Annual Report 2008

==> picture [136 x 54] intentionally omitted <==

ABN 80 009 132 405

corporate directory

BOARD OF DIRECTORS	Anthony BohnennNon-Executive Chairman
	Russell StJohn ClarkManaging Director
	Alexander Henry NutterTechnical Director
	Richard KrasnoffNon-Executive Director
	David Michael MacoboyNon-Executive Director
	Douglas Haig StewartNon-Executive Director
SENIOR MANAGEMENT	Wayne BouldGeneral Manager – Business Readiness
	Neil MarstonGeneral Manager - Commercial & Company Secretary
	Len SkotschGeneral Manager - Geology
REGISTERED OFFICE	Level 11, QBE House
	200 St George’s Terrace
	PERTH WA 6000
	Telephone: + 61 (8) 9321 1118
	Facsimile: + 61 (8) 9321 1523
SHARE REGISTRY	Computershare Investor Services Pty Limited
	Level 2, 45 St George’s Terrace
	PERTH WA 6000
AUDITORS	Ernst & Young
	11 Mounts Bay Road
	PERTH WA 6000
SOLICITORS	Clayton Utz
	QV1 Building
	250 St George’s Terrace
	PERTH WA 6000
PRINCIPAL BANKERS	Westpac Banking Corporation Limited
	109 St George’s Terrace
	PERTH WA 6000
	Investec Bank (Australia) Limited
	Level 21, 140 St George’s Terrace
	PERTH WA 6000
STOCK EXCHANGE	Grange Resources Limited is listed on the ASX Limited
	(ASX Code: GRR) and the “OTC” Markets in Berlin, Munich, Stuttgart and
	Frankfurt in Germany (Code: WKN. 917447)
WEBSITE	www.grangeresources.com.au

www.grangeresources.com.au

II Grange Resources Limited Annual Report 2008

Chairman’s Report	3
Highlights	5
Review of Operations and Activities	6
Directors’ Report	16
Remuneration Report	21
Auditor’s Independance Declaration
to the Directors of Grange Resources Limited	30
Corporate Governance Statement	31
Financial Statements	37
Income Statement	38
Balance Sheet	39
Statement of Recognised Income and Expense	40
Cashfow Statement	41
Notes to the Financial Statements	42
Directors’ Declaration	84
Independent Audit Report to the Members
of Grange Resources Limited	85
ASX Additional Information	87
Tenement Schedule	89

Grange Resources Limited Annual Report 2008 1

During the year Sojitz Corporation of Japan funded its acquisition of a 30% stake in the western portion of the Southdown Magnetite deposit.

2 Grange Resources Limited Annual Report 2008

CHAIRMAN’S REPORT

2008 has been a year of substantial change and major progress for Grange as it advances the Southdown Project towards implementation.

==> picture [143 x 244] intentionally omitted <==

On behalf of your Board of Directors, I have pleasure in presenting the Annual Report and Financial Statements of Grange Resources Limited (“Grange” or “the Company”) and its controlled entities for the financial year ended 30 June 2008.

Grange recorded a consolidated operating profit after tax of $0.931 million for the financial year ended 30 June 2008 compared to an operating after tax loss of $0.773 million in the previous financial year. The result was achieved on revenue of $1.667 million which compared to $3.694 million in the previous financial year.

2008 has been a year of substantial change and major progress for Grange as it advances the Southdown Project towards implementation. Your company is being transformed with the addition of new management and a project team in preparation for project start-up.

In March we welcomed our new Managing Director and CEO Russell Clark to the company. Russell came to Grange from Newmont Mining Corporation, one of the world’s largest gold mining companies. His experience and knowledge in project implementation is a welcome boost to the company at this crucial stage and results delivered by his team to date vindicate his appointment to the position.

Our relationship with our 30% Joint Venture partner Sojitz Corporation of Japan is strengthening as we work closely together on the Southdown project. Grange looks forward to a long and prosperous future working with Sojitz as we bring the project into production.

Grange and Sojitz recently appointed global banking group Standard Chartered Bank to act as Financial Advisor. Standard Chartered Bank has commenced developing a financing plan for the Joint Venture and will work with us to secure overall project finance next year.

Metso Minerals (Australia) Limited have been working closely with Grange and Sojitz during the year to determine the optimum processing circuit for the Southdown project. This work has resulted in significant improvements in the quality of magnetite concentrate and confirms that we will be able to produce a high quality Direct Reduction grade iron ore pellet.

Grange prides itself on the low impact nature of its development plans at Southdown and in Malaysia. We have spent 3 years working on ensuring the project has the lowest possible environmental impact with strategies such as using recycled waste water at the processing plant being adopted in order to minimise our draw on

water from the existing environment. These strategies have paid off with the Western Australian Environmental Protection Authority recently recommending approval of the project.

In Malaysia Grange continues to build up its presence with capital expenditure approval and the commencement of processing plant construction at the Bukit Ibam iron ore mine. This project has the potential to quickly generate a positive cashflow. The ability to expand production at Bukit Ibam exists and will be evaluated once initial iron ore concentrate production starts in late 2008.

On behalf of the Board of Directors, I congratulate our Managing Director & CEO, Russell Clark, senior management, the project team and all employees at Grange Resources for their achievements and successes during the past year.

To all our shareholders I extend our appreciation for your continued support.

==> picture [151 x 58] intentionally omitted <==

Anthony Bohnenn Chairman

Grange Resources Limited Annual Report 2008 3

Grange has funded state-of-the-art environmental surveys within the waters around Albany Port in preparation for its expansion to meet the needs of the Southdown Magnetite Project.

4 Grange Resources Limited Annual Report 2008

2008 HIgHlIgHTS

==> picture [329 x 337] intentionally omitted <==

Sojitz Corporation of Japan funded its acquisition of a 30% stake in the western portion of the Southdown Magnetite deposit.
Grange completed the acquisition from Rio Tinto Exploration Pty Ltd of Exploration Licence 70/2512 which covers the eastern extension of the Southdown Magnetite deposit.
388 million tonnes of Magnetite ore converted from previously announced Minerals Resources to Ore Reserves in the Southdown Magnetite deposit.
Standard Chartered Bank was appointed to act as Financial Advisors to Grange and Sojitz with a mandate to secure project finance for the Southdown Magnetite and Kemaman Pellet Plant Project.
The Environmental Protection Authority recommended approval for development of the Southdown Magnetite Project.
Metallurgical testwork confirms that DR quality pellets can be produced from the Southdown Magnetite deposit.
Government of Western Australia allocates $180 million in its budget towards the construction of 220kV transmission line to Southdown.
The Company approved funding its 51% share of capital expenditure on a new processing plant at the Bukit Ibam iron ore mine in Malaysia.
Russell Clark appointed as Managing Director and Chief Executive Officer in March 2008.
David Macoboy and Douglas Stewart appointed as non-executive directors of the Company.

Grange Resources Limited Annual Report 2008 5

REvIEw Of OPERATIONS ANd ACTIvITIES

==> picture [375 x 244] intentionally omitted <==

----- Start of picture text -----

Geraldton
Leonora
Australia
Indian Ocean Koolyanobbing
KALGOORLIE
Southern Cross ROAD
RAILWAY
PERTH
Fremantle Norseman
Grass Patch
Bunbury
Esperance
N
SOUTHDOWN
Albany MAGNETITE DEPOSIT
0 200km
----- End of picture text -----

==> picture [211 x 244] intentionally omitted <==

Figure 1: Location of Southdown Magnetite Project, Albany WA

Southdown Magnetite and Kemaman Pellet Plant Project

(Grange 70%, Sojitz Resources & Technology Pty Ltd (“Sojitz”) 30%)

OVERVIEW

The Southdown Magnetite and Kemaman Pellet Plant Project is a long term iron ore mining and processing joint venture that will see the development of a regional supply of premium iron ore pellets.

The key elements of the project are:

Open pit mining of the Southdown magnetite (iron ore) deposit;
Concentrating the magnetite ore at Southdown via a crushing and magnetic separation plant to produce up to 7 million tonnes per annum of magnetite concentrate grading over 69% Fe;
Pumping the magnetite concentrate as slurry to Albany Port and filtering before shipping;
Shipping the magnetite concentrate from the deepened Albany Port in Capesize vessels to Kemaman Port in Malaysia;

PROJECT LOCATION

Southdown

The Southdown Magnetite Deposit is located approximately 90 kilometres northeast of the Port of Albany on the south coast of Western Australia (Figure 1).

The project comprises three granted mining leases (M70/433, M70/718 and M70/719) covering the western end of the Southdown Magnetite deposit. These mining leases are subject to the joint venture between Grange and Sojitz.

In addition, in September 2007 Grange acquired a 100% interest in Exploration Licence E70/2512 from Rio Tinto Exploration Pty Ltd. This licence covers the eastern half of the Southdown Magnetite deposit.

Processing the magnetite concentrate at Kemaman Port through a new pelletizing plant to produce about 7 million tonnes per annum of high quality iron ore pellets, and
Selling the iron ore pellets to regional steel plants which are currently supplied from Brazil and other distant suppliers.

6 Grange Resources Limited Annual Report 2008

==> picture [301 x 244] intentionally omitted <==

----- Start of picture text -----

Thailand
Vietnam
Cambodia
1.5MT DRI PLANTMEGASTEEL 1.5MT DRI PLANTPERWAJA STEEL 0.9MT HBI PLANTAMSTEEL
Malaysia
Kemaman Port
PELLET PLANTKEMAMAN Malaysia
Singapore
Indonesia
PT KRAKATAU STEEL
3.0MT DRI PLANT
N
----- End of picture text -----

Figure 2: Location of Kemaman Port.

Kemaman Port is a central location from which to service Asian and Gulf state DR grade pellet consumers.

==> picture [92 x 101] intentionally omitted <==

Kemaman

Kemaman Port is located on the east coast of peninsular Malaysia in the state of Terengganu. The Pellet plant site is located on land close to the existing deep water port (Figure 2).

Kemaman Port is an ideal location from which to service local Direct Reduction Iron (DRI) or Hot Briquetted Iron (HBI) plants. In Malaysia Ansteel has a 0.65Mtpa capacity HBI plant located on Labuan Island and Megasteel has built a new 1.54Mtpa capacity DRI plant at Banting, south of Kuala Lumpur. Perwaja Steel has a 1.5 Mtpa DRI plant on land at Kemaman Port, adjacent to Grange’s planned pellet plant. In nearby Indonesia PT Krakatau Steel have 2 DRI modules with a combined capacity of 3.03Mtpa. Kemaman Port is a central location from which to service other Asian and Persian Gulf state DR grade pellet consumers.

RESOURCES & RESERVES

The Southdown Magnetite deposit is approximately 12 km long. The three mining leases cover the western 6 km of the deposit, with the eastern 6 km located within exploration licence E70/2512 (Figure 3).

In September 2006, following the completion of a detailed diamond drilling programme, a resource estimate within the mining leases of 479.1 million tonnes containing 37.3% magnetite grading 69.2% Fe was announced (see Table 1 - over page).

In May 2008 Golder Associates updated the pit optimisation for the Southdown Project based on revised mining and processing costs and developed an Ore Reserve within the designed pit (Table 2). Run of Mine (ROM) tonnes are the estimated tonnes that would be delivered to the plant.

The concentrate tonnes and grade are the estimated tonnes and concentrate grades produced by the plant based on the DTR analysis protocol.

The Ore Reserve defined in Table 2 is sufficient to support the planned production rate for a period of approximately 20 years. Additional diamond drilling planned for late 2008 is expected to increase the Ore Reserve within the mining leases. Diamond drilling and aeromagnetic surveys have confirmed that the mineralisation continues for a further 6 km within E70/2512 and importantly analytical work has shown the quality of the magnetite to be the same as that within the western portion of the deposit. The known extensions to the magnetite deposit within the exploration licence should extend the project life considerably.

Grange Resources Limited Annual Report 2008 7

REvIEw Of OPERATIONS ANd ACTIvITIES

TABLE 1 SOUTHDOWN MAGNETITE PROJECT IN SITU MINERAL RESOURCES (Cut-off 10% DTR)

Resource	Tonnes	DTR%	Conc.	Conc.	Conc.	Conc.	Conc.	Conc.
Classifcation	(Mt)		Fe%	SiO²%	Al²O³%	TiO²%	S%	P%
Indicated	427.3	38.2	69.2	1.9	1.40	0.37	0.42	0.002
Inferred	51.8	30.1	69.0	2.0	1.30	0.44	0.63	0.003
Subtotal	479.1	37.3	69.2	1.9	1.30	0.37	0.44	0.002

The information in Table 1 is based on information compiled by Mr Richard Gaze who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Gaze is employed by Golder Associates Pty Ltd. Mr Gaze has sufficient experience which is relevant to the style of mineralisation and type of deposit 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’ (The JORC Code). Mr Gaze consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

TABLE 2 SOUTHDOWN MAGNETITE PROJECT ORE	TABLE 2 SOUTHDOWN MAGNETITE PROJECT ORE	TABLE 2 SOUTHDOWN MAGNETITE PROJECT ORE	TABLE 2 SOUTHDOWN MAGNETITE PROJECT ORE	RESERVE	WITHIN	DESIGNED	PIT (Cut-off	10% DTR)
Reserve	ROM	DTR%	Conc.	Conc.	Conc.	Conc.	Conc.	Conc.	Conc.
Classifcation	(Mt)		(Mt)	Fe%	SiO²%	Al²O³%	TiO²%	S%	P%
Probable	388	35.5	131	68.8	2.06	1.41	0.45	0.55	0.003

The information in Table 2 is based on information compiled by Mr Ross Bertinshaw who is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Bertinshaw is employed by Golder Associates Pty Ltd. Mr Bertinshaw has sufficient experience in Ore Reserve estimation relevant to the style of mineralisation and type of deposit under consideration 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’ (The JORC Code). Mr Bertinshaw consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Notes relating to Ore Reserves:

1. Mineral Resource Estimate for Conversion to Ore Reserves

The Mineral Resource model for Southdown Deposit has been developed by Golder Associates as part of an on-going Feasibility Study for Grange Resources Limited. The stated Mineral Resource (Table 1) is inclusive of the Ore Reserve (Table 2).

2. Cut-off Parameters

A cut-off grade of 10% Davis Tube Concentrate Mass Recovery (DTR) has been used for reporting which is above the marginal cut-off of 7% DTR.

3. Mining Factors or Assumptions

The mining block model includes an allowance for likely mining dilution based on a regularisation of the geological model. The dilution has

added approximately 8% tonnage at a grade of 5.8% DTR. A mining loss of 5% has been allowed for.

The Ore Reserves are reported within a detailed pit design which is based on open pit optimisation. The optimisation was carried out on the Indicated Mineral Resource using a gross FOB pellet price at Kemaman of US$104/t.

The overall pit slopes used for the design and optimisation are based on detailed geotechnical studies by Golder.

4. Metallurgical Factors or Assumptions

The metallurgical recoveries are based on DTR assay results with a 0.95 factor applied to adjust laboratory recovery and a 3% increase in tonnes for conversion of concentrate to pellets due to pelletising additives.

5. Cost and Revenue Factors

Costs include allowances for royalties, concentrate production, transport to Albany, shipping to Kemaman, pellet conversion, loading of pellets onto ships for onward transportation plus administration in Australia and Malaysia.

6. Market Assessment

A production rate of 6.6 Mtpa concentrate at the mine site has been assumed giving a potential pellet production of 6.8 Mtpa. Pricing assumptions are based on an estimated price in 2010 and compared to a possible Vale pellet price in SE Asia at that time.

7. Classification

There are no Measured Resources. All Indicated Resources have been converted to Probable Ore Reserves contained within the pit design.

8 Grange Resources Limited Annual Report 2008

==> picture [210 x 244] intentionally omitted <==

==> picture [376 x 244] intentionally omitted <==

----- Start of picture text -----

6829 6843
6841 Wellstead
E70/2512
6849
6830
6842
4
6831 G70/234 1
M70/718
G70/236
M70/433 6832
6859
6836 SOUTHDOWN
M70/719 MAGNETITE
DEPOSIT
6833
6857
6
6902
G70/235 6897
N G70/217 6856
7
4
Freehold land acquired
0 4km
1
----- End of picture text -----

Figure 3: Southdown Magnetite Deposit and Location of Mining Tenements

DEVELOPMENT PLAN

The deposit will be mined using conventional mining methods to develop an open pit approximately 300 metres deep. Mining will commence at the western end of the deposit and progressively extend eastwards over the life of the mine. Overburden will to be placed in waste rock dumps for the first few years of production following which progressive backfilling of the pit with both waste rock and tailings is planned.

Mined ore will be processed by being crushed, ground, screened and magnetically separated to produce a magnetite concentrate at a planned production rate of about 6.6 Mtpa. The magnetite concentrate will be pumped as slurry through a buried pipeline, approximately 100 km to the port of Albany before being loaded on to capesize vessels and shipped to Malaysia. At Albany Port the magnetite concentrate slurry will be processed through a filtration plant to remove most of the water before being stockpiled in a large shed. Filtered water recovered from the slurry will be pumped back to the mine site for re-use via a return water pipeline buried beside the slurry pipeline.

The magnetite concentrate will be conveyed from the storage shed to the new ship loader whenever loading of the capesize ships is required. Widening and extending of the existing shipping channel into Albany Port is required to facilitate the access of capesize vessels for the project.

At Kemaman Port the capesize vessels will be unloaded with the magnetite concentrate transported to the Pellet Plant site by conveyors, where it will be stored ready for use.

Pelletizing the magnetite concentrate produces hardened spheres of iron ore typically 8 to 18 mm diameter. The process combines agglomeration and thermal treatment to convert the magnetite concentrate into the hard pellets with physical and chemical characteristics appropriate for use in steel making. Following pelletisation the pellets will be stockpiled ready for shipment to customers.

The pellet plant will use proven technology in all aspects of its process.

SOUTHDOWN INFRASTRUCTURE

The Southdown Magnetite Project will require access to significant infrastructure as detailed below.

Power Supply

The project will require a reliable power supply of about 80 Megawatts at the mine and Albany Port. Network access will involve the construction of a new 220kV transmission line for the supply of electricity to the Southdown mine.

Grange has contracted the network operators, Western Power to secure the transmission line easement in readiness for construction. The State Government of Western Australia announced in its budget an allocation of $180 million towards the construction of the new 220kV transmission line to Southdown.

Pipelines

It is planned to transport the magnetite concentrate in slurry form by buried pipeline from the Southdown mine site into Albany port. A return water pipeline will be buried alongside the slurry pipeline to transport recycled water back to the mine. The pipelines will be about 100 km each in length and generally run through rural freehold land.

Grange Resources Limited Annual Report 2008 9

REvIEw Of OPERATIONS ANd ACTIvITIES

To facilitate the access of Capesize vessels to Albany Port the Albany Port Authority intends to create a new berth for the project as well as deepening, widening and extending the existing channel.

10 Grange Resources Limited Annual Report 2008

==> picture [210 x 244] intentionally omitted <==

==> picture [374 x 244] intentionally omitted <==

----- Start of picture text -----

Return water
pipeline
Albany Port
Concentrate slurry Filter
pipeline Plant
Concentrate King
storage shed Point
Reclaimed land
Existing Port
Proposed Berth 5 Proposed Berth 7 Channel dredgedand widened
Berth 6
Ship loader
Bramble
New Capesize Point PossessionPoint
N Vessel Berth
0 200m
|
|
|
|
Existing channel
|
|
|
|
|
| | | |
----- End of picture text -----

Figure 4: Albany Port Infrastructure

Water Supply

Securing sustainable water supplies is a key to project success. Recycling water is an important part of the project process and is made possible via the construction of the return water pipeline. Nonetheless water losses will occur and the expected annual makeup water requirement for the project will be approximately 3.4 Gigalitres (3.4 x 109 litres).

The preferred water supply sources (in order) are:

Treating about 1.8 Gigalitres of waste water from the town of Albany and pumping it to site via the return water pipeline;
Pit dewatering from groundwater and rainfall inflows;
On-site rain water runoff capture, and
On/off-site groundwater extraction.

The Company is working closely with the Water Corporation to finalise a suitable supply contract for the off-take of the waste water.

Albany Port

The Company continues to work closely with the Albany Port Authority (APA) with respect to port infrastructure requirements.

To facilitate the access of Capesize vessels to Albany Port the Albany Port Authority intends to create a new berth within Princess Royal Harbour as well as deepening, widening and extending the existing channel (Figure 4). A portion of dredged material will be used for land reclamation with the excess material placed in deep water at an offshore disposal site. The proposed land reclamation will be used to accommodate Grange’s new facilities.

SOUTHDOWN APPROVALS

Environmental Approvals - Mine and Pipeline

Grange is responsible for the environmental approvals relating to the Southdown mine and pipelines.

The Public Environmental Review (PER) culminated on 30 June 2008 with the Environmental Protection Authority

(EPA) recommending that the project be approved subject to a number of proposed conditions. An approval from the Minister of Environment for the Southdown mine and pipelines is expected in due course.

The recommendation for approval by the EPA is a strong endorsement for the project after three years of environmental surveys and impact studies completed by the Company.

Environmental Approvals - Albany Port

APA is responsible for the environmental approvals relating to the Albany Port Expansion including dredging of a new berth and deepening the shipping channel.

The PER document for the Albany Port Expansion was published in September 2007 for public comment. An approval from the Minister of Environment for the Albany Port Expansion is expected in 2009.

Grange Resources Limited Annual Report 2008 11

REvIEw Of OPERATIONS ANd ACTIvITIES

==> picture [293 x 244] intentionally omitted <==

----- Start of picture text -----

TELUK KALONG
INDUSTRIAL ESTATE
PARCEL C
(92.76 ha) PROPOSED PELLET
PLANT SITE
(up to 60 ha)
HUNTSMAN
PARCEL B TOXIDE MALAYSIA SDN BHD
(117.413 ha)
TNB
SUB STATION South China Sea
PERWAJA
LAND HELD BY STEEL SDN BHD
ROAD BUILDER (M)HOLDINGS BHD PARCEL A
(125.196 ha)
Conveyor TANJUNG
Corridor KEMAMAN BERHALA
SUPPLY BASE
KEMAMAN
KEMAMAN SUPPLY BASE East Wharf
BITUMEN
REFINERY West KEMAMAN
Wharf PORT
Liquid Chemical East
Berth Breakwater
LPG
N LPG Loading Pier
storage area South
BUKIT Breakwater
PENJAJAT TANJUNG
0 1km SULONG
----- End of picture text -----

==> picture [293 x 244] intentionally omitted <==

Figure 5: Kemaman Port Infrastructure

KEMAMAN INFRASTRUCTURE

Infrastructure requirements for the Kemaman Pellet Plant are substantially in place as detailed below.

Pellet Plant Site

The Kemaman Pellet Plant site is located on 60 hectares of industrial land located 3 kilometres from the Kemaman Port (see Figure 5). The Kemaman site was selected as the preferred location for a number of reasons including the following:

Access to natural gas and electricity infrastructure.
Close proximity to potential off-take parties and markets.
Access to deep water port infrastructure with low operating costs.
Availability of a skilled construction and operating workforce.

The ground conditions of the site have been assessed and the results indicate that ground improvement of selected areas on the site will need to be undertaken prior to plant construction.

West Wharf

The West Wharf consists of an existing jetty with a concrete deck approximately 510 metres long by 29 metres wide, sufficient to berth a Capesize and Panamax vessel concurrently.

Under the current arrangements with the wharf owners the Project will have priority access to the West Wharf until November 2055.

Power Supply

Tenega Nasional Berhad (TNB) is the national electricity provider for Malaysia. High voltage power is available from a TNB substation located immediately next to the pellet plant site (see Figure 5). TNB have indicated that they would

be able to supply power to an agreed location within the pellet plant site via a 132kV feeder line.

Natural Gas Supply

Natural Gas for the pellet plant passes the site, via a pipeline that runs along the infrastructure corridor. Petronas Gas would supply the gas to the pellet plant site via a new lateral from the pipeline to a designated supply point on the pellet plant site. A formal application for the supply of gas has been made but not yet approved by Petronas Gas.

Conveyor Corridor

An infrastructure corridor exists between the West Wharf and the pellet plant site (see Figure 5). A pipe conveyor system has been designed for the transport of imported Southdown concentrates and the export of Kemaman iron ore pellets. This pipe conveyor would be sited within or adjacent to the infrastructure corridor.

12 Grange Resources Limited Annual Report 2008

==> picture [596 x 244] intentionally omitted <==

KEMAMAN APPROVALS

Environmental Approval for the Kemaman Pellet Plant was granted by the Ministry of Natural Resources and Environment in November 2006. As this licence is for 2 years an extension of the licence has been applied for.

A Manufacturing Licence for the pellet plant was issued by the Ministry of International Trade and Industry of Malaysia in December 2006.

PRODUCT QUALITY

In January 2008 Grange announced the signing of a Memorandum of Understanding (“MOU”) between the Company and Sojitz with Metso Minerals (Australia) Limited (“Metso”) for the Project.

Under the terms of the MOU Metso has been undertaking further extensive metallurgical test work on a 30 tonne bulk sample from the Southdown deposit in Australia, the United States and Europe to determine the optimum processing circuit for the project. This test work was largely completed during the year and has identified the preferred processing circuit.

The test work culminated in the

production of approximately 4 tonnes of concentrate from a pilot plant facility in Perth. Prior to the pilot plant run final grind size test work was undertaken to determine the optimal grind size for the concentrate and confirmed that at a grind size of 34 microns the silica content of the concentrate could be reduced to less than 1%. Overall the bench test work produced excellent results (shown below).

Further test work will be done by Metso during the second half of 2008.

The extensive metallurgical work undertaken over the past three years has lead to improvements to the process design flow sheet which has resulted in significant improvements to the quality of the concentrate being produced from the pilot scale plant.

PROJECT FINANCE

In June 2008 Grange, together with Sojitz, appointed Standard Chartered Bank to act as Financial Advisor in relation to Project Finance. The appointment of Standard Chartered Bank followed a rigorous selection process which attracted quality submissions from a number of international banks.

Concentrate Sizing	Fe %	SiO² %	Al²O³ %	TiO² %	MnO %	CaO %	P %	MgO %	Cr²O³ %
P80 34μm	69.87	0.80	1.39	0.400	0.042	0.059	0.002	0.14	0.026

Grange Resources Limited Annual Report 2008 13

REvIEw Of OPERATIONS ANd ACTIvITIES

==> picture [596 x 244] intentionally omitted <==

----- Start of picture text -----

KEMAMAN PORT New Old mine
Bukit plantsite
Ibam area
plant
BUKIT
IBAM
KUANTAN PORT PIT
Transport Route KUANTAN
BUKIT IBAM
TOWN
South
China A
Sea
N
BUKIT IBAM
old airstrip
Nenasi 0 500m
Muadzam
Shah Main Road
B
Forest Reserve Boundary
N
Represents the area approved by
Forestry Dept for extraction of
Kuala Rompin iron ore tailings and to rehabilitate
0 30km Forest Reserve Area
----- End of picture text -----

Figure 6: Location of Bukit Ibam project

Figure 7: Location of Bukit Ibam Mine Tailings Dam

Bukit Ibam Project

Grange Minerals Sdn. Bhd. 51%

The Bukit Ibam Project is located at the former Bukit Ibam iron ore mine, in Pahang State, Malaysia (Figure 6). The mine operated from 1962 and produced approximately 22 million tonnes of haematite and magnetite ore before closure in 1970. Grange Minerals Sdn Bhd, a wholly owned Malaysian subsidiary, holds 51% project equity in a joint venture with a privately owned Malaysian mining company, Esperance Mining Sdn Bhd.

Following successful resource drilling, metallurgical test work and viability studies Grange announced Joint Venture capital expenditure approval to develop the Bukit Ibam magnetite mine in June 2008.

All statutory approvals for the project are in place and work is well advanced on procurement and construction. The pit has been prepared for mining which is scheduled to recommence in 2008.

The new processing plant is forecast to be commissioned before the end of 2008 with a planned initial production rate of 100,000 tonnes per year magnetite concentrate. This concentrate will be sold on the spot market and shipped out of Kuantan Port.

The plant is designed to allow for future expansion to treat other potential resources located on nearby Joint Venture leases and other areas.

In June 2008, Grange Minerals received approval from the Department of Forestry in Pahang to extract and process iron ore tailings located in a Forest Reserve Area and to rehabilitate the area in the process. The tailings were generated during mining operations between the years 1962 to 1970 and are contained in a storage dam located 1.5 kms east of the plant being constructed at Bukit Ibam (Figure 7). This ‘tailings re-treatment’ project has the potential to significantly increase the production capacity of the current project at minimal cost.

The surface area of the tailings is approximately 60 hectares and the tailings are estimated to be on average 4 metres deep giving a volume of 2.5 million cubic metres which will convert into approximately 4 to 5 million tonnes of tailings within the approved area.

There has been insufficient sampling conducted to date to identify the likely grade of iron ore in the tailings however other parts of the tailings dam outside of the Forest Reserve Area are currently being processed by other parties using a simple magnetic separator to produce a marketable iron ore concentrate.

However it must be noted that the quantity of tailings stated above is conceptual in nature. There has been insufficient evaluation work completed to date to define a Mineral Resource and it is uncertain if further evaluation work will result in the determination of a Mineral Resource.

14 Grange Resources Limited Annual Report 2008

Freshwater Project

Grange - Sliding Scale Production Royalty Barrick Gold of Australia Limited (“Barrick”) 100%

The Freshwater project is located adjacent to and to the east of the Plutonic Gold Mine located approximately 180 km north east of Meekatharra in Western Australia. The project is owned and operated by Barrick Gold of Australia Limited. The Company holds a sliding scale royalty based on grade, tonnage and type of ore milled on all production from the Freshwater leases.

Total royalty income earned for the year ended 30 June 2008 amounted to $63,938 from underground ore.

Red Hill Project

Grange 4% Gross Revenue Royalty Barrick (PD) Australia Limited (“Barrick PD”) 100%

Grange holds a 4% gross revenue royalty on all production after the first 85,000 ounces of gold produced from the Red Hill Mining Lease (M27/57), which is located approximately 4 km north east of the Kanowna Belle Gold Mine, 20 km north east of Kalgoorlie. The project is owned and operated by Barrick PD.

Mining operations were completed at Red Hill in May 2007. During the financial year royalty payments from ore processing activities totalled $670,947. Royalty income from the commencement of operations in February 2003 to 30 June 2008 amounts to $7,064,196.

Other exploration projects

The Horseshoe Lights Project is located approximately 130 km north of the town of Meekatharra in Western Australia. The project covers the Horseshoe Lights copper/gold mine which the company operated up until its closure in 1994. During 2004 Grange entered into an option to purchase agreement with Murchison Copper Mines Pty Ltd over the Project, which has been exercised. Subsequent to entering into the option agreement a plaint was lodged over the main mining lease at Horseshoe Lights which was resolved in the Company’s favour by the High Court of Australia in April 2008. The transfer of ownership and management of the project to Murchison Copper Mines Pty Limited (now a 79.2% subsidiary of the Company) is in progress.

Substantial resources of low-grade copper bearing material are present at Horseshoe Lights in stockpiles, dumps, tailings and in-situ hard rock resources.

The Wembley Project is located in the Murchison district, approximately 12 km south of the former Peak Hill Gold Mine and comprises one granted mining lease and a mining lease application. The granted mining lease covers the Durack and Outback prospects, which host a modest gold resource of 568,000 tonnes grading 2.3g/t gold (42,700 contained ounces). The resource comprises an indicated resource of 390,000 tonnes grading 2.2g/t gold containing 27,600 ounces and an inferred resource of 180,000 tonnes grading 2.6g/t gold containing 15,100 ounces.

In May 2008 Grange reached an agreement with Montezuma Mining Company Ltd for Montezuma to acquire an 85% interest in granted mining lease M52/801 which contains the Durack gold deposit. Montezuma has agreed to spend $500,000 on exploration and development over the next four years to earn an 85% interest in the mining lease.

The Mt Windsor project is located approximately 37 km south of Charters Towers in North Queensland and is an unincorporated joint venture between BML Holdings Pty Ltd (BML) 30% (a wholly owned subsidiary of Grange) and Thalanga Copper Mines Pty Limited (“TCM”) 70%, the manager. The joint venture operated the Reward and Highway open pit mines during 1998-2002 and the Reward Deeps and Conviction underground mine until the cessation of mining activities in 2005, producing a copper concentrate for export. The project area remains prospective for gold and base metals mineralisation.

In the Wiluna district of Western Australia the Company holds a 10% free carried interest to a decision to mine or expenditure of $2 million in the Abercromby Well Joint Venture with MPI Nickel Pty Ltd. The tenement is prospective for gold mineralisation.

The Company holds equity in several tenements in the Tennant Creek region in the Northern Territory. The most prospective area with potential to host a high-grade gold, copper, bismuth resource is the Mt Samuel prospect located approximately 6 km south of Tennant Creek. Access to the Mt Samuel property is currently not available due to the presence of an Aboriginal sacred site.

Metallurgical testwork confirms that DR quality pellets can be produced from the Southdown Magnetite deposit.

==> picture [205 x 175] intentionally omitted <==

Grange Resources Limited Annual Report 2008 15

dIRECTORS’ REPORT

Your Directors submit their report with respect to the results of Grange Resources Limited (“Grange” or “the Company”) and its controlled entities (the “Group”) for the year ended 30 June 2008 (the “Balance Date”).

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

Anthony Clemens Maria Bohnenn

Non-executive Chairman

Mr Bohnenn was appointed as a director of Grange in November 2001 and subsequently elected as Chairman on 1 July 2002. Mr Bohnenn has more than 25 years experience in the investment banking and financial services industries, with an emphasis in research and funds management. Mr Bohnenn is based in the Netherlands and his main focus has been identifying investment opportunities in Australia, China and Asia. Mr Bohnenn is chairman of the Remuneration Committee.

Russell StJohn Clark BSc, ARSM, MIMM, MAusIMM, CE, JP

Managing Director and Chief Executive Officer

Mr Clark was appointed as Managing Director of Grange on 6 March 2008. Mr. Clark holds a Mining Engineering degree (BSc Hons) from the Royal School of Mines, London, UK and a Graduate Diploma from the Securities Institute of Australia. In addition he has undertaken a number of Executive Development programs in Australia and the USA. Prior to joining Grange, Mr Clark worked for Renison Goldfields for over 18 years and with Newmont for the past 8½ years. He has over 30 years of mining experience in Africa, Papua New Guinea, the USA and throughout Australia, in technical, project management, general management and executive positions.

Richard Krasnoff BA (Cornell), MBA (Harvard), GAICD

Non-executive Director

Mr Krasnoff was appointed as a director of Grange on 16 June 2005. Mr Krasnoff’s previous roles have included an executive position with Wesfarmers Limited and as a management consultant with McKinsey & Company for a period of ten years. Mr Krasnoff is a graduate of the Australian Institute of Company Directors and has completed a Master of Business Administration from the Harvard Business School. Mr Krasnoff is a member of the Audit and Compliance Committee and Remuneration Committee. During the past three years he has also served as a director of the following listed companies:

Conquest Mining Limited* - Appointed 28 October 2004

denotes current directorship

David Michael Macoboy BEc, BCom, FAICD, CPA

Non-executive Director

Mr Macoboy was appointed as a director of Grange on 30 November 2007. Mr Macoboy has a wealth of business and corporate finance experience. Mr Macoboy holds degrees in economics and finance. He has held a number of senior positions through his career including Executive Director of Finance & Corporate with Portman Limited, Group Treasurer with Australian Capital Equity, Vice President, Investment Banking with Merrill Lynch and General Manager, Treasury & Capital Markets with Challenge Bank. Mr Macoboy is chairman of the Audit & Compliance Committee. During the past three years he has also served as a director of the following listed companies:

Ammtec Limited* - Appointed 11 September 2007

Global Construction Services Limited - Appointed 1 July 2007 Ironclad Mining Limited - Appointed 1 July 2007

Territory Resources Ltd – Appointed 28 December 2005; Resigned 9 August 2007 Monarch Gold Ltd – Appointed March 2002; Resigned 30 June 2007 Consolidated Minerals Ltd – Appointed 1998; Resigned 31 December 2006

Croesus Mining Ltd - Appointed 12 January 2006; Resigned 26 June 2006

denotes current directorship

16 Grange Resources Limited Annual Report 2008

DIRECTORS’ REPORT (COnTInuED)

Directors (continued)

Names, qualifications, experience and special responsibilities (continued)

Alexander Henry Nutter BSc, MSc, DIC, FAusIMM, MAIG

Technical Director

Mr Nutter was appointed as a director of Grange on 27 November 2001. Mr Nutter is a geologist and holds degrees from Southampton, Leeds and London universities. He has over 30 years experience in mineral exploration, resource evaluation and mining geology in Australia, West Africa and the Asia-Pacific region. He has held senior positions in the mining industry and has been responsible for the discovery and/or acquisition of several mineral resources for both international and Australian public companies.

Douglas Haig Stewart BSc, FAusIMM, FAIG

Non-executive Director

Mr Stewart was appointed as a director of Grange on 23 October 2007. Mr Stewart has over 37 years experience in the mining industry in a variety of geological and engineering roles. His experience covers a wide range of commodities. Mr Stewart has had management responsibilities on mining operations in Africa, Canada and New Zealand in both open pit and underground mines. Mr Stewart was formerly an Associate Director of N M Rothschild & Sons (Australia) and Managing Director of Territory Resources Limited. Mr Stewart is a member of the Audit & Compliance Committee. During the past three years he has also served as a director of the following listed companies:

Conquest Mining Limited* – Appointed 30 November 2007

Territory Resources Limited – Appointed 4 March 2005; Resigned 25 July 2007

Interest in the shares and options of the company and related bodies corporate

As at the date of this report, the interest of the directors in the shares and options of Grange Resources Limited were:

	Number of	Number of Options
	Ordinary Shares	over Ordinary Shares
A.C.M. Bohnenn	13,774,338	Nil
R.S. Clark	Nil	Nil
D.M. Macoboy	65,000	Nil
R. Krasnoff	68,000	Nil
D.H. Stewart	Nil	Nil
A.H. Nutter	944,999	Nil

Company Secretary

Neil Andrew Marston BCom, ACIS

Company Secretary

Mr Marston was appointed Company Secretary and Chief Financial Officer of Grange on 21 July 2006. Mr Marston has a Bachelor of Commerce, obtained from Curtin University of Technology, WA. He has over 15 years experience in the mining/ exploration industry together with 13 years experience in a broad range of administration and management positions in several other industry sectors.

Grange Resources Limited Annual Report 2008 17

DIRECTORS’ REPORT (COnTInuED)

Directors’ meetings

The number of meetings of the directors (including meetings of committees of directors) held during the year and the number of meetings attended by each Director was:

Director	Directors’	Meetings	Audit & Compliance Committee	Audit & Compliance Committee	Remuneration	Committee
	Number	Number	Number	Number	Number	Number
	eligible	Attended	eligible	Attended	eligible	Attended
	to Attend		to Attend		to Attend
A.C.M. Bohnenn	10	10	2	2	1	1
R.S Clark	3	3	-	-	-	-
R. Krasnoff	10	10	2	2	1	1
D.M. Macoboy	5	5	-	-	-	-
H.R. Moser+	6	-	-	-	-	-
A.H. Nutter	10	10	-	-	-	-
D.S. Stewart	5	5	-	-	-	-
G.L.W. Wedlock*	6	6	-	-	-	-

Mr Moser resigned 31 December 2007
Mr Wedlock resigned 22 January 2008

As at the date of this report, the Company had an Audit and Compliance Committee and a Remuneration Committee of the Board of Directors.

Members acting on the committees of the board during the year were:

Members acting on the committees of the board	during the year were:
Audit & Compliance Committee	Remuneration Committee
A C M Bohnenn (Chairman)	A C M Bohnenn (Chairman)
R Krasnoff	R Krasnoff

Principal activities

The principal activities during the year of entities within the Group were:

development of the Southdown Magnetite and Kemaman Pellet Project;
development of the Bukit Ibam Iron Ore Project
royalty income from production of gold;
investment of cash assets; and
administration of the Group.

There were no changes to the principal activities of the Group during the year.

Review of operations

Overview

This financial year saw significant progress on the core assets of the Company being the Southdown Magnetite project in south Western Australia and the Bukit Ibam Iron Ore Project in Pahang state, Malaysia.

Southdown Magnetite Project

Southdown Project activities were focussed on advancing the project towards implementation. The environmental approvals process was advanced to the point where the Environmental Protection Authority issued its bulletin recommending project approval on 30 June 2008. Other activities centred on progressing the establishment of port, power and water infrastructure to support the Project.

Bukit Ibam Iron Ore Project

Bukit Ibam activities were focussed on the design and construction of a processing plant at the Bukit Ibam Iron Ore mine in Pahang state Malaysia. Construction activities were well advanced as at the date of this report and the plant is scheduled to be in production before the end of this year.

More detailed information on the Company’s operations is contained in the Review of Operations and Activities located on page 6.

18 Grange Resources Limited Annual Report 2008

DIRECTORS’ REPORT (COnTInuED)

Financial position

All dollar amounts shown in this report are in Australian dollars unless otherwise indicated.

The net assets of the Group have increased by $49,389,410 since 30 June 2007 to $95,114,802 on 30 June 2008. This increase is mainly as a result of increased cash together with exploration and evaluation expenditure capitalised.

Consolidated results

The consolidated operating profit of the Group after providing for income tax amounted to $931,136 (2007: loss $772,733). The result included the following items of significance:

Gain on sale of asset (30% interest in the Southdown Magnetite Project) of $4,245,192

Shareholder returns

The earnings per share of the company over the past 5 years is shown in the table below:

	2008	2007	2006	2005	2004#
Earnings ($million)	0.93	(0.77)	1.94	(5.27)	5.0
Basic earnings per share (cents)	0.82	(0.76)	2.04	(7.02)	7.3
Diluted earnings per share (cents)	0.82	(0.76)	2.04	(7.02)	7.3

2004 and prior years accounted for under Australian Accounting Standards applicable prior to 1 January 2005, and for 2005 onwards, Australian Accounting Standards applicable after 1 January 2005.

Earnings of the Group were modest during the year and reflect the current development phase of the business. The Company’s share price performance from the beginning ($2.01) to the end ($1.70) of the year represent a 15.4% drop over the period, a trend experienced by most stocks and indices during the year.

Dividends

Since the end of the previous financial year, no amount has been paid or declared by the Company by way of a dividend.

Significant Changes in State Of Affairs

Total equity of the group increased $49,389,410 or 60% during the financial year from $45,725,392 to $95,114,802. Factors contributing to this increase included the following:

the issue of 9,000,000 fully paid ordinary shares at an issue price of $2.49, and
the profit from ordinary activities of $931,136.

Significant events after the balance date

On 5 September 2008, the Company cancelled 6,300,000 director options. The cancellation was required by ASX Limited because the options were issued more than one month after the issue of them was approved by shareholders. The relevant shareholders’ meeting was held on 20 May 2008 and the options were issued on 9 July 2008. Under the ASX Listing Rules the latest date for issue of these options was 20 June 2008. The Company intends to seek shareholder approval for the issue of an equivalent number of replacement options to directors, with the same exercise prices and with some minor changes to the other terms, at the Company’s next general meeting.

Likely developments and expected results

In general terms the Company intends to progress its major project activities being the Southdown Magnetite Project and the Bukit Ibam Iron Ore Project.

Specific details of the likely developments in the operations of the Company, prospects and business strategies and their expected results in future financial years have not been included in this report as inclusion of such information is likely to result in unreasonable prejudice to the Company.

Grange Resources Limited Annual Report 2008 19

DIRECTORS’ REPORT (COnTInuED)

Environmental regulation and performance

The mining and exploration tenements held by the Group contain environmental requirements and conditions that the entities must comply with in the course of normal operations. These conditions and regulations cover the management of the storage of hazardous materials and rehabilitation of mine sites. There have been no significant known breaches of the Group’s environmental obligations.

Indemnities and insurance of officers

During or since the financial year, the Company has paid premiums totalling $26,620 in respect of Directors’ and Officers’ Liability Insurance and Company Reimbursement policies, which cover all directors and officers of the Group to the extent permitted under the Corporations Act 2001 . The policy conditions preclude the Group from any detailed disclosures.

Proceedings on behalf of the Company

No person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company of all or any part of those proceedings. No proceedings have been brought or intervened in or on behalf of the Company with leave of the court under section 237 of the Corporations Act 2001 .

Non-audit services

The following non-audit services were provided by the Company’s auditor, Ernst & Young. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The nature and scope of each type of non-audit service means that auditor independence was not compromised.

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 30.

Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:

	$
Tax compliance and advisory services Other advisory services	149,490 134,950
	284,440

20 Grange Resources Limited Annual Report 2008

DIRECTORS’ REPORT (COnTInuED)

Remuneration report (audited)

The Remuneration Report outlines the director and executive remuneration arrangements of the Company and the Group 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 Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company, and includes the five executives in the parent and the Group 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 Company and the Group.

Details of key management personnel (including the five highest executives of the Company and the Group)

(i) Directors

A.C.M. Bohnenn Chairman (Non-Executive) R.S Clark Managing Director and Chief Executive Officer – appointed 6 March 2008 A.H. Nutter Technical Director R. Krasnoff Director (Non-Executive) D.M. Macoboy Director (Non-Executive) – appointed 30 November 2007 H.R. Moser Director (Non-Executive) – resigned 31 December 2007 D.H. Stewart Director (Non-Executive) – appointed 23 October 2007 G.L.W. Wedlock Managing Director – resigned 22 January 2008

(ii) Executives

L.W. Bould General Manager – Business Readiness – appointed 1 May 2008 S. Hall General Manager – Business Development – resigned 15 August 2008 R.W.S. Hill Financial Controller – appointed 23 June 2008 N.A. Marston General Manager – Commercial & Company Secretary M. Muirhead Financial Controller – resigned 2 May 2008 L. Skotsch General Manager – Geology

Other than the resignation of S. Hall, there have been no changes to the CEO or KMP after reporting date and before the date the financial report was authorised for issue.

Remuneration Committee

The remuneration committee of the board of directors of the Company is responsible for determining and reviewing remuneration arrangements for the directors and executives.

It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality executive team by remunerating directors and executives fairly and appropriately with reference to relevant market conditions. To assist in achieving this objective, the Board attempts to link the nature and amount of executives’ emoluments to the Company’s performance. The outcome of the remuneration structure is:

the retention and motivation of key executives;
attraction of quality personnel with appropriate expertise; and
performance incentives that allow executives to share the rewards of the success of Grange.

Remuneration philosophy

The performance of the Company largely depends upon the quality of its directors and executives. To prosper the Company must be able to attract, motivate and retain highly skilled directors and executives. To achieve this, the Company adheres to the following principles in formulating its remuneration framework:

provide competitive rewards to attract high calibre executives;
link executive rewards to shareholder value; and
establish appropriate, demanding performance hurdles for variable executive remuneration.

The company does not have a board policy in relation to directors and executives limiting his or her exposure in relation to shares and options issued as elements of remuneration.

Grange Resources Limited Annual Report 2008 21

DIRECTORS’ REPORT (COnTInuED)

Remuneration report (audited) (continued)

Remuneration structure

In accordance with best practice corporate governance, the structure of non-executive director and senior executive remuneration is separate and distinct.

Non-executive director remuneration

Objective

The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders.

Structure

The Constitution and ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general meeting. The latest determination was at the General Meeting held on 30 November 2007 when shareholders approved an aggregate remuneration of $300,000 per year.

The amount of aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed annually. The board considers advice from external consultants as well as fees paid to non-executive directors of comparable companies when undertaking the annual review process.

Each non-executive director receives a base fee of $60,000 for being a director of the Company. The non-executive chairman receives a base fee of $90,000 per annum. An additional fee may be payable for each board committee on which a director sits which recognises the additional time required by directors who serve on one or more committees. At this time there are no additional fees paid to directors who serve on committees.

In addition the issue of 1,800,000 Director Options was approved by shareholders in May 2008 to non-executive Directors to act as an incentive for these Directors to align themselves with the Company’s strategic plan focusing on optimising performance with the benefits flowing through to enhanced Shareholder returns. There are no specific performance conditions attached to the non-executive director options however the exercise prices have been set at prices of $2.05, $3.00 and $3.50 which are all well above the closing share price of $1.60 on the approval date.

The earnings per share of the company over the past 5 years is shown in the table below:

	2008	2007	2006	2005	2004#
Earnings ($million)	0.93	(0.77)	1.94	(5.27)	5.0
Basic earnings per share (cents)	0.82	(0.76)	2.04	(7.02)	7.3
Diluted earnings per share (cents)	0.82	(0.76)	2.04	(7.02)	7.3

2004 and prior years accounted for under Australian Accounting Standards applicable prior to 1 January 2005, and for 2005 onwards, Australian Accounting Standards applicable after 1 January 2005.

Earnings of the Group were modest during the year and reflect the current development phase of the business. The Company’s share price performance from the beginning ($2.01) to the end ($1.70) of year represent a 15.4% drop over the period, a trend experienced by most stocks and indices during the year.

The remuneration of non-executive directors for the period ending 30 June 2008 and 30 June 2007 is detailed in Table 1& 2 respectively of this report.

Executive remuneration

Objective

The Group aims to reward executives with a level and combination of remuneration commensurate with their position and responsibilities within the Group so as to:

reward executives for Group and individual performance against targets set by reference to appropriate benchmarks;
align the interests of executives with those of shareholders; and
ensure total remuneration is competitive by market standards.

22 Grange Resources Limited Annual Report 2008

DIRECTORS’ REPORT (COnTInuED)

Remuneration report (audited) (continued)

Executive remuneration (continued)

Structure

In determining the level and components of executive remuneration, the Remuneration Committee considers recommendations from senior management which are based upon the prevailing labour market conditions. In addition independent advice is sought from external consultants as needed in the form of reports detailing market levels of remuneration for comparable executive roles.

Remuneration consists of the following key elements:

Fixed remuneration (base salary, superannuation and non-monetary benefits)
Variable remuneration
short term incentive
long term incentive

The proportion of fixed remuneration and variable remuneration (potential short term and long term incentives) for each executive is set out in Table 1.

Fixed remuneration

Objective

Fixed remuneration is reviewed annually by the Remuneration Committee. The process consists of a review of Group and individual performance, relevant comparative remuneration externally and internally and, where appropriate, external advice on policies and practices. As noted above, the Remuneration Committee has access to external consultant’s advice independent of management.

Structure

Executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash and fringe benefits. It is intended that the manner of payment chosen is optimal for the recipient without creating any undue cost for the Group.

Variable remuneration – Short Term Incentive (STI)

Objective

The objective of the STI program is to link the achievement of the Group’s operational targets with the remuneration received by the executives responsible for meeting those targets. The total potential STI available is set at a level so as to provide sufficient incentive to the executive to achieve the operational targets and such that the cost to the Group is reasonable in the circumstances.

Structure

Actual STI payments granted to each executive depend on overall performance and include the extent to which specific operating targets set from time to time are met. The operational targets may consist a number of key performance indicators (KPIs) covering both financial and non-financial, corporate and individual measures of performance. Currently, the STI targets and performance indicators are linked to the operational performance of the Group, in particular the achievement of project milestones and financial performance relative to budget.

KPIs that are monitored are:

Budget vs Actual expenditure
Project delivery vs timetable

The Group sets performance standards with each executive that must be met in order to trigger payments under the STI scheme. On an annual basis, after appropriate assessment of performance against KPIs, the Remuneration Committee, in line with their responsibilities, determine the amount, if any, of the short term incentive to be paid to each executive. This process usually occurs in the first three months of the calendar year.

The aggregate STI payments available for executives are subject to the approval of the Remuneration Committee with payments usually made as a 10% cash bonus. The maximum STI cash bonus for the 2008 financial year is $75,300. The minimum amount of the STI cash bonus assuming that no executives meet their respective KPIs for the 2008 financial year is nil.

STI bonus for 2007 and 2008 financial years

For the 2007 financial year, a total of $465,000 in STI cash bonuses was paid in March 2007 to executives. For the 2008 financial year, a total of $37,650 in STI cash bonuses was paid in May 2008 to executives.

Grange Resources Limited Annual Report 2008 23

DIRECTORS’ REPORT (COnTInuED)

Remuneration report (audited) (continued)

Variable remuneration – Long Term Incentive (LTI)

Objective

The objective of the LTI program is to reward executives in a manner that aligns remuneration with the creation of long term shareholder wealth. As such participation in the LTI program is only made to executives who are able to influence the generation of shareholder wealth and thus have an impact on the Group’s performance against the relevant long term performance hurdle.

Structure

In August 2007 Grange Resources Limited implemented the Grange Resources Limited Long Term Incentive (LTI) Plan. Under the LTI Plan, the board may, from time to time at its discretion grant Options or Rights, or both, under the Plan to Eligible Employees. The quantity and nature of share options or performance rights issued to executives varies depending upon each executive’s remuneration classification.

2007 Employee Rights Plan

Individual Milestones

Individual performance milestones covered such key targets as project acquisitions, stakeholder agreements and project approvals. These performance milestones were chosen due to their relevance to the ongoing success of the Company. The milestones chosen were clearly measurable and were objectively assessed by the Remuneration Committee in March 2008.

Corporate Comparable Shareholder Return

Corporate comparable shareholder return is measured by comparing the Company’s Total Shareholder Return (‘TSR’) (share price appreciation plus dividends reinvested) with a group of peer companies over the respective calendar year. In assessing whether the TSR hurdle for each grant has been met, the Company receives independent data from an external advisor, who provides both the Company’s TSR growth from the commencement of the measurement period and that of the pre-selected peer group. This group below presently reflects the Company’s 10 closest competitors for capital and talent.

Company	ASX Code	Company	ASX Code
Murchison Metals Limited	MMX	Australasian Resources Limited	ARH
Sundance Resources Limited	SDL	Territory Resources Limited	TTY
Gindalbie Metals Limited	GBG	Western Plains Resources Limited	WPG
Midwest Corporation Limited	MIS	Centrex Metals Limited	CXM
Atlas Iron Limited	AGO	Sphere Investments Limited	SPH

The group of peer companies for the 2008 year is subject to board review as at the date of this report.

24 Grange Resources Limited Annual Report 2008

DIRECTORS’ REPORT (COnTInuED)

Remuneration report (audited) (continued)

Employment contracts

Russell Clark - Managing Director and Chief Executive Officer

The Managing Director and Chief Executive Officer, Mr Clark is employed under contract. The current employment contract commenced on 6 March 2008 and terminates on 6 March 2011, at which time the Group may choose to enter into a new employment contract with Mr Clark.

Mr Clark receives fixed remuneration of $545,000 per annum.
Pursuant to his employment contract and following shareholder approval on 20 May 2008, Mr Clark was granted the following option package:
(i) 1,500,000 options vesting on 6 March 2009 and exercisable at $2.05 on or before 6 March 2012.
(ii) 1,500,000 options vesting on 6 March 2010 and exercisable at $3.00 on or before 6 March 2012.
(iii) 1,500,000 options vesting on 6 March 2011 and exercisable at $3.50 on or before 6 March 2012.
Pursuant to his employment contract and following shareholder approval, Mr Clark was granted the following bonus package on 20 May 2008:
(i) One-off payment of $1,000,000 (less applicable tax) upon the Board being satisfied that the Company has, as part of the Southdown Magnetite and Kemaman Pellet Plant Project, achieved commercial production of magnetite concentrate (subject to any applicable law or regulatory policy).
(ii) One-off payment of $1,000,000 (less applicable tax) upon the Board being satisfied that the Company has, as part of the Southdown Magnetite and Kemaman Pellet Plant Project, achieved commercial production of iron ore pellets (subject to any applicable law or regulatory policy).
Mr Clark may resign from his position and thus terminate his employment agreement by providing three months written notice. On the serving of written notice all unvested options will immediately lapse.
The company may terminate this employment agreement by providing three months written notice or by providing payment in lieu of giving notice, the agreement will then terminate upon such payment being made. On the serving of written notice all unvested options will immediately lapse.
The company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs the Managing Director is only entitled to that portion of remuneration that is fixed, and only up to the date of termination. On termination with cause any unvested options will immediately lapse.

Other Executives

The following executives are employed under contracts of employment:

A Nutter (Technical Director)
L Bould (General Manager – Business Readiness)
S Hall (General Manager – Business Development) (resigned 15 August 2008)
N Marston (General Manager – Commercial and Company Secretary)
L Skotsch (General Manager – Geology)
R Hill (Financial Controller)

The employment contracts include:

Participation in the Grange STI Scheme being a share of the bonus pool as determined by the Remuneration Committee and Board of the Company.
The Director or Executive may resign from their position and thus terminate their employment agreement by providing three months written notice.
On resignation any options will be forfeited.
The company may terminate the employment agreement by providing three months written notice or the unexpired period of the agreement in lieu of giving notice, the agreement will then terminate upon such payment being made.
The company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs the Director or Executive is only entitled to that portion of remuneration that is fixed, and only up to the date of termination. On termination with cause any unvested options will immediately be forfeited.

Grange Resources Limited Annual Report 2008 25

DIRECTORS’ REPORT (COnTInuED)

Remuneration report (audited) (continued)

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

of the Company and the Group
Table 1: Remuneration for the year ended 30 June 2008 2008	Short-term Salary & Fees Cash Bonus Non-monetary benefts Other $ $ $ $
Non-Executive Directors A.C.M. Bohnenn R. Krasnoff D.M. Macoboy D.H. Stewart H.R. Moser Sub-total Non-Executive Directors Executive Directors R.S. Clark A.H. Nutter G.L.W. Wedlock Other key management personnel L.W. Bould S. Hall N.A. Marston M. Muirhead L. Skotsch Sub-total executive KMP Total	77,203 - - - - - - - 20,000 - - - - - - - 11,677 - - -
	108,880 - - - 153,612 - 4,537 - 140,215 - 7,459 - 263,471 - 4,217 - 25,182 - 2,971 - 136,995 11,000 7,459 - 225,365 10,750 7,459 - 108,310 6,000 - - 200,730 9,900 7,459 - 1,253,880 37,650 41,561 -
	1,362,760 37,650 41,561 -

Note: Unvested Options held by G L W Wedlock automatically lapsed upon his resignation on 22 January 2008. This resulted in a reversal of the share based payment expense during the period.

Table 2: Remuneration for the year ended 30 June 2007 2007 Non-Executive Directors A.C.M. Bohnenn R. Krasnoff H.R. Moser Sub-total Non-executive Directors Executive Directors G.L.W. Wedlock A.H. Nutter Other key management personnel S. Hall N.A. Marston M. Muirhead L. Skotsch M. Smith Sub-total executive KMP Total	Short-term Salary & Fees Cash Bonus Non-monetary benefts Other $ $ $ $ 70,000 - - - - - - - 23,000 - - -
	93,000 - - - 396,461 400,000 - - 120,311 15,000 - - 78,568 20,000 - - 166,567 20,000 - - 87,915 10,000 - - 85,573 - - - - - - - 935,395 465,000 - -
	1,028,395 465,000 - -

26 Grange Resources Limited Annual Report 2008

DIRECTORS’ REPORT (COnTInuED)

Remuneration report (audited) (continued)

				Share-Based		Performance
Post Employment		Long-term		Payment	Total	Related
Super- annuation	Retirement benefts	Incentive Plans	Long Service Leave	Options
$	$	$	$	$	$	%
6,948	-	-	-	13,428	97,579	-
55,325	-	-	-	13,428	68,753	-
-	-	-	-	13,428	33,428	-
39,461	-	-	-	13,428	52,889	-
-	-	-	-	-	11,677	-
101,734	-	-	-	53,712	264,326	-
54,019	-	-	-	134,280	346,448	-
97,094	-	-	-	-	244,768	-
22,898	-	-	-	(343,887)	(53,301)	-
11,085	-	-	-	-	39,238	-
116,364	-	-	-	-	271,818	4.05%
44,808	-	-	-	-	288,382	3.73%
9,273	-	-	-	-	123,583	4.86%
17,948	-	-	-	-	236,037	4.19%
373,489	-	-	-	(209,607)	1,496,973	2.52%
475,223	-	-	-	(155,895)	1,761,299	2.14%

				Share-Based		Performance
Post Employment		Long-term		Payment	Total	Related
Super- annuation	Retirement benefts	Incentive Plans	Long Service Leave	Options
$	$	$	$	$	$	%
-	-	-	-	-	70,000	-
49,050	-	-	-	-	49,050	-
-	-	-	-	-	23,000	-
49,050	-	-	-	-	142,050	-
35,682	-	-	-	(354,193)	477,950	9.58%
98,573	-	-	-	-	233,884	6.41%
135,876	-	-	-	-	234,444	8.53%
36,246	-	-	-	-	222,813	8.98%
8,076	-	-	-	-	105,991	9.43%
7,702	-	-	-	-	93,275	-
8,717	-	-	-	-	8,717	-
330,872	-	-	-	(354,193)	1,377,074	8.05%
379,922	-	-	-	(354,193)	1,519,124	7.29%

Grange Resources Limited Annual Report 2008 27

DIRECTORS’ REPORT (COnTInuED)

Remuneration report (audited) (continued)

Remuneration of key management personnel and the five highest paid executives of the Company and the Group (continued)

Table 3: Compensation Options: Granted and vested during the year (Consolidated)

Terms and conditions of each Grant

30 June 08			Fair
			Value per
			option	Exercise
			at grant date ($)	Price per option ($)		First Exercise	Last Exercise	Vested
	Granted No.	Grant Date	(note 20)	(note 20)	Expiry date	Date	date	No.	%
Directors
A.C.M. Bohnenn	150,000	20-May-2008	0.48	2.05	6-Mar-2012	6-Mar-2009	6-Mar-2012	-	-
	150,000	20-May-2008	0.34	3.00	6-Mar-2012	6-Mar-2010	6-Mar-2012	-	-
	150,000	20-May-2008	0.27	3.50	6-Mar-2012	6-Mar-2011	6-Mar-2012	-	-
R.S. Clark	1,500,000	20-May-2008	0.48	2.05	6-Mar-2012	6-Mar-2009	6-Mar-2012	-	-
	1,500,000	20-May-2008	0.34	3.00	6-Mar-2012	6-Mar-2010	6-Mar-2012	-	-
	1,500,000	20-May-2008	0.27	3.50	6-Mar-2012	6-Mar-2011	6-Mar-2012	-	-
R. Krasnoff	150,000	20-May-2008	0.48	2.05	6-Mar-2012	6-Mar-2009	6-Mar-2012	-	-
	150,000	20-May-2008	0.34	3.00	6-Mar-2012	6-Mar-2010	6-Mar-2012	-	-
	150,000	20-May-2008	0.27	3.50	6-Mar-2012	6-Mar-2011	6-Mar-2012	-	-
D.M. Macoboy	150,000	20-May-2008	0.48	2.05	6-Mar-2012	6-Mar-2009	6-Mar-2012	-	-
	150,000	20-May-2008	0.34	3.00	6-Mar-2012	6-Mar-2010	6-Mar-2012	-	-
	150,000	20-May-2008	0.27	3.50	6-Mar-2012	6-Mar-2011	6-Mar-2012	-	-
D.H. Stewart	150,000	20-May-2008	0.48	2.05	6-Mar-2012	6-Mar-2009	6-Mar-2012	-	-
	150,000	20-May-2008	0.34	3.00	6-Mar-2012	6-Mar-2010	6-Mar-2012	-	-
	150,000	20-May-2008	0.27	3.50	6-Mar-2012	6-Mar-2011	6-Mar-2012	-	-
Total	6,300,000							-
30 June 2007
Directors
Nil
Total	-							-

28 Grange Resources Limited Annual Report 2008

DIRECTORS’ REPORT (COnTInuED)

Remuneration report (audited) (continued)

Remuneration of key management personnel and the five highest paid executives of the Company and the Group (continued)

Table 4: Options granted as part of remuneration

	Value of options	Value of options	Value of options	Remuneration
	granted during	exercised during	lapsed during	consisting of options
	the year	the year	the year	for the year
	$	$	$	%
A.C.M. Bohnenn	163,500	-	-	13.76
R.S. Clark	1,635,000	-	-	38.75
R. Krasnoff	163,500	-	-	19.53
D.M. Macoboy	163,500	-	-	40.17
D.H. Stewart	163,500	-	-	25.39
G.L.W. Wedlock	-	-	-	N/A

For details on the valuation of the options, including models and assumptions used, please refer to note 17.

There were no alterations to the terms and conditions granted as remuneration since their grant date. There were 2,500,000 options forfeited on 22 January 2008.

Table 5: Shares issued on exercise of compensation options (consolidated)

30 June 2008	Shares issued No. Paid per share (note 17) Unpaid per share $ $
Directors Nil Total 30 June 2007 Directors G.L.W. Wedlock Total	- - -
	-
	1,500,000 0.5 -
	1,500,000

Signed in accordance with a resolution of the directors.

==> picture [86 x 56] intentionally omitted <==

Russell StJohn Clark Managing Director

22nd day of September 2008

Grange Resources Limited Annual Report 2008 29

auDITOR’S InDEPEnDEnCE DEClaRaTIOn

==> picture [137 x 58] intentionally omitted <==

==> picture [119 x 70] intentionally omitted <==

Auditor’s Independence Declaration to the Directors of Grange Resources Ltd

In relation to our audit of the financial report of Grange Resources Ltd for the financial year ended 30 June 2008, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

==> picture [105 x 43] intentionally omitted <==

Ernst & Young

==> picture [101 x 40] intentionally omitted <==

Peter McIver Partner

Perth

22 September 2008

Liability limited by a scheme approved under Professional Standards Legislation.

30 Grange Resources Limited Annual Report 2008

CORPORaTE gOvERnanCE STaTEmEnT

The Board of Directors of Grange Resources Limited is responsible for the corporate governance of the Group. The Board guides and monitors the business affairs of Grange Resources Limited on behalf of the shareholders by whom they are elected and to whom they are accountable.

The table below summarises the Company’s compliance with the Corporate Governance Council’s Recommendations.

	Recommendation	Comply	Reference/
		Yes/No	Explanation
1.1	Formalise and disclose the functions reserved to the Board and those delegated to management.	Yes	Page 32
2.1	A majority of the Board should be independent directors.	No	Page 33
2.2	The chairperson should be an independent director.	No	Page 33
2.3	The roles of chairperson and chief executive offcer should not be exercised by the same	Yes	Page 33
	individual.
2.4	The Board should establish a nomination committee.	No	Page 33
3.1	Establish a code of conduct to guide the directors, the chief executive offcer (or equivalent), the	Yes	Page 34
	chief fnancial offcer (or equivalent) and any other key executives as to:
	· the practices necessary to maintain confdence in the Company’s integrity;
	· the responsibility and accountability of individuals for reporting and investigating reports of
	unethical practices.
3.2	Disclose the policy concerning trading in Company securities by directors, offcers and	Yes	Page 34
	employees.
4.1	Require the chief executive offcer (or equivalent) and the chief fnancial offcer (or equivalent) to	Yes	Page 34
	state in writing to the Board that the Company’s fnancial reports present a true and fair view,
	in all material respects, of the Company’s fnancial condition and operational results and are in
	accordance with relevant accounting standards.
4.2	The Board should establish an audit committee.	Yes	Page 34
4.3	Structure the audit committee so that it consists of:	Yes	Page 34
	· only non-executive directors;
	· a majority of independent directors;
	· an independent chairperson, who is not chairperson of the Board;
	· at least three members.
4.4	The audit committee should have a formal charter.	Yes	Page 34
5.1	Establish written policies and procedures designed to ensure compliance with ASX Listing Rule	Yes	Page 35
	disclosure requirements and to ensure accountability at a senior management level for that
	compliance.
6.1	Design and disclose a communications strategy to promote effective communication with	Yes	Website
	shareholders and encourage effective participation at general meetings.
6.2	Request the external auditor to attend the annual general meeting and be available to answer	Yes
	shareholder questions about the conduct of the audit and the preparation and content of the
	auditor’s report.
7.1	The Board or appropriate Board committee should establish policies on risk oversight and	Yes	Page 35
	management.
7.2	The chief executive offcer (or equivalent) and the chief fnancial offcer (or equivalent) should state	Yes	Page 35
	to the Board in writing that:
	· the statement given in accordance with best practice recommendation 4.1 (the integrity
	of fnancial statements) is founded on a sound system of risk management and internal
	compliance and control which implements the policies adopted by the Board;
	· the Company’s risk management and internal compliance and control system is operating
	effciently and effectively in all material respects.
8.1	Disclose the process for performance evaluation of the Board, its committees and individual	Yes	Page 35
	directors, and key executives.
9.1	Provide disclosure in relation to the Company’s remuneration policies to enable investors to	Yes	Page 36
	understand (i) the costs and benefts of those policies and (ii) the link between remuneration paid
	to directors and key executives and corporate performance.
9.2	The Board should establish a remuneration committee.	Yes	Page 36

Grange Resources Limited Annual Report 2008 31

CORPORaTE gOvERnanCE STaTEmEnT (COnTInuED)

	Recommendation	Comply	Reference/
		Yes/No	Explanation
9.3	Clearly distinguish the structure of non-executive directors’ remuneration from that of executives.	Yes	Page 36
9.4	Ensure that payment of equity-based executive remuneration is made in accordance with	Yes	Page 36
	thresholds set in plans approved by shareholders.
10.1	Establish and disclose a code of conduct to guide compliance with legal and other obligations to	Yes	Page 36
	legitimate stakeholders.

Except for where noted above Grange Resources Limited’s corporate governance practices were in place throughout the year ended 30 June 2008.

Various corporate governance practices are discussed within this statement. For further information on corporate governance policies adopted by Grange Resources Limited, refer to our website:

www.grangeresources.com.au

Principle 1: Lay solid foundations for management and oversight

The Board’s primary role is the protection and enhancement of shareholder value.

The key responsibilities of the Board include:

developing long-term corporate objectives and strategy with management and approving plans, new investments, major capital and operating expenditures and major funding activities proposed by management;
defining and setting performance expectations for the Company and monitoring actual performance;
appointing and reviewing the performance of the Managing Director and senior management;
assuring itself that there are effective health, safety, environmental and operational procedures in place;
assuring itself that there is effective budgeting and financial supervision;
assuring itself that appropriate audit arrangements are in place;
satisfying itself there are effective reporting systems that will assure the Board that proper financial, operational, compliance, risk management and internal control processes are in place and functioning appropriately;
satisfying itself that the annual financial statements of the Company fairly and accurately set out the financial position at year end, and the financial performance during the year;
assuring itself that the Company has adopted a Code of Corporate Ethics and that Company practice is consistent with that Code; and
reporting to and advising shareholders.

The responsibility for the operation and administration of the Company is delegated, by the Board, to the CEO and the executive management team. The Board ensures that this team is appropriately qualified and experienced to discharge their responsibilities and has in place procedures to assess the performance of the CEO and the executive management team.

Whilst at all times the Board retains full responsibility for guiding and monitoring the Company, in discharging its stewardship it makes use of sub-committees. Specialist committees are able to focus on a particular responsibility and provide informed feedback to the Board.

To this end the Board has established the following committees:

Audit & Compliance
Remuneration

The roles and responsibilities of these committees are discussed throughout this Corporate Governance Statement.

The Board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risk identified by the Board. The Board has a number of mechanisms in place to ensure this is achieved including:

Board approval of a strategic plan designed to meet stakeholders’ needs and manage business risk;
ongoing development of the strategic plan and approving initiatives and strategies designed to ensure that continued growth and success of the entity; and
implementation of budgets by management and monitoring progress against budget – via the establishment and reporting of both financial and non financial key performance indicators.

Other functions reserved to the Board include:

approval of the annual and half-yearly financial reports;
approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures;
ensuring that any significant risks that arise are identified, assessed, appropriately managed and monitored;
reporting to shareholders.

32 Grange Resources Limited Annual Report 2008

CORPORaTE gOvERnanCE STaTEmEnT (COnTInuED)

Principle 2: Structure the Board to add value

The skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report is included in the Directors’ Report. Directors of Grange Resources Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with – the exercise of their unfettered and independent judgement.

Independence

In the context of director independence, ‘materiality’ is considered from both the Group and individual director perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be quantitatively immaterial if it is equal to or less than 5% of the appropriate base amount. It is presumed to be material (unless there is qualitative evidence to the contrary) if it is equal to or greater than 10% of the appropriate base amount. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors that point to the actual ability of the director in question to shape the direction of the Group’s loyalty.

In accordance with the definition of independence above, and the materiality thresholds set, the following directors of Grange Resources Limited are considered to be independent:

In accordance with the Resources Limited are	defnition of independence above, and the mat considered to be independent:
Name	Position
R. Krasnoff	Non-executive Director
D.M. Macoboy	Non-executive Director
D.H. Stewart	Non-executive Director

The Company has not been compliant in respect to Corporate Governance Council’s Recommendation 2.1 for the entire year.

During the year the Board composition was:

	Independent	Non-independent	Total Number	Compliant with
Period	Directors	Directors	of Directors	Recommendation 2.1
1 July – 22 October 2007	2	3	5	No
23 October – 29 November 2007	3	3	6	No
30 November – 31 December 2007	4	3	7	Yes
1 January – 22 January 2008	3	3	6	No
23 January – 5 March 2008	3	2	5	Yes
6 March – 30 June 2008	3	3	6	No

The Company’s approach differs from the recommendation due to the fact that during the year it had 2 executive directors who are not independent and the non-executive Chairman is not independent due to his substantial shareholder status. However the intent of the Company has to been to be compliant or at least to have an equal number of independent Non-Executive directors to non-independent directors on the Board. This approach has resulted in 2 new Non-Executive directors joining the Board during the year with the relevant expertise to ensure that independent judgement is applied to all Board decisions.

There are procedures in place, agreed by the Board, to enable directors in furtherance of their duties to seek independent professional advice at the Company’s expense.

The term in office held by each director in office at the date of this report is as follows:

Name	Term in Offce
A.C.M. Bohnenn	7 years
R.S. Clark	6 months
R. Krasnoff	3 years
D.M. Macoboy	10 months
A.H. Nutter	7 years
D.H. Stewart	11 months

For additional details regarding Board appointments, please refer to our website.

Nomination Committee

Due to the small size of the Company’s Board, it has not formally established a Nomination Committee for the purposes of managing the selection, review and appointment practices for Board members. Nonetheless Board processes are in place to address the issues normally considered by the Nomination Committee as they arise.

Grange Resources Limited Annual Report 2008 33

CORPORaTE gOvERnanCE STaTEmEnT (COnTInuED)

Principle 3: Promote ethical and responsible decision making

The Board and all employees are expected to uphold high levels of integrity and professionalism in their relationships with all the Group’s stakeholders. Summarised below are the core codes and policies which apply and have been reviewed during 2008. Further detail on these codes and policies is available from the company website.

Code of Conduct

The Code of Conduct lays describes the standard for appropriate ethical and professional behaviour for all Directors, employees and contractors working for the Group. The Code of Conduct requires all Directors, employees and contractors to conduct business with the highest ethical standards, including compliance with the law, and to report or avoid conflict of interest situations. Compliance with the Code of Conduct is mandatory with breaches taken seriously.

Trading Policy

To safeguard against insider trading, the Company’s Securities Trading Policy prohibits an executive or Director from trading in any securities of the Company at any time when they are in possession of unpublished, price-sensitive information in relation to those securities.

Before commencing to trade, an executive must first obtain the approval of the Company Secretary to do so and a Director must first obtain approval of the Chairman.

Only in exceptional circumstances will approval be forthcoming outside of the period which is four weeks after:

one day following the announcement of the half yearly and full year results as the case may be;
one day following the holding of the Annual General Meeting;
one day after any other form of earnings forecast update is given to the market.

As required by the ASX Listing Rules, the Company notifies the ASX of any transaction conducted by Directors in the securities of the Company.

Principle 4: Safeguard integrity in financial reporting

The Managing Director and Chief Financial Officer have each declared in writing to the board that the financial records for the Company for the year have been properly maintained and present a true and fair view of the Company’s financial condition and operating results, in accordance with the Corporations Act and the relevant accounting standards.

Audit and Compliance Committee

The Board has established an Audit and Compliance Committee, which operates under a charter approved by the Board. It is the Board’s responsibility to ensure that an effective internal control framework exists within the Group. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial information as well as non-financial considerations such as the benchmarking of operational key performance indicators. The Board has delegated responsibility for establishing and maintaining a framework of internal control and ethical standards to the Audit and Compliance Committee.

The Committee also provides the Board with additional assurance regarding the reliability of financial information for inclusion in the financial reports. All members of the Audit and Compliance Committee are non-executive directors being: A.C.M. Bohnenn (committee chairman to June 08)

R. Krasnoff

D.M. Macoboy (committee chairman from June 08)

D.H. Stewart (appointed June 08)

N.A. Marston (attending role only)

N.A. Marston is the current Chief Financial Officer of the Group.

34 Grange Resources Limited Annual Report 2008

CORPORaTE gOvERnanCE STaTEmEnT (COnTInuED)

Principle 5: Make timely and balanced disclosure

Grange is committed to providing relevant up-to-date information to its shareholders and the broader investment community in accordance with its continuous disclosure obligations under the ASX Limited Listing Rules and the Corporations Act.

The Board has implemented a Continuous Disclosure Policy to ensure that information considered material by the Company is immediately reported to the ASX Limited. Other information such as company presentations is also disclosed to the ASX and on the company website.

The Company website provides access to all current and historical information, including ASX announcements, financial reports and other releases.

Principle 6: Respect the rights of shareholders

In adopting a Continuous Disclosure Policy the Board ensures that shareholders are provided with up-to-date information.

Communication to shareholders is facilitated by the production of the annual report, quarterly and half yearly reports, public announcements and the posting of all ASX announcements and other information on the Company’s website.

Shareholders are encouraged to attend and participate in the Annual General Meeting of the Company. Shareholders may raise questions at the AGM and the external auditor is in attendance at such meetings to address any questions in relation to the conduct of the audit.

Principle 7: Recognise and manage risk

The Board determines the Company’s risk profile and is responsible for overseeing and approving risk management strategy and policies, internal compliance and internal control. A summary of the Company’s Risk Management Policy is available on the Company’s website.

The Board oversees an annual assessment of the effectiveness of risk management and internal compliance and control. The responsibility for undertaking and assessing risk management and internal control effectiveness is delegated to management. Management is required by the Board to assess risk management and associated internal compliance and control procedures and report back on the efficiency and effectiveness of risk management by benchmarking the Company’s performance to the Australia/New Zealand Standard on Risk Management (AS/NZ 4360).

The Chief Executive Officer and Chief Financial Officer have provided a written statement to the Board that:

their view provided on the Company’s financial report is founded on a sound system of risk management and internal compliance and control which implements the financial policies adopted by the Board; and
that the Company’s risk management and internal compliance and control system is operating effectively in all material respects.

Principle 8: Encourage enhanced performance

The performance of the Board was not formally assessed during the reporting period due to the substantial number of board changes which occurred during the year. However a policy of formal assessment of board member performance has been established by the Company and is available on the Company’s website.

The performance of key executives is reviewed regularly against both measurable and qualitative indicators. During the reporting period, the Remuneration Committee conducted performance evaluations that involved an assessment of each key executive’s performance against specific and measurable qualitative and quantitative performance criteria. The performance criteria against which executives are assessed are aligned with the financial and non-financial objectives of the Company.

Grange Resources Limited Annual Report 2008 35

CORPORaTE gOvERnanCE STaTEmEnT (COnTInuED)

Principle 9: Remunerate fairly and responsibly

It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and executive team by remunerating directors and key executives fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the Remuneration Committee links the nature and amount of executive directors’ and officers’ remuneration to the Company’s financial and operational performance. The expected outcomes of the remuneration structure are:

retention and motivation of key executives;
attraction of high quality management to the Company; and
performance incentives that allow executives to share in the success of Grange Resources Limited.

Board Remuneration

The total annual remuneration paid to non-executive directors may not exceed the limit set by the shareholders at an annual general meeting (currently $300,000).

In addition 1,800,000 Director Options were granted by shareholders in May 2008 to non-executive Directors to act as an incentive for these Directors to align themselves with the Company’s strategic plan focusing on optimising performance with the benefits flowing through to enhanced Shareholder returns.

The Board acknowledges the grant of Director Options to the non-executive Directors is contrary to ASX Corporate Governance Principles and Recommendations. However, the Board considers the grant of Director Options to be reasonable in the circumstances, given the necessity to attract the highest calibre of professionals to the Company, whilst maintaining the Company’s cash reserves.

There is no scheme to provide retirement benefits to non-executive directors.

Executive Remuneration

For a full discussion of the Company’s remuneration philosophy and framework and the remuneration received by directors and executives in the current period please refer to the Remuneration Report, which is contained within the Directors’ Report.

For details on the number of meetings of the Remuneration Committee held during the year and the attendees at those meetings, refer to the Directors Report.

Principle 10: Recognise the legitimate interests of stakeholders

Grange has established a Code of Conduct which provides Directors, employees and contractors with guidance on compliance with legal and other obligations to legitimate stakeholders.

More information on Grange’s Code of Conduct is available from the Company’s website.

36 Grange Resources Limited Annual Report 2008

FINANCIAL STATEMENTS

Income statement	38
Balance sheet	39
Statement of recognised income and expense	40
Cash fow statement	41
Notes to the fnancial statements	42
Note 1. Corporate information	42
Note 2. Summary of signifcant accounting policies	42
Note 3. Revenues, other income & expenses	56
Note 4. Income tax expense	57
Note 5. Cash and cash equivalents	60
Note 6. Trade and other receivables (current)	61
Note 7. Trade and other receivables (non-current)	61
Note 8. Other fnancial assets	62
Note 9. Interests in controlled entities	62
Note 10. Interests in joint venture operations and business undertakings	63
Note 11. Property, plant and equipment	64
Note 12. Exploration & evaluation expenditure	66
Note 13. Trade and other payables	67
Note 14. Provisions (current)	67
Note 15. Provisions (non-current)	67
Note 16. Loans and borrowings	67
Note 17. Contributed equity	68
Note 18. Reserves and accumulated losses	69
Note 19. Expenditure commitments	70
Note 20. Share based payment plans	71
Note 21. Contingent liabilities and contingent assets	73
Note 22. Subsequent events	74
Note 23. Earnings per share	74
Note 24. Remuneration of auditors	74
Note 25. Related party disclosure	75
Note 26. Key management personnel	75
Note 27. Segment information	78
Note 28. Financial instruments	80
Directors’ declaration	84
Independent auditor’s report to the members of Grange Resources Limited	85
ASX additional information	87
Tenement schedule	89

Grange Resources Limited Annual Report 2008 37

InCOmE STaTEmEnT

for the year ended 30 June 2008

NOTE	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Sale of iron ore Royalties Finance revenue Revenue from continuing operations 3(a) Cost of sales 3(b) Gross proft Other income 3(c) Gain on Sale of Asset 3(d) Administrative expenses 3(e) Employee benefts expense 3(f) Other expenses 3(g) Proft/(loss) from continuing operations before tax and borrowing costs Borrowing costs 3(h) Proft/(loss) from continuing operations before income tax Income tax expense 4 Proft/(loss) from continuing operations after income tax expense Attributable to - Minority Interest - Members of the parent Basic earnings/(loss) per share (cents per share) 23 Diluted earnings/(loss) per share (cents per share) 23	153,654 - - - 734,882 2,856,211 670,947 2,633,510 778,887 837,591 778,887 837,591
	1,667,423 3,693,802 1,449,834 3,471,101 (312,747) - - -
	1,354,676 3,693,802 1,449,834 3,471,101 25,108 132,510 21,316 129,346 4,245,192 - 4,245,192 - (2,160,999) (2,483,393) (1,620,238) (2,033,742) (2,260,932) (1,816,000) (2,139,051) (1,741,780) (199,765) (299,652) - -
	1,003,280 (772,733) 1,957,052 (175,075) (4,544) - - -
	998,736 (772,733) 1,957,052 (175,075) - - - -
	998,736 (772,733) 1,957,052 (175,075)
	(67,600) - - - 931,136 (772,733) 1,957,052 (175,075)
	0.82 (0.76) 0.82 (0.76)

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

38 Grange Resources Limited Annual Report 2008

balanCE ShEET

as at 30 June 2008

NOTE	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
ASSETS Current Assets Cash and cash equivalents 5 Trade and other receivables 6 Prepayments Total Current Assets Non-current Assets Trade and other receivables 7 Other fnancial assets 8 Property, plant & equipment 11 Exploration and evaluation 12 Total Non-current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables 13 Provisions 14 Loans and borrowings 16 Total Current Liabilities Non-current Liabilities Provisions 15 Total Non-current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Equity attributable to equity holders of the parent Contributed equity 17(a) Reserves 18 Accumulated losses 18 Total Parent Entity Interest in Equity Minority Interests TOTAL EQUITY	7,659,988 13,492,474 7,085,996 13,109,925 1,009,966 2,948,032 1,186,513 627,935 50,208 60,945 50,208 60,945
	8,720,162 16,501,451 8,322,717 13,798,805
	5,225,231 2,705,231 6,770,224 4,115,204 - 480,975 5,242,301 5,242,301 5,926,062 912,908 4,854,395 610,123 80,994,463 30,140,366 78,219,209 29,088,659
	92,145,756 34,239,480 95,086,129 39,056,287
	100,865,918 50,740,931 103,408,846 52,855,092
	1,324,514 1,354,261 1,248,860 1,143,893 387,923 3,661,278 157,911 726,149 - - 32,769,653 32,546,868
	1,712,437 5,015,539 34,176,424 34,416,910
	4,038,679 - 584,603 -
	4,038,679 - 584,603 -
	5,751,116 5,015,539 34,761,027 34,416,910
	95,114,802 45,725,392 68,647,819 18,438,182
	86,048,017 63,662,384 86,048,017 63,662,386 29,763,948 3,903,283 29,779,753 3,912,799 (20,909,139) (21,840,275) (47,179,951) (49,137,003)
	94,902,826 45,725,392 68,647,819 18,438,182
	211,976 - - -
	95,114,802 45,725,392 68,647,819 18,438,182

The above Balance Sheet should be read in conjunction with the accompanying notes.

Grange Resources Limited Annual Report 2008 39

STaTEmEnT OF RECOgnISED InCOmE anD EXPEnSE

for the year ended 30 June 2008

NOTE	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Foreign currency translation 18 Net income/(expense) recognised directly in equity Proft/(loss) for the year Total recognised income/(expense) for the year Total recognised income/(expense) for the year is attributable to: Members of Grange Resources Limited Minority Interest	(6,290) (9,516) - -
	(6,290) (9,516) - - 998,736 (772,733) 1,957,052 (175,075)
	992,446 (782,249) 1,957,052 (175,075)
	924,846 (782,279) 1,957,052 (175,075) 67,600 - - -
	992,446 (782,249) 1,957,052 (175,075)

40 Grange Resources Limited Annual Report 2008

CaSh FlOW STaTEmEnT

for the year ended 30 June 2008

NOTE	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Cash fows from operating activities Receipts from customers Payments to suppliers and employees Interest received Borrowing costs Receipt of government grants Net cash fows from/(used in) operating activities 5 Cash fows from investing activities Payment for exploration and evaluation Payments for property, plant and equipment Payment for convertible note & investments Proceeds from sale of property, plant and equipment Proceeds from/(payment of) security deposit Net cash fows from/(used in) investing activities Cash fows from fnancing activities Proceeds from borrowings from controlled entities within wholly owned group Loans to controlled entities within wholly owned group Proceeds from issue of fully paid shares 17 Payment for share costs Proceeds from exercise of share options 17 Net cash fows from/(used in) fnancing activities Net increase/(decrease) in cash and cash equivalents Net foreign exchange differences Cash and cash equivalents at beginning of the fnancial year Cash and cash equivalents at end of the fnancial year 5	827,506 3,123,629 322,443 2,984,556 (4,736,166) (4,482,933) (3,183,460) (3,624,362) 778,887 837,591 778,887 837,591 - - - - - 32,211 - 32,211
	(3,129,773) (489,502) (2,082,130) 229,996
	(12,357,821) (6,645,520) (11,476,120) (5,565,470) (5,845,073) (32,413) (5,845,073) (31,136) - (480,975) - (661,163) 15,835,999 - 15,835,999 - (300,000) 137,500 (300,000) 137,500
	(2,666,895) (7,021,408) (1,785,194) (6,120,269)
	- - - - - - (2,132,235) (1,793,766) - 12,350,000 - 12,350,000 (29,527) (393,238) (24,370) (393,238) 750,000 - 750,000
	(29,527) 12,706,762 (2,156,605) 10,912,996
	(5,826,195) 5,195,852 (6,023,929) 5,022,723 (6,291) (9,515) - - 13,492,474 8,306,137 13,109,925 8,087,202
	7,659,988 13,492,474 7,085,996 13,109,925

Grange Resources Limited Annual Report 2008 41

nOTES TO ThE FInanCIal STaTEmEnTS

NOTE 1. CORPORATE INFORMATION

The financial report of Grange Resources Limited (the Company) for the year ended 30 June 2008 was authorised for issue in accordance with a resolution of the directors on 22 September 2008.

Grange Resources Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange.

The nature of the operations and principal activities of the Group is mining and exploration.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(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.

The financial report has been prepared on a historical cost basis.

The financial report is presented in Australian dollars and all values are in whole dollars.

(b) Statement of compliance

The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) and the Urgent Issues Group that are relevant to its operations and effective for annual reporting periods beginning on 1 July 2007. The adoption of these new and revised Standards and Interpretations did not have any effect on the financial position or performance of the Group.

Applicable Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting period ending 30 June 2008. These are outlined in the table below:

			Application		Application
Reference	Title	Summary	date of standard	Impact on Group fnancial report	date for Group
AASB Int. 12 and	Service Concession	Clarifes how operators	1 January	Unless the Group enters	1 July 2008
AASB 2007-2	Arrangements	recognise the infrastructure	2008	into service concession
	and consequential	as a fnancial asset and/		arrangements or public-
	amendments to other	or an intangible asset –		private-partnerships (PPP),
	Australian Accounting	not as property, plant and		the amendments
	Standards	equipment.		are not expected
				to have any impact
				on the Group’s fnancial
				report.
AASB Int. 4 (Revised)	Determining whether an	The revised Interpretation	1 January	Refer to AASB Int. 12 and	1 July 2008
	Arrangement contains a	specifcally scopes out	2008	AASB 2007-2 above.
	Lease	arrangements that fall
		within the scope of AASB
		Interpretation 12.
AASB Int. 129	Service Concession	Requires disclosure of	1 January	Refer to AASB Int. 12 and	1 July 2008
	Arrangements:	provisions or signifcant	2008	AASB 2007-2 above.
	Disclosures	features necessary to assist
		in assessing the amount,
		timing and certainty of
		future cash fows and
		the nature and extent of
		the various rights and
		obligations involved. These
		disclosures apply to both
		grantors and operators.

42 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Statement of compliance (continued)

			Application		Application
Reference	Title	Summary	date of standard	Impact on Group fnancial report	date for Group
AASB Int. 13	Customer Loyalty	Deals with the accounting	1 July 2008	The Group does not have	1 July 2008
	Programmes	for customer loyalty		any customer loyalty
		programmes, which are		programmes and as such
		used by companies to		this interpretation is not
		provide incentives to their		expected to have any
		customers to buy their		impact on the Group’s
		products or use their		fnancial report.
		services.
AASB Int. 14	AASB 119 – The Limit	Aims to clarify how to	1 January	The Group does not have	1 July 2008
	on a Defned Beneft	determine in normal	2008	a defned beneft pension
	Asset, Minimum Funding	circumstances the limit		plan and as such this
	Requirements and their	on the asset that an		interpretation does not
	Interaction	employer’s balance sheet		have an impact on the
		may contain in respect of		Group’s fnancial report.
		its defned beneft pension
		plan.
AASB 8 and	Operating Segments	New standard replacing	1 January	AASB 8 is a disclosure	1 July 2009
AASB 2007-3	and consequential	AASB 114 Segment	2009	standard so will have
	amendments to other	Reporting, which adopts		no direct impact on
	Australian Accounting	a management reporting		the amounts included
	Standards	approach to segment		in the Group's fnancial
		reporting.		statements, although it may
				indirectly impact the level
				at which goodwill is tested
				for impairment. In addition,
				the amendments may have
				an impact on the Group’s
				segment disclosures.
AASB 123 (Revised)	Borrowing Costs	The amendments to	1 January	These amendments to	1 July 2009
and AASB 2007-6	and consequential	AASB 123 require that all	2009	AASB 123 require that all
	amendments to other	borrowing costs associated		borrowing costs associated
	Australian Accounting	with a qualifying asset be		with a qualifying asset be
	Standards	capitalised.		capitalised. The Group
				has no borrowing costs
				associated with qualifying
				assets and as such the
				amendments are not
				expected to have any
				impact on the Group’s
				fnancial report.
AASB 101 (Revised)	Presentation of	Introduces a statement	1 January	These amendments are	1 July 2009
and AASB 2007-8	Financial Statements	of comprehensive	2009	only expected to affect the
	and consequential	income. Other revisions		presentation of the Group’s
	amendments to other	include impacts on the		fnancial report and will
	Australian Accounting	presentation of items		not have a direct impact
	Standards	in the statement of		on the measurement and
		changes in equity, new		recognition of amounts
		presentation requirements		disclosed in the fnancial
		for restatements or		report. The Group has
		reclassifcations of items		not determined at this
		in the fnancial statements,		stage whether to present
		changes in the presentation		a single statement of
		requirements for dividends		comprehensive income or
		and changes to the titles of		two separate statements.
		the fnancial statements.

Grange Resources Limited Annual Report 2008 43

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Statement of compliance (continued)

			Application		Application
Reference	Title	Summary	date of standard	Impact on Group fnancial report	date for Group
AASB 2008-1	Amendments to	The amendments clarify the	1 January	The Group has share-	1 July 2009
	Australian Accounting	defnition	2009	based payment
	Standard – Share-	of 'vesting conditions',		arrangements that may
	based Payments:	introducing the term		be affected by these
	Vesting Conditions and	'non-vesting conditions'		amendments. However,
	Cancellations	for conditions other than		the Group has not yet
		vesting conditions as		determined the extent of
		specifcally defned and		the impact, if any.
		prescribe the accounting
		treatment of an award
		that is effectively cancelled
		because a non-vesting
		condition is not satisfed.
AASB 2008-2	Amendments to	The amendments provide	1 January	These amendments are	1 July 2009
	Australian Accounting	a limited exception to the	2009	not expected to have any
	Standards – Puttable	defnition of a liability so		impact on the Group’s
	Financial Instruments	as to allow an entity that		fnancial report as the
	and Obligations arising	issues puttable fnancial		Group does not have on
	on Liquidation	instruments with certain		issue or expect to issue
		specifed features, to		any puttable fnancial
		classify those instruments		instruments as defned by
		as equity rather than		the amendments.
		fnancial liabilities.
AASB 3 (Revised)	Business Combinations	The revised standard	1 July 2009	The Group has not yet	1 July 2009
		introduces a number of		assessed the impact of
		changes to the accounting		early adoption, including
		for business combinations,		which accounting policy to
		the most signifcant of		adopt.
		which allows entities a
		choice for each business
		combination entered
		into – to measure a non-
		controlling interest (formerly
		a minority interest) in the
		acquiree either at its fair
		value or at its proportionate
		interest in the acquiree’s
		net assets. This choice
		will effectively result in
		recognising goodwill
		relating to 100% of the
		business (applying the fair
		value option) or recognising
		goodwill relating to the
		percentage interest
		acquired. The changes
		apply prospectively.
AASB 127 (Revised)	Consolidated and	Under the revised standard,	1 July 2009	If the Group changes	1 July 2009
	Separate Financial	a change in the ownership		its ownership interest in
	Statements	interest of a subsidiary (that		existing subsidiaries in the
		does not result in loss of		future, the change will be
		control) will be accounted		accounted for as an equity
		for as an equity transaction		transaction. This will have
				no impact on goodwill, nor
				will it give rise to a gain
				or a loss in the Group’s
				income statement.

44 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Statement of compliance (continued)

			Application		Application
Reference	Title	Summary	date of standard	Impact on Group fnancial report	date for Group
AASB2008-3	Amendments to	Amending standard issued	1 July 2009	Refer to AASB 3 (Revised)	1 July2009
	Australian Accounting	as a consequence of		and AASB 127 (Revised)
	Standards arising from	revisions to AASB 3 and		above.
	AASB 3 and AASB 127	AASB 127.
Amendments to	Cost of an Investment	The main amendments	1 January	Recognising all dividends	1 July
International Financial Reporting Standards	in a Subsidiary, Jointly Controlled Entity or	of relevance to Australian entities are those made to	2009	received from subsidiaries, jointly controlled entities	2009
	Associate	IAS 27 deleting the ‘cost		and associates as income
		method’ and requiring all		will likely give rise to greater
		dividends from a subsidiary,		income being recognised
		jointly controlled entity or		by the parent entity
		associate to be recognised		after adoption of these
		in proft or loss in an		amendments.
		entity’s separate fnancial statements (i.e., parent company accounts). The distinction between pre- and post-acquisition profts is no longer required. However, the payment of such dividends requires the entity to consider whether there is an indicator of		In addition, if the Group enters into any group reorganisation establishing new parent entities, an assessment will need to be made to determine if the reorganisation meets the conditions imposed to be effectively accounted for on
		impairment.		a ‘carry-over basis’ rather than at fair value.
		AASB 127 has also been
		amended to effectively
		allow the cost of an
		investment in a subsidiary,
		in limited reorganisations,
		to be based on the
		previous carrying amount
		of the subsidiary (that is,
		share of equity) rather than
		its fair value.
Amendments to	Improvements to IFRSs	The improvements project	1 January	The Group has not yet	1 July 2009
International Financial		is an annual project that	2009	determined the extent
Reporting Standards		provides a mechanism for	except for	of the impact of the
		making non-urgent, but	amendments	amendments, if any.
		necessary, amendments	to IFRS 5,
		to IFRSs. The IASB has	which are
		separated the amendments	effective from
		into two parts: Part 1	1 July
		deals with changes the
		IASB identifed resulting
		in accounting changes;
		Part II deals with either
		terminology or editorial
		amendments that the IASB
		believes will have minimal
		impact.

Grange Resources Limited Annual Report 2008 45

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Statement of compliance (continued)

			Application		Application
Reference	Title	Summary	date of standard	Impact on Group fnancial report	date for Group
IFRIC 15	Agreements for the	This interpretation proposes	1 January	The Group does not enter	1 July 2009
	Construction of Real	that when the real estate	2009	into agreements to provide
	Estate	developer is providing		construction services to the
		construction services to		buyer’s specifcations and
		the buyer’s specifcations,		as such this interpretation
		revenue can be recorded		is not expected to have
		only as construction		any impact on the Group’s
		progresses. Otherwise,		fnancial report.
		revenue should be
		recognised on completion
		of the relevant real estate
		unit.
IFRIC 16	Hedges of a Net	This interpretation proposes	1 January	The Interpretation is unlikely	1 July 2009
	Investment in a Foreign	that the hedged risk in a	2009	to have any impact on the
	Operation	hedge of a net investment		Group since it does not
		in a foreign operation		signifcantly restrict the
		is the foreign currency		hedged risk or where the
		risk arising between the		hedging instrument can
		functional currency of		be held.
		the net investment and
		the functional currency
		of any parent entity. This
		also applies to foreign
		operations in the form of
		joint ventures, associates
		or branches.

Adoption of new accounting standard

The Group has adopted AASB 7 Financial Instruments; Disclosures and all consequential amendments which became applicable on 1 January 2007. The adoption of this standard has only affected the disclosure in these financial statements. There has been of affect on profit and loss or the financial position of the entity.

(c) Basis of consolidation

The consolidated financial statements comprise the financial statements of Grange Resources Limited and all of its controlled entities. Control exists where Grange Resources Limited has the capacity to dominate the decision making relative to the financial and operating policies of another entity so that the other entity operates with Grange Resources Limited to achieve the objectives of Grange Resources Limited.

A list of controlled entities is contained in note 9 to the accounts. The financial statements of the controlled entities are prepared for the same reporting period as the parent company, using consistent accounting policies. All inter-company balances and transactions between entities in the Group, including any unrealised profits or losses, have been eliminated on consolidation.

Where controlled entities have entered or left the Group during the year, their operating results have been included from the date control was obtained or until the date control ceased.

(d) Segment reporting

A business segment is a distinguishable component of the Company that is engaged in providing products or services that are subject to risks and returns that are different to those of other business segments.

A geographical segment is a distinguishable component of the Company that is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different than those of segments operating in other economic environments.

46 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(e) Foreign currency translation

Functional and presentation currency

Both the functional and presentation currency of Grange Resources Limited and its Australian subsidiaries are Australian dollars ($). Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions and 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 the balance sheet date.

All exchange differences in the consolidated financial report are taken to profit and loss with the exception 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 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.

The functional currency of the foreign operations, Grange Minerals Sdn Bhd and Grange Developments Sdn Bhd, is Malaysian ringgit (MYR).

As at the reporting date the asset and liabilities of these subsidiaries are translated into the presentation currency of Grange Resources Limited at the rate of exchange ruling at the balance sheet date and their income statements are translated at the weighted average exchange rate for the year.

The exchange differences arising on the translation are taken directly to a separate component of equity.

On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in profit and loss.

(f) Significant accounting judgements, estimates and assumptions

The preparation of a financial report in conformity with Australian Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The accounting policies have been consistently applied by each entity in the Group.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Impairment of capitalised exploration and evaluation expenditure

The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group 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 the future recoverability include the level of reserves and resources, future technological changes, which could impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices.

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

In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent it is determined in the future that this capitalised expenditure should be written off, profits and net assets will be reduced in the period in which this determination is made.

Grange Resources Limited Annual Report 2008 47

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(f) Significant accounting judgements, estimates and assumptions (continued)

Share-based payment transactions

The Group 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 fair value is determined by an external valuer using a binomial model, using the assumptions detailed in note 20.

Provision for decommissioning and restoration costs

Decommissioning and restoration costs are a normal consequence of mining, and the majority of this expenditure is incurred at the end of a mine’s life. In determining an appropriate level of provision consideration is given to the expected future costs to be incurred, the timing of these expected future costs (largely dependent on the life of the mine), and the estimated future level of inflation.

The ultimate cost of decommissioning and restoration is uncertain and costs can vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites. The expected timing of expenditure can also change, for example in response to changes in reserves or to production rates.

Changes to any of the estimates could result in significant changes to the level of provisioning required, which would in turn impact future financial results.

(g) Revenue recognition and other income

Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Sale of goods

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be measured reliably. Risks and rewards are considered passed to the buyer at the time of delivery of the goods to the customer.

Royalties

Royalty revenue is recognised on an accrual basis in accordance with the substance of the arrangements.

Interest revenue

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 value amount of the financial asset.

Other income - Government grants

Government grants are recognised when there is reasonable assurance that the grant will be received and all attaching conditions will be complied with.

When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate.

When the grant relates to an asset, the fair value is credited to a deferred income account and is released to the income statement over the expected useful life of the relevant asset by equal annual instalments.

48 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(h) Leases

Leases are classified as either operating or finance leases based on the economic substance of their agreement so as to reflect the risks and benefits incidental to ownership.

Leases that effectively transfer substantially all of the risks and benefits incidental to ownership of the leased item to the Group are capitalised at the present value of the minimum lease payments and disclosed as property plant and equipment. A lease liability of equal value is also recognised. Lease payments are apportioned between finance charges and the reduction of the lease liability so as to achieve a consistent rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in the Income Statement.

Capitalised lease assets are depreciated over the shorter of the estimated useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Lease incentives are recognised in the Income Statement as an integral part of the total lease expense.

(i) Cash and cash equivalents

Cash and cash equivalents in the balance sheet 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.

(j) Trade and other receivables

Trade and other receivables are recognised and carried at the original invoice amount less an allowance for any uncollectible amounts.

An allowance for doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts. Financial difficulties of the debtor, default payments or debts more than 60 days overdue are considered objective evidence of impairment. Bad debts are written off when identified.

Trade terms are determined by contractual agreement or otherwise on a 14 day basis.

(k) Inventories

Inventories comprise broken ore, work in progress and concentrate which are carried at the lower of cost and net realisable value.

Costs represent weighted average cost and include direct costs and an appropriate portion of fixed and variable overhead expenditure, including amortisation.

Net realisable value is the amount estimated to be obtained from sale of the item of inventory in the normal course of business, less any anticipated costs to be incurred prior to its sale.

(l) Income tax

Current income tax and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

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:

(i) where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
(ii) when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures and 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.

Grange Resources Limited Annual Report 2008 49

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(l) Income tax (continued)

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 credits and unused tax losses can be utilised except:

(i) 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; or
(ii) in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, a deferred tax asset is 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 difference 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.

Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

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.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

Tax consolidation legislation

Grange Resources Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July 2002.

The head entity, Grange Resources Limited and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group.

In addition to its own current and deferred tax amounts, Grange Resources Limited also recognised the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

Assets or liabilities arising under tax funding agreement with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.

(m) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

a. when GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
b. receivables and payables, which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

50 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(n) Interests in jointly controlled assets

The Group’s interest in its jointly controlled assets are accounted for by recognising the Group’s assets and liabilities from the joint venture, as well as expenses incurred by the Group and the Group’s share of income earned from the joint venture, in the consolidated financial statements.

Where part of a joint venture interest is farmed out in consideration of the farm-in party undertaking to incur further expenditure on behalf of both the farm-in party and the entity in the joint venture area of interest, exploration expenditure incurred and carried forward prior to farm out continues to be carried forward without adjustment, unless under the terms of the farm out it is considered excessive based on the diluted interest retained. A provision is then made to reduce exploration expenditure to its recoverable amount. Any cash received in consideration for farming out part of a joint venture interest is treated as a reduction in the carrying value of the related mineral property.

(o) Property, plant and equipment

Plant and equipment are brought to account at cost less, where applicable, any accumulated depreciation, amortisation or impairment in value.

Land and buildings are measured at cost less, where applicable, any accumulated depreciation, amortisation or impairment in value.

Property, plant and equipment are depreciated to their residual value at rates based upon the life of the individual asset or the life of the mine, whichever is considered shorter. Depreciation rates used are as follows:

Buildings 10% straight line per annum Furniture and fittings 14% straight line per annum Computer equipment 27% straight line per annum Mining plant and equipment 27% straight line per annum

The assets residual values, useful lives and amortisation methods are reviewed and adjusted if appropriate, at each financial year end.

Impairment

The carrying amount of property, plant and equipment is reviewed for impairment at each reporting date, with the recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

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 unless the asset’s value in use can be estimated to be close to its fair value. If any indication of impairment exists, and where the carrying values exceed the estimated recoverable amount, the asset or cash-generating 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.

Derecognition and disposal

An item of property, plant and equipment is derecognised upon disposal or when no further economic benefits are expected from its use or disposal.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

Grange Resources Limited Annual Report 2008 51

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(p) Mineral exploration and evaluation expenditure

Mining tenements and capitalised exploration expenditure (including acquisition costs) are stated at cost, less, where applicable, any accumulated amortisation. The carrying amount of deferred mineral exploration and evaluation expenditure is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets.

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

Costs arising from the acquisition, exploration and evaluation relating to an area of interest are carried forward provided that rights to tenure of the area of interest are current and provided further that at least one of the following conditions is met:

(i) such costs are expected to be recouped through successful development and exploitation of the area of interest, or alternatively by its sale; or
(ii) exploration and evaluation activities in the area of interest have not at balance date reached a stage which permits a reasonable 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.

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

Ultimate recoupment of these costs is dependent on the successful development and commercial exploitation or sale, of the respective areas of interest.

(q) Development properties

Development expenditure incurred by, or on behalf of, the entity is accumulated separately for each area of interest in which economically recoverable reserves have been identified to the satisfaction of the directors.

Once a development decision has been taken, all past and future exploration and evaluation expenditure in respect of the area of interest is aggregated with the costs of development and classified under non-current assets as “Development Properties”.

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

All expenditure incurred prior to the commencement of commercial levels of production from each development property is carried forward to the extent to which recoupment out of revenue to be derived from the sale of production from the relevant development property, or from the sale of that property, is reasonably assured.

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

No amortisation is provided in respect of development properties until they are reclassified as “Production Properties” following a decision to commence mining.

(r) Production properties

Production properties represent the accumulation of all exploration, evaluation and development expenditure incurred by, or on behalf of, the entity in relation to areas of interest in which mining of a mineral resource has commenced.

Where further development expenditure is incurred in respect of a production property after the commencement of production, such expenditure is carried forward as part of the cost of that production property only when substantial future economic benefits are thereby established, otherwise such expenditure is classified as part of the cost of production.

Costs on production properties in which the Group has an interest are amortised over the life of the area of interest to which such costs relate on the production output basis.

The net carrying value of each production property is reviewed annually by directors to ensure it is not in excess of the recoverable amount from those assets.

52 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(s) Provisions for site restoration

The Group records the present value of the estimated cost of legal and constructive obligations (such as those under the Group’s Environmental Policy) to restore operating locations in the period in which the obligation is incurred. The nature of restoration activities includes dismantling and removing structures, rehabilitating mines, dismantling operating facilities, closure of plant and waste sites and restoration, reclamation and revegetation of affected areas.

Typically the obligation arises when the asset is installed at the production location. When the liability is initially recorded, the estimated cost is capitalised by increasing the carrying amount of the related mining assets. Over time, the liability is increased for the change in the present value based on the discount rates that reflect the current market assessments and the risks specific to the liability. Additional disturbances or changes in rehabilitation costs are recognised as additions or changes to the corresponding asset and rehabilitation liability when incurred.

The unwinding of the effect of discounting on the provision is recorded as a finance cost in the income statement. The carrying amount capitalised is depreciated over the life of the related asset.

(t) Investments and other financial assets

Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified in the following categories where appropriate: financial assets at fair value through profit or loss, loans and receivables, held-tomaturity investments, or available-for-sale investments. The Group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end.

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. 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.

Loans and receivables

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

(u) Investments in associates

The Group’s investment in its associates is accounted for using the equity method of accounting in the consolidated financial statements. The associates are entities over which the Group has significant influence and that are neither subsidiaries nor joint ventures.

Under the equity method, investments in the associates are carried in the consolidated balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associates. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. After application of the equity method, the Group determines whether it is necessary to recognise any impairment loss with respect to the Group’s net investment in associates.

The Group’s share of its associates post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are recognised in the parent entity’s income statement, while in the consolidated financial statements they reduce the carrying amount of the investment.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured long-term receivables and loans, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

The reporting dates of the associates and the Group are identical and the associates’ accounting policies conform to those used by the Group for like transactions and events in similar circumstances.

Grange Resources Limited Annual Report 2008 53

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(v) Impairment of assets

At each reporting date, the Group assesses whether there is any indication that an asset including capitalised exploration and evaluation and capitalised development expenditure may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of the 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 cash inflows that are largely independent of those from other assets or groups 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. Impairment losses are recognised in the income statement.

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have deceased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

(w) Trade and other payables

Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.

(x) Borrowings

All borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest method.

Borrowing costs

Borrowing costs are recognised as an expense when incurred.

(y) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability.

When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

(z) Employee entitlements

Wages, salaries, annual, sick and long service leave

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

Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

54 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(z) Employee entitlements (continued)

Share-based payment transactions

The Group provides benefits to employees (including directors) in the form of share-based payment transactions, whereby employees render services in exchange for share rights or options (“equity-settled transactions”).

The current plan in place is the Grange Resources Limited Long Term Incentive Plan.

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 using the enhanced trinomial method.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Grange 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 Board of the Group, 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 those 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 an equity-settled award is 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 modifications, 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.

(aa) Earnings per share (EPS)

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

Diluted EPS is calculated as net profit attributable to members, adjusted for:

costs of servicing equity (other than dividends);
the after tax effects of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses;
other non-discretionary changes in revenue 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.

(bb) Contributed equity

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, net of tax, of the share proceeds received.

Grange Resources Limited Annual Report 2008 55

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 3. REVENUES, OTHER INCOME & EXPENSES

	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
*Revenue and expenses from* *continuing operations* (a) Revenue Revenue from sale of iron ore Revenue from royalties Finance revenue Breakdown of fnance revenue: Interest received from other persons/ corporations (b) Costs of sales Included in cost of sales: Amortisation of deferred exploration, evaluation and development costs Production costs (c) Other income Government grants Sundry income (d) Gain on Sale of Asset Sale of 30% interest in the land relating to the Southdown Magnetite Project (e) Administration expenses Included in administrative expenses: Audit Consultants Contractors Depreciation Freight Insurance Investor relations Legal Minimum lease commitments – operating lease Public relations Rent outgoings Travel Other	153,654 - - - 734,882 2,856,211 670,947 2,633,510 778,887 837,591 778,887 837,591
	1,667,423 3,693,802 1,449,834 3,471,101
	778,887 837,591 778,887 837,591
	778,887 837,591 778,887 837,591
	11,728 - - - 301,019 - - -
	312,747 - - -
	- 32,211 - 32,211 25,108 100,299 21,316 97,135
	25,108 132,510 21,316 129,346
	4,245,192 - 4,245,192 -
	4,245,192 - 4,245,192 -
	76,329 67,032 65,555 59,075 455,999 382,401 183,208 188,640 107,251 90,545 84,731 40,105 97,797 84,556 84,661 81,415 22,021 21,549 885 19,473 77,549 70,010 65,720 64,466 46,364 44,695 46,364 44,694 206,206 400,256 119,694 283,412 109,787 101,840 109,787 101,840 79,077 109,887 79,077 109,887 226,509 86,159 215,720 86,159 261,268 424,950 205,871 420,452 394,842 599,513 358,965 534,124
	2,160,999 2,483,393 1,620,238 2,033,742

56 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 3. REVENUES, OTHER INCOME & EXPENSES (continued)

	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
*Revenue and expenses from* *continuing operations (continued)* (f) Employee benefts expenses Payroll cost Defned contribution plan expense Share-based payments expense (g) Other expenses Horseshoe expenses (i) (i) Horseshoe expenses are the ongoing care and maintenance costs of the Horseshoe Gold Mine that ceased production in May 1994. (h) Borrowing costs Interest paid to non-related entities	2,240,316 2,045,346 2,126,128 1,976,405 176,511 124,847 168,818 119,568 (155,895) (354,193) (155,895) (354,193)
	2,260,932 1,816,000 2,139,051 1,741,780
	199,765 299,652 - -
	199,765 299,652 - -
	4,544 - - -
	4,544 - - -

NOTE 4. INCOME TAX EXPENSE

		Consolidated	Consolidated	Grange Resources Limited	Grange Resources Limited
		2008	2007	2008	2007
		$	$	$	$
(a)	Major components of income tax expense for the years
	ended 30 June 2008 and 2007 are:	-	-	-	-
	Income Statement
	Current income tax
	Current income tax charge/(beneft)	(14,676,293)	(3,109,031)	(11,247,747)	(1,877,372)
	Deferred income tax
	Relating to origination and reversal of temporary
	differences	14,919,153	1,468,892	14,315,173	1,754,346
	Utilisation of previously unrecognised tax losses	(242,860)	-	(3,067,426)	-
	Timing differences not recognised	-	1,640,139	-	123,026
	Income tax expense reported in income statement	-	-	-	-
		-	-	-	-
	Statement of changes in equity
	Income tax liability reported in equity	-	-	-	-

Grange Resources Limited Annual Report 2008 57

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 4. INCOME TAX EXPENSE (continued)

	Consolidated 2008 2007 $ $	Grange Resources Limited 2008 2007 $ $
(b) A reconciliation of income tax expense applicable to accounting proft before income tax at the statutory income tax rate to income tax expense at the Group’s effective income tax rate for the years ended 30 June 2008 and 2007 is as follows: Accounting proft/(loss) before tax 931.136 (772,733) At statutory income tax rate of 30% (2007: 30%) 279,341 (231,820) Non-deductible/(non-assessable) items (36,481) (44,845) Non-deductible provision for non-recovery of loan to controlled entity - - Over/under adjustment - (1,396,738) Non-deductible decrement in carrying value of assets - - Deductible research & development claim - - Utilisation of previously unrecognised tax losses/ unrecognised tax losses (242,860) 1,673,403 Income tax expense reported in income statement - - (c) Deferred income tax Deferred income tax at 30 June relates to the following: CONSOLIDATED Deferred tax liabilities Accrued income (27,757) (111,917) Accelerated deductions for tax purposes - - Other receivable (688,491) (666,000) Deferred mining exploration - - Exploration (23,557,771) (8,633,992) (24,274,019) (9,411,909) Deferred tax assets Accelerated depreciation for tax purposes 162,490 162,490 Foreign exchange (1,907) 20,424 Accrued expenses 9,000 11,265 Provision for employee entitlements 47,374 42,464 Blackhole costs 78,170 105,609 Provision for rehabilitation 605,607 380,920 Provision for restoration 675,000 675,000 Retirement Asset (234,605) - Carried forward losses 28,481,310 13,805,017 Deferred tax assets not bought to account as - - realisation is not regarded as probable (5,548,420) (5,791,280) 24,274,019 9,411,909 Deferred tax expense Net deferred tax recognised in the balance sheet - -	931.136 (772,733)	1,957,052 (175,075)
	279,341 (231,820) (36,481) (44,845) - - - (1,396,738) - - - - (242,860) 1,673,403	587,116 (52,523) (37,101) (44,845) - - - (25,658) - - - - (550,015) 123,026
	- -	- -
		(84,160) (149,211) - - 22,491 (791) - - 14,923,779 1,601,844 - - 22,331 (5,817) 2,265 16,632 (4,910) (885) 27,439 - (224,687) 7,120 - - 234,605 (14,676,293) - (242,860) -
	(24,274,019) (9,411,909)
	162,490 162,490 (1,907) 20,424 9,000 11,265 47,374 42,464 78,170 105,609 605,607 380,920 675,000 675,000 (234,605) - 28,481,310 13,805,017 - - (5,548,420) (5,791,280)
	24,274,019 9,411,909
	- -	- 1,468,892

58 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 4. INCOME TAX EXPENSE (continued)

	Consolidated 2008 2007 $ $	Grange Resources Limited 2008 2007 $ $
(c) Deferred income tax (continued) PARENT Deferred tax liabilities Accrued income Accelerated deductions for tax purposes Deferred mining Exploration Deferred tax assets Accelerated depreciation for tax purposes Foreign exchange Accrued expenses Provision for employee entitlements Blackhole costs Provision for rehabilitation Carried forward losses Deferred tax assets not bought to account as realisation is not regarded as probable Unrecognised deferred tax assets Deferred tax expense Net deferred tax recognised in the balance sheet	- (83,845) - - - - (23,133,215) (8,726,596)	(83,845) 82,709 - - - - 14,406,619 1,659,353
	(23,133,215) (8,810,441)	14,322,774 1,742,062
	- - 50,465 20,424 9,000 8,911 47,374 42,464 78,170 105,609 175,381 175,381 26,775,762 15,528,015 - - (4,002,937) (7,070,363)	- - (30,041) (5,817) (89) 18,986 (4,910) (885) 27,439 - - - (11,247,747) - (3,067,426) - - -
	23,133,215 8,810,441
	- -
		- 1,754,346

Deferred tax assets attributable to tax losses of $5,548,420 (2007: $5,791,280) carried forward have not been brought to account at 30 June 2008 because directors do not believe it is appropriate to regard realisation of the future tax benefit as probable. These benefits will only be obtained if:

(i) the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deduction for the loss to be realised;

(ii) the Group continues to comply with the conditions for the deductibility imposed by law; and

(iii) no changes in tax legislation adversely affect the Group in realising the benefit from the deduction for the loss

(d) Tax consolidation

The Company and its 100% owned subsidiaries are a tax consolidated group as of 1 July 2002. Members of the group have agreed to enter into a tax sharing arrangement in order to allocate income tax expense to the wholly owned subsidiaries. The agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. At the balance date, the possibility of default is remote. The head entity of the tax consolidated group is Grange Resources Limited. Entities within the tax-consolidated group have entered in to a tax funding arrangement with the head entity. Under the terms of the tax funding arrangement, Grange Resources Limited and each of the entities of the tax consolidated group has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Assets or liabilities arising under tax funding agreement with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group.

Grange Resources Limited Annual Report 2008 59

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 5. CASH AND CASH EQUIVALENTS

	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Cash at bank and in hand (i) Short term deposits (ii) Cash at bank and in hand - Joint Ventures (iii)	7,449,146 1,089,294 7,085,996 909,925 - 12,200,000 - 12,200,000 210,842 203,180 - -
	7,659,988 13,492,474 7,085,996 13,109,925

(i) Cash at bank earns interest at floating rates based on daily bank deposit rates.
(ii) Short-term deposits are made for varying periods depending on the cash requirements of the Group, and earn interest at the respective short-term deposit rates.
(iii) Joint Venture cash at bank represents Mount Windsor Joint Venture, Reward, Highway and Reward Deeps/ Conviction cash calls paid by Grange Resources Limited but not yet used by the joint ventures to pay creditors.

	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Reconciliation to cash fow statement For the purposes of the cash fow statement, cash and cash equivalents comprise the following at 30 June: Cash at banks and in hand Short term deposits Cash at banks and in hand - Joint Ventures Reconciliation of net proft/(loss) after tax to net cash fows from operations Net proft/(loss) after income tax Adjustments for: Amortisation Proft on Sale of Assets Depreciation Share based payment expense Minority Interest Changes in assets and liabilities (Increase)/decrease in trade and other receivables (Increase)/decrease in prepayments (Increase)/decrease in retirement asset (Decrease)/increase in trade and other payables (Decrease)/increase in provisions Net cash from operating activities	7,449,146 1,089,294 7,085,996 909,925 - 12,200,000 - 12,200,000 210,842 203,180 - -
	7,659,988 13,492,474 7,085,996 13,109,925
	931,136 (772,733) 1,957,052 (175,075) 12,053 - - - (4,245,192) (4,245,192) 97,799 84,556 84,661 81,415 (155,896) (354,193) (155,896) (354,193) 211,976 - - - (281,934) 480,989 (558,578) 561,807 10,737 (7,751) 10,737 (7,751) (782,018) - - - 306,242 100,414 808,721 120,842 765,324 (20,784) 16,365 2,951
	(3,129,773) (489,502) (2,082,130) 229,996

60 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 6. TRADE AND OTHER RECEIVABLES (CURRENT)

	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Trade receivables (i) Other debtors (ii) Other receivables (iii)	4,065 373,060 2,065 279,484 930,931 77,908 917,661 71,387 74,970 2,497,064 266,787 277,064
	1,009,966 2,948,032 1,186,513 627,935

(i) Trade receivables are all non-interest bearing and are generally on 14 day terms.
(ii) Other debtors relate to GST receivable from the Australian Taxation Office and amounts receivable from the Sojitz Corporation.
(iii) Other receivables include amounts receivable from Esperance Mining Sdn. Bhd.

NOTE 7. TRADE AND OTHER RECEIVABLES (NON-CURRENT)

NOTE	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Related party receivables Loans to controlled entities 25 Provision for doubtful recovery 25 Other receivables Security deposits (i) Insurance Receivable (ii)	- - 16,414,101 14,059,081 - - (11,078,949) (11,078,949)
	- - 5,335,152 2,980,132
	3,005,231 2,705,231 1,435,072 1,135,072 2,220,000 - - -
	5,225,231 2,705,231 6,770,224 4,115,204

Terms and conditions

(i) Security deposits earn interest at prevailing term deposit rates and include amounts with:
a. Perth Diocesan Trustees for the office lease expiring 19 July 2010;
b. Road Builder (M) Holdings Bhd to acquire land in the Malaysian port city of Kemaman and secure port facilities. The deposit is repayable twelve months from termination or expiry of the agreement;
c. Minister for Mines and Energy for the States of Queensland and Western Australia for performance bonds in relation to the rehabilitation of Highway Reward and Horseshoe Lights mine, repayable upon satisfactory completion of rehabilitation.
(ii) It is virtually certain that insurance compensation will be received for the Gregory Development Road. Refer note 14 and 15(i). The receivable is the Group’s 30% share. The receivable has been reclassed to non-current at 30 June 2008.

Provision for doubtful recovery

Movement in the provision for doubtful recovery were as follows:

NOTE	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
At 1 July 2007 25 Change for year At 30 June 2008	- - (11,078,949) (11,078,949) - - - -
	- - (11,078,949) (11,078,949)

Grange Resources Limited Annual Report 2008 61

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 8. OTHER FINANCIAL ASSETS

NOTE 8. OTHER FINANCIAL ASSETS
NOTE	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Investments in controlled entities – at cost Provision for impairment 9 Convertible note – at cost (i)	- - 29,028,111 28,547,136 - - (23,785,810) (23,785,810)
	- - 5,242,301 4,761,326 - 480,975 - 480,975
	- 480,975 5,242,301 5,242,301

(i) In the year ended 30 June 2007 the Group had a 35.51% ownership interest in an associate, Murchison Copper Mines Pty Ltd (MCM), which was involved in mining exploration in Australia. The directors had previously determined that the original investment in MCM was fully impaired and as a result it was written off.

On the 31st July 2007 the convertible note issued by MCM to Grange Resources Limited matured, resulting in the conversion of the note to 4,809,750 fully paid shares in MCM. The conversion results in Grange, together with Horseshoe Gold Mine Pty Ltd, now holding 79.18% (2007: 35.51%) of MCM. The acquisition of the controlling interest in MCM does not constitute a business combination.

The principal activity of MCM in the year ended 30 June 2008 was care and maintenance of the Horseshoe Gold Mine.

NOTE 9. INTERESTS IN CONTROLLED ENTITIES

NOTE 9. INTERESTS IN CONTROLLED ENTITIES
Percentage of equity interest held by the Group 2008 2007 % %	Investment 2008 2007 $ $
Grange Developments Sdn Bhd 100 100 Grange Minerals Sdn Bhd 100 100 Grange Capital Pty Ltd 100 100 Tribune Development Pty Ltd 100 100 Barrack Mines Pty Ltd 100 100 Bamine Pty Ltd 100 100 BML Holdings Pty Ltd 100 100 Horseshoe Gold Mine Pty Ltd 100 100 Surfboard Securities Pty Ltd 100 100 Murchison Copper Mines Pty Ltd 79.18 35.51	1 1 180,180 180,180 2 2 - - 4,581,143 4,581,143 - - - - - - - - 480,975 -
	5,242,301 4,761,326

With the exception of Grange Developments Sdn Bhd and Grange Minerals Sdn Bhd which are subsidiaries incorporated in Malaysia, the Company and all other subsidiaries are incorporated in Australia. Grange Resources Limited is a company limited by shares and domiciled in Australia.

62 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 10. INTERESTS IN JOINT VENTURE OPERATIONS AND BUSINESS UNDERTAKINGS

At 30 June 2008 the Group was participant in the following joint ventures:

	Consolidated	Consolidated	Grange Resources Limited	Grange Resources Limited
	% Interest	% Interest	% Interest	% Interest
Name of Joint Venture	2008	2007	2008	2007
Production Joint Ventures:
Reward - Copper/Gold	31.15	31.15	-	-
Highway – Copper	30.00	30.00	-	-
Development Joint Ventures:			-	-
Reward Deeps/Conviction - Copper	30.00	30.00	-	-
Bukit Ibam (Malaysia) – Iron Ore	51.00	-	-	-
Exploration Joint Ventures:			-	-
Mt Samuel - Exploration Gold	85.00	85.00	42.50	42.50
Abercromby Well - Exploration Gold/Nickel	10.00	10.00	-	-
Mt Windsor - Exploration Gold/Base Metals	30.00	30.00	-	-

The joint ventures are not separate legal entities. They are contractual arrangements between the participants for the sharing of costs and output and do not in themselves generate revenue and profit.

The Group’s direct interests in joint venture net assets, as summarised below, are included in the corresponding balance sheet items in the Group accounts

	Consolidated 2008 2007
Current Assets Cash and cash equivalents Trade debtors and other receivables Total Current Assets Non-current Assets Trade debtors and other receivables Property, plant and equipment Total Non-current Assets Total Assets Current Liabilities Trade and other payables Provisions Total Current Liabilities Non-current Liabilities Provisions Total Non-current Liabilities Total Liabilities Net Assets/(liabilities) employed in joint venture operations	210,842 230,180 - 2,220,000
	210,842 2,450,180
	2,220,000 - 262,742 262,742
	2,482,742 262,742
	2,693,584 2,712,922
	68,468 119,072 230,012 2,935,129
	298,480 3,054,201
	2,250,000 -
	2,250,000 -
	2,548,480 3,054,201
	145,104 (341,279)

The net contributions of joint venture operations (inclusive of resultant revenues) to the Group operating profit before income tax and abnormal items was a loss of $129,436 (2007: loss $440,466).

The parent entity does not hold ownership in any operating joint ventures.

Contingent liabilities in relation to joint ventures are disclosed in Note 21.

Grange Resources Limited Annual Report 2008 63

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 11. PROPERTY, PLANT AND EQUIPMENT

	Consolidated Freehold land and buildings Plant and equipment Computer equipment Pastoral lease Furniture and fttings Restoration Asset Total $ $ $ $ $ $ $
Year ended 30 June 2008 At 1 July 2007, net of accumulated depreciation and impairment Additions Disposals Depreciation charge for the year Impairment At 30 June 2008, net of accumulated depreciation and impairment At 1 July 2007 Cost or fair value Accumulated depreciation and impairment Net carrying amount At 30 June 2008 Cost or fair value Accumulated depreciation and impairment Net carrying amount Year ended 30 June 2007 At 1 July 2006, net of accumulated depreciation and impairment Additions Disposals Depreciation charge for the year At 30 June 2007, net of accumulated depreciation and impairment At 1 July 2006 Cost or fair value Accumulated depreciation and impairment Net carrying amount At 30 June 2007 Cost or fair value Accumulated depreciation and impairment Net carrying amount	383,964 17,288 77,005 262,742 171,909 - 912,908 6,064,560 1,199 63,283 - 19,261 782,018 6,930,321 (1,819,368) - - - - - (1,819,368) (14,234) (6,905) (44,654) - (32,006) - (97,799) - - - - - - -
	4,614,922 11,582 95,634 262,742 159,164 782,018 5,926,062
	412,431 61,065 188,162 262,742 224,458 - 1,148,858 (28,467) (43,777) (111,157) - (52,549) - (235,950)
	383,964 17,288 77,005 262,742 171,909 - 912,908
	4,657,623 62,265 251,444 262,742 243,719 782,018 6,259,811 (42,701) (50,684) (155,809) - (84,555) - (333,749)
	4,614,922 11,582 95,634 262,742 159,164 782,018 5,926,062
	128,102 18,586 91,813 262,742 193,713 - 694,956 270,095 3,865 19,328 - 9,220 - 302,508 - - - - - - - (14,233) (5,163) (34,136) - (31,024) - (84,556)
	383,964 17,288 77,005 262,742 171,909 - 912,908
	142,336 57,200 168,834 262,742 215,238 - 846,350 (14,234) (38,614) (77,021) - (21,525) - (151,394)
	128,102 18,586 91,813 262,742 193,713 - 694,956
	412,431 61,065 188,162 262,742 224,458 - 1,148,858 (28,467) (43,777) (111,157) - (52,549) - (235,950)
	383,964 17,288 77,005 262,742 171,909 - 912,908

64 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 11. PROPERTY, PLANT AND EQUIPMENT (continued)

	Grange Resources Limited Freehold land and buildings Plant and equipment Computer equipment Pastoral lease Furniture and fttings Restoration Asset Total $ $ $ $ $ $ $
Year ended 30 June 2008 At 1 July 2007, net of accumulated depreciation and impairment Additions Disposals Depreciation charge for the year Impairment At 30 June 2008, net of accumulated depreciation and impairment At 1 July 2007 Cost or fair value Accumulated depreciation and impairment Net carrying amount At 30 June 2008 Cost or fair value Accumulated depreciation and impairment Net carrying amount Year ended 30 June 2007 At 1 July 2006, net of accumulated depreciation and impairment Additions Disposals Depreciation charge for the year At 30 June 2007, net of accumulated depreciation and impairment At 1 July 2006 Cost or fair value Accumulated depreciation and impairment Net carrying amount At 30 June 2007 Cost or fair value Accumulated depreciation and impairment Net carrying amount	383,964 2,529 51,721 - 171,909 - 610,123 6,064,560 1,200 63,281 - 19,261 - 6,148,302 (1,819,368) - - - - - (1,819,368) (14,234) (1,006) (37,416) - (32,006) - (84,662) - - - - - - -
	4,614,922 2,723 77,587 - 159,164 - 4,854,395
	412,431 2,588 164,306 - 224,458 - 803,783 (28,467) (58) (112,586) - (52,549) - (193,660)
	383,964 2,530 51,720 - 171,909 - 610,123
	4,657,623 3,788 225,439 - 243,719 - 5,130,569 (42,701) (1,065) (147,853) - (84,555) - (276,174)
	4,614,922 2,723 77,586 - 159,164 - 4,854,395
	128,102 - 68,492 - 193,713 - 390,307 270,095 2,588 19,328 - 9,220 - 301,231 - - - - - - - (14,233) (58) (36,100) - (31,024) - (81,415)
	383,964 2,530 51,720 171,909 - 610,123
	142,336 - 144,978 - 215,238 - 502,552 (14,234) - (76,486) - (21,525) - (112,245)
	128,102 - 68,492 - 193,713 - 390,307
	412,431 2,588 164,306 - 224,458 - 803,783 (28,467) (58) (112,586) - (52,549) - (193,660)
	383,964 2,530 51,720 - 171,909 - 610,123

Grange Resources Limited Annual Report 2008 65

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 11. PROPERTY, PLANT AND EQUIPMENT (continued)

The useful life of the assets was estimated as follows for 2007 and 2008: Buildings 10% straight line per annum Furniture and fittings 14% straight line per annum Computer equipment 27% straight line per annum Mining plant and equipment 27% straight line per annum

No item of property, plant and equipment has been pledged as security for the Group’s liabilities.

NOTE 12. EXPLORATION & EVALUATION EXPENDITURE

	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Exploration & evaluation properties (at cost) Production properties (at cost) Accumulated amortisation of production properties Movement: Exploration & Evaluation Properties Balance at beginning of year Current year expenditure Receipts from Sojitz Value of options issued to Hamersley Holdings Limited as part consideration for the purchase of Exploration Licence 70/2512 Value of share issued to Hamersley Holdings Limited as part consideration for the purchase of Exploration Licence 70/2512 Transfer to Production Properties Balance at end of year Production properties Balance at beginning of year Transfer from/(to) development, exploration and evaluation properties Current year expenditure Amortisation charged Balance at end of year	79,368,932 30,140,366 78,219,209 29,088,654 2,853,145 1,215,562 - - (1,227,615) (1,215,562) - -
	80,994,463 30,140,366 78,219,209 29,088,654
	30,140,366 23,440,495 29,088,659 23,557,476 11,833,913 6,699,871 10,772,368 5,531,183 (10,074,667) - (10,074,667) - 26,022,849 - 26,022,849 - 22,410,000 - 22,410,000 - (963,529) - - -
	79,368,932 30,140,366 78,219,209 29,088,659
	- - - - 963,529 - - - 674,054 - - - (12,053) - - -
	1,625,530 - - -

The ultimate recoupment of exploration and evaluation expenditure is dependent upon successful development and commercial exploitation or alternatively the sale of the respective areas of interest at an amount at least equal to book value.

The directors have reviewed the carrying values of each area of interest as at Balance Date. Where the carrying value of an individual area of interest was in excess of its recoverable amount the area of interest has been written down to its recoverable amount.

66 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 13. TRADE AND OTHER PAYABLES

	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Trade payables (i) Other creditors (ii)	1,252,135 1,152,004 1,248,860 1,143,893 72,379 202,257 - -
	1,324,514 1,354,261 1,248,860 1,143,893

(i) Trade payables are non-interest bearing and are normally settled on repayment terms between 7 and 30 days.

(ii) Other creditors are non-interest bearing and have no fixed repayment date.

NOTE 14. PROVISIONS (CURRENT)

NOTE 14. PROVISIONS (CURRENT)
NOTE	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Provision for annual leave 157,911 141,546 157,911 141,546 Provision for road restoration 15 (i) - 2,250,000 - - Provision for mine rehabilitation 15 (ii) 230,012 1,269,732 - 584,603 387,923 3,661,278 157,911 726,149 NOTE 15. PROVISIONS (NON-CURRENT) Provision for road restoration (i) 2,250,000 - - - Provision for mine rehabilitation (ii) 1,788,679 - 584,603 - 4,038,679 - 584,603 -	157,911 141,546 157,911 141,546 - 2,250,000 - - 230,012 1,269,732 - 584,603
	387,923 3,661,278 157,911 726,149
	4,038,679 - 584,603 -

(i) During 2006, cracking was detected in the Gregory Development Road adjacent to the Highway-Reward open pit of which the Group has a 30% joint venture interest. Remediation measures are being considered. If found liable, the joint venture may be required to relocate a section of the road away from the open pit. The provision is the Group’s 30% share. It is virtually certain that the costs associated with the relocation will be compensated by insurance. Refer note 7. The provision has been reclassified to non-current at 30 June 2008.

(ii) The provision for rehabilitation is recognised for mining activities for costs such as reclamation, plant closure and other costs associated with the rehabilitation of a mine site. Estimates of the rehabilitation obligations are based on expert opinions based on the anticipated future costs. The Group has assumed that no significant changes will occur in the relevant Federal and State Legislation in relation to the rehabilitation of such mines in the future.

NOTE	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Movements in mine rehabilitation provisions Total current and non-current carrying amount at the beginning of the fnancial year Amounts utilised during the year Increase in provision during the year Carrying amount at the end of the fnancial year NOTE 16. LOANS AND BORROWINGS Loans from controlled entities – unsecured 25	1,269,732 1,293,467 584,603 584,603 (33,058) (225,836) - - 782,017 202,101 - -
	2,018,691 1,269,732 584,603 584,603
	- - 32,769,653 32,546,868
	- - 32,769,653 32,546,868

Grange Resources Limited Annual Report 2008 67

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 17. CONTRIBUTED EQUITY

		Consolidated 2008 2007 $ $	Grange Resources Limited 2008 2007 $ $
(a) (b)	Ordinary shares Issued and fully paid Fully paid ordinary shares carry one vote per share and	86,048,017 63,662,384	86,048,017 63,662,386
		86,048,017 63,662,384	86,048,017 63,662,386
		carry the right to dividends	Number of shares $
	Movements in ordinary share capital At 1 July 2006 Share Issue (i) Issued to landowners: (ii) (a) Issued on 20 October 2006 (b) Issued on 15 March 2007 (c) Issued on 4 May 2007 (d) Issued on 8 June 2007 Exercise of options (iii) Transaction Costs (iv) At 30 June 2007 Share Issue (v) Transaction Costs (iv) At 30 June 2008		95,034,974 50,685,531 9,500,000 12,350,000 126,625 202,600 14,000 20,440 16,500 27,885 9,000 19,170 1,500,000 750,000 - (393,242)
			106,201,099 63,662,384 9,000,000 22,410,000 - (24,367)
			115,201,099 86,048,017

(i) In October 2006 the Company arranged a share placement to professional and sophisticated investors in the USA under section 708 of the Corporations Act for 9.5 million shares at $1.30 per share;
(ii) The Company issued shares to freehold and leasehold landowners as part of the pre-development activities for the Southdown Magnetite project pipeline alignment process as follows:
a. In October 2006, 126,625 shares were issued to 32 landowners;
b. In March 2007, 14,000 shares were issued to 3 landowners;
c. In May 2007, 16,500 shares were issued to 3 landowners;
d. In June 2007, 9,000 shares were issued to 2 landowners.
(iii) In June 2007 the Company issued 1.5 million fully paid ordinary shares on the conversion of $0.50 options in accordance with the Grange Resources Limited Directors’ & Officers’ Option Plan.
(iv) The transaction costs represent the costs of issuing shares.
(v) In September 2007 the Company issued 9.0 million fully paid ordinary shares to Hamersley Holdings Limited (a subsidiary of Rio Tinto Limited) as part consideration for the purchase of Exploration Licence 70/2512. The fair value of the exploration licence could not be reliably measured so the Group recognised the Exploration Licence in its financial statements at the fair value of the purchase consideration.

(c) Share options

The Company has share based payment option schemes under which options to subscribe for the company’s shares have been granted to certain executives and other employees (refer to Note 20).

(d) Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds of winding up of the Company in proportion to the number of and amounts paid on the shares held.

Ordinary shares entitle their holder to one vote per share, either in person or by proxy, at a meeting of the Company. Effective 1 July 1998, the Corporations legislation in place abolished the concepts of authorised capital and par value shares. Accordingly, the Company does not have authorised capital nor par value in respect of its issued shares.

68 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 18. RESERVES AND ACCUMULATED LOSSES

		Consolidated 2008 2007 $ $	Consolidated 2008 2007 $ $	Grange Resources Limited 2008 2007 $ $
(a)	Reserves Option issue reserve Foreign currency translation reserve Share-based payments reserve	29,591,761 (15,805) 187,992	3,568,912 (9,516) 343,887	29,591,761 3,568,912 - - 187,992 343,887
		29,763,948	3,903,283	29,779,753 3,912,799
			Option issue reserve $	Foreign currency translation reserve Share-based payments reserve $ $
	Movements in reserves At 1 July 2006 Share based payments Foreign currency translation At 30 June 2007 Share based payments Foreign currency translation Options issued for exploration licence		3,568,912 - -	- 698,080 - (354,193) (9,516) -
			3,568,912 - - 26,022,849	(9,516) 343,887 - (155,895) (6,289) - - -
			29,591,761	(15,805) 187,992
				Option issue reserve Share-based payments reserve $ $
	PARENT Movements in reserves At 1 July 2006 Share based payments At 30 June 2007 Share based payments Options issued for exploration licence At 30 June 2008			3,568,912 698,080 - (354,193)
				3,568,912 343,887 - (155,895) 26,022,849 -
				29,591,761 187,992

Grange Resources Limited Annual Report 2008 69

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 18. RESERVES AND ACCUMULATED LOSSES (continued)

	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
(b) Accumulated losses Movements in accumulated losses were as follows: Balance 1 July Net proft/(loss) for the year Balance 30 June	(21,840,275) (21,067,542) (49,137,003) (48,961,928) 931,136 (772,733) 1,957,052 (175,075)
	(20,909,139) (21,840,275) (47,179,951) (49,137,003)

(c) Nature and purpose of reserves

Option issue reserve

The option issue reserve is used to recognise the fair value of options issued other than equity benefits provided to employees and directors as part of their remuneration.

Foreign currency translation reserve

The foreign currency translation reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign subsidiaries.

Share based payments reserve

The share based payments reserve is used to recognise the fair value of equity benefits provided to employees and directors as part of their remuneration. Refer to the Directors’ Report for further details of these plans.

NOTE 19. EXPENDITURE COMMITMENTS

(a) Lease expenditure commitments

The operating lease commitments refer to the rent of the Perth office for seven years (1 September 2005 to 31 August 2012).

The lease allows for an extension of five years commencing 1 September 2012, together with a review of lease commitments at this date and each year thereafter.

Future minimum rentals payable as at 30 June are as follows:

	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Within one year After one year but not more than fve years	112,560 107,200 112,560 107,200 369,840 482,400 369,840 482,400
	482,400 589,600 482,400 589,600

(b) Exploration expenditure commitments

In order to maintain the mining and exploration tenements in which the Group is involved, the Group is committed to meet conditions under which the tenements were granted. If the Group continues to hold those tenements, the minimum expenditure requirements (excluding obligations farmed out under joint venture arrangements) will be approximately:

	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Within one year After one year but not more than fve years	375,000 335,600 256,300 236,900 1,500,000 1,342,400 1,025,200 947,600
	1,875,000 1,678,000 1,281,500 1,184,500

70 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 19. EXPENDITURE COMMITMENTS (continued)

(c) Joint venture exploration expenditure commitments

The group has interests in various joint ventures (refer to Note 10). In order to maintain the mining and exploration tenements in which the joint ventures are involved, each joint venture is committed to meet conditions under which the tenements were granted. If each joint venture continues to hold those tenements, the minimum expenditure requirements (excluding obligations farmed out under joint venture arrangements) will be approximately:

	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Within one year After one year but not more than fve years	30,000 30,000 - - 30,000 30,000 - -
	60,000 60,000 - -

(d) Southdown project acquisition expenditure commitments

Under the terms of a purchase agreement in prior years with a wholly owned subsidiary of MedAire Inc., the Company secured the right to acquire the Southdown Magnetite Project (“Southdown”). In accordance with the staggered purchase arrangement, as detailed in the purchase agreement, the Company is committed to expend $1,000,000 upon the commencement of commercial mining operations at Southdown.

(e) Remuneration commitments

In accordance with Executive Employment Agreements, the Company may terminate executive agreements by giving three months written notice. On termination of an executive agreement, the Company is obliged to pay a service fee equivalent to the total remuneration package, including STI bonuses, for the lesser period of twelve months or the unexpired period of each agreement in compensation to the following executives: Neil Marston ($253,000) Len Skotsch ($228,250).

(f) Financial advisor contracts

Grange has contracts with Standard Chartered Bank and Azure Capital Pty Ltd. Each contract has a break fee payable should Grange terminate the agreements. The size and nature of the break fees is in line with industry practice and is subject to confidentiality agreements.

NOTE 20. SHARE BASED PAYMENT PLANS

(a) Recognised share-based payment expenses

The expense recognised for employee services during the year is shown in the table below:

	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Expense arising from equity-settled share- based payment transactions Expense arising from cash-settled share- based payment transactions Total expense arising from share-based payment transactions	(155,895) (354,193) (155,895) (354,193) - - - -
	(155,895) (354,193) (155,895) (354,193)

The share-based payment plans are described below. There have been cancellations or modifications to any plan during 2008 and 2007.

Grange Resources Limited Annual Report 2008 71

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 20. SHARE BASED PAYMENT PLANS (continued)

(b) Types of share-based payment plans

Directors Options

Long Term Incentive (LTI) Plan

2007 Employee Rights Plan

Subsequent to the approval of the LTI Plan, the company issued rights to selected eligible employees, the vesting conditions of which were dependent upon individual performance milestones and corporate comparable shareholder return. Corporate comparable shareholder return was measured by comparing the Company’s Total Shareholder Return (‘TSR’) (share price appreciation plus dividends reinvested) with a group of peer companies over the 2007 calendar year. In assessing whether the TSR hurdle for each grant has been met, the Company receives independent data from an external advisor, who provides both the Company’s TSR growth from the commencement of the measurement period and that of the pre-selected peer group. This group reflects the Company’s 10 closest competitors for capital and talent.

Eligible employees will receive 12.5% of the Rights for every one of the group of comparable companies which the Company’s share price outperforms above the bottom 2 companies. If the Company is ranked in the top 3 companies of the group of comparable companies eligible employees will receive 100% of the Rights.

The Board may determine the suite of companies which shall be the basis for measuring Corporate Comparable Shareholder Return on an annual basis or as otherwise required.

As at the balance date no rights had been converted to shares under the plan.

The expense recognised in the income statement in relation to share-based payments is disclosed in note 3(e).

(c) Summary of options granted

The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options issued during the year.

share options issued during the year.
	2008 2008 2007 2007 No. WAEP No. WAEP
Outstanding at the beginning of the year Granted during the year Forfeited during the year Exercised during the year (i) Lapsed during the year Outstanding at the end of the year	2,500,000 1.90 5,500,000 1.34 6,300,000 0.36 - - - - - - - - (1,500,000) 0.50 (2,500,000) 1.90 (1,500,000) 1.25
	6,300,000 0.36 2,500,000 1.90

(i) The share price of Grange Resources Limited on the exercise of 1,500,000 options on 27 June 2007 was $2.60.

The outstanding balance as at 30 June 2008 is represented by:

Number of options	Grant Date	Vesting Date	Expiry Date	Exercise Price	WAEP
2,100,000	20 May 2008	6 March 2009	6 March 2012	$2.05	$0.48
2,100,000	20 May 2008	6 March 2010	6 March 2012	$3.00	$0.34
2,100,000	20 May 2008	6 March 2011	6 March 2012	$3.50	$0.27

72 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 20. SHARE BASED PAYMENT PLANS (continued)

(c) Summary of options granted (continued)

The outstanding balance as at 30 June 2007 is represented by:

Number of options	Grant Date	Vesting Date	Expiry Date	Exercise Price	WAEP
1,500,000	2 May 2005	Southdown Project	30 June 2008	$1.50	$0.90
		commencement
1,000,000	2 May 2005	Payment of $0.05	30 June 2011	$2.50	$1.00
		dividend

(d) Weighted average remaining contractual life

The weighted average remaining contractual life for the share options outstanding as at 30 June 2008 is 3.68 years (2007: 2.20 years).

(e) Range of exercise price

The range of exercise prices for options outstanding at the end of the year was $2.05 - $3.50 (2007: $1.50 -$2.50)

(f) Weighted average fair value

The weighted average fair value of options granted during the year was $0.36 (2007: $1.90)

(g) Option pricing model

Equity-settled transactions

The fair value of the equity-settled share options granted is estimated as at the date of grant using an enhanced trinomial model taking into account the terms and conditions upon which the options were granted.

NOTE 21. CONTINGENT LIABILITIES AND CONTINGENT ASSETS

(a) Contingent liabilities

Bank Guarantees

At year end bank guarantees have been provided on the Group’s behalf to secure, on demand by the Minister for Mines and Energy for the State of Queensland, any sum to a maximum aggregate amount of $1,262,658 (2007: $1,233,858), in relation to the rehabilitation of the Highway Reward project.

Bank guarantees have been provided by Horseshoe Gold Mine Pty Ltd to secure, on demand by the Minister for Mines and Energy for the State of Western Australia, any sum to a maximum aggregate amount of $607,500 (2007: $327,500), in relation to the rehabilitation of the Horseshoe Lights Mine.

A Bank guarantee has been provided by Grange Resources Limited, on demand by Road Builder (M) Holdings Bhd for the amount of $1,000,000 (2007: $1,000,000), in accordance with the terms of a Heads of Agreement dated 17 February 2005 to acquire land in the Malaysian port city of Kemaman and to secure port facilities. The guarantee will be payable should the Company commit to develop a pellet plant at a alternative site to Kemaman within 12 months of withdrawal from the offer to acquire the land.

A Bank guarantee has been provided by Grange Resources Limited, on demand by the Perth Diocesan Trustees for the amount of $135,072 (2007: $135,072), in accordance with the terms of an office lease agreement dated 20 July 2005 to lease office premises in QBE House.

No material losses are anticipated in respect of any of the above contingent liabilities.

(b) Contingent assets

The Group did not have any contingent assets at the Balance Date.

Grange Resources Limited Annual Report 2008 73

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 22. SUBSEQUENT EVENTS

There is no other matter or circumstance, aside from the aforementioned, that has arisen since 30 June 2008 that has significantly affected the Group’s future operations or state of affairs.

NOTE 23. EARNINGS PER SHARE

NOTE 23. EARNINGS PER SHARE
	Consolidated
	2008	2007
	Cents	Cents
Basic earnings per share	0.82	(0.76)
Diluted earnings per share	0.82	(0.76)
The following refects the income and share data used in the basic and
diluted earnings per share computations:

(a) Reconciliations of earnings used in calculating earnings per share

Reconciliations of earnings used in calculating earnings per share
Proft (loss) attributable to the ordinary equity holders of the company used in calculating basic and diluted earnings per share Weighted average number of shares used as the denominator Weighted average number of shares used as the denominator in calculating basic earnings per share Effect of dilution: Share options Weighted average number of ordinary options and potential ordinary shares used as the denominator in calculating diluted earnings per share	931,136 (772,733)
	113,006,578 102,199,831 949,627 -
	113,956,205 102,199,831

(b) Weighted average number of shares used as the denominator

There were 6,300,000 potential ordinary shares as at 30 June 2008 (2,500,000 for 30 June 2007).

Conversions, calls, subscription or issues after 30 June 2008

Since the end of the financial year, there have been no conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares and before the completion of this financial report.

NOTE 24. REMUNERATION OF AUDITORS

	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
The auditor of Grange Resources Limited is Ernst & Young. Amounts received or due and receivable by Ernst & Young: - an audit or review of the fnancial report of the entity and any other entity in the Group - tax compliance - due diligence - other services	76,329 67,032 65,555 59,075 193,775 66,120 193,775 66,120 97,850 - 97,850 - 27,815 - 27,815 -
	395,769 133,152 384,995 125,195

74 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 25. RELATED PARTY DISCLOSURE

Ultimate parent

Grange Resources Limited is the ultimate Australian holding company of the Group.

	Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
Aggregate amounts receivable at balance date from: Controlled entities (i) Provision for non-recovery Aggregate amounts payable at balance date to: Controlled entities (i)	- - 16,414,101 14,059,081 - - (11,078,949) (11,078,949)
	- - 5,335,152 2,980,132
	- - 32,769,653 32,546,868
	- - 32,769,653 32,546,868

(i) Loans from or to controlled entities are interest free and repayable on demand.

Other related party transactions

Fees of $60,000 (2007: $60,000) were paid to Hendygwyn Holding & Beheer b.v., of which Mr A Bohnenn is a director and shareholder, under a marketing and public relations services agreement under normal commercial terms and conditions.

Transactions with related parties, other than wholly owned subsidiaries, are made under normal commercial terms and conditions unless otherwise stated.

NOTE 26. KEY MANAGEMENT PERSONNEL

(a)		Consolidated Grange Resources Limited 2008 2007 2008 2007 $ $ $ $
	Compensation for key management personnel Short-term employment benefts Post-employment benefts Other long-term employment benefts Termination benefts Share-based Payments Total Compensation	1,441,971 1,493,395 1,441,971 1,493,395 475,223 379,922 475,223 379,922 - - - - - - - (155,895) (354,193) (155,895) (354,193)
		1,761,299 1,519,124 1,761,299 1,519,124

Grange Resources Limited Annual Report 2008 75

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 26. KEY MANAGEMENT PERSONNEL (continued)

(b) Option holdings of key management personnel (consolidated)

Option holdings of key management personnel (consolidated)	Option holdings of key management personnel (consolidated)
30 June 2008 Balance at beginning of period Granted as remuneration Options exercised Net change other# Balance at end of period Vested at 30 June 2008 1 July 2007 30 June 2008 Total Exercisable Not Exercisable
Directors A.C.M. Bohnenn - 450,000 - - 450,000 - - - R.S. Clark - 4,500,000 - - 4,500,000 - - - R. Krasnoff - 450,000 - - 450,000 - - - D.M. Macoboy - 450,000 - - 450,000 - - - D.H. Stewart - 450,000 - - 450,000 - - - G.L.W. Wedlock 2,500,000 - - (2,500,000) - - - - Total 2,500,000 6,300,000 - (2,500,000) 6,300,000 - - - # includes forfeitures 30 June 2007 Balance at beginning of period Granted as remuneration Options exercised Net change other# Balance at end of period Vested at 30 June 2007 1 July 2006 30 June 2007 Total Exercisable Not Exercisable
Directors G.L.W. Wedlock Total	5,500,000 - (1,500,000) (1,500,000) 2,500,000 - - -
	5,500,000 - (1,500,000) (1,500,000) 2,500,000 - - -

includes forfeitures

76 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 26. KEY MANAGEMENT PERSONNEL (continued)

(c) Shareholdings of key management personnel (consolidated)

Shares held in Grange Resources Limited (number)

30 June 2008	Balance 1 July 2007 Granted as remuneration On exercise of Options Net change other Balance# 30 June 2008 Ord Ord Ord Ord Ord
Directors A.C.M. Bohnenn 13,461,338 - - 313,000 13,774,338 A.H. Nutter 944,999 - - - 944,999 G.L.W. Wedlock 1,604,000 - - (600,000) 1,004,000 H.R. Moser 4,410,450 - - - 4,410,450 R. Krasnoff 50,000 - - 18,000 68,000 R.S. Clark - - - - - D.M. Macoboy - - - 65,000 65,000 D.H. Stewart - - - - - Executives S Hall 10,000 - - - 10,000 Total 20,480,787 - - (204,000) 20,276,787 #Balance at 30 June 2008 for GLW Wedlock and HR Moser are as per Final Director’s Interest Notice. 30 June 2007 Balance 1 July 2006 Granted as remuneration On exercise of Options Net change other Balance# 30 June 2007 Ord Ord Ord Ord Ord	13,461,338 - - 313,000 13,774,338 944,999 - - - 944,999 1,604,000 - - (600,000) 1,004,000 4,410,450 - - - 4,410,450 50,000 - - 18,000 68,000 - - - - - - - - 65,000 65,000 - - - - - 10,000 - - - 10,000
	20,480,787 - - (204,000) 20,276,787
Directors A.C.M. Bohnenn A.H. Nutter G.L.W. Wedlock H.R. Moser R. Krasnoff Executives S. Hall M. Muirhead Total	13,270,338 - - 191,000 13,461,338 944,999 - - - 944,999 104,000 - 1,500,000 - 1,604,000 4,410,450 - - - 4,410,450 50,000 - - - 50,000 10,000 - - - 10,000 - - - 5,000 5,000
	18,789,787 - 1,500,000 196,000 20,485,787

All equity transactions with KMP other than those arising from the exercise of remuneration options have been entered into upon terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length.

(d) Other transactions with key management personnel

Fees of $60,000 (2007: $60,000) were paid to Hendygwyn Holding & Beheer b.v., of which Mr A Bohnenn is a director and shareholder, under a marketing and public relations services agreement.

Grange Resources Limited Annual Report 2008 77

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 27. SEGMENT INFORMATION

(a) Industry segments

The Group operates predominantly in the mining and exploration industry.

(b) Geographical segments

The Group’s geographical segments are determined based on the location of the Group’s assets.

The following table’s present revenue, expenditure and certain asset and liability information regarding geographical segments for the year ended 30 June 2007 and 2008.

	Australia Malaysia $ $	Total $
Year ended 30 June 2008 Revenue Sales revenue and royalties Total segment revenue Unallocated revenue Total consolidated revenue Result Segment results Proft/(loss) before tax Income tax expense Net proft/(loss) for the year Assets and liabilities Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information Capital expenditure Depreciation and amortisation Cash fow information Net cash fow from operating activities Net cash fow from investing activities Net cash fow from fnancing activities	734,882 153,654	888,536
	734,882 153,655	888,536 778,887
	1,068,594 (137,458) 83,756,410 2,382,098 3,271,655 2,479,461 29,615,997 1,225,458
		1,667,423
		931,136
		931,136 -
		931,136
		86,138,508 14,727,410
		100,865,918
		5,751,116 -
		5,751,116
		30,841,455
	96,716 13,136 (3,129,773) -	109,852 (3,129,773)
	(23,851,437) (1,225,458)	(25,076,895)
	22,380,473 -	22,380,473

78 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 27. SEGMENT INFORMATION (continued)

(b) Geographical segments (continued)

Geographical segments (continued)
	Australia Malaysia $ $	Total $
Year ended 30 June 2007 Revenue and other income Sales revenue and royalties Total segment revenue Unallocated revenue Total consolidated revenue Results Segment results Proft/(loss) before tax Income tax expense Net proft/(loss) for the year Assets and liabilities Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information Capital expenditure Depreciation and amortisation Cash fow information Net cash fow from operating activities Net cash fow from investing activities Net cash fow from fnancing activities	2,856,211 -	2,856,211
	2,856,211 -	2,856,211 837,591
	(762,245) (10,488) 36,079,765 1,168,692 3,827,660 1,187,879 5,833,686 1,168,692
		3,693,802
		(772,733)
		(772,733) -
		(772,733)
		37,248,457 13,492,474
		50,740,931
		5,015,539 -
		5,015,539
		7,002,378
	84,556 - (489,502) -	84,556 (489,502)
	(5,852,716) (1,168,692)	(7,021,408)
	12,706,762 -	12,706,762

Grange Resources Limited Annual Report 2008 79

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 28. FINANCIAL INSTRUMENTS

Fair value

Set out below is a comparison by category of carrying amounts and fair values of all of the Group’s financial instruments recognised in the financial statements.

	Carrying Amount Fair Value 2008 2007 2008 2007 $ $ $ $
CONSOLIDATED Financial Assets Cash Cash – joint ventures Short term deposits Trade and other receivables - current Security deposits Convertible note Financial Liabilities Trade and other payables PARENT Financial Assets Cash Short term deposits Trade receivables Security deposits Related party receivables Convertible note Financial Liabilities Trade and other payables	7,449,146 1,089,294 7,449,146 1,089,294 210,842 203,180 210,842 203,180 - 12,200,000 - 12,200,000 3,229,966 2,948,032 3,229,966 2,948,032 3,005,231 2,705,231 3,005,231 2,705,231 - 480,975 - 480,975
	1,324,514 1,354,261 1,324,514 1,354,261
	7,085,996 909,925 7,085,996 909,925 - 12,200,000 - 12,200,000 607,523 627,935 607,523 627,935 1,435,072 1,135,072 1,435,072 1,135,072 5,335,152 2,980,132 5,335,152 2,980,132 - 480,975 - 480,975
	1,248,860 1,143,893 1,248,860 1,143,893

Shares in controlled entities are excluded from the above as these are accounted for at cost in accordance with AASB 127.

(a) Financial Risk Management Policy

The Groups management of financial risk is aimed at ensuring net cash flows are sufficient to:

meet all it’s financial commitments as and when they fall due;
maintain the capacity to fund it’s forecast project developments and exploration strategy

The Group continually monitors and tests its forecast financial position against these criteria.

The Group’s principal financial instruments are cash, security deposits and short-term deposits. The main purpose of these financial instruments is to raise finance for the Group operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken. Being at an exploration stage, the Group has limited exposure to risks arising from the Group’s financial instruments.

The Group currently has minimal exposure to commodity price risk, foreign currency risk and credit risk but it is expected that as Group’s projects move into the development and production phase the exposure to these risks is expected to increase significantly. The Board will set appropriate policies to manage these risks dependent on market conditions and requirements at that time.

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

80 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 28. FINANCIAL INSTRUMENTS (continued)

(b) Interest rate risk

The following table sets out the carrying amount of the financial instruments exposed to interest rate risk:

	2008 2007 Floating Interest Rate Floating Interest Rate $ $
CONSOLIDATED Financial Assets < 1 year Cash at bank Cash on deposit > 1 year < 2 years Security deposits Weighted average interest rate PARENT Financial Assets < 1 year Cash at bank Cash on deposit > 1 year < 2 years Security deposits Weighted average interest rate	7,657,704 1,290,448 - 12,200,000 3,005,231 2,705,231
	10,662,935 16,195,679
	5.64% 6.00% 7,083,712 907,899 - 12,200,000 1,435,072 1,135,072
	8,518,784 14,242,971
	5.76% 6.20%

The following table summarises the sensitivity of the fair value of financial instruments held at balance date, following a movement to the Reserve Bank of Australia risk free rate, with all other variables held constant. The 1% sensitivity is based on reasonable possible changes over a financial year.

					Consolidated	Grange Resources Limited
					Post–tax gain/(loss)/equity	Post–tax gain/(loss)/equity
					increase/(decrease)	increase/(decrease)
					2008 2007	2008 2007
RBA risk free rate +	1%	(100	basis	points)	59,958 120,550	48,967 99,701
RBA risk free rate -	1%	(100	basis	points)	(59,958) (112,010)	(48,967) (98,341)

The 1% sensitivity reasonably possible changes over a financial year, using the observed range of actual historical rates for the preceding 5 year period. The impact of Interest rates on return on investment is continually monitored. Return on investment is maximised by maintaining an appropriate mix of fix and floating cash investments.

Grange Resources Limited Annual Report 2008 81

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 28. FINANCIAL INSTRUMENTS (continued)

c) Net fair values

Cash, cash equivalents and security deposits: The carrying amount approximates fair value because of their short term to maturity.

Trade receivable and trade creditors: The carrying amount approximates fair value.

d) Credit risk

The consolidated entities maximum exposure to credit risk at reporting date in relation to each class of recognised financial assets is the carrying amount of those assets as indicated in the balance sheet.

The company minimises concentration of credit risk in relation to trade receivables by undertaking transactions with reputable customers and undertaking reasonable steps to ensure credit worthiness of customers.

The Group has no trade or other receivables that are past due or impaired.

Cash is held with reputable banking institutions, primarily Westpac Banking Corporation.

e) Liquidity risk

The consolidated entities liquidity position is managed to ensure sufficient funds are available to meet our financial commitments in a timely and cost- effective manner.

The company continually reviews our liquidity position including cash flow forecasts to determine the forecast liquidity position and maintain appropriate liquidity levels.

The table below reflects the contractual maturity of financial liabilities as at 30 June 2008. Cash flows for financial liabilities are presented on an undiscounted basis.

		Payables	aging analysis	between	Currency of Payables	Currency of Payables
	Total	<30 days	30-60 days	>60 days	AUD$	MYR
2008
Consolidated
Trade Payables	1,252,135	1,252,135	-	-	1,247,368	4,767
Other Payables	72,379	72,379	-	-	-	-
Total Payables	1,324,514	1,324,514	-	-	1,247,368	4,767
Grange
Trade Payables	1,248,860	1,248,860	-	-	1,248,860	-
Total Payables	1,248,860	1,248,860	-	-	1,248,860	-
2007
Consolidated
Trade Payables	1,152,004	1,152,004	-	-	1,144,160	7,844
Other Payables	202,257	202,257	-	-	119,072	83,185
Total Payables	1,354,261	1,354,261	-	-	1,263,232	91,029
Grange
Trade Payables	1,143,893	1,143,893	-	-	1,143,893	-
Total Payables	1,143,983	1,143,983	-	-	1,143,893	-

82 Grange Resources Limited Annual Report 2008

nOTES TO ThE FInanCIal STaTEmEnTS (COnTInuED)

NOTE 28. FINANCIAL INSTRUMENTS (continued)

f) Capital management disclosure

When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. Capital resources include ordinary equity and interest bearing liabilities.

Management is constantly adjusting the capital structure to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, management may change the amount of dividends to be paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Management has no plans to issue further shares on the market.

Management monitors capital through the gearing ratio (net debt/total capital). The gearing ratios based on continuing operations at 30 June 2008 and 2007 were as follows;

	Consolidated Grange Resources Limited 2008 2007 2008 2007
Total trade and other payables Less cash and cash equivalents Net debt position Total equity Total Capital Gearing ratio	1,324,514 1,354,261 34,018,513 33,690,761 (7,659,988) (13,492,474) (7,085,996) (13,109,925)
	(6,335,474) (12,138,213) 26,932,517 20,580,836
	72,930,122 45,725,392 46,463,140 18,438,182
	66,594,648 33,587,179 73,395,657 39,019,018
	(9.5%) (3.6%) 37% 53%

Grange Resources Limited Annual Report 2008 83

DIRECTORS’ DEClaRaTIOn

In accordance with a resolution of the Board of Directors of Grange Resources Limited, I state that:

In the opinion of the directors:
(a) the financial statements, notes and additional disclosures included in the director’s report designated as audited, of the Company and of the Group are in accordance with the Corporations Act 2001 , including:
- (i) giving a true and fair view of the Company’s and Group’s financial position as at 30 June 2008 and of their performance for the year ended on that date; and
- (ii) complying with Accounting Standards and 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.
This declaration has been made after receiving the declarations required to be made to the directors in accordance with Section 295(A) of the Corporations Act 2001 for the financial period ending 30 June 2008.

On behalf of the Board

==> picture [86 x 56] intentionally omitted <==

Russell Clark

Managing Director

Dated this 22nd day of September 2008 Perth, Western Australia

84 Grange Resources Limited Annual Report 2008

InDEPEnDEnT auDITOR’S REPORT

to members of Grange Resources Limited

==> picture [137 x 57] intentionally omitted <==

==> picture [119 x 70] intentionally omitted <==

Independent Audit Report to the members of Grange Resources Ltd

Report on the Financial Report

We have audited the accompanying financial report of Grange Resources Ltd, which comprises the balance sheet as at 30 June 2008, and the income statement, statement of recognised income and expense and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

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 the 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(b), the directors also state that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

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 our judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, we consider internal controls 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 controls. 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 have met the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy of which is included in the directors’ report. The Auditor’s Independence Declaration would have been expressed in the same terms if it had been given to the directors at the date this auditor’s report was signed.

Grange Resources Limited Annual Report 2008 85

InDEPEnDEnT auDITOR’S REPORT (COnTInuED)

Auditor’s Opinion

In our opinion:

the financial report of Grange Resources Ltd is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of Grange Resources Ltd and the consolidated entity at 30 June 2008 and of their 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.
the financial report also complies with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 21 to 29 of the directors’ report for the year ended 30 June 2008. 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 Grange Resources Ltd for the year ended 30 June 2008, complies with section 300A of the Corporations Act 2001.

Ernst & Young

==> picture [101 x 40] intentionally omitted <==

Peter McIver Partner

Perth,

22 September 2008

Liability limited by a scheme approved under Professional Standards Legislation.

86 Grange Resources Limited Annual Report 2008

aSX aDDITIOnal InFORmaTIOn

Additional information required by the Australian Stock Exchange Limited and not shown elsewhere in this report is as follows. The information is current as at 17 September 2008:

Ordinary Shares

1. Twenty Largest Shareholders

The twenty largest holders of ordinary fully paid shares are listed below:

Name

Number
%

National Nominees Ltd
HSBC Custody Nominees (Australia) Ltd
ANZ Nominees Ltd
Hamersley Holdings Ltd
Citicorp Nominees Pty Ltd
Zero Nominees Pty Ltd
HSBC Custody Nominees (Australia) Ltd
HSBC Custody Nominees (Australia) Ltd
Pan Australian Nominees Pty Ltd
HSBC Custody Nominees (Australia) Ltd
Mr Hans-Rudolf Moser
AH & ME Nutter
Bond Street Custodians Ltd
J P Morgan Nominees Australia Ltd
Colvic Pty Ltd
Merrill Lynch (Australia) Nominees Pty Ltd
King Chong Chai No 17
Machinery Automation & Robotics Pty Ltd
Merrill Lynch (Australia) Nominees Pty Ltd (Berndale A/C)
Mr King Chong Chai

35,207,557
30.53
25,224,460
21.87
13,223,364
11.47
9,000,000
7.80
3,646,837
3.16
3,213,460
2.79
1,514,997
1.31
1,513,481
1.31
1,258,934
1.09
1,069,892
0.93
860,450
0.75
845,000
0.73
842,214
0.73
818,093
0.71
600,000
0.52
597,038
0.52
470,900
0.41
409,328
0.35
372,800
0.32
300,000
0.26

100,988,805
87.56

2. Distribution of Shareholders

(a) Analysis of number of shareholders by size and holding:

Category of shareholding	Number of shareholders
1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over TOTAL	388 741 246 226 37
	1,638

(b) There are 41 holders of ordinary shares each holding less than a marketable parcel.

Grange Resources Limited Annual Report 2008 87

aSX aDDITIOnal InFORmaTIOn (COnTInuED)

3. Voting Rights

All shares carry one vote per share without restriction.

4. Substantial Shareholders

An extract of the Company’s Register of Substantial Shareholders is set out below:

Name	Number of fully	Percentage of
	paid shares	issued capital %
Anthony Bohnenn	13,774,338	11.94
Rio Tinto Limited	9,065,556	7.86
Unquoted Securities
The Company has the following unquoted	securities on issue:
	Number of	Number of
	Securities on	security holders
	Issue
$1.95 options expiring 28 Sep 2008	8,500,000	1
$1.50 options expiring 28 Sep 2010	9,000,000	1
$2.05 options expiring 2 May 2012	300,000	2
$3.00 options expiring 2 May 2012	300,000	2
$3.50 options expiring 2 May 2012	300,000	2
$2.05 options expiring 30 June 2012	175,000	3

Securities Subject to Voluntary Escrow

The following securities are subject to voluntary escrow:

	Number of	Date escrow
	Securities on	period ends
	Issue
$1.50 options expiring 28 Sep 2010	9,000,000	28 September 2008
Fully Paid Ordinary Shares	9,000,000	28 September 2008

88 Grange Resources Limited Annual Report 2008

TENEMENT SCHEDULE

as at 17 September 2008

Prospect Tenement Interest Western Australia Horseshoe Lights L52/42-45 100% (1) L52/66 100% (1) M52/743 100% (1) M52/744 100% (1) (2) E52/2042 100% (1) (2) M52/585 100% (1) (2) M52/651 100% (1) (2) P52/1203-1211 100% (1) (2) Kumarina M52/27 100% (4) E52/1998 100% (1) (2) Wembley M52/801 100% (3) (5) M52/587 100% (2) (5) Abercromby Well M53/336 10% (6) Red Hill M27/57 0% (7) Freshwater M52/277-281 0% (8) M52/285 0% (8) M52/295-296 0% (8) M52/299-301 0% (8) M52/305-306 0% (8) M52/368-370 0% (8) Southdown M70/433 70% (9) (16) M70/718 70% (9) (16) M70/719 70% (9) (16) G70/217 70% (16) G70/234-236 70% (2) (16) E70/2512 100% E70/3073 100% (2)	Prospect Tenement Interest
	Queensland Mt Windsor JV ML 1571 30% (10) ML 1734 30% (10) ML 1739 30% (10) ML 10028 30% (10) ML 1758 30% (10) EPM 14537 30% (10)
	Northern Territory Mt Samuel MLC 49 50% (11) (14) MLC 527 100% (14) MLC 599 85% (12) (14) MLC 617 85% (12) (14) MCC 174 100% (13) MCC 212 85% (12) (13) MCC 287-288 100% (13) MCC 308 85% (12) MCC 344 100% (14) MCC 340-341 100%(14) True Blue MCC 342 100%(14) MLC 619 85% (12)(14) Aga Khan MLC 522 100%(14) Black Cat MCC 338-339 100%(14)
	Malaysia Bukit Ibam MC 01/2005 51% (15) ML 03/2000 51% (15)

Notes:

Beneficial Holder - Murchison Copper Mines Pty Ltd.
Under application.
Subject to option agreement with Montezuma Mining Company Ltd.
Held by Murchison Copper Mines Pty Ltd.
Subject to 1% Net Smelter Return royalty with Lac Minerals (Australia) NL.
Subject to joint venture agreement with MPI Nickel Pty Ltd.
Royalty interest with Barrick (PD) Australia Limited.
Royalty interest with Barrick Gold of Australia Limited.
Subject to conditional purchase agreement with Medaire Inc.
Subject to joint venture agreement with Thalanga Copper Mines Pty Limited.
Subject to joint venture agreement with Santexco Pty Ltd.
Subject to joint venture agreement with W. & L.D.C. Appel.
Subject to option agreement with J.L. Love & G.P. Hamilton.
Subject to 2% Net Profit Royalty with Lytton Nominees Pty Ltd and Barossa Vintage Pty Ltd (formerly Moublon Pty Ltd).
Subject to joint venture agreement with Esperance Mining Sdn Bhd.
Subject to Joint Venture Implementation Agreement with Sojitz Resources and Technology Pty Ltd.

Grange Resources Limited Annual Report 2008 89

www.grangeresources.com.au

==> picture [596 x 406] intentionally omitted <==

www.mindfield.net.au GR_1_12001

AI assistant

GRANGE RESOURCES LIMITED. — Annual Report 2008

65014_rns_2008-10-29_ace0a9a1-84f5-49b7-847d-e6f0205e21a5.pdf

corporate directory

CONTENTS

CHAIRMAN’S REPORT

2008 has been a year of substantial change and major progress for Grange as it advances the Southdown Project towards implementation.

2008 HIgHlIgHTS

REvIEw Of OPERATIONS ANd ACTIvITIES

Southdown Magnetite and Kemaman Pellet Plant Project

OVERVIEW

PROJECT LOCATION

Southdown

Kemaman

RESOURCES & RESERVES

TABLE 1 SOUTHDOWN MAGNETITE PROJECT IN SITU MINERAL RESOURCES (Cut-off 10% DTR)

Notes relating to Ore Reserves:

1. Mineral Resource Estimate for Conversion to Ore Reserves

2. Cut-off Parameters

3. Mining Factors or Assumptions

5. Cost and Revenue Factors

DEVELOPMENT PLAN

SOUTHDOWN INFRASTRUCTURE

Power Supply

Pipelines

Water Supply

Albany Port

SOUTHDOWN APPROVALS

Environmental Approvals - Mine and Pipeline

Environmental Approvals - Albany Port

KEMAMAN INFRASTRUCTURE

Pellet Plant Site

West Wharf

Power Supply

Natural Gas Supply

Conveyor Corridor

KEMAMAN APPROVALS

PRODUCT QUALITY

PROJECT FINANCE

Bukit Ibam Project

Freshwater Project

Red Hill Project

Other exploration projects

dIRECTORS’ REPORT

Directors

Names, qualifications, experience and special responsibilities

Anthony Clemens Maria Bohnenn

Non-executive Chairman

Russell StJohn Clark BSc, ARSM, MIMM, MAusIMM, CE, JP

Managing Director and Chief Executive Officer

Richard Krasnoff BA (Cornell), MBA (Harvard), GAICD

Non-executive Director

David Michael Macoboy BEc, BCom, FAICD, CPA

Non-executive Director

Ammtec Limited* - Appointed 11 September 2007

Directors (continued)

Names, qualifications, experience and special responsibilities (continued)

Alexander Henry Nutter BSc, MSc, DIC, FAusIMM, MAIG

Technical Director

Douglas Haig Stewart BSc, FAusIMM, FAIG

Non-executive Director

Interest in the shares and options of the company and related bodies corporate

Company Secretary

Neil Andrew Marston BCom, ACIS

Company Secretary

Directors’ meetings

Principal activities

Review of operations

Overview

Southdown Magnetite Project

Bukit Ibam Iron Ore Project

Financial position

Consolidated results

Shareholder returns

2004 and prior years accounted for under Australian Accounting Standards applicable prior to 1 January 2005, and for 2005 onwards, Australian Accounting Standards applicable after 1 January 2005.

Dividends

Significant Changes in State Of Affairs

Significant events after the balance date

Likely developments and expected results

Environmental regulation and performance

GRANGE RESOURCES LIMITED. Annual Report 2008