788,770) and net assets of $8,085,279 (30 June 2011: $12,235,059).

The Financial Report has been prepared on the going concern basis, subsequent to a review of the capital requirements by the Directors. This contemplates continuity of normal business activities and the realisation of assets and the discharge of liabilities in the ordinary course of business when they fall due. Due to the encouraging results of past exploration activities, the Directors anticipate a continued focus on exploration over the next 12 months. To facilitate the ongoing exploration and drilling program, the Group may undertake a capital raising to meet its funding requirements during the period. In the unlikely event that capital raising does not occur, the Group may be unable to realise its assets and discharge its liabilities in the ordinary course of business.

The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful development and commercial exploitation or sale of the respective mining tenements.

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FRONTIER RESOURCES LTD & ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2011

2. REVENUE

Revenue from continuing operations: Drilling contract income Other Revenue: Gain on Sale of Asset Interest Income Other	2011 2010 $ $ - 6,531 6,794 - 125,173 114 41,929 28,849
	173,896 35,494

3. OPERATING SEGMENTS

The consolidated entity operates predominantly in the mining industry. This comprises exploration and evaluation of gold, silver and base metals projects. Inter-segment transactions are priced at cost to the consolidated entity.

Segment assets include the cost to acquire the tenement and the capitalised exploration costs of those tenements.

For the Half Year to 31 December 2011 Segment Revenue Segment Results Amounts not included in segment results but reviewed by Board: Corporate Expenses Share-based Payments Expense (Loss) before Income Tax As at 31 December 2011 Segment Assets Segment Liabilities	Australian Exploration $ Papua New Guinea Exploration $ Treasury $ 30,414 18,309 125,173	Consolidated $ 173,896
	(1,178,130) (3,060,533) 125,173	(4,113,490) (334,864) (881,287)
	3,129,086 2,459,435 3,034,132
		(5,329,641)
		8,622,653
	281,178 256,196 -	537,374

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FRONTIER RESOURCES LTD & ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2011

3. OPERATING SEGMENTS (Cont.)

For the Half Year to 31 December 2010 Segment Revenue Segment Results Amounts not included in segment results but reviewed by Board: Corporate Expenses (Loss) before Income Tax As at 30 June 2011 Segment Assets Segment Liabilities 4. CONTRIBUTED EQUITY Ordinary shares – fully paid Balance at 1 July Listed options exercised Balance at 31 December Options to purchase ordinary shares Balance at 1 July Listed options exercised Expiry of listed options Issue of employee options Cancellation or expiry of employee options Issue of Directors options Directors options exercised Expiry of Directors options Balance at 31 December	Australian Exploration $ 15,225	Papua New Guinea Exploration $ Treasury $ 20,155 114	Consolidated $ 35,494
	(362,094)	(893,017) 114	(1,254,997) (353,958)
	3,632,532	525,080 8,287,285
			(1,608,955)
			12,444,897
	125,708	84,130 -	209,838
	2011 Shares 294,520,253 2,000,000	2010 2011 Shares $ 205,154,014 30,498,737 39,381,232 90,000	2010 $ 18,452,527 1,772,156
	296,520,253	244,535,246 30,588,737	20,224,683
		2011 Options 13,200,000 - - 10,200,000 - 6,000,000 (2,000,000) -	2010 Options 55,069,575 (39,381,232) (1,788,343) 4,500,000 (550,000) 5,000,000 - (3,200,000)
		27,400,000	19,650,000

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FRONTIER RESOURCES LTD & ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2011

5. PLANT AND EQUIPMENT

Plant and equipment Plant and equipment at cost Drill rigs at cost Less accumulated depreciation Carrying amount at 31 December Reconciliation Reconciliation of the carrying amount of plant and equipment at the beginning and end of the financial period are set out below: Carrying amount at 1 July Additions Disposals Depreciation expense Foreign exchange differences Carrying amount at 31 December 6. RESERVES Reserves Share based payment reserve Foreign currency translation reserve Movements – Share based payment reserve Balance at 1 July Option expense Balance at 31 December Movements – Foreign currency translation reserve Balance at 1 July Currency translation differences arising during the period Balance at 31 December	2011 $ 2010 $ 1,908,264 593,972 2,062,312 182,138 (945,123) (427,157)
	3,025,453 348,953
	1,164,880 493,651 2,125,835 1,273 (31,846) (72,389) (395,614) (70,437) 162,198 (3,145)
	3,025,453 348,953
	2,132,749 1,002,136 (252,256) (481,538)
	1,880,493 520,598
	1,251,462 894,880 881,287 107,256
	2,132,749 1,002,136
	(460,830) (438,233) 208,574 (43,305)
	(252,256) (481,538)

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FRONTIER RESOURCES LTD & ITS CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2011

7. EVENTS OCCURRING AFTER THE REPORTING DATE

There were no subsequent events from reporting date, except for:

On 6 March 2012, the Company announced that it had signed a Heads of Agreement pursuant to which between the Company and a wholly owned subsidiary of Newcrest Mining Limited pursuant to which:

• Newcrest agreed to subscribe for $750,000 of Frontier Shares; and

• Newcrest and the Company have agreed to negotiate the terms of a proposed farm-in by Newcrest into Frontier’s Mt Andewa project.

On 9 March 2012, 7,026,429 fully paid ordinary shares at $0.1067 were issued to Newcrest Mining Limited in respect to the Heads of Agreement to raise $749,719.97.

On 9 March 2012, the Group issued 2,220,000 employee options exercisable at 16.5 cents on or before 30 December 2014 and 2,320,000 employee options exercisable at 11 cents on or before 30 December 2014.

8. COMMITMENTS AND CONTINGENT LIABILITIES

At 31 December 2011 the Group had commitments totalling $281,556 of instalments payable on plant and equipment ordered but not yet delivered.

The Group’s other commitments remain consistent with those noted at 30 June 2011. The Group has no contingent liabilities at 31 December 2011.

9. RELATED PARTY TRANSACTIONS

On 24 November 2011, the Directors were issued 6,000,000 options, as detailed below:

Director	Exercise	Expiry Date	Quantity	Fair	Volatility
	Price			Value
Graham Fish	$0.19	31 Oct 2014	1,000,000	$0.0682	95%
Peter McNeil	$0.19	31 Oct 2014	3,000,000	$0.0682	95%
Warren Staude	$0.19	31 Oct 2014	1,000,000	$0.0682	95%
Hugh Swain	$0.19	31 Oct 2014	1,000,000	$0.0682	95%

10. DIVIDENDS

There were no dividends paid or recommended during the financial period ended 31 December 2011.

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