GENESIS RESOURCES LIMITED — Annual Report 2009

Oct 22, 2009

Genesis Resources Limited ABN 22 114 787 469

$\hat{\boldsymbol{x}}$

Annual Financial Report

30 June 2008

Continued State

$\sim 400$

$\bar{\mathbf{z}}$

$\sim 10^7$

Contents

$\hat{\vec{r}}$

$\overline{a}$

$\overline{1}$

	Page
Financial statements
Directors' report
Lead auditor's independence declaration
Balance sheet	6
Income statement	⇁
$\mathcal{L}$ Statement of changes in equity	8
Statement of cash flows	9
Notes to the financial statements	10
Directors' declaration	29
Independent audit report	30

$\sim$ $\sim$

Directors' report

1. Directors

$\overline{\phantom{a}}$

The directors of the Company at any time during or since the end of the financial year are:

Name and qualifications	Age	Experience, special responsibilities and other directorships
Mr Peter G Hepburn-Brown BSc Non-Executive Chairman	51	Peter has over 25 years mining industry experience having previously worked for Siberia Mining Corporation, Harmony Gold (Australia), Great Central Mines and with mining operations for Niugini Mining and Western Mining Corporation. Peter is currently an Executive Director of Kasbah Resources Limited and Alloy Resources Limited.
Mr Pedro Kastellorizos BSc Managing Director	35	Pedro has over 10 years exploration experience specialising in the Northern Territory. Pedro was most recently Exploration Director for Batavia Mining, an ASX-listed company. Prior to joining Batavia, he was Exploration Manager for Thor Mining plc, an AIM-listed company focused on molybdenum, tungsten and uranium exploration in the Northern Territory.
		Pedro gained significant exploration experience in the Northern Territory with Tennant Creek Gold, Burnside Operations, Northern Gold, the Northern Territory Geological Survey and Afmeco Mining & Exploration.
Mr Ahmet K Sener BSc, MSc Non-Executive Director	32	Kerim has over 8 years of exploration experience, having worked for Independence Gold Mining Pvt. Ltd. (a subsidiary of LSE-listed Lonmin plc) in Zimbabwe and ASX-listed Northern Gold in the Northern Territory. While undertaking his PhD, he completed a number of consulting projects for clients in Western Australia, including the exploration for manganese mineralisation with Consolidated Minerals.
		Kerim is currently Managing Director of Ariana Resources plc, an AIM-listed exploration company focused on precious metals in Turkey.
Mr Anthony S Veitch BCom, MBA Non-Executive Director/Public Officer	40	Tony previously worked with the ASX, as Manager of Corporate Finance for the London Stock Exchange plc and as a consultant to listed and private companies.
		Tony is currently an Executive Director of Citadel Capital Pty Ltd, an investment and advisory business based in Perth. Resigned 14 November 2008.

Directors' report

2. Company secretary

Mr Anthony S Veitch acted as company secretary for the year. Mr Veitch's qualifications and experience are outlined above.

On 14 November 2008, Mr Anthony S Veitch resigned from all positions held with the Company. In the interim, Mr Pedro Kastellorizos will act as Company Secretary until an official appointment is made.

3. Principal activities

The principal activities of the entity during the year were exploration for and evaluation of gold, manganese and base metals. There was no significant change in the nature of the Company's activities during the year.

4. Results

The loss of the Company for the financial year was \$141,275 (2007: profit \$49,305).

5. Directors' meetings

The number of directors' meetings and number of meetings attended by each of the directors of the Company during the financial year were:

Director		Directors Meetings
	А	в
Mr P Kastellorizos
Mr A K Sener
Mr A S Veitch
Mr P G Hepburn-Brown

$A$ – Number of meetings attended

B - Number of meetings held during the time the director held office during the year

6. State of affairs

There were no significant changes in the state of affairs of the Company during the financial year.

7. Likely developments

The Company will continue exploration and development activities and will also assess new joint venture and commercial opportunities that the directors believe can create value for shareholders, including the acquisition of interests in additional projects should they arise. Because of the unpredictable nature of these opportunities, developments could occur at short notice.

Directors' report

8. Environmental regulations

As the Company is only conducting preliminary exploration activities there are no environmental issues that will impact the operating performance of the Company. When the Company commences full exploration and development activities the Company will ensure all activities are conducted in accordance with environmental regulations under both Commonwealth and State legislation.

The Board is not aware of any significant breaches of environmental regulations during the period covered by this report.

9. Events subsequent to reporting date

On 1 July 2008, the Company signed a Heads of Agreement with Western Desert Resources Limited ("WDR"), an ASX-listed company, to enter into a joint venture agreement over the Company's Gladstone and McArthur River manganese projects.

Under the terms of the joint venture, WDR issued 5 million fully paid ordinary shares to Genesis and also agreed to spend \$500,000 on the tenements within two years to earn a 45% interest in the Gladstone and McArthur River tenements. Of the \$500,000 minimum expenditure, \$300,000 must be spent within six months.

On 4 September 2008, the Company signed a consulting agreement with Tigermoth Investments Limited ("Tigermoth") under which Tigermoth agreed to provide advisory services and assistance to the Company in seeking to raise a minimum of \$2 million on or before 30 April 2009.

On 26 September 2008, the Company issued 12,500 fully paid ordinary shares at 10 cents per share to raise $$1,250.$

On 29 October 2008, the Company issued 2,000,000 fully paid ordinary shares at 5 cents per share to raise \$100,000.

Other than the matter discussed above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Company, the results of those operations or the state of affairs of the Company, in future financial years.

10. Dividends

The company has not declared or paid any dividends during the current or previous years.

Directors' report

11. Directors' interests

The relevant interest of each director in the share capital of the Company, as notified by the directors, at the date of this report is as follows:

	Ordinary Shares
Mr A S Veitch	333,333
Mr A K Sener
Mr P G Hepburn-Brown	3,750,000
	1,090,750

12. Lead auditor's independence declaration

The lead auditor's independence declaration is set out on page 5 and forms part of the directors' report for the year ended 30 June 2008.

13. Indemnification and insurance of officers and auditors

The Company, during the financial year, in respect of any person who is or has been an officer or auditor of the Company:

Has not indemnified or made any relevant agreement for indemnifying against a liability incurred as an officer or auditor.

Signed in accordance with a resolution of directors at Perth:

f tostette

Mr P Kastellorizos Director

Thursday Dated at

$\sim$ $\sim$ $\sim$

this $18ⁿ$

day of December

2008

Grant Thornton (WA) Partnership
ABN: 17 735 344 518 Now. 17733 344 516
Level 1
10 Kings Park Road
West Perth WA 6005
PO BOX 570 West Perth WA 6872 T +61 8 9480 2000 F +61 8 9322 7787 E admin@gtwa.com.au
W www.grantthornton.com.au

AUDITOR'S INDEPENDENCE DECLARATION TO THE DIRECTORS OF GENESIS RESOURCES LIMITED

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Genesis Resources Limited for the year ended 30 June 2008, I declare that, to the best of my knowledge and belief, there have been:

• No contraventions of the auditor independence requirements of the Corporations $\mathbf a$ Act 2001 in relation to the audit; and
• No contraventions of any applicable code of professional conduct in relation to the $\mathbf b$ audit.

Grant Thomton (WA) Partressby

GRANT THORNTON (WA) PARTNERSHIP Chartered Accountants

Und

J W VIBERT Partner

Perth, 18 December 2008

Liability limited by a scheme approved under Professional Standards Legislation.

Gran! Thornton (WA) Partnership is an independent business onlibed to lado under the international name Gran! Thomlon,
Gran! Thomlon is a bademark owned by Gran! Thomlon International and used under licence by independent

Balance sheet

As at 30 June 2008

		2008	2007
	Note	S	\$
Assets
Cash and cash equivalents	5	24,211	134,610
Trade and other receivables	7	61,241	1,021
Total current assets		85,452	135,631
Exploration and evaluation assets	9	155,997	75,816
Total non-current assets		155,997	75,816
Total assets		241,449	211,447
Liabilities
Loans and borrowings	10	3,445	3,290
Trade and other payables	11	20,580	9,339
Total current liabilities		24,025	12,629
Deferred tax liabilities	8		13,179
Total non-current liabilities			13,179
Total liabilities		24,025	25,808
Net assets		217,424	185,639
Equity
Share capital	12	358,012	184,952
Retained earnings/(accumulated losses)		(140, 588)	687
Total equity		217,424	185,639

The balance sheet is to be read in conjunction with the notes to the financial statements set out on pages 10 to 28.

Income statement

For the year ended 30 June 2008

		2008	2007
	Note	\$	S
Other income	13		88,155
Other expenses	14	(158, 046)	(27, 170)
Results from operating activities		(158, 046)	60,985
Finance income	15	3,849	1,693
Finance expense	15	(257)	(194)
Net finance income		3,592	1,499
(Loss)/profit before income tax		(154, 454)	62,484
Income tax expense	16	13,179	(13, 179)
(Loss)/profit for the period		(141.275)	49,305

The income statement is to be read in conjunction with the notes to the financial statements set out on pages 10 to 28.

Genesis Resources Limited Statement of changes in equity For the year ended 30 June 2008

2008

	Issued capital S	Retained earnings S	Total equity S
Balance at 1 July 2007	184,952	687	185,639
Net profit/(loss) for the period		(141, 275)	(141, 275)
Total recognised income and expense		(141, 275)	(141, 275)
Issue of ordinary shares	127,300		127,300
Equity settled transactions, net of tax	50,000		50,000
Transaction costs of share issues	(4,240)		(4,240)
Balance at 30 June 2008	358,012	(140, 588)	217,424

2007

	Issued capital S	Retained earnings S	Total equity S
Balance at 1 July 2006	70,002	(48,618)	21,384
Net profit/(loss) for the period	$\overline{\phantom{a}}$	49,305	49,305
Total recognised income and expense	$\blacksquare$	49,305	49,305
Issue of ordinary shares	121,000		121,000
Transaction costs of share issues	(6,050)	$\bullet$	(6,050)
Balance at 30 June 2007	184,952	687	185,639

The statement of changes of equity is to be read in conjunction with the notes to the financial statements set out on pages 10 to 28.

Genesis Resources Limited Statement of cash flows For the year ended 30 June 2008

$\ddot{\phantom{0}}$

Ť

		2008	2007
	Note	S	S
Cash flows from operating activities
Cash paid to suppliers and employees		(99, 457)	(29, 203)
Cash generated from operations		(99, 457)	(29, 203)
Interest received		3,044	1,693
Net cash used in operating activities	6	(96, 413)	(27,510)
Cash flows from investing activities
Proceeds from sale of tenements			89,731
Exploration and evaluation expenditure	9	(80, 181)	(61, 884)
Loans to related parties		(56, 763)
Net cash (used in)/from investing activities		(136, 944)	27,847
Cash flows from financing activities
Proceeds from issue of share capital		123,060	121,000
Loans from associates		(102)	(770)
Net cash from financing activities		122,958	120,230
Net decrease in cash and cash equivalents		(110,399)	120,567
Cash and cash equivalents at 1 July		134,610	14,043
Cash and cash equivalents at 30 June	5	24,211	134,610

The cash flow statement is to be read in conjunction with the notes to the financial statements set out on pages 10 to 28.

Notes to the financial statements

$\mathbf{1}$ Reporting entity

Genesis Resources Limited (the "Company") is a Company domiciled in Australia. The address of the Company's registered office is Unit 8, 52 Marina Boulevard, Cullen Bay, Darwin NT 0820. The Company primarily is involved in gold, manganese and base metal exploration and development activities.

$\overline{2}$ Basis of preparation

Statement of compliance $(a)$

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The financial report of the Company complies with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).

The financial statements were approved by the Board of Directors on 18 December 2008.

$(b)$ Basis of measurement

The financial statements have been prepared on a historical cost basis.

$(c)$ Functional and presentation currency

These financial statements are presented in Australian dollars, which is the Company's functional currency. All financial information has been rounded to the nearest dollar, unless otherwise stated.

$(d)$ Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described below:

Recoverability of receivable amounts

The Company has recognised a receivable amount from a related party (refer note 7) amounting to \$57,568 (2007: Nil). This amount is disclosed as:

	2008	2007
		S.
Receivables due from related parties	57,568	٠

Notes to the financial statements

$\overline{2}$ Basis of preparation continued

$(d)$ Use of estimates and judgements continued

The recoverability of this amount is based on the related party's undertaking to repay the loan in full should the concessions for the Plavica tenements not be granted by the end of January 2009.

In assessing this recoverability management has assumed that RIK SILEKS AD KRATOVO is a reputable and highly successful company in the Republic of Macedonia that has considerable resources invested in the sporting, banking, mining and leisure industries in Macedonia.

The Company's management is confident that the amounts will be repaid having conducted a detailed review of the related party's business including obtaining expert advice in regard to SILEKS' activities in the relevant industries in which it operates.

$\mathbf{3}$ Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

Certain comparative amounts have been reclassified to conform with the current year's presentation.

$(a)$ Foreign currency

$(i)$ Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Company entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss.

$(b)$ Financial instruments

$(i)$ Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below.

Notes to the financial statements

$\mathbf{3}$ Significant accounting policies continued

Financial instruments continued $(b)$

$(i)$ Non-derivative financial instruments continued

A financial instrument is recognised if the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Company's contractual rights to the cash flows from the financial assets expire or if the Company transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Company commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Company's obligations specified in the contract expire or are discharged or cancelled.

Cash and cash equivalents comprise cash balances and call deposits.

Accounting for finance income and expense is discussed in note $3(e)$ .

Non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.

$(ii)$ Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

Exploration and evaluation assets $(c)$

Exploration and evaluation costs, including the costs of acquiring licences, are capitalised as exploration and evaluation assets on an area of interest basis. Costs incurred before the Company has obtained the legal rights to explore an area are recognised in the income statement.

Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either:

• (i) the expenditures are expected to be recouped through successful development and exploitation of the area of interest; or
• (ii) activities in the area of interest have not at the reporting date, reached a stage which ermits a resonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing.

Notes to the financial statements

$\overline{\mathbf{3}}$ Significant accounting policies continued

$(c)$ Exploration and evaluation assets continued

Exploration and evaluation assets are assessed for impairment if:

• (i) sufficient data exists to determine technical feasibility and commercial viability; and
• (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount (see impairment accounting policy (d)). For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. The cash generating unit shall not be larger than the area of interest.

Once the technical feasibilty and commercial viabilty of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from exploration and evaluation assets to mining property and development assets within property, plant and equipment.

$(d)$ Impairment

$(i)$ Financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost the reversal is recognised in profit or loss.

$(ii)$ Non-financial assets

The carrying amounts of the Company's non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset's recoverable amount is estimated.

Notes to the financial statements

Significant accounting policies continued $3¹$

$(d)$ Impairment continued

$(ii)$ Non-financial assets continued

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash-generating").

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Finance income and expenses (e)

Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

Finance expenses comprise interest expense on borrowings. All borrowing costs are recognised in profit or loss using the effective interest method.

Income tax $(f)$

Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Notes to the financial statements

$\overline{\mathbf{3}}$ Significant accounting policies continued

$(f)$ Income tax continued

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Goods and services tax $(g)$

Revenue, 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 taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

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 balance sheet.

Cash flows are included in the statement of cash flows on a gross basis. 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.

Notes to the financial statements

$3¹$ Significant accounting policies continued

$(h)$ New standards and interpretations not yet adopted

The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 30 June 2008, but have not been applied in preparing this financial report:

• Revised AASB 101 Presentation of Financial Statements introduces as a financial statement (formerly "primary" statement) the "statement of comprehensive income". The revised standard does not change the recognition, measurement or disclosure of transactions and events that are required by other AASBs. The revised AASB 101 will become mandatory for the Company's 30 June 2010 financial statements. The Company has not yet determined the potential effect of the revised standard on the Company's disclosures.
• Revised AASB 123 Borrowing Costs removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The revised AASB 123 will become mandatory for the Company's 30 June 2010 financial statements. In accordance with the transitional provisions the Company will apply the revised AASB 123 to qualifying assets for which capitalisation of borrowing costs commences on or after the effective date. The Company has not yet determined the potential effect of the revised standard on future earnings.
• AASB 8 Operating Segments introduces the "management approach" to segment reporting. AASB 8, which becomes mandatory for the Company's 30 June 2010 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the Company's Chief Operating Decision Maker in order to assess each segment's performance and to allocate resources to them.

$(i)$ Segment information

A segment is a distinguishable component of the Company that is engaged either in providing related products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and returns that are different from those of other segments.

The company operates in one business segment and one geographical segment, namely gold manganese and base metals exploration in Australia. The revenues and results of this segment are those of the Company as a whole and are set out in the income statement.

Determination of fair values $\boldsymbol{4}$

A number of the Company's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Notes to the financial statements

Determination of fair values continued $\overline{4}$

Trade and other receivables $(a)$

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

Non-derivative financial liabilities $(b)$

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

$(c)$ Share-based payment transactions

The fair value of equity-settled share-based payment transactions is measured as the fair value of the goods and services received.

Cash and cash equivalents $5₁$

2008	2007
S	S
1,819	89,942
22,392	44.668
	134,610
	24,211

The Company's exposure to interest rate risk and sensitivity analysis for financial assets and liabilities are disclosed in note 17.

Notes to the financial statements

Reconciliation of cash flows from operating activities 6 2007 2008 $\mathbf S$ \$ Cash flows from operating activities 49,305 (Loss)/profit for the period $(141, 275)$ 15 Net finance expense $(3,592)$ $(6,050)$ Share issue expenses Shares issued for no consideration 50,000 $\overline{a}$ Profit on sale of tenement $(87, 831)$ $\overline{a}$ 13,179 Income tax expense $(13, 179)$ $(108, 046)$ $(31, 397)$ Operating loss before changes in working capital and provisions Change in trade and other receivables $(2,652)$ 1,033 Change in trade payables and other payables 11,241 2,854 $(99, 457)$ $(27,510)$ Cash used in operations 3,044 Interest paid $\overline{a}$ $(96, 413)$ 27,510 Net cash used in operating activities $\overline{7}$ Trade and other receivables 2008 2007 $\mathbf S$ $\mathbf S$ 57,568 Receivables due from related parties $\overline{a}$ GST receivable 3,673 1,021 61,241 1,021

Loans to related parties are interest free and repayable on demand.

The Company's exposure to credit risk and impairment losses related to trade and other receivables are disclosed in note 17.

∞	Tax assets and liabilities
	Unrecognised deferred tax assets
	Deferred tax assets have not been recognised in respect of the following items:					2008	2007
	Taxable temporary difference					(34, 801) 68,228 Ø	ł $\bullet$
	Tax losses					33,427
	The tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilise the benefits therefrom.
	Recognised deferred tax assets and liabilities
	following: Deferred tax assets and liabilities are attributable to the	Assets		Liabilities		Z
		2008 S	2007 မာ	2008 Ø	2007 Ø	2008 Ø	2007 69
	Exploration and evaluation assets				22,745		(22, 745)
	Other items		2,046		ı		2,046
	Tax loss carry-forwards		7,520		٠		7,520
	Tax (assets)/liabilities	ı	9,566	ı	22,745	$\mathbf{I}$	(13, 179)

$\frac{1}{3}$

$\frac{1}{4}$

Notes to the financial statements

Genesis Resources Limited

Notes to the financial statements

$9^°$ Exploration and evaluation assets

Reconciliation table

	Exploration and evaluation assets S
Balance at 1 July 2006	15,832
Capitalised expenditure during the year	61,884
Disposal of tenement	(1,900)
Balance at 30 June 2007	75,816
Balance at 1 July 2007	75,816
Capitalised expenditure during the year	80,181
Balance at 30 June 2008	155,997

The recoverability of carrying amounts of exploration and evaluation assets is dependent on the successful development and commercial exploitation or sale of the respective area of interest. This is assessed at balance date on an annual basis.

10 Loans and borrowings

This note provides information about the contractual terms of the Company's interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Company's exposure to interest rate and liquidity risk, see note 17.

	2008	2007
		S
Loans from associates	3,445	3,290

The loan is repayable at call to lender and accrues interest at 8.05% per annum.

$20\,$

Notes to the financial statements

11 Trade and other payables

	2008	2007
Non-trade payables and accrued expenses	20,580	9.339

The Company's exposure to liquidity risk related to trade and other payables is disclosed in note 17.

12 Capital and reserves

Reconciliation of movement in capital and reserves

The movement in ordinary shares during the year are as follows:

	2008		2007
	Number of Shares	\$	Number of Shares	\$
At the beginning of the year	14,815,002	184,952	13,000,002	70,002
Shares issued during the year:
Ordinary shares issued at 5 cents per share on 3 July 2007	60,500	3,025
Ordinary shares issued at 10 cents per share on 3 July 2007	30,250	3,025
Equity settled transactions - 20 December 2007	2,000,000	50,000
Issue of Class A performance shares - 20 December 2007	2,500,000	250
Ordinary shares issued at 8 cents per share on 12 February 2008	1,512,500	121,000
Issue of shares at 5 cents per share on 30 October 2006			960,000	48,000
Issue of shares at 10 cents per share on 30 October 2006			480,000	48,000
Ordinary shares issued at 5 cents per share on 10 January 2007			200,000	10,000
Ordinary shares issued at 10 cents per share on 10 January 2007			100,000	10,000
Ordinary shares issued at 5 cents per share on 13 March 2007			50,000	2,500
Ordinary shares issued at 10 cents per share on 13 March 2007			25,000	2,500
Less share issue costs		(4,240)		(6,050)
Balance at the end of the year	20,918,252	358,012	14,815,002	184,952

Notes to the financial statements

12 Capital and reserves continued

The Company does not have authorised capital or par value in respect of its issued shares.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to vote per share at meetings of the Company.

The Company has also issued share options and unvested performance shares.

On 20 December 2007 the directors resolved to issue 500,000 options exercisable at 20 cents each on or before three years from the date of listing of the Company on the Australian Stock Exchange (ASX). Unissued ordinary shares of the Company under option at year end are:

	Issue date Expiry date	Exercise price S	at year end 2008	Options on issue Options on issue at year end 2007
20/12/2007	20/12/2010	0.20	166,667	-
20/12/2007	20/12/2010	0.20	166,667	$\blacksquare$
20/12/2007	20/12/2010	0.20	166,666

Unvested performance shares outstanding at year end are:

	2008	2007
Balance at 1 July	-
Class A Performance Shares issued	2,500,000	-
Balance at 30 June	2,500,000

Class A Performance Shares were issued for consideration of \$250. In the event that the Company is listed on the ASX, the shares will automatically be converted into ordinary shares of the Company.

The shares will be redeemed for no consideration if the Company is not admitted to the ASX within 9 months of the date of the issue.

13 Other income

	2008	2007
	S	S
Other income	-	324
Net gain on sale of tenement	$\blacksquare$	87,831
		88,155

Notes to the financial statements

14 Other expenses

~~~~~~~~~~~~~	2008	2007
	\$	S
Accounting fees	21,615	8,452
Audit fees	8,120	3,000
Bank charges	175	29
Consulting and professional fees	88,426	8,776
Entertainment	106	219
Filing fees	1,130
Postage	379	263
Telephone and fax	1,086	$\overline{\phantom{a}}$
Travel - domestic and overseas	37,009	6,432
	158.046	27.170

15 Finance income and expense

	2008 S	2007 \$
Interest income on bank deposits Gain on exchange differences	3,044 805	1,693
Finance income	3,849	1,693
Interest expense - loans to associates	257	194
Finance expense	257	194
Net finance income	3,592	l.499

Notes to the financial statements

16 Income tax expense

	2008 S	2007 \$
Deferred tax expense
Origination and reversal of temporary differences	(13,179)	18,745
Recognition of previously unrecognised tax losses	$\overline{\phantom{a}}$	(5,206)
Arising from prior period adjustments		(360)
Total income tax expense/(benefit)	(13, 179)	13.179

Numerical reconciliation between tax expense and pre-tax accounting profit
	2008	2007
	S	\$
Profit for the period	(141, 275)	49,305
Total income tax expense	13,179	13,179
Net profit before tax	(154, 454)	62,484
Income tax using the Company's domestic corporation tax rate of 30% (2007: 30%)	(46, 336)	18,745
Effect of tax losses not recognised	33,157
Recognition of previously unrecognised tax losses		(5,206)
Under/(over) provided in prior years		(360)
Income tax expense on pre-tax net profit/(loss)	(13, 179)	13,179

17 Financial risk management and financial instruments

$(a)$ Overview

The Company has exposure to the following risks from its use of financial instruments:

• liquidity risk
• market risk

This note presents information about the Company's exposure to each of the above risks, its objectives and policies and processes for measuring and managing risk. Further quantitative disclosures are included throughout this financial report.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Management monitors and manages the financial risks relating to the operations of the Company through regular reviews.

Notes to the financial statements

17 Financial risk management and financial instruments continued

Liquidity risk $(b)$

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

Typically the Company ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The company does not maintain any lines of credit.

The following are the contractual maturities of financail liabilities, including estimated interest payments and excluding the impact of netting agreements:

30 June 2008

		Contract-
	Carrying amount	ual cash flows	6 mths or less
	\$	S	S
Non-derivative financial liabilities
Trade and other payables	20,580	(20, 580)	(20, 580)
	20,580	(20, 580)	(20, 580)
30 June 2007
	Carrying amount	Contract- ual cash flows	6 mths or less
	\$	S	S
Non-derivative financial liabilities
Trade and other payables	9,339	(9, 339)	(9,339)

Market risk $(c)$

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

9,339

$(9, 339)$

$(9, 339)$

Notes to the financial statements

17 Financial risk management and financial instruments continued

Market risk continued $(c)$

Interest rate risk

Profile

At balance date the Company had minimal exposure to interest rate risk, through its cash and cash equivalents held within financial institutions.

At the reporting date the interest rate profile of the Company's interest-bearing financial instruments was:

2008	2007
S
24.211	134.610

Fair value sensitivity analysis for fixed rate instruments

The company does not account for any fixed rate financial assets through profit and loss. Therefore a change in interest rates at reporting date would not affect profit or loss.

$(d)$ Fair values

Fair values of financial assets and liabilities approximate their carrying values.

Notes to the financial statements

18 Related parties

The following were key management personnel of the Company at any time during the reporting period and unless otherwise indicated were key management personnel for the entire period:

Non-executive directors Mr P Kastellorizos Mr A K Sener Mr P G Hepburn-Brown Mr A S Veitch

Transactions with key management personnel

Key management personnel hold positions in other entities that result in them having control or significant influence over the financial operating policies of those entities.

These entities transacted with the Company in the reporting period. The terms and conditions of those transactions were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to unrelated entities on an arm's length basis.

The aggregate amounts recognised as expenses during the year relating to key management personnel and their personally-related entities were \$6,000 (2007: \$5,727). Details of the transactions are as follows: 2008 2007

Director/Transaction
- Mr Pedro Kastellorizos - Geological reports	(1)	6,000	5.727

Provision of geological consulting and tenement management services at normal commercial rates. $\ddot{\mathbf{i}}$

Other related party transactions

Mr Pedro Kastellorizos has loaned funds to the Company through payment of expenses from time to time. The balance of the loan at 30 June 2008 is \$3,445 (2007: \$3,290). Interest is charged on this loan at 8.05% per annum.

19 Commitments

In order to maintain current rights of tenure to exploration permits, the Company is required to perform minimum exploration work to meet minimum expenditure requirements. These obligations may vary over time, depending on the Company's exploration program and priorities.

Notes to the financial statements

19 Commitments continued

These obligations are not provided for in the financial report and are payable as follows:

	2008	2007
	S	S
Within one year	343,693	249,693
One to five years	1,083,117	936,210
Later than five years	46,530	20,600
	1,473,340	1,206,503

20 Subsequent events

On 1 July 2008, the Company signed a Heads of Agreement with Western Desert Resources Limited ("WDR"), an ASX-listed company, to enter into a joint venture agreement over the Company's Gladstone and McArthur River manganese projects.

Under the terms of the joint venture, WDR issued 5 million fully paid ordinary shares to Genesis and also agreed to spend \$500,000 on the tenements within two years to earn a 45% interest in the Gladstone and McArthur River tenements. Of the \$500,000 minimum expenditure, \$300,000 must be spent within 6 months.

On 4 September 2008, the Company signed a consulting agreement with Tigermoth Investments Limited ("Tigermoth") under which Tigermoth agreed to provide advisory services and assistance to the Company in seeking to raise a minimum of \$2 million on or before 30 April 2009.

On 26 September 2008, the Company issued 12,500 fully paid ordinary shares at 10 cents per share to raise $$1,250.$

On 15 October 2008, the Company redeemed 2,500,000 Class 'A' performance shares that were issued on 20 December 2007 due to to failure to meet the conditions of issue by 19 September 2008. They were redeemed for no consideration.

On 29 October 2008, the Company issued 2,000,000 fully paid ordinary shares at 5 cents per share to raise \$100,000.

Other than as set out above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Company, the results of those operations, or the state of affairs of the Company, in future financial years.

Directors' declaration

• In the opinion of the directors of Genesis Resources Limited, ("the Company"): $\mathbf{1}$
• (a) the financial statements and notes, set out on pages 6 to 28, 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 2008 and of its performance for the financial year ended on that date; and
  • complying with Australian Accounting Standards (including the Australian Accounting $(ii)$ Interpretations) and the Corporations Regulations 2001; and
• (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the directors:

testell-

Director

Perth, Western Australia 18 December 2008

Grant Thornton (WA) Partnership ABN: 17 735 344 518 Level 1 10 Kings Park Road West Perth WA 6005 PO BOX 570 West Perth WA 6872 T +61 8 9480 2000 F + 61 8 9322 7787 Eadmin@otwa.com.au W www.grantthornton.com.au

Independent Auditor's Report To the Members of Genesis Resources Limited

Report on the financial report

We have audited the accompanying financial report of Genesis Resources Limited, which comprises the balance sheet as at 30 June 2008, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies and other explanatory notes and the directors' declaration.

Directors' responsibility for the financial report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, 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, which require us to comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance as to whether the financial report is free of 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 circumstance, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.

Liability limited by a scheme approved under Professional Standards Legislation.

Grant Thomton (WA) Partnership is an independent business entitled to trade under the international name Grant Thomton Grant Thomken cresc careformed by Grant Thomken were assessed to be a second the concept of the and entities throughout the world
Grant Thomken is a trademark owned by Grant Thomken International and used under licence by

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

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

Independence

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

Auditor's opinion

In our opinion:

• the financial report of Genesis Resources Limited is in accordance with the $\mathbf{a}$ Corporations Act 2001, including:
• i giving a true and fair view of the company's financial position as at 30 June 2008 and of its performance for the year ended on that date; and
• ii complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and
• $\mathbf b$ the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.

Significant uncertainty regarding the valuation of receivables

Without qualification to the opinion expressed above, attention is also drawn to the following matter:

We refer to note 2(d) to the financial statements relating to the estimates and assumptions concerning the future, used to assess the recoverability of related party receivables. The estimates and assumptions have a significant risk of being different due to changes in economic or market conditions and/or due to events beyond the control of the management.

Grant Thomton (WA) Partomoty

GRANT THORNTON (WA) PARTNERSHIP Chartered Accountants

n (just

J W VIBERT Partner

Perth, 18 December 2008

31

Grant Thomton is a trademark owned by Grant Thornton International Ltd

(UK) and used under locate by independent firms and enklise throughout the world. Grant Thomba member firms in Australia are businesses trading independently under the name Grant Thomba. Grant Thomba
Australia Ltd has been legislation.