GREENWING RESOURCES LTD - Annual Report 2010

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ABN 31 109 933 995

Annual Report for the year ended 30 June 2010

ANNUAL REPORT For the year ended 30 June 2010

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1)	Corporate Directory	2
2)	Review of Operations	4
3)	Corporate Governance	24
4)	Directors’ Report and Financial Statements
	− Directors’ Report	32
	− Statement of Comprehensive Income	42
	− Statement of Financial Position	43
	− Statements of Changes in Equity	44
	− Statement of Cash Flows	45
	− Statement of Significant Accounting Policies	46
	− Directors’ Declaration	96
5)	Independent Audit Report	97
6)	Auditor’s Independence Declaration	100
7)	Additional Information	101

ANNUAL REPORT For the year ended 30 June 2010

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1. CORPORATE DIRECTORY

DIRECTORS

Don Boyer (Non Executive Chairman) Michael Rosenstreich (Managing Director) Craig McGown (Non Executive Director) Tony Treasure (Non Executive Director)

COMPANY SECRETARY

Susan Hunter

REGISTERED OFFICE

16 Thelma Street West Perth Western Australia 6005 PO Box 1330 West Perth Western Australia 6872

Telephone:(08) 6315 1300 Facsimile:(08) 9481 2846 Website: www.bassmetals.com.au Email:[email protected]

LEGAL ADVISORS

Wright & Cooney Unit 1, 103 Colin Street West Perth WA 6005

Blakiston & Crabb 1202 Hay Street West Perth WA 6005

Page Seager Lawyers 162 Macquarie Street Hobart, TAS 7000

FINANCIAL RISK ADVISORY

Noah’s Rule Level 8, 182-186 Blues Point Road McMahons Point NSW 2060

SHARE REGISTRY

Computershare Investor Services Pty Ltd Level 2, 45 St Georges Terrace Perth WA 6000 Telephone:1300 55 70 10

AUDITORS

Grant Thornton Audit Pty Ltd Level 1, 10 Kings Park Road West Perth WA 6005

STOCK EXCHANGE LISTINGS

ASX Limited (Code: BSM) Deutsche Börse (R2F-Ber (Berlin) and R2F-FRA (Frankfurt))

ANNUAL REPORT For the year ended 30 June 2010

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Chairman’s Letter

Dear Fellow Shareholder

This past year has again recorded many important milestones for Bass Metals Ltd (“Bass” or “the Company”), the most important being completion of the Fossey Feasibility Study and commencement of the mine development within almost two years of the initial Fossey discovery. These activities were underpinned by a continuing solid operating profit from the Que River Mine of $4.4 million for the year; a good result given it is now in its third year of production, twice its original planned mine life. The financial statements reflect a company in a transformational growth and development phase poised to significantly increase its production and revenue profile in the next financial year.

The Company’s Board and Management share a vision to grow the Company into a diversified mid-tier mining house with the aim of establishing further operational centres in addition to its current mining and exploration operations in Tasmania, over the next 3 to 5 years. To achieve this we must successfully develop the Hellyer Mine Project (HMP) into a profitable operation, and utilise the cash flow and operational experience to develop new opportunities both organically and transactionally.

Organic Growth

Bass has many organic growth opportunities and during the past financial year significant progress was made to develop a number of these into potentially profitable additions to our Hellyer operations, including:

Re-treatment of the Hellyer tailings utilising existing Bass-owned infrastructure to increase lead-zinc production and sales. The potential to process 1 million tonnes per annum of tailings to produce 60,000 tonnes per annum of bulk lead-zinc concentrate is an important opportunity.
Development of a processing circuit to potentially treat the millions of ounces of refractory gold and silver occurring at attractive grades within the Company’s resource inventory. The addition of 50,000 to 100,000oz of gold production to the Company’s annual Hellyer output would have a significant financial impact and is therefore a very attractive prospect.
The continuing evaluation and development of the Company’s volcanogenic massive sulphide (VMS) exploration targets on its highly prospective and well endowed tenement holdings. VMS deposits typically occur in clusters and this ground is prospective for the discovery of another 3 to 5Mt high grade polymetallic deposit such as occurs at Que River.

A particularly exciting aspect of these opportunities is that the Company owns 100% of the underlying resources and aside from the possible new gold circuit, much of the infrastructure required to bring them to fruition. A significant advantage that the Company enjoys is the prospect of quickly commencing low cost mining operations from potential new discoveries through utilisation of existing infrastructure, including the 1.5mtpa Hellyer Mill. This applies equally to large scale deposits and smaller opportunistic discoveries.

It is recognised that these opportunities represent considerable value to the Company and its market valuation and, by leveraging the cash-flows generated from the HMP, it is anticipated that they will become a focal point of the organic growth strategy through the coming year.

Transactional Growth

The examination of acquisition and merger opportunities has also been a low priority for management relative to getting the HMP into production. HMP cash flows and operational experience will be a strong catalyst for both new acquisitions and possible corporate deals. In the coming financial year Bass plans to be more proactive in this area and this is likely to see its activities start to grow beyond Tasmania. This extension of activities will seek to leverageoff our expertise in finding and processing VMS and polymetallic style ore bodies, and will always be assessed on the benefits for shareholders resulting from any transaction.

The Future

Our Company is very well positioned for robust growth by virtue of its high grade resources and low cost operations. This outcome is directly attributable to a very hard working and professional team that contribute to all facets of the company’s activities; in the field, on the mine, in the plant, the lab, and in the office. Together we are forging an exceptional company culture of integrity, excellence and accountability and on behalf of the Board I would like to acknowledge and thank them for their respective contributions to all of these aspects of the Company’s development. I would also like to thank our shareholders and stakeholders for their ongoing interest and support of our activities.

Yours sincerely

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Don Boyer Chairman

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS

2.0 OVERVIEW

The core focus through the past financial year has been the completion of the Fossey Feasibility Study and Environmental Management Plan followed by the commencement in early 2010 of the mine development and Hellyer Mill refurbishment programme, collectively referred to as the Hellyer Mine Project. Other important activities included an aggressive exploration programme, the ongoing care and maintenance activities around the Hellyer Mill and the amelioration of significant legacy environmental issues. During these activities Bass has also positioned itself for this next production growth phase by building up its management and operating team with the recruitment of an Operations General Manager, based in Tasmania; a Chief Financial Officer; a dedicated Environmental Officer; a Mining Engineer and a Safety Co-ordinator; overall establishing the foundations of its operating team, policies and structures.

The Hellyer Mine Project will transform Bass into a significant producer of zinc, lead and copper-silver-gold concentrates. At the end of June 2010, the Mill refurbishment was approximately 50% complete and the decline was over half way down to the Fossey ore body with costs consistent with the original development plan. Commercial arrangements with Nyrstar for the sale of the Fossey zinc and lead concentrates and with RMB Resources for the provision of the $12 million project loan facility are also in their final stages and in line with previous reports.

Developing and growing the Company’s asset base has been largely funded through difficult economic times by the profitable, high-grade Que River polymetallic mining operation. However, to fund the development of the HMP and maintain a sound cash position, a $15 million capital raising was completed in January 2010. This was a significant achievement for a Company of Bass’ size and was initiated to maintain independence from the financing alternatives that would have included Life-of-Mine concentrate sales obligations; which Bass did not think was commercially acceptable given the modest size of the Fossey ore reserve and the huge exploration potential to find a larger deposit.

As indicated above, management considers that along with cash generation, the other significant value driver for Bass is growth through exploration. The Company has a significant tenement holding in the highly mineralised Mt Read Volcanic Belt in North West Tasmania, refer Figure 1. A major milestone in the past year was the completion of a detailed research study utilising several new exploration techniques resulting in the generation of an exciting array of exploration targets. Drill testing of these commenced in December 2009 and had immediate “technical” success with mineralisation intersected at both the North Hellyer and Switchback targets. Whilst further drilling failed to outline a resource at North Hellyer, significant resource potential remains at Switchback. This process of target generation, refinement and testing is ongoing and Bass appears poised to make another new discovery.

The Company’s financial performance has been broadly in line with expectations and reflects a business undergoing significant change and growth. The result for the year is a loss after tax of $0.4 million, but underlying this figure is an operating profit for the year of $4.4 million for the Que River operation; down on last year but consistent with less tonnes sold at lower grades.

Bass has a cash balance of $9.5 million and a working capital position of $8.3 million as at 30 June 2010. In the December 2009 quarter and January this year, the Company raised a total of $15.3 million (before costs) through the issue of approximately 66.6 million shares. Major expenditure during the year included:

HMP Development $8.3 million
Exploration $3.9 million
Environmental bonds to cover Hellyer Mill/Mine lease $1.0 million
Hellyer maintenance, environmental, and management costs $1.7 million
Corporate administration and business development costs (net of interest income) of $2.2 million

The Company also has a credit approved offer of finance from RMB Resources Limited to fund the HMP development which is currently being documented with drawdown planned in late 2010.

Clearly the 2010 financial year was another transformational period for the company in terms of both technical and financial outcomes. Further detail on both these aspects of the Company’s growth is provided in the following sections of this report.

ANNUAL REPORT For the year ended 30 June 2010

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Figure 1: Tenement Location Plan

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ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

2.1. SUSTAINABILITY

2.1.1 OCCUPATIONAL HEALTH AND SAFETY

In the mining operations there were no lost time injuries (LTI) or material environmental incidents during the year. The Que River operation reached a major milestone of almost 3 years without a LTI, to the end of August 2010. The exploration division recorded 210 days free of LTI’s during the year.

Overall a very positive safety and training culture is developing with a declining trend in treated and lost time injuries and an improving awareness of work place safety obligations and standards as indicated by a high hazard reporting participation. Development of safety systems and risk assessments is well advanced for the anticipated scale-up in operations later in the year.

2.1.2 ENVIRONMENTAL MANAGEMENT

Bass employed a full-time, Tasmanian based Environmental Officer during the year to develop new innovative means of minimising the impact of the Company’s activities on the local environment, ensure compliance of its operations with Tasmanian Environmental Protection Authority (EPA) requirements and to focus on the amelioration of legacy environmental issues that were inherited by the Company.

The main initiatives and achievements for the period include:

material improvements in the quality of water leaving the Hellyer lease;
implementation of specific management measures to reduce legacy acid mine drainage including former stockpile area rehabilitation and tailings saturation;
interim measures to manage water from the Fossey decline development;
improved control of water quality leaving the Que River lease over winter through lime dosing upgrades; and
growing awareness of environmental considerations for exploration and mining activities across both mine leases.

Bass also continues to support several research projects aimed at developing self-sustaining water treatment systems to manage acid mine drainage problems.

2.1.3 HUMAN RESOURCES

The Company is going through a major growth phase including significant increases in the number of employees and contractors on its sites and the diversity of skills required to undertake its various activities. The work force has increased from approximately 45 people 12 months ago to approximately 106 people currently. When the operation is running at full capacity the total site workforce will be approximately 100 to 115 comprising operations, exploration and site management. Bass continues to invest in Human Resources programs to attract and retain talented individuals to drive the business.

2.2 TASMANIAN OPERATIONS

2.2.1 HELLYER MINE PROJECTS – (Cu-Pb-Zn-Ag & Au)

The Hellyer Mine Project (HMP) refers to the evaluation of mining ore from the Fossey, Hellyer and Que River resources (refer sections 2.2.4, 2.4 and 2.5) and processing it through the Hellyer Mill to produce separate zinc, lead and copper-precious metals concentrates over a possible 5 year period. Figure 2 illustrates the location of the Company’s resource and infrastructure assets. In October 2009, Bass completed a Definitive Feasibility Study (DFS) focussing on the Fossey deposit to supply the ore feed for the first 2.5 years. This was subsequently incorporated into an implementation plan referred to as the Hellyer Operating Plan (HOP).

In early 2010 Bass commenced a $20 million capital expenditure programme to develop the Fossey deposit and refurbish the Hellyer Mill; which together comprise Stage 1 of the HMP.

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

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Figure 2: Hellyer-Que River Mine Lease Location Plan
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a. Hellyer Operating Plan (HOP)

The HOP is the detailed, optimised implementation plan to develop the new Fossey underground mine, refurbish the Hellyer Mill and commence mining and processing Fossey ore at the rate of 400ktpa to produce 53ktpa of zinc concentrate, 27ktpa of lead concentrates and 4.5ktpa of copper-silver–gold concentrates. The HOP also incorporates the finalised concentrate off take terms for the lead and zinc concentrates agreed with Nyrstar.

The main revisions to key technical and financial outcomes are presented in Table 1, utilising the same commodity and exchange rate assumptions in the DFS, which are presented in Table 2.

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

The revised estimated overall outcome in the HOP is a $6 million (13%) improvement in the planned earnings before interest and tax (EBIT). The industry wide benchmark C1 cost estimate is also reduced from US$0.33/lb (payable Zn after all credits) to US$0.17/lb, placing it in the lower quartile of the world production cost curve. The improvement in the project’s C1 cost reflects refinements to the mining capital schedule as well as a reallocation of logistics charges pursuant to the final concentrate sales agreements. In addition, real improvements to the project’s production, mining efficiency and sales outcomes have also acted to positively influence this benchmark metric.

Table 1: HOP Technical & Financial Summary

Technical Parameters
Ore Reserve/Mining Inventory1	886kt at 8.4% zinc (Zn), 5.0% lead (Pb), 0.3% copper (Cu), 119 g/t silver (Ag) & 2.3 g/t gold (Au). (Refer sections 2.2.4, 2.4 and 2.5)
Mine Life	c. 3years(from start-up, i.e. decline commencement, to completion)
Concentrate Production	Zinc Concentrate: 106kt at 53% Zn 150g/t Ag& 2.3g/t Au
	Lead Concentrate: 54kt at 58% Pb,10% Zn,478g/t Ag& 2.3g/t Au
	Copper-Silver Concentrate: 9kt at 18% Cu,4,374g/t Ag& 9.1g/t Au
Estimates of Financial Outcomes
		HOP(March 2010)		DFS(Oct. 2009)
	Units	Total	A$/t ore	Total	A$/t ore
Gross Revenue	A$M	238	268	229	269
Net Smelter Return	A$M	172	194	174	205
Site OperatingCosts	A$M	74	84	86	101
Royalties2	A$M	15	17	14	17
EBITDA	A$M	83	94	74	87

Start-upCapital Costs	A$M	21	24	18	21
Ongoing CapitalCosts	A$M	8	9	8	9
EBIT	A$M	54	61	48	57
EBIT Margin	%	c.31%		c.28%
C1 Costs(per lb payable Zn aftercredits)	US$/lb	US$0.17		US$0.33

Mining Inventory is an Inferred Mineral Resource component that occurs within the planed stoping shapes. (Refer section 2.2.4, 2.4 and 2.5)
Includes State and production/incentive royalties.

Table 2: Commodity price & FX assumptions utilised in the HOP & DFS

	Units	USD Price	AUD Price
Zinc	$/t	1,950	2,241
Lead	$/t	2,100	2,414
Copper	$/t	6,000	6,897
Silver	$/oz	17	20
Gold	$/oz	1,000	1,149

*as in the DFS with AUD:USD 0.8700

b. Mine Development Access to the 0.9Mt Fossey deposit will be via a decline 911 metres in length. At the end of June 2010, total underground development (decline and stockpiles) totalled 537 linear metres with the decline face position at 474 metres from the portal. The decline and associated development is due to be completed in October 2010. Ore production, which commences in November 2010, will be from a series of transverse long hole open stopes with cemented aggregate fill applied to the primary stopes to enable extraction of the intervening secondary stopes as presented schematically in Figure 3.

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

Figure 3: Fossey Schematic Long-section illustrating planned mine layout

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c. Hellyer Mill Refurbishment The Hellyer Mill is a modern large scale facility specially designed for processing polymetallic ores (i.e. containing copper, lead, zinc, silver and gold), such as Fossey, to produce a series of base metal concentrates at an annualised rate of up to 1.5mtpa.

The soft nature of the Fossey ore as shown by additional test work completed in January 2010 led to further circuit refinements, which include by-passing the ball mill and utilising only the SAG and Tower Re-grind mills to achieve the target grind sizes and metal recoveries. This may generate further operating cost savings not currently factored into the DFS.

Mill refurbishment activities commenced in January 2010 and at the end of June were progressing in accordance with the HOP targets.

d. Base Metal Concentrate Sales & Marketing

In January 2010 the Company signed a committed off-take contract with leading global multi-metals business, Nyrstar, for all zinc and lead concentrates produced from the Fossey Mine. Nyrstar is the world’s largest zinc metal producer and one of the world’s largest primary lead smelting and refining companies. Nyrstar owns the Risdon Zinc Smelter in Tasmania and the Port Pirie Lead Smelter in South Australia, hence contracting with Nyrstar generates many logistical advantages in concentrate freight and payment terms. Negotiations for marketing the copper-silver-gold concentrate are at an advanced stage with final detailed negotiations close to conclusion with a preferred party.

These sales arrangements apply only to concentrates produced from the Fossey deposit and the company has retained the right to market any products derived from any other deposit or feed stock.

e. Capital Expenditure Total capital expenditure and commitments to the end of June 2010 for the Hellyer Project comprise $8.3 million versus the budget estimate to the end of June 2010 of $8.8 million.

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

2.2.2 QUE RIVER MINE - (Cu-Pb-Zn-Ag & Au)

Mining operations commenced at Que River in late September 2007 with ore being mined from a series of shallow open pits. Ore is stockpiled, sampled and assayed before being trucked to the Rosebery flotation concentrator owned by MMG Australia Limited. Bass is paid a percentage of the zinc, lead, copper, gold and silver contained in the ore under an Ore Sales Agreement with MMG Australia Limited.

a. Mining Activities

Mined tonnages of ore during the year exceeded predictions from the Ore Reserve model by 29% due to ore being mined from outside the model. Actual mined grades for all contained payable metals significantly exceeded predictions as presented in Table 3.

Table 3: Production Comparison – Mined vs. Predicted FY2010

	Tonnes**	Zn(%)	Pb (%)	Ag (g/t)	Au (g/t)	Cu (%)
Predicted (OBM*)	39,096	10.8	6.3	164	2.2	0.3
Ore Mined	50,474	15.9	8.9	236	3.5	0.4
Variance to OBM	29%	47%	42%	44%	59%	41%

(OBM=Ore Body Model used for the Mine Plan budget; *Tonnes are wet metric tonnes (wmt))

b. Ore Sales

A total of 54,136 tonnes of ore was sold to MMG Australia Limited during the year. At 30 June, an inventory position of 1,331 wmt remains in stockpiles ready for haulage and sale.

c. Operating Performance

Revenue

Revenue for the year was $18.2 million ( 2009: $23.8 million ) a 23% reduction from the previous year, primarily because 18% less ore was sold and at lower metal grades. The revenue does not include hedging gains/losses associated with ore sold.

Gross revenue per tonne of ore sold was $336/wmt. The timing of revenue within a period is affected by the time lag between delivery of the sold ore and fixing the realised price (Quotational Period). The Quotational Period for zinc and lead is four months after the month of delivery, one month for gold and silver and six months for copper.

Hedging losses during the year were $0.2 million or approximately $4 per tonne of ore sold.

Operating Margin

On a Profit & Loss basis per tonne sold, Que River generated a profit for the Company during the year as shown in Table 4 below, a 20% increase to the previous financial year. The operating margin was 30%, and after subtraction of the average realised hedge loss of $4 per tonne the margin decreased to $97 per tonne of ore sold or 29%. Site operating costs were higher than the previous year due to 18% less tonnes being sold, higher waste mining and more onerous ore preparation requirements.

Table 4: Unit Operating Profit – per tonne of ore sold

Cost Centre		FY10	FY09	FY08
Average ore value	$/t	336	361	247
Operating Cost
Site Operating costs	$/t	106	68	88
Treatment Costs	$/t	40	40	40
State Royalties	$/t	10	22	4
Depreciation & Amortisation	$/t	79	103	57
Total Operating Cost	$/t	235	233	189
Operating Margin	$/t	101	128	58
Operating Margin	%	30%	35%	23%
Realised hedge gains/(loss)	$/t	(4)	16	38
Total Margin	$/t	97	144	96

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

d. Que River Mine Outlook

At the end of the financial year the operation has almost completed mining the PQ North cutback pit, the final ore source for the ore sales arrangement with MMG at Rosebery. The remaining resources (refer sections 2.2.4, 2.4 and 2.5) will be evaluated for mining and processing through the Hellyer Mill.

2.2.3 SPECIAL PROJECTS

The Company’s focus is clearly on the HMP development. This is planned to generate the cash flow to fund both organic and transactional growth. However, several special projects have also been pursued during the year as part of the organic growth strategy, including retreatment of the Hellyer tailings resource to fully utilise the mill and opportunities to recover gold, given the significant gold endowment across the Company’s resource assets (refer sections 2.2.4, 2.4 and 2.5).

a. Hellyer Tailings Retreatment Project

A pre-feasibility study to examine the technical and financial viability of re-starting the Hellyer tailings retreatment project was advanced significantly during the year. The total combined Hellyer tailings Mineral Resource (refer sections 2.2.4, 2.4 and 2.5) grades 2.8% lead, 2.5% zinc and 104 g/t silver, as well as 0.2% copper and 2.6 g/t gold. From December 2006 a total of 2 million tonnes had been reclaimed by dredge, pumped to the Hellyer mill for flotation recovery of lead, zinc and silver into a bulk concentrate. The previous owners suspended operations in September 2008 and subsequently sold all of their Hellyer assets, including the dredge, to Bass.

The objective of the study is to assess restarting the operation and running it in conjunction with the HMP ore processing schedule to produce approximately 60ktpa of bulk concentrate grading 50% lead plus zinc and 100-150 g/t silver. The site operating costs of this operation are well understood and there should be cost synergies to both feed stocks (Fossey ore and tailings) through economies of scale by fully utilising the plant capacity.

This type of bulk lead-zinc concentrate can only be treated by ISF type smelting operations and there are a limited number of these globally; mostly in China. To complete the Pre-feasibility Study, Bass must obtain reliable indicative concentrate off-take terms from smelters. This process is underway and includes some additional test work to tailor the product specifications to the potential buyers.

b. Gold Recovery Project

As an adjunct to the tailings re-treatment study Bass has completed a conceptual study examining the potential to recover gold and silver from the various resources Bass owns in the region, in particular the Hellyer tailings which contain approximately 800kz of gold and 32 million ounces of silver (refer sections 2.2.4, 2.4 and 2.5).

Whilst the highly refractory nature of the gold in the Hellyer tailings is well known, there were extractive technologies identified and tested in the 1990’s that achieved high gold recoveries, but were not economic, at that time. The Company considers that several factors have changed since then, including:

technological advances in gold extraction technology;
Bass has a significantly larger resource base i.e. not just the tailings resource, with components that have a less refractory gold endowment than the tailings;
a higher gold price environment; and
potentially a base metals mining and milling operation running in parallel to share costs.

Three processing options were identified as potentially viable; Direct Cyanidation, Albion Process and Pressure Oxidation. The findings were reported in detail to ASX on 29 July 2010, and two key summary Tables 5 and 6 are presented which highlight the metallurgical recovery and potential production estimates reported.

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

Table 5: Production Estimate Summary - assuming 1mtpa processed

		Direct Cyanidation	Direct Cyanidation	Albion Process	Albion Process	Pressure	Pressure	Oxidation
	Units	Au	Ag	Au	Ag	Au		Ag
Feed Grade	g/t	2.59	104	2.59	104	2.59		104
Total Recovery	%	25	40	86	82	37		65
Metal Recovered	koz/pa	20.8	1,338	71.6	2,742	30.8		2,174
Table 6: Financial Outcome Estimates for each Option
			Units	Direct Cyanidation	Albion Process		Pressure Oxidation
Gold Equivalent production per year~~*~~			koz	40.2	111.4		62.3
Estimated total site operating costs per ounce			A$/oz.	743	877		694
Operating margin			%	43	33		47

* Gold equivalence is based on gold and silver prices of A$1,310/oz gold & $19/oz silver giving a factor of c. 1:70, Au:Ag.

Bass is highly encouraged by the outcomes of the scoping study and whilst it is at an early phase it indicates the potential of utilising proven technologies to recover appreciable quantities of gold and silver and possibly also certain base metals (for Pressure Oxidation method), which could significantly enhance the production and revenue profile of its business in Tasmania. Further large scale sampling and test work programmes are planned prior to committing to a definitive feasibility study to determine if such an operation could be viable and how it might be implemented.

2.2.4 TASMANIAN ORE RESERVES AND MINERAL RESOURCES

Bass has a large and diversified Mineral Resource Inventory comprising high grade massive sulphide base and precious metal mineralisation, tailings from the former Hellyer Mine operations containing gold and base metal sulphides and a shallow, hard-rock gold-silver resource.

a. Ore Reserves

The Fossey deposit is the initial Ore Reserve for the HMP; a detailed summary is provided below in Table 7. This also includes a Inferred Mineral Resource component that occurs within the planed stoping shapes and is reported separately below as Mining Inventory (Table 7a). At Que River a minor Ore Reserve position remains as summarised in Table 7, based on the ore sales arrangement with MMG Rosebery. The PQ North mine is due for completion in September 2010 and there is no plan to mine and sell S-Lens ore under this sales arrangement. The previously reported S-lens Ore Reserve was based on these ore sales terms and has now been removed from the summary as Bass is assessing the S-Lens Resources for processing at Hellyer.

The Ore Reserves in Table 7 are a sub-set of the Mineral Resources presented in Table 8 below.

Table 7: Tasmanian Ore Reserves as at 30 June 2010 – 5% Pb+Zn cut-off

Location	JORC Classification	Tonnes kt	Copper (%)	Lead (%)	Zinc (%)	Silver (g/t)	Gold (g/t)
Fossey1	Total Probable	824	0.3	5.3	8.9	126	2.4
	Total Proved	-
PQ~~2~~ (Que River)	Total Probable	12	0.2	7.4	13.2	209	2.6
	Total Proved	1	0.3	6.4	10.4	232	4.2
	Total Reserves	13	0.2	7.3	12.9	212	2.8
Total3		837	0.3	5.3	9.0	127	2.4

Fossey Ore Reserve – Refer Competent Person statement Section 2.4 and Technical Checklist in Section 2.5, Appendix 1.
Que River Ore Reserve - Refer Competent Person statement Section 2.4 and Technical Checklist in Section 2.55, Appendix 2.
Rounding errors may occur.

Table 7a: Tasmanian Mining Inventory as at 30 June 2010 – 5% Pb+Zn cut-off

Location		Tonnes kt	Copper (%)	Lead (%)	Zinc (%)	Silver (g/t)	Gold (g/t)
Fossey1	MiningInventory	62	0.2	3.8	6.2	84	1.9

Fossey Ore Reserve – Refer Competent Person statement Section 2.4 and Technical Checklist in Section 2.5, Appendix 1.

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

b. Massive Sulphide Resources

The Fossey, Hellyer and Que River deposits comprise the Company’s massive base metal sulphide Mineral Resources. These estimates are reported at a (Pb+Zn)>5% cut off in Table 8 below in accordance with the JORC Code.

Table 8: Combined Polymetallic Massive Sulphide Mineral Resources as at 30 June 2010 – 5% Pb+Zn cut-off

Location	JORC Classification	Tonnes kt	Copper (%)	Lead (%)	Zinc (%)	Silver (g/t)	Gold (g/t)
Fossey~~1~~	Indicated	690	0.4	6.1	10.4	143	2.5
	Inferred	110	0.3	4.3	7.4	106	2.1
	Total	800	0.4	5.8	9.9	137	2.5
Hellyer Remnants2	Indicated	640	0.4	4	6.8	83	1.3
	Inferred	110	0.2	4.9	8.1	107	1.5
	Total	750	0.3	4.1	7	87	1.3
Que River Pb-Zn3	Indicated	160	0.2	3.8	6.5	96	1.2
	Inferred	140	0.3	4.2	7.4	104	1.2
	Total	300	0.2	4	6.9	100	1.2
Que River Cu3	Measured	60	1.7	0.7	2.1	69	0.3
	Indicated	260	1.9	1.6	4.3	68	0.3
	Inferred	60	2.5	0.2	0.6	33	0.2
	Total	380	2	1.3	3.4	63	0.3
Total~~4~~	Measured	60	1.7	0.7	2.1	69	0.3
	Indicated	1,750	0.6	4.5	7.8	106	1.6
	Inferred	420	0.6	3.8	6.6	95	1.4
	Total	2,230	0.6	4.2	7.4	103	1.5

Fossey Resource – Refer Competent Person statement Section 2.4 and Technical Checklist in Section 2.5, Appendix 1.
Hellyer Remnant Resource- Refer Competent Person statement Section 2.4 and Technical Checklist in Section 2.5, Appendix 3.
Que River Resource is estimated from 4 separate bodies, PQ, QR32, Nico and S Lens. Refer Competent Person statement Section 2.4 and Technical Checklist in Section 2.5, Appendix 2 & 4.
Rounding errors may occur.

c. Tailings Resource Estimate The Company also has a significant tonnage of tailings, contained in a purpose built impoundment and stored submerged beneath water to prevent environmental degradation through acid mine drainage. This Mineral Resource is summarised in Table 9, in accordance with the JORC Code.

Table 9: Hellyer Tails Combined Mineral Resource Estimate – 23 June 2009

JORC Classification	Tonnes Mt	Copper (%)	Lead (%)	Zinc (%)	Silver (g/t)	Gold (g/t)
Measured	4.9	0.2	3.1	2.8	105	2.7
Indicated	2.5	0.2	3.0	2.6	104	2.6
Inferred	2.1	0.2	2.9	1.7	103	2.4
Total	9.5	0.2	2.8	2.5	104	2.6

Refer Competent Person statement Section 2.4 and Technical checklist in Section 2.5, Appendix 5.

d. Mt Charter Gold-Silver Resource

At Mt Charter a large tonnage low grade gold-silver Mineral Resource has been delineated. The Mineral Resource is reported above a 0.7 g/t cut-off within the mineralised envelope boundary and is classified as Indicated and Inferred in accordance with the JORC code (December 2004), as listed in Table 10 below.

Table 10: Summary of Mt Charter Mineral Resource at a 0.7g/t Au cut-off - 30 October 2006

JORC Classification	Tonnes Mt	Gold (g/t)	Silver (g/t)	Zinc (%)	Gold koz	Silver koz
Indicated	1.9	1.21	36.3	0.7	74	2,218
Inferred	4.2	1.22	35.2	0.4	165	4,754
TOTAL	6.1	1.22	35.5	0.5	239	6,972

Refer Competent Person statement Section 2.4 and Technical Checklist in Section 2.5, Appendix 6.

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

2.3 EXPLORATION

2.3.1 OVERVIEW

Bass has maintained a strong level of exploration activity with expenditure for the year of $3.9 million. The first four months of the financial year was a target generating period with new geoscientific techniques completed on Bass’ extensive core library, including a short wave infrared spectral / alteration study and a multi-element low detection limit geochemical sampling program. The remainder of the year was spent interpreting the results and target testing. A total of 7,414 metres of diamond drilling in 23 holes was completed in ongoing testing of these targets.

There has been a strategic refocusing of exploration towards the Mt Read Volcanic belt, which is considered highly prospective for the larger higher grade volcanic hosted massive sulphide (VHMS) style deposits (e.g. Que River/ Hellyer) required to keep the Hellyer Mill fully utilised long-term. Commensurate with this, several regional exploration programmes were completed resulting in further tenement relinquishments as well as a new tenement application; the Lake Margaret exploration licence north of Mt Lyell. Bass’ total ground position was approximately 300 km[2] at the end of June 2010 (Figure 1).

Highlights of exploration work carried out during the year are summarised below.

2.3.2 HELLYER – MT CHARTER CORRIDOR (HMCC) BASS METALS LTD 100%

This geological corridor covers exploration licences EL 24/2004 Bulgobac and EL 48/2003 Mt Block, the Hellyer (CML 103M/87) and Que River (CML 68M/84) mining leases and the Mt Charter retention licence (RL 11/1997) as presented in Figure 4. The exploration strategy was to firstly fingerprint footwall alteration beneath the known resources (Hellyer, Que River, Fossey and Mt Charter) with a spectral and litho geochemical study to determine proximity indicators. Results were then applied to drill core, rock and soil samples away from known mineralisation. All drill holes within the HMCC away from known mineralisation were sampled, with a total of 66,270 infrared and 3,451 low detection limit geochemical samples collected from 186 and 165 drill holes respectively.

Analysis and interpretation of the results indicated that the combination of litho geochemistry and short wavelength spectral data (ASD) was able to define a range of footwall alteration facies. Furthermore, the clear association between a number of the litho geochemical elements and known mineralisation demonstrated the utility of certain elements as pathfinders to mineralisation.

The alteration facies and pathfinder elements combined to highlight nine targets warranting further work, including a number ready for immediate drilling as labelled in Figure 4.

In April 2010 a new generation high power airborne VTEM survey was flown over 50km[2] of the HMCC comprising 600km of helicopter flight lines. Subtle conductors detected by the VTEM are currently being followed up.

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

Figure 4: Geology of the Hellyer – Mt Charter Corridor and prospects

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a. Hellyer Mine Lease (CML 103M/1987)(100% Bass Metals Ltd) Exploration on the Hellyer Mine Lease has focussed mainly on testing new targets generated by the new exploration techniques. A programme of 5,742 metres of diamond drilling in 16 holes was completed.

At the North Hellyer target a total of 3,176 metres was completed in 5 diamond drill holes. Whilst the first hole (HLD999) did intersect 0.6 metres at 13.9% Zn, 8.7% Pb, 0.1% Cu, 132g/t Ag and 0.9g/t Au, the subsequent 4 drill holes failed to delineate any significant zone of in-situ mineralisation. A further hole is planned to test a virtually untested zone to the north east of Hellyer where the projection of the VMS feeder zones is interpreted to occur.

At the Switchback target, two diamond drill holes were completed for 869 metres. Drill hole HED16 intersected 2.35 metres of high grade massive base metal sulphide mineralisation grading 25.0% Zn, 8.7 % Pb, 192 g/t Ag and 4.9 g/t Au, within an overall zone of 9.25 metres at 8.5 % Zn, 3.3 % Pb, 69 g/t Ag and 1.6 g/t Au. The mineralisation consists of clasts of massive base metal sulphides within a mass flow unit. The presence of significant hanging wall and footwall alteration indicates reasonably close proximity to an active VHMS system, and potentially an insitu massive sulphide accumulation. The mineralisation HED16 is not typical of either Hellyer or Que River and the textural, mineralogical and Pb-isotope signatures suggests that a high grade massive sulphide deposit has existed part way between Que and Hellyer and any preserved in situ mineralisation is yet to be discovered.

At Fossey 7 diamond drill holes were completed for 1,326 metres testing for extensions, but no significant mineralisation was intersected.

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

At the D-Zone target area (Refer Figure 5), Bass geologists recently discovered at surface 1.5 to 2.5 metre thick massive pyrite and barite lens in two trenches approximately 100 metres apart whilst following up an extensive soil anomaly in the Ernie’s area. This is an exciting development as the mineralisation style is identical to that associated with the Fossey resource and there is no historic drilling in the area. Late in the year two diamond drill holes (HLD1007-1008) were completed for a total of 371 metres and, whilst no significant mineralisation was intersected, it has highlighted the prospectivity of the main D-Zone anomaly to the south east.

The D-Zone target horizon between Hellyer and Que River remains poorly tested with many drill holes wholly within the footwall andesite or the hanging wall dacite; that is, not intersecting the Host Horizon. Bass is now focussing on this area and has identified at least 600 metres of strike which is totally untested while the entire horizon has only been tested at shallow depth, as illustrated in Figure 6.

b. Que River Mine Lease (ML 68M/1987) (Bass Metals Ltd 100%)

A four hole 378 metre diamond drill program (QR 1309, 1310, 1312 and 1313) testing for extensions to the PQ and P3 lenses at Que River was completed with moderate alteration but no base metal sulphide intersections.

Two drill holes QRD1311 (530 metres – abandoned) and QRD 1314 (653 metres) were targeted at a deep DHEM conductor at Que River as detected from QRD1289. A thick zone of strong alteration was intersected with only weak copper mineralisation occurring in stringer veins. No further work is planned on this target.

Figure 5: D-Zone soil anomaly and schematic geology

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ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

Figure 6: Schematic long section from Que River to Hellyer looking west - Note significant areas with potential to host large scale deposits.

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2.3.3 REGIONAL EXPLORATION

Bass’ regional exploration focus is the Mt Read volcanic belt prospective for large scale, high grade VMS style deposits. Bass’ other regional tenements currently comprise tenements prospective for granite intrusion related mineralisation.

a. Lake Margaret-EL28/2009 (Bass Metals Ltd 75% & Clancy Exploration 25%) Bass was successful in its tender for the Lake Margaret Exploration Licence (EL 28/2009). The 59 km[2] licence covers approximately 12 kilometres of the geological horizon that hosts the nearby Mt Lyell (copper-gold) and Henty (gold) deposits and is interpreted as the equivalent geology to the Host Horizon at the Hellyer-Que River leases.

The tenement is prospective for three styles of mineralisation and Bass intends to apply its new exploration techniques to test for:

North Lyell high grade copper deposits.
The North Lyell deposits are part of the giant Mt Lyell copper-gold mining district which has been mined for the past 120 years. The North Lyell deposits are a discrete mineralised style with historic recorded production of 4.9 million tonnes grading 5.4% copper, 0.45 g/t gold and 34 g/t silver. A glacial erratic within the Lake Margaret licence contains copper mineralisation and previous rock chip sampling yielded average assays of 5.6% copper, 0.6 g/t gold and 29 g/t silver from three samples.
Henty style gold
This is a plus 1 million ounce high grade, gold deposit.
Polymetallic VMS (Hellyer/Rosebery style) deposits
This is the style of deposit that Bass is currently mining and exploring on its Hellyer-Que River Mine leases.

b. Iron-Tin-Tungsten Joint Venture (Bass Metals Ltd 30% Venture Minerals 70%)

Venture Minerals has earned its 70% interest in the iron-tin-tungsten rights on the Heazlewood (EL 31/2003) and Whyte River (EL36/2003) tenements. Bass has elected to maintain its 30% stake by contributing to the next exploration programme. Drilling at the Rocky River South prospect indicated that the magnetite mineralisation became poddy and sulphidic at shallow depth and did not present a direct shipping ore target.

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

2.4. COMPETENT PERSONS STATEMENTS

2.4.1 EXPLORATION RESULTS

The information within this report that relates to exploration results is based on information compiled by Mr Kim Denwer and Mr Michael Rosenstreich who are both full time employees of the Company. Mr Rosenstreich is a Member of The Australasian Institute of Mining and Metallurgy and Mr Denwer is a Member of the Australian Institute of Geoscientists. They both, individually have sufficient experience relevant to the styles of mineralisation and types of deposits under consideration and to the activities currently being undertaken to qualify as a Competent Person(s) as defined in the 2004 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code)” and they consent to the inclusion of this information in the form and context in which it appears in this report.

2.4.2 MINERAL RESOURCES AND ORE RESERVES

The information in this report that relates to the Nico, S lens, QR 32 lenses at Que River and Fossey Mineral Resource estimates is based on information compiled by Mr Steve Richardson who is a fulltime employee of the company and a Member of the Australasian Institute of Mining and Metallurgy. Mr Richardson has sufficient experience which is relevant to the style of mineralisation and type of deposit 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 Richardson consents to the inclusion in the report of the matters based on this information in the form and context in which it appears.

The information in this report that relates to the PQ resource estimate at Que River and the Fossey and Que River Reserve estimates is based on information compiled by Mr Tim Akerman who is a full time employee of Mancala and a Member of the Australasian Institute of Mining and Metallurgy. Mr Akerman has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they have undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Mineral Resources and Reserves (the JORC Code)”. Mr Akerman consents to the inclusion in this report of the matters based on this information in the form and context in which it appears.

The information in this report that relates to Hellyer Remnant Ore Resource estimate is based on information compiled by Mr Neil Inwood who is a full time employee of Coffey Mining and a Member of the Australasian Institute of Mining and Metallurgy. Mr Inwood has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they have undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Mineral Resources and Reserves (the JORC Code)”. Mr Inwood consents to the inclusion in this report of the matters based on the work performed by Coffey Mining in the form and context in which it appears.

The information in this report that relates to the Mt Charter Mineral Resource is based on information compiled by Mr Michael Andrew who is a full-time employee of Snowden Mining Industry Consultants and a Member of the Australasian Institute of Mining and Metallurgy. Mr Andrew has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken 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 Andrew consents to the inclusion in the report of the matters based on the information in the form and context in which it appears.

The information in this report that relates to the Hellyer Tails Mineral Resource estimate is based on information compiled by Mr John Tyrrell who is a full-time employee of AMC Consultants Pty Limited and a Member of the Australasian Institute of Mining and Metallurgy. Mr Tyrrell has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that 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 Tyrrell consents to the inclusion in the report of the matters based on the information in the form and context in which it appears.

2.4.3 TECHNICAL DETAIL

This Report aims to provide a high level summary of various technical aspects of the Company’s projects. For more details on the underlying technical parameters the reader is referred to the ASX Reports on the Bass’ website, www.bassmetals.com.au

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

2.5. APPENDICES: ORE RESERVE AND MINERAL RESOURCE ESTIMATE CHECKLISTS

Appendix 1: Checklist of Assessment and Reporting Criteria- Fossey Mineral Resource and Ore Reserve Estimate

*Estimate*
Criteria	Comments
Geological setting	Fossey is a Volcanic Hosted Massive Sulphide deposit comprising a stratiform zone of dominantly baritic mineralisation, associated with areas of high-grade Base Metal Sulphide (BMS) and underlain by minor stringer and disseminated mineralisation.
Tenement and land status	Fossey occurs within Hellyer Mining Lease CML103M/87 and is wholly owned by Bass Metals Ltd.
Drilling	All Bass Metals Ltd holes (27 holes in mineralisation) were diamond-drilled and NTW or NQ-sized core recovered (diameters of 56mm or 47.6mm respectively). Historic holes (14 holes) were also diamond-drilled and are of NQ or BQ core size (47.6mm or 36.4mm diameter respectively). >90% core recovery, averaged over the entire hole, was achieved during Bass Metals Ltd drilling with close to 100% recovery in the ore zones. Similar high recoveries were achieved by historic drilling. The Fossey resource has been drilled on 25m spaced sections oriented mine grid E-W. Drill-hole spacing is approximately 20-25malong these section lines.
Logging	All drill holes have been geologically logged using standard Que-Hellyer logging codes. Wet and dry digital photographs of all Bass Metals Ltd core were taken and RQD measurements were recorded at per drill-run intervals (average of 3.0m). For historic holes RQD was also measured and corephotographs on slide film were taken.
Sampling	For both Bass Metals Ltd and historic drilling half-core samples were collected at nominal 1.0m intervals or at lithological boundaries.Sampling extendedinto barren hostrocks orsub-grademineralisation inboththehangingwallandfootwall.
Assaying	For Bass Metals Ltd drilling half core samples were submitted to Ammtec Laboratories in Burnie, Tasmania. Samples were analysed for Cu, Pb, Zn, Ag, As, Fe (triple acid digest and AAS), Au (fire assay) and Ba (pressed powder XRF). SG determination was conducted by the laboratory on each assay sample. QA-QC involved standards, blanks and duplicates (one of each every 25 samples). Identification of problems with some Ammtec data led to re-submission of all assay pulp samples, within mineralised zones planned for mining, to Amdel Laboratories in Adelaide, South Australia. At Amdel, modified aqua regia digest was followed by Cu, Pb, Zn, Ag, As, Fe assay by ICP and Au by fire assay. Review by independent experts recommended use of Amdel Cu, Pb, Zn, Ag, As and Fe values and Ammtec Au and Ba assays for resource estimation. Historic assays were carried out on half core at Aberfoyle’s company laboratory (now the Ammtec Burnie lab) using pressed powder XRF for Cu, Pb, Zn; AAS for Ag and As and Au by fire assay. Internal laboratory blanks and standardswere the only QA-QCfor historicholes.
Surveying	All Bass Metals Ltd drill-hole collar locations have been measured by a contract surveyor and historic holes by Hellyer Mine surveyor.
Database integrity	The drill-hole database used comprises Bass Metals Ltd drilling data recorded on Excel spreadsheet and historical data in ASCII format, both imported into Datamine software. New assay results together with standard and blank results were checked to ensure thesewerewithinacceptablelimits.
Geological interpretation	The Fossey deposit strikes grid NNW and has the broad cross sectional form of a downward tapering wedge. The deposit comprises three major zones: • _Massive Barite Zone -_The bulk of the deposit comprises massive barite, which is dominant in the stratigraphically upper areas but also occurs locally in the underlying BMS zone. • _BMS Zone -_Underlying the massive barite zone is banded to massive BMS. Whilst the boundary of the footwall of the BMS is a sharp contact, the internal boundary between the BMS and Barite zones is a gradational grade boundary. • _Footwall Zone -_Commonly underlying the BMS is low to moderate grade base metal mineralisation as disseminations to stringer veins upto several 10’s of centimetres thick.
Estimation and modelling techniques	Within the Barite and BMS zones elements were estimated using Ordinary Kriging, restricted to mineralisation domain boundaries. Variography of all elements was studied and grade continuity modelled. Due to the lower number of samples gradewasinterpolatedinto theFootwall Zone and theminor lenses using 3D inverse distanceinterpolation(power 2).
Cut-off parameters	The outer boundary of the Fossey barite and BMS zones is based on sharp geological contacts. The internal boundary between the two zones is gradational and a boundary of 4 %(Pb+Zn) was chosen as the highest possible grade which provided good continuity between holes and from section to section. Immediately underlying the BMS zone several holes contain stringer vein and / or disseminated to semi-massive mineralisation. This domain was wireframed at a cutoff of 5%(Pb+Zn), although at the northern end and on 10000N gold rich and base metal poor material was included at a 2g/t Au cutoff.
Previousmining	Nomininghas yet takenplace atFossey.
Mining / metal	No assumptions were made about mining factors for the resource estimation. For the reserve estimation some dilution (<4.0% Pb+Zn) is internal to the ore body and falls within the coherent stope shapes; this is classified as planned dilution. Planned dilution amounts to some 17k tonnes, or some 2% of the total reserve tonnage. In general, the unplanned dilution has been estimated as a 1.0 to 1.5 metre failure envelope, some of which is mineralised. The average grade and waste of this envelope has been calculated by digitising the void surrounding the planned stope into the geological block model. For the primary stopes unplanned dilution is estimated to average 10%. Where dilution is defined as: Dilution (%) = (volume of unplanned dilution) x 100/(volume of resource tonnage in stope envelope) For the pillars the failure envelope surrounding the ore is assumed to be a little more adverse as the mining of the adjacent stope has already had an impact on the rock mass thus the unplanned dilution is estimated to be 15%. In addition, an allowance has been made for dilution from the cemented aggregate fill (CAF) which forms the northern and southern walls of the stopes. This is estimated as a 0.5 metre failure/overbreak of the CAF walls. In total unplanned dilution for the pillars is estimated to 15%. Dilution grade has been determined by averaging the block model grade within the dilution envelope. Where CAF is the diluents, a zero grade has been applied. The total unplanned waste rock dilution which is contained within the stope reserve amounts to: 55k tonnes at 0.1% Cu, 0.4% Pb, 0.8% Zn, 33 g/t Ag and 0.9g/t Au at an average density of 3.62 In addition to dilution from stoping activities, development within the resource model has been estimated to attract 5% dilution and a recovery of 95% of the diluted resource volumes. Estimated dilution parameters at Fossey are consistent with the long term averages from Hellyer, where similar stope geometries were adopted and where similar CAF strength was used. Ore body recovery is estimated to be 95% of the diluted resource volumes as both the stopes and pillars are expected to be stable. The net result is an overall dilution (stope, pillars and development) of approximately 12% waste for an estimated recovery of 95%. The resource base underpinning the reserve estimate contains some 8% by mass (60k tonnes), material categorised as Inferred. This material is largely constrained to the periphery of the resource limits. This material has been included in the mine productionschedule as aMiningInventory, butis excludedfromtheMineral ReserveEstimate.

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

2. REVIEW	OF OPERATIONS (continued)
Bulk density	Where no bulk density measurement was available (only 34 of 1297 assay samples in the mineralised zones) regression equationswere developed to estimate bulkdensityfromassayvalues. Bulkdensitywasinterpolatedforeachblock.
Classification	Classification of resources was undertaken by taking into account data integrity, grade continuity, geological confidence and drill hole spacing.
Audits or reviews	Resource estimate was reviewed byresource consultant specialists duringHellyer FeasibilityStudy.

Appendix 2: Checklist of Assessment and Reporting Criteria - Que River Pb-Zn Mineral Resource and PQ Ore Reserve Estimate

Criteria	Comments
Geological setting	Three base metal resources occur in separate lenses at Que River; these are PQ, Nico, and QR 32 Lenses. The lenses are examples of Volcanic Hosted Massive Sulphide deposits. Mineralisation style is diverse and includes footwall stringer veins, disseminations,local replacement, epiclastic brecciahosted tomassivehigh-grade basemetalsulphidemineralisation.
Tenement and land status	All lenses occur within Que River Mining Lease 68M/84 which is wholly owned by Bass Metals Ltd.
Drilling	The resource estimate at Nico is based on 15 historic diamond drill holes of NQ or BQ core size (47.6mm or 36.4mm diameter respectively). Core recoveries are not available but expected to range from poor in weathered near surface rocks to almost 100% in fresh material. The Nico Lens resource has been drilled on 25m spaced sections oriented mine grid E-W. Drill-hole spacing is generally 25m along these section lines. At QR32 all Bass Metals Ltd holes (7 holes within the lens) were diamond-drilled and NTW-sized core recovered (diameter of 56mm). Historic drilling (70 holes) was also diamond-drilled and is of NQ or BQ core size. Core recoveries range from poor in weathered near surface rocks to almost 100% in fresh material. The QR32 Lens resource has been drilled on 12.5m to 25m spaced sections oriented mine grid E-W. Drill-hole spacing generally 10-20m along these section lines. At PQ lens drilling comprises Bass Metals Ltd NTW and historic NQ and BQ diamond drilling on a 12.5m by 12.5m spaced pattern. Corerecoveries again rangefrompoor in weatherednearsurfacerocks to almost100%in fresh material.
Logging	All drill holes have been geologically logged using standard Que-Hellyer Mine logging codes. Wet and dry digital photographs of all Ltd core were taken and RQD measurements were recorded at per drill-run intervals (average of 3.0m). For historic holes RQD was also measured but corephotographs on slide film were taken onlyfor some holes.
Sampling	Half-core samples were collected at nominal 1.0m intervals or at lithological boundaries. Sampling extends into barren or sub-grademineralisation inboththehangingwallandfootwall.
Assaying	For Bass Metals Ltd drilling half core samples were submitted to Ammtec Laboratories located in Burnie, Tasmania. Samples were analysed for; Cu, Pb, Zn, Ag, As, Fe (triple acid digest and AAS); Au (fire assay) and Ba (pressed powder XRF). SG determination was conducted by the laboratory on each assay sample. QA-QC involved standards (every 25 samples) and blanks (every 25 samples). Historic assays were carried out at Aberfoyle’s company laboratory (now the Ammtec Burnie lab) using pressed powder XRF for Cu, Pb, Zn; AAS for Ag and As and Au by fire assay. Internal laboratory blanks and standards were the only QA-QC for historic holes.
Surveying	All Bass Metals Ltd drill-hole collar locations have been measured by a contract surveyor and historic holes by Que River Mine surveyor.
Database integrity	The drill hole database used comprises historical data in ASCII format and Bass Metals Ltd drill data recorded on Excel spreadsheet, with both imported into Datamine software. In addition, original 1:500 scale mine geology cross-sections, long projections and level plans were available. New assay results together with standard and blank results were checked to ensure thesewerewithinacceptablelimits (required before thelaboratory jobwas accepted).
Geological interpretation	All Que River lenses (except S Lens) are stratiform lenses of stringer, disseminated, semi-massive to massive sulphide that lie at the same stratigraphic horizon, with their present geometric position attributed to folding and faulting. PQ Lens is the main ore lens and is sub-vertical but locally folded, with a strike length around 800m, down-dip extent of 225m, maximum thickness of 34m and average thickness of 8m. Nico Lens is a sub-cropping, sub-vertical lens, with a strike length of 175m and down-dip extent of around 140m. Thickness ranges from less than one metre to around 10m. QR32 Lens is a sub-cropping, sub-vertical lens, with a strike length and down-dip extent of around 225m. Thickness ranges from less than one metre to around 15m.
Estimation and modelling techniques	At Nico elements were estimated using 2D inverse distance interpolation (power 2) and an anisotropic search radius was used for each block. At QR32 single structure spherical variograms were prepared and modelled. Continuity axes were inferred from the orientation of the lens and high grade pods. 3D Ordinary Kriging was undertaken, constrained by the interpreted ore zone wire frames. At PQ Lens tonnage and grade estimation has been undertaken using a simple polygonal model with length weighted averages to estimate grades.
Cut-off parameters	A 5% (Pb+Zn) outline has been used historically at Que River to correlate mineralised intercepts, as this was seen as a natural cut-off that provided good continuity, closely following geological boundaries. This cut-off was used to define Nico Lens and PQ Lens Resources. For QR32 Lens assays were converted to an A$ dollar value, based on long term average metal prices. Log probability plots of dollar-value suggested a natural boundary at A$70, separating background mineralisation from the ore system and this was used to define the shape of the mineralized zone. Internal geologically logged high grade Base Metal Sulphide pods were alsowireframed. Resourceswere tallied using a blockcut-offgrade of5%(Pb+Zn).
Previous mine production	Mining of PQ Lens was carried out from 1980 to 1990. No mining has occurred at Nico Lens, whilst some mining of high grade pods within QR32 Lens was carried out from underground during the 1980’s. Details on mined out areas were sourcedfromanend of minelifereport andminelong projections.
Mining factors or assumptions	No assumptions were made about mining for resource calculations. For PQ reserve estimate resources have been modified to obtain the reserves by: • Inclusion of dilution at zero grade at a rate of 10% of the resource tonnage; • Application of a 90% recovery factor to the diluted resource; Having beensubject tomine designprocedures
Metallurgical factors	No assumptionshave been made aboutmetallurgicaltreatment.
Bulk density	At Nico and QR32 Lenses some assays from early holes do not have density data. Using the available measured density data, amultiplelinear regression was developed to estimate densityforthese samplesfromCu,Pb andZngrades.
Classification	Classification of resources was undertaken by taking into account data integrity, grade continuity, geological confidence and drill hole spacing.
Audits or reviews	No audits or reviews have been completed.

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

Appendix 3: Checklist of Assessment and Reporting Criteria - Hellyer Remnant Mineral Resource Estimate

Criteria	Comments
Geological setting	Hellyer is a VMS style deposit, occurring as polymetallic massive sulphide mineralisation within a mafic – felsic volcano- sedimentary sequence.
Tenement and land status	Hellyer occurs within CML 103M and is 100% owned by Hellyer Mill Operations a wholly owned subsidiary of Bass Metals Ltd.
Drilling	Historic drilling through the Hellyer deposit is predominantly on a 20 metre by 20 metre spacing with some 10 metre by 10 metre infill. The local mine grid is orientated approximately 022° AMG. A total of 957 diamond drill holes and 1,548 channel sample are present in the Hellyer database and define the Hellyer mineralisation. Diamond drilling took place over the deposit from 1983 to 2000. Of these,453 diamond drill holes and 251 channel samples were used in this resource estimate.
Logging	Alldrill holeshave beengeologicallylogged using standard Que-Hellyer Minelogging codes
Sampling	Half-core samples were collected at nominal 1.0m intervals or at lithological boundaries. Sampling extends into barren or sub-grademineralisation inboththehangingwallandfootwall.
Assaying	No QAQC datawas available, and sources suggest thatno QAQCwork was done apartfrom internal laboratory checks.
Surveying	All holes were measured bya Hellyer Mine surveyor.
Database integrity	The supplied database contained some inconsistencies: • Duplicated collar entries with different co-ordinates • Duplicated surveys with different measurements • Inconsistencies with depths (assay/collar/survey) • Duplicated samples and grades assigned to different holes • Overlapping intervals Most, though not all, of the inconsistencies fell within the mined-out void. Comments, changes and deletions were entered into a spreadsheet thatwas passed to the clientforcomment before theresource estimation wasmade.
Geological interpretation	Confidence in the geological interpretation at Hellyer is high. Three geological domains were distinguished: • Stringer • BMS • Remnant pillars and surrounds These were further subdivided based on position west or east of the Jack Fault, and on higher or lower grade within those zones. Inall36 separatewireframe solidswere produced.
Estimation and modelling techniques	Statistical analyses on 1 metre composites were completed. Variography and search neighbourhood analysis were also conducted as input into grade estimation. The method used to obtain grade estimates for Pb, Zn and Cu was Ordinary Kriging on accumulated grade times density, with grade back- calculated following estimation. Density, Au and Ag was estimated using OrdinaryKriging.
Cut-off parameters	No cut-off grade was applied to the base metal sulphide zones as this mineralisation was defined geologically. The other mineralised zones (‘Stringer’ and ‘Remnant Pillar and Surrounds’) were modelled based upon a combination of a nominal 1% combinedPb+ Zngrade andlogged geology.
Mining /metal	No assumptionsweremade aboutmining or metallurgical factors.
Previous mine production	Underground mining commenced on the Hellyer deposit in 1986 and stopped in 2000. 16.9 Mt @ 0.4% Cu, 7.2% Pb, 13.8 % Zn, 167 g/t Ag and 2.5 g/t Au. There is a good model of the voids, which generally ties in well with the working plans generated at the time of mining. However, no allowance has been made for possible fracturing and spoiling at open faces. The wireframes were modelled to the outer limit of the void model, but it is quite possible that this face has migrated outwards, and that themodelledwireframevolumeis over-estimated.
Bulk density	Specific gravity (air pycnometer) measurements were made for the bulk of the samples. The relative bulk density (specific gravity) which is assumed to be equivalent to dry insitu bulk density has been estimated by Ordinary Kriging based upon the air pycnometer measurements reported from the samples. The density used for reporting has been multiplied by a factor of 0.95 to takeinto account the effect ofpore spaces.
Classification	Resource classification was developed from the confidence levels of key criteria including drilling methods, geological understanding and interpretation, sampling, data density and location, grade estimation and quality. Historic mining (voids and drives) have been depleted from the resource model. The availability of good quality working plans dating back to the time of the Hellyer mine operations and discussions with several former senior technical employees at that time also contributed significantlyto thisprocess

Appendix 4: Checklist of Assessment and Reporting Criteria - S lens, Que River Mineral Resource Estimate

Criteria	Comments
Geological setting	S Lens is a Volcanic Hosted Massive Sulphide deposit. Mineralisation comprises massive to stringer base metal sulphides.
Tenement and land status	S Lens occurs within Que River Mining Lease 68M/84 and is wholly owned by Bass Metals Ltd.
Drilling	All Bass Metals Ltd holes (22 holes) were diamond-drilled and NTW-sized core recovered (diameter of 56mm). Historic drilling (92 holes) was also diamond-drilled and is of NQ or BQ core size (47.6mm or 36.4mm diameter respectively). An average 94% core recovery was achieved during Bass Metals Ltd drilling. Similar high recoveries were achieved by historic drilling. The S Lens resource has been drilled on 12.5m to 25m spaced sections oriented mine grid E-W. Drill-hole spacingis approximately10-20malong these section lines.
Logging	All drill holes have been geologically logged using standard Que-Hellyer mine logging codes. Wet and dry digital photographs of all Bass Metals Ltd core were taken and RQD measurements were recorded at per drill-run intervals (average of 3.0m). For historic holes RQD was also measured and core photographs on slide film were taken for all holes except themostrecent 34 holes.
Sampling	For Bass Metals Ltd and historic drilling half-core samples were collected at nominal 1.0m intervals or at lithological boundaries.Sampling extendedinto barrenorsub-grademineralisation inboththehangingwallandfootwall.
Assaying	For Bass Metals Ltd drilling half core samples were submitted to Ammtec Laboratories located in Burnie, Tasmania. Samples were analysed for; Cu, Pb, Zn, Ag, As, Fe (triple acid digest and AAS); Au (fire assay) and Ba (pressed powder XRF). SG determination was conducted by the laboratory on each assay sample. QA-QC involved standards (every 25 samples) and blanks (every 25 samples). Historic assays were carried out at Aberfoyle’s company laboratory (now the Ammtec Burnie lab) using pressed powder XRF for Cu, Pb, Zn; AAS for Ag and As and Au by fire assay. Internal laboratoryblanks and standards were the only QA-QC for historic holes.
Surveying	All Bass Metals Ltd drill-hole collar locations have been measured by a contract surveyor and historic holes by Que River Mine surveyor.
Database integrity	The drill hole database used comprises historical data in ASCII format and Bass Metals Ltd drill data recorded on Excel spreadsheet, with both imported into Datamine software. In addition, original 1:500 scale mine geology cross-sections and long projection were available. New assay results together with standard and blank results were checked to ensure these were within acceptable limits(required before the laboratory job was accepted).

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

Geological interpretation	S Lens is an outcropping, sub-vertical lens of stringer, disseminated, semi-massive to locally massive sulphide, with a strike length 300m and down-dip extent of around 200m. Thickness ranges from less than one metre to over 12m and averages 4.5m. Ore contacts are occasionally sharp but more often are diffuse and grade controlled. The lens is strongly zoned, from dominantly copper rich in the south (Copper Zone) to relatively Zn-Pb rich in the north (Zinc Zone). S Lens sulphide mineralogy is relatively simple, comprising sphalerite - galena ± chalcopyrite (Zinc Zone) and chalcopyrite (Copper Zone).
Estimation and modelling techniques	Multiple elements were estimated using 2D inverse distance interpolation (power 2). Ananisotropic search radiuswas usedforeachblock.
Cut-off parameters	Historically a 5% (Pb+Zn) outline has been used at Que River to correlate mineralised intercepts. This was seen as a natural cut-off that provided good continuity, closely following geological boundaries. However, S Lens mineralisation is more variable in style. Although the 5% (Pb+Zn) outline was generally successful in the northern, Zn rich, part of S Lens, it was often necessary elsewhere to use geology, principally the logged massive pyrite boundary, or the 1% Cu contour where stringerand disseminated Cumineralisationextendsinto alteredvolcanics.
Previous mine production	Some underground mining of the Zinc Zone was carried out during the late 1980’s. Details on mined out areas were sourced from an end of mine life report and discussions with the ex-Que River Mine Captain, who supervised the mining of SLens.
Mining / metal assumptions	No assumptions were made about mining or metallurgical factors
Bulk density	Some assays from early holes do not have density data (88 of 983 samples within the ore lens). Using the available air pycnometer density data, a multiple linear regression was developed to estimate density for these samples from Cu, Pb andZngrades.
Classification	Classification of resources was undertaken by taking into account data integrity, grade continuity, geological confidence and drill hole spacing.
Audits /reviews	No audits or reviewshave beencompleted.

Appendix5: Checklist of Assessment and Reporting Criteria -*Hellyer Tails Mineral Resource Estimate*	Appendix5: Checklist of Assessment and Reporting Criteria -*Hellyer Tails Mineral Resource Estimate*
Geological setting	Hellyer is a VMS style deposit occurring as polymetallic massive sulphide mineralisation within a mafic–felsic volcano- sedimentary sequence. The deposit was mined from 1985 to 2000 with production of 16.9 Mt @ 0.4% Cu, 7.2% Pb, 13.8 %Zn,167g/tAg and2.5 g/tAu. TheHellyer TailsMineral Resource estimaterelates to the tailingsfromthis production.
Previous calculations	AMC estimated the Mineral Resource of the Hellyer tailings in 2005. AMC was requested by Bass Metals Ltd to restate the Hellyer Tailings Mineral Resource estimate in 2009,allowingfor depletion of tailingfor reprocessingsince 2005.
Tenement and land status	Hellyer occurs within CML 103M and is 100% owned by Hellyer Mill Operations a wholly owned subsidiary of Bass Metals Ltd.
Drilling	Total hole drill samples were collected in June 1998 (61 holes) and July 2000 (53 holes) programmes. Vibracore drilling techniqueswere used.
Logging	No geological logging ofthe drillcuttingswas undertaken. Thisis understandable giventhe type of material inthe deposit.
Sampling	Samples were collected at 2 metre intervals in the 1998 programme and 6.5 metre intervals in the 2000 programme. Drillholeswere composited to one sample downholefor length weighting during grade estimation.
Assaying	Samples were analysed by AMMTEC Burnie Research Laboratory (BRL), Au was determined by fire assay and Cu, Pb, Zn and Agwere determined usingXRD determination. OnlyminorQA-QC was completed.
Databaseintegrity	Routinevalidation was carried out byAMC.
Estimation and modelling techniques	A block model of the tailings was developed using predeposition (of tailings) topography and tailings surfaces determined in 1998, 2000 and 2009. Grades were estimated into the model using Ordinary Kriging. Grade in the Shale Pit and Western Armareas (retreated tailings)were calculated bymetallurgicalbalance.
Cut-off parameters	The Hellyer Tails Mineral Resource statement and classification refers to tonnes and grade above cut-offs of 1.65% Pb, 2.04%Zn,0.10%Cu,76.83g/t Agand 2.28g/t Au.
Mining / metal assumptions	No assumptions were made about mining or metallurgical factors
Bulk density	A bulk density of 1.93 tm-3was assigned to insitu tailings. Tailings that had been retreated were assigned a bulk density of 1.64tm-3.
Classification	A numeric code, RESCODE, was set in the model, with values of one, two or three, corresponding to Measured Resource, Indicated Resource and Inferred Resource respectively. The model has been classified in a global sense and the classification is only intended to be valid if the tailings are mined in their entirety. The model has been classified as Measured Resource in all areas where the drilling density was sufficient to allow an estimate of grade in the first pass. This equates to most of the tailings dam that was drilled in 2000. Kriging efficiency testing helped to confirm the classification in this area. The model has been classified as Indicated Resource at the peripheries of the drilling, as there was greater uncertainty in the continuity of grade. Four areas of the model have been classified as Inferred Resource, as there was uncertainty in grade continuity as well as uncertainty in the volume represented by the wireframes in these areas. The areas in question are the western edge of the model in the areas marked as 'shale borrow pits', the north eastern corner of the model where the tailings have inundated a shallow creek and tailings in the Western Arm dam and ShalePit.
*Appendix 6: Checklist of Assessment and Reporting Criteria* *- Mt Charter Mineral Resource Estimate*
Criteria	Comments
Geological setting	The Mt Charter deposit is a variety of VMS deposit. Mineralisation is massive to stockwork auriferous and argentiferous bariteveins.
Tenement and land status	The Mt Charter deposit occurs within retention licence RL 11_1997 and is wholly owned by Bass Metals Ltd.
Drilling	All Bass Metals Ltd holes have been diamond-drilled and NTW-sized core recovered (diameter of 56mm). Historic drilling was also diamond-drilled and of NQ core size (47.6mm diameter). An average of 92% core recovery was achieved. The Mt Charter resource has been drilled on 50m spaced sections oriented WNW/ESE. Drill-hole spacing is approximately 50malong these section lines.
Logging	All drill holes were geologically logged using the same nomenclature as pre- Bass Metals Ltd drilling (Aberfoyle log codes). Wet and dry digital photographs of all cores were systematically taken and RQD measurements were recorded at perdrill-run intervals (average of3.0m).
Sampling	Half-core samples were collected at 1.0m interval unless there were major lithological boundaries which warranted more detailed sampling.
Assaying	Half core samples were submitted to Ammtec-Burnie Research Laboratories located in Wivenhoe, Tasmania. Samples were routinely analysed for Au (fire assay); Ag, Pb, Zn, Cu, As, Fe (triple acid digest and AAS); Ba (pressed powder XRF). SG determination was conducted by the laboratory on the 1m composite samples. QA-QC involved standards (every 25 samples)and blanks(every25 samples)and a selection of samples were analysed byGenalysis(Perth)for comparison.

ANNUAL REPORT For the year ended 30 June 2010

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2. REVIEW OF OPERATIONS (continued)

Surveying	Alldrill-hole collar locationshave been measured by a contract surveyor.
Database integrity	The responsible project geologist reviewed and checked new results and plots standard and blank results to ensure these are within acceptable limits. This is required before the laboratory job is accepted. The drill-hole data is stored in an Excel spreadsheet.
Geological interpretation	The Mt Charter mineralisation comprises a barite-rich vein package which has a NNE trending enveloping surface and sub-vertical/steep westerly dip. The mineralized veins have a NNW strike and are sub-vertical.
Estimation and modelling techniques	Multiple elements were estimated using Ordinary Kriging. Ordinary Kriging restricted to mineralisation and homogeneous domain boundaries. The change of support process is based on multi-element conditional simulation. Variography of all elements studied and grade trendsmodelled.
Cut-offparameters	Acut-offgrade of0.7g/tAuwas applied.
Previous mine production	No previous mining has taken place on the Mt Charter deposit.
Mining factors or assumptions	The tonnage and grade estimation is based on a ‘change of support’ geostatistical technique that is targeted at modelling the deposit behaviour using anticipated open pit mining on five metre high benches and a mining selectivity of 5m by 10m by 5m.
Metallurgical factors	No assumptionshave been made aboutmetallurgicaltreatment.
Bulkdensity	Average bulkdensityvaluesforstratigraphic domains calculated and applied to estimated blocks.
Classification	Snowden and Bass Metals Ltd have completed classification by taking into account data integrity, grade continuity, geological confidence and drill hole spacing.
Audits or reviews	No audits or reviewshave beencompleted.

ANNUAL REPORT For the year ended 30 June 2010

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3. CORPORATE GOVERNANCE

3.1 Introduction

Corporate Governance Statement

Bass Metals Ltd (“Bass” or "the Company") has adopted a Corporate Governance Manual which forms the basis of a comprehensive system of control and accountability for the administration of corporate governance. The Board is committed to administering the policies and procedures with openness and integrity; pursuing the true spirit of corporate governance commensurate with the Company’s needs. A summary of the Company’s corporate governance policies and procedures is included in this Statement.

The Company’s corporate governance policies and procedures are in line with the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations 2[nd] Edition ("the ASX Principles & Recommendations"). The Company has followed the Principles & Recommendations where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices. Where, after due consideration by the Board, the Company's corporate governance practices depart from the Principles & Recommendations, the Board has fully disclosed the departure and the reason for the adoption of its own practice, in compliance with the "if not, why not" exception reporting regime.

Further information about the Company's corporate governance practices including the information on the Company's charters, code of conduct and other policies and procedures is set out on the Company's website www.bassmetals.com.au.

Role of the Board and Management

The role of the Board is to provide leadership for and supervision of the Company’s senior management. The Board provides the strategic direction of the Company and regularly measures the progression by senior management of that strategic direction.

Those who have the opportunity to materially influence the integrity, strategy and operation of the Company and its financial performance are considered to be part of senior management.

The role of senior management is to progress the strategic direction provided by the Board. In particular, the Managing Director is responsible for the day-to-day activities of the Company in advancing the strategic direction. Senior management is responsible for supporting the Managing Director and to assist the Managing Director implement the running of the general operations and financial business of the Company, in accordance with delegated authorities for expenditure levels and materiality thresholds in place.

The Board is collectively responsible for promoting the success of the Company by:

overseeing the Company, including its control and accountability systems;
appointing the Managing Director, or equivalent, for a period and on terms as the Directors see fit and, where appropriate, removing the Managing Director, or equivalent;
ratifying the appointment and, where appropriate, the removal of senior executives, including the Chief Financial Officer (or equivalent) and the Company Secretary;
ensuring the Company's Policy and Procedure for Selection and (Re)Appointment of Directors is reviewed in accordance with the Company's Nomination Committee Charter;
approving the Company's policies on risk oversight and management, internal compliance and control, Code of Conduct, and legal compliance;
satisfying itself that senior management has developed and implemented a sound system of risk management and internal control in relation to financial reporting risks and reviewed the effectiveness of the operation of that system;
assessing the effectiveness of senior management's implementation of systems for managing material business risk including the making of additional enquiries and to request assurances regarding the management of material business risk, as appropriate;
monitoring, reviewing and challenging senior management's performance and implementation of strategy;
ensuring appropriate resources are available to senior management;
approving and monitoring the progress of major capital expenditure, capital management, acquisitions and divestitures;

ANNUAL REPORT For the year ended 30 June 2010

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3. CORPORATE GOVERNANCE (continued)

approving the annual budget of the Company;
monitoring the financial performance of the Company;
ensuring the integrity of the Company's financial and other reporting through approval and monitoring;
providing overall corporate governance of the Company, including conducting regular reviews of the balance of responsibilities within the Company to ensure division of functions remain appropriate to the needs of the Company;
appointing the external auditor and the appointment of a new external auditor when any vacancy arises, provided that any appointment made by the Board must be ratified by shareholders at the next annual general meeting of the Company;
engaging with the Company’s external auditors;
monitoring compliance with all of the Company's legal obligations, such as those obligations relating to occupational health and safety, the environment, native title and cultural heritage; and
make regular assessment of whether each Non-executive Director is independent in accordance with the Company's Policy on Assessing the Independence of Directors.

The Board may not delegate its overall responsibility for the matters listed above. However, it may delegate to senior management the responsibility of the day-to-day activities in fulfilling the Board's responsibility provided those matters do not exceed the Company’s delegated authorities for expenditure levels and materiality thresholds in place. Directors are encouraged to request information from senior management where they consider such information necessary to make informed decisions.

The Managing Director is responsible for running the affairs of the Company under delegated authority from the Board and to implement the policies and strategy set by the Board. The Managing Director is also responsible for appointing and, where appropriate, removing senior executives, including the Chief Financial Officer (or equivalent) and the Company Secretary, with the approval of the Board.

The Chief Financial Officer is responsible for managing the financial and administration controls across the Company, including the overall management and the preparation of statutory reporting for the Group.

The Chair is responsible for evaluation of the Board and, where deemed appropriate, Board committees and individual Directors. The Company has conducted an annual performance evaluation of the Board during the financial year which involved completion of a questionnaire by each Board member and collation and review of the results by the Board. The Non-executive Directors undertook an annual performance and remuneration review of the Managing Director during the financial year. The Managing Director is reviewed against a number of qualitative and quantitative factors including key performance indicators. Senior executives also undertook annual performance and remuneration reviews conducted by the Managing Director. Senior executives are reviewed against a number of qualitative and quantitative factors relevant to their role and position.

A summary of the Board Charter, a statement of matters reserved for the Board and senior management is available on the Company's website.

Composition of the Board

The Company has adopted a Policy on Assessing the Independence of Directors which is consistent with the guidelines detailed in the ASX Principles & Recommendations.

The Company’s Board Charter includes guidelines for assessing the materiality of matters which are summarised below:

Balance sheet items are material if they have a value of more than 5% of pro-forma net asset.
Profit and loss items are material if they will have an impact on the current year operating result of 5% or more.
• Items are also material if (i) they impact on the reputation of the Company, (ii) they involve a breach of legislation or may potentially breach legislation, (iii) they are outside the ordinary course of business, (iv) they could affect the Company’s rights to its assets, (v) if accumulated they would trigger the quantitative tests above, (vi) they involve a contingent liability that would have a probable effect of 5% or more on balance sheet or profit and loss items or (vii) they will have an effect on operations which is likely to result in an increase or decrease in net income or dividend distribution of more than 5%.

ANNUAL REPORT For the year ended 30 June 2010

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3. CORPORATE GOVERNANCE (continued)

Contracts will be considered material if (i) they are outside the ordinary course of business, (ii) they contain exceptionally onerous provisions, (iii) they impact on income or distribution in excess of the quantitative tests above, (iv) any default, should it occur, may trigger any of the quantitative or qualitative tests above, (v) they are essential to the activities of the Company and cannot be replaced, or cannot be replaced without an increase in cost of such a quantum, triggering any of the quantitative tests above, (vi) they contain or trigger change of control provisions, (vii) they are between or for the benefit of related parties or (viii) they otherwise trigger the quantitative tests above.

The current Board consists of a Non-executive Chairman (Mr Don Boyer), two Non-executive Directors (Mr Craig McGown and Mr Tony Treasure) and one Executive Director (Mr Michael Rosenstreich), who also performs the role of Managing Director. A profile of each Director containing their date of appointment, skills, experience and expertise is set out in the Directors' Report.

The Board considers that Mr Don Boyer (Chairman) and Mr Craig McGown are independent based on the criteria for independence included in the Company’s Policy on Assessing the Independence of Directors and the ASX Principles & Recommendations. When applying the Company’s Policy on Assessing the Independence of Directors and the ASX Principles & Recommendations, Mr Tony Treasure is not considered an independent Director due to his direct association with the major shareholder of the Company.

As only two of the four Directors are independent, there is not a majority of independent Directors on the Board. The Board considers that its structure has been, and continues to be, appropriate in the context of the Company's recent history. The Company considers that each of the non-independent Directors possess skills and experience suitable for building the Company. However it is noted the Board takes the responsibilities of best practice in corporate governance seriously and will consider the appointment of independent Directors if deemed appropriate depending on the scope and scale of its operations.

The Company has a Policy and Procedure for Selection and (Re)Appointment of Directors.

A minimum of three Directors is required under the Company’s Constitution. Any changes to the composition of the Board will be determined by the Board, subject to any applicable laws and the resolutions of Shareholders. The Board seeks to nominate persons for appointment to the Board who have the qualifications, experience and skills to augment the capabilities of the Board. All Directors (except the Managing Director) are required by the Constitution of the Company to submit themselves for re-election at regular intervals and at least every three years.

New Directors are provided with a letter of appointment which sets out the key terms and conditions of their appointment and undergo a formal Induction Program.

A summary of the Company’s Policy and Procedure for Selection and (Re)Appointment of Directors is available on the Company's website.

Conflicts of Interest

In accordance with the Corporations Act, Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Company. Where the Board believes that a significant conflict exists, the Director concerned does not receive the relevant Board papers and is not present at the meeting whilst the item is considered.

Statement Concerning Availability of Independent Professional Advice

The Board acknowledges the need for independent judgement on all Board decisions, irrespective of each individual Director's independence.

To assist Directors with independent judgement, it is the Board's Policy that if a Director considers it necessary to obtain independent professional advice to properly discharge the responsibility of their office as a Director then, provided the Director first obtains approval for incurring such expense from the Chair, the Company will pay the reasonable expenses associated with obtaining such advice.

Nomination Committee

Given the present size of the Company, the whole Board acts as the Nomination Committee, if required. The Board believes no efficiencies or other benefits could be gained by establishing a separate Nomination Committee. To assist the Board to fulfil its function as the Nomination Committee, the Board has adopted a Nomination Committee Charter. A summary of the Nomination Committee Charter is available on the Company's website.

ANNUAL REPORT For the year ended 30 June 2010

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3. CORPORATE GOVERNANCE (continued)

Remuneration Committee

Given the present size of the Company, the whole Board acts as the Remuneration Committee, if required. The Board believes no efficiencies or other benefits could be gained by establishing a separate Remuneration Committee. To assist the Board to fulfil its function as the Remuneration Committee, the Board has adopted a Remuneration Committee Charter. All matters of remuneration are determined by the Board pursuant to the Corporations Act and the ASX Listing Rule requirements, especially in respect of related party transactions. That is, no Directors participated in any deliberation regarding his own remuneration or related issues.

The Company has a Remuneration Policy adopted by the Board. Remuneration of Directors and senior management is determined with regard to payments made by other companies of similar size and industry and in accordance with the skills and experience of the particular person. Details of remuneration of Directors and Key Management Personnel are disclosed in the Remuneration Report.

There are no termination or retirement benefits for Non-executive Directors (other than for superannuation).

Pursuant to the Remuneration Policy, executives are prohibited from entering into transactions or arrangements which limit the economic risk of participating in unvested entitlements.

A copy of the Remuneration Committee Charter is available on the Company's website.

Audit Committee

During the 30 June 2010 financial year, the role of the Audit Committee was carried out by the full Board. However, it is noted that the Board established a separate Audit Committee on 1 July 2010. A formal Audit Committee Charter has been adopted, a copy of which is available on the Company's website.

The Audit Committee established on 1 July 2010 is comprised of Mr Craig McGown (Chairman of the Committee and Non-Executive Director of the Company), Mr Don Boyer (Non-Executive Director and Chairman of the Board of Directors), Mr Tony Treasure (Non-Executive Director of the Company) and Ms Susan Hunter (Company Secretary of the Company). No Executive Directors are members of the Committee and the Chairman of the Committee is an independent Non-Executive Director who is not the chairman of the Board. A profile of each Director and the Company Secretary containing their date of appointment, skills, experience and expertise is set out in the Directors' Report.

The Company has a Policy for the Selection, Appointment and Rotation of External Auditors which is available on the Company’s website. The Board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor when any vacancy arises. Any appointment made by the Board must be ratified by shareholders at the next annual general meeting of the Company.

Candidates for the position of external auditor of the Company must be able to demonstrate complete independence from the Company and an ability to maintain independence through the engagement period. Further, the successful candidate must have arrangements in place for the rotation of the audit engagement partner on a regular basis.

Other than the mandatory criteria mentioned above, the Board may select an external auditor based on criteria relevant to the business of the Company such as experience in the industry in which the Company operates, references, cost and any other matters deemed relevant by the Board.

The Audit Committee reviews the performance of the external auditor on an annual basis.

Integrity of Financial Reporting

The Company’s Managing Director and Chief Financial Officer have provided a declaration to the Board in writing pursuant to section 295A of the Corporations Act and the ASX Listing Rules that:

the consolidated financial statements of the Company and its controlled entities for each half and full year present a true and fair view, in all material aspects, of the Company’s financial condition and operational results and are in accordance with accounting standards;
the above statement is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and
the Company’s risk management and internal compliance and control framework is operating efficiently and effectively in all material respects.

ANNUAL REPORT For the year ended 30 June 2010

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3. CORPORATE GOVERNANCE (continued)

Risk Management

The operation of internal controls and the measurement of risk are important in the creation and preservation of shareholder value and is a high priority for the Board and management. A summary of the Company's Risk Management Policy is available on the Company's website. Responsibility for control and risk management is delegated to the appropriate level of management with the Managing Director having ultimate responsibility to the Board for the risk management and control framework.

The Company is committed to the identification, monitoring and management of risks associated with its business activities and has established various financial and operational reporting procedures and other internal control and compliance systems in this regard. These include the following:

the Managing Director is required to report on the management of risk as a standing agenda item at each Board meeting. This involves the tabling of a Risk Register which is actively monitored and updated by management;
delegated authority limits exist in respect of financial expenditure and other business activities;
a comprehensive insurance programme is undertaken;
internal controls exist to safeguard the Company’s assets and ensure the integrity of business processes and reporting systems;
annual budgeting and monthly reporting systems for business operations is undertaken which enable the monitoring of progress against performance targets and the evaluation of trends;
appropriate due diligence procedures are undertaken for acquisitions and divestments; and
disaster recovery procedures and crisis management systems exist.

The Company’s Managing Director and Chief Financial Officer have provided a declaration that the Company’s financial reports present a true and fair view, in all material respects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards. Additionally, the Managing Director and Chief Financial Officer has stated that this declaration is based on a sound system for risk management and internal compliance and control which implements the policies adopted by the Board and the Company’s risk management and internal compliance and control framework is operating efficiently and effectively in all material respects.

The Board also requires management to report to it confirming that those risks are being managed effectively. The Board has received assurance from the Managing Director that the Company's management of its material business risks are effective.

Hedge Committee

To assist in the execution of its responsibilities, the Board has established a Hedge Committee. The primary role of the Hedge Committee is the monitoring, assessment and management of the Company’s financial market exposures.

The Committee is comprised of Mr Craig McGown (Chairman of the Committee), Mr Michael Rosenstreich and Mr Ben Hamilton. Mr McGown is an independent Non-executive Director, Mr Rosenstreich is the Managing Director and Mr Hamilton is the Chief Financial Officer of the Company. Details of the attendance at the Hedge Committee meetings are set out in the Directors’ Report.

The Hedge Committee provides recommendations to the Board in relation to the Company’s financial markets risk management approach and the use of a range of hedging strategies as outlined within the Company’s Hedging Policy; which is approved by the Board.

Continuous Disclosure

The Board has adopted a Policy on Continuous Disclosure. A summary of the Policy on Continuous Disclosure is available on the Company’s website.

The Policy on Continuous Disclosure sets out the obligations of Directors, officers and employees to ensure the Company satisfies its continuous disclosure obligations. It provides information as to what a person should do when they become aware of information which could have a material effect on the Company's securities. The Policy also sets out the consequences of non compliance and a person's confidentiality obligations.

All relevant information provided to ASX in compliance with the continuous disclosure requirements of the Corporations Act and ASX Listing Rules is promptly posted on the Company’s website.

ANNUAL REPORT For the year ended 30 June 2010

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3. CORPORATE GOVERNANCE (continued)

Compliance Procedures

The Board has also adopted Compliance Procedures to assist it to comply with the Corporations Act and ASX Listing Rule disclosure requirements. A summary of the Compliance Procedures are available on the Company's website.

Under the Compliance Procedures, Responsible Officers are appointed who are primarily responsible for ensuring the Company complies with its disclosure obligations. The Managing Director and Company Secretary are the Responsible Officers of the Company. The duties of the Responsible Officers are set out in the Compliance Procedures. The Compliance Procedures provide guidelines as to the type of information that needs to be disclosed and encourages thorough recording of disclosure decision making. The Compliance Procedures contain information on avoiding a false market, safeguarding confidentiality of corporate information, and information on external communication for the purpose of protecting the Company's price sensitive information. The Compliance Procedures also provide guidance relating to potential disclosure material.

Communication to Shareholders

The Company has a Shareholder Communications Policy that promotes effective communication with shareholders and encourages presentation of information to shareholders in a clear, concise and effective manner. The Board aims to ensure that Shareholders are informed of all major developments affecting the Company’s state of affairs. Information will be communicated to Shareholders through its annual report, annual general meeting, half-yearly results and quarterly activities and cash flow announcements, ASX announcements and the Company’s website.

The Company considers general meetings to be an effective means to communicate with shareholders and encourages shareholders to attend the meeting. Information included in the notice of meeting sent to shareholders is presented in a clear, concise and effective manner.

The Shareholder Communications Policy is available on the Company's website.

Code of Conduct

The Board has adopted a Code of Conduct which requires Directors, management and employees to deal with the Company's customers, suppliers, competitors and each other with honesty, fairness and integrity and to observe the rule and spirit of the legal and regulatory environment in which the Company operates. The Code prohibits Directors, management and employees from involving themselves in situations where there is a real or apparent conflict of interest between them as individuals and the interest of the Company. The Company also has a policy on financial and other inducements. Directors, management and employees are required to respect the confidentiality of all information of a confidential nature acquired in the course of the Company's business. Directors, management and employees must protect the assets of the Company to ensure availability for legitimate business purposes. The Company acknowledges its responsibility to shareholders, the community, and the individual. The Company uses its best endeavours to ensure a safe work place and maintain proper occupational health and safety practices.

A breach of the code is subject to disciplinary action which may include termination of employment.

A summary of the Code of Conduct is available on the Company's website.

Ethical Standards

The Board considers that the success of the Company will be enhanced by a strong ethical culture within the Group. Accordingly, the Board is committed to the highest level of integrity and ethical standards in all business practices. Employees must conduct themselves in a manner consistent with current community and corporate standards and in compliance with all legislation.

Policy for Trading in Company Securities

The Policy for Trading in Company Securities adopted by the Board prohibits trading in shares by a Director, officer or employee during certain blackout periods (in particular, prior to release of interim or annual results) except in exceptional circumstances and subject to procedures set out in the Policy.

Outside of these blackout periods, a Director, officer or employee must first obtain clearance in accordance with the Policy before trading in shares. For example:

a Director must receive clearance from the Chairman before he may buy or sell shares;
if the Chairman wishes to buy or sell shares he must first obtain clearance from the Managing Director; and
other officers and employees must receive clearance from the Managing Director before they may buy or sell shares.

ANNUAL REPORT For the year ended 30 June 2010

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3. CORPORATE GOVERNANCE (continued)

Directors must advise the Company Secretary of any transactions conducted by them in securities of the Company as soon as reasonably possible after the date of the change and in any event no later than three business days after the date of the change.

Directors, officers and employees must observe their obligations under the Corporations Act not to buy or sell shares if in possession of price sensitive non-public information and that they do not communicate price sensitive non-public information to any person who is likely to buy or sell shares or communicate such information to another party. A summary of the Policy for Trading in Company Securities is available on the Company's website.

3.2 Corporate Governance Disclosures

ASX Listing Rule Disclosure – Exception Reporting

As required by ASX Listing Rules, the following table discloses the extent to which the Company has not followed the best practice recommendations set by the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations (2[nd] Edition).

Principle No	Best Practice Recommendation	Compliance	Reasons for Non-compliance
2.1	A majority of the Board should be independent Directors.	Currently, the Company has two independent Directors and two Directors that are not considered to be independent.	The Board considers that its structure has been, and continues to be, appropriate in the context of the Company's recent history. The Company considers that each of the non-independent Directors possess skills and experience suitable for building the Company. Furthermore, the Board considers that in the current phase of the Company's growth, the Company's shareholders are better served by Directors who have a vested interest in the Company. Nonetheless, the Board takes the responsibilities of best practice in corporate governance seriously and has in the past and will in the future consider the appointment of independent Directors if deemed appropriate depending on the scope and scale of its operations.
2.4	The Board should establish a nomination committee.	The Board has not established a separate nomination committee, however, the responsibilities of a nomination committee are carried out by the full Board. It is noted the Board has adopted a Nomination Committee Charter.	Given the present size of the Company, the whole Board acts as a nomination committee, if required. The Board believes no efficiencies or other benefits could be gained by establishing a separate Nomination Committee. The Board will re- consider establishing a separate Nomination Committee as the Company's operations grow.

ANNUAL REPORT For the year ended 30 June 2010

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3. CORPORATE GOVERNANCE (continued)

4.1 and 4.2	The Board should establish an audit committee and structure it in accordance with Recommendation 4.2.	The Board had not established a separate audit committee during the 30 June 2010 financial year, however, the responsibilities of the audit committee were carried out by the full Board. It is noted the Board had adopted an Audit Committee Charter.	The role of the Audit Committee was carried out by the full Board during the 30 June 2010 financial year. The Board considered that given its size and stage of development, no efficiencies or other benefits would be gained by establishing a separate Audit Committee. It is noted the Board re-considered establishing a separate Audit Committee on 1 July 2010 given the increasing activities of the Company particularly in relation to the Hellyer Mine Project and a separate Audit Committee was established on that date.
8.1	The Board should establish a remuneration committee.	The Board has not established a separate remuneration committee, however, the responsibilities of a remuneration committee are carried out by the full Board. It is noted the Board has adopted a Remuneration Committee Charter.	Given the present size of the Company, the whole Board acts as a remuneration committee, if required. The Board believes no efficiencies or other benefits could be gained by establishing a separate remuneration committee. All matters of remuneration are determined by the Board in accordance with Corporations Act requirements, particularly in respect of related party transactions. No Director participates in any decision regarding his own remuneration or related issues. The Board has adopted a Remuneration Committee Charter and Remuneration Policy.

ANNUAL REPORT For the year ended 30 June 2010

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4. DIRECTORS’ REPORT

The Directors are pleased to present their report, together with the financial statements of the Group, being Bass Metals Ltd (“Bass” or “the Company”) and subsidiary Hellyer Mill Operations Pty Ltd.

Directors

The Company’s Directors in office during the financial period and until the date of this report are as follows. Directors were in office for the entire period.

Mr David Donald Boyer – Independent Non-executive Chairman BSc (Hons), CP Geo, FAIMM, MAIG, MAICD Appointed - 2 August 2004

Mr Boyer is a consultant geologist and resource company director with over 40 years experience in gold and base metal exploration and the management of resource projects in Australia and overseas. His experience ranges from project acquisition through discovery to production, and he has been instrumental in the listing of a number of successful junior exploration companies.

Mr Boyer has held a number of executive and non-executive director positions over the past 15 years and is currently non-executive Chairman of Midas Resources Ltd.

Mr Michael Benjamin Rosenstreich - Managing Director BSc (Hons), MMEE, MAIMM, MAICD Appointed - 15 December 2004

Mr Rosenstreich has a strong combination of technical and commercial skills gained over the past 25 years in the banking and mining sectors. He is a geologist with 13 years of experience gained in both exploration and mining roles including senior management positions with companies such as Homestake Mining, Dominion Mining and Consolidated Gold.

Since July 1997 until November 2002 he was a member of the NM Rothschild Australia resource finance team where he was involved in domestic and offshore project and corporate financings covering a range of commodity types. He left Rothschild in late 2002 to become involved with several junior and start-up resources companies in management, corporate advisory and technical consulting roles. He has been the fulltime Managing Director of Bass since December 2004.

Graduating in 1984 from Otago University (NZ) with an Honours degree in Geology, he went on to complete a Masters of Mineral and Energy Economics at Macquarie University in 1996. He is a member of the Australian Institute of Mining and Metallurgy and the Australian Institute of Company Directors.

Mr Craig Ian McGown – Independent Non-executive Director B. Com, FCA, ASIA Appointed - 7 July 2004

Mr McGown has more than 37 years experience in corporate finance, covering mergers and acquisitions, capital raisings in both domestic and international financial markets, asset acquisitions and asset disposals, initial public offerings and corporate restructurings.

He holds a Bachelor of Commerce degree from the University of Western Australia, is a Fellow of the Institute of Chartered Accountants and an Affiliate of the Financial Services Institute of Australasia (FINSIA).

Mr McGown has significant experience with capital raisings in both domestic and foreign financial markets and has been involved in a number of successful capital raising transactions. Mr McGown has also served on the Boards of a number of listed and unlisted companies including Resource Finance Corporation Limited as an Executive Director and as the Executive Chairman of DJ Carmichael Pty Limited.

Mr McGown is also currently an Executive Director of New Holland Capital Pty Limited, Non-executive Chairman of Pioneer Resources Limited, Entek Energy Ltd and Non-executive Director of Peel Exploration Limited.

ANNUAL REPORT For the year ended 30 June 2010

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4. DIRECTORS’ REPORT (continued)

Mr Patrick Anthony Treasure – Non-executive Director BSc(Hons), MAusIMM, MAICD Appointed – 2 December 2008

Mr Treasure is a geologist by profession who has been actively involved in the resource and metal recovery industry for over 35 years, holding senior executive positions with a number of publicly listed companies in the process metallurgy and mining fields. He is currently a Director and Chief Executive Officer of Metals Finance Limited, a Company of which he was a founding director and primary architect of its business plan.

Mr Treasure has extensive experience in corporate management, technology development, project evaluation and development.

He is Metals Finance Limited’s nominated Director on the Board of Bass.

Ms Susan Patricia Hunter - Company Secretary BCom, ACA, F Fin (GDipAFin (SecInst)), MAICD (Dip), ACIS (Dip) Appointed – 28 September 2006

Ms Hunter has over 16 years experience in the corporate finance industry.

She holds a Bachelor of Commerce degree from the University of Western Australia majoring in accounting and finance, is a Member of the Australian Institute of Chartered Accountants, a Fellow of the Financial Services Institute of Australasia, a Member of the Australian Institute of Company Directors and is founder and Managing Director of consulting firm Hunter Corporate Pty Ltd.

Ms Hunter is also a Member of the Institute of Chartered Secretaries and Administrators and Chartered Secretaries Australia and she is currently Company Secretary for four Australian Stock Exchange listed companies.

Principal Activities

During the period the principal activities of the Company consisted of mineral exploration, development and mining within Australia.

Dividends

No dividends have been paid during the period and no dividends have been recommended by the Directors.

Result for the Financial Period

Profit/(loss) from ordinary activities after income tax expense for the Group was ($406,034) (2009: $19,122,323).

Review of Operations

A review of the operations during the financial year is set out in Section 2 of this report.

Remuneration Report (Audited)

This report details the amount and nature of remuneration of Key Management Personnel including each Director of the Company and the executives receiving the highest remuneration.

Remuneration Policy

The principles used to determine the nature and amount of remuneration are applied through a remuneration policy which ensures the remuneration package properly reflects the person’s duties and responsibilities and that the remuneration is competitive in attracting, retaining and motivating people of the highest quality.

The remuneration policy, setting the terms and conditions for the Directors and other executives has been developed by the Board after seeking professional advice and taking into account market conditions and comparable salary levels for companies of a similar size and operating in similar sectors.

The remuneration policy is to provide a fixed remuneration component and a specific equity related component. The Board believes that this remuneration policy is appropriate given the stage of development of the Company and the activities which it undertakes and is appropriate in aligning Director and Executive objectives with shareholder and businesses objectives.

ANNUAL REPORT For the year ended 30 June 2010

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4. DIRECTORS’ REPORT (continued)

The remuneration framework has regard to shareholders’ interests in the following ways:

Focuses on sustained growth as well as focusing the executive on key non-financial drivers of value, and
• Attracts and retains high calibre executives.

The remuneration framework has regard to executives’ interests in the following ways:

Rewards performance, capability and experience,
Reflects competitive reward for contributions to shareholder growth,
Provides a clear structure for earning rewards, and
Provides recognition for contribution.

Non-executive Directors

The Board policy is to remunerate Non-executive Directors at market rates for comparable companies for time, commitment and responsibilities. The Board determines payments to the Non-executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Non-executive Directors is subject to approval by shareholders at a General Meeting. Fees for Non-executive Directors are not linked to the performance of the Company. However, to align Non-executive Directors’ interests with shareholder interests, the Non-executive Directors are encouraged to hold shares in the Company and may receive options as long-term incentive remuneration.

The Board has resolved that Directors fees will be $75,000 per annum for the Chairman and $50,000 per annum for Non-executive Directors, inclusive of statutory superannuation contributions effective 1 October, 2008. Shareholders approved on 10 August 2006 the aggregate remuneration for all Non-executive Directors at an amount of $250,000 per annum. This amount does not include the value of options provided to Non-executive Directors or committee member fees.

Non-executive Directors are eligible for participation in the Bass Metals Ltd Share Purchase Plan and the Bass Metals Ltd Employee Share Option Plan. Any issue of shares to Directors under the Bass Metals Ltd Employee Share Purchase Plan or options under the Bass Metals Ltd Employee Share Option Plan will be subject to shareholder approval pursuant to the provisions of the ASX Listing Rules and the Corporations Act 2001.

Executives

Executive Directors and executives receive either a salary plus superannuation guarantee contributions as required by law, currently set at 9%, or provide their services via a consultancy arrangement. Individuals may elect to sacrifice part of their salary to increase payments towards superannuation. Bonus payments are at the discretion of the Board and are based on an executive’s performance. In addition, long term incentives are received through participation in the Bass Metals Ltd Share Purchase Plan and the Bass Metals Ltd Employee Share Option Plan.

All remuneration paid to Directors and Executives is valued at cost to the Company and expensed. Options are valued using the Black-Scholes methodology.

Base Salary

Structured as a total employment cost package comprising cash, leave benefits and superannuation. Executives’ remuneration is reviewed annually with regard to competitiveness and performance. There are no guaranteed salary increases fixed in any senior executives’ contracts.

Benefits

Directors and Executives may receive reimbursements of out-of-pocket expenses incurred in the undertaking of their duties, including reasonable travel, accommodation and entertainment expenses.

Bass Metals Ltd Share Purchase Plan

Information on the Bass Metals Ltd Share Purchase Plan is set out in Note 29.

ANNUAL REPORT For the year ended 30 June 2010

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4. DIRECTORS’ REPORT (continued)

Bass Metals Ltd Employee Share Option Plan

Information on the Bass Metals Ltd Employee Share Option Plan is set out in Note 29.

Relationship between Remuneration Policy and Company Performance

The remuneration policy has been tailored to increase goal congruence between shareholders, directors and executives. Two methods have been applied to achieve this aim, the first being a performance-based incentive based on performance milestones, and the second being the issue of options and shares to the majority of directors, executives and employees to encourage the alignment of personal and shareholder interests. The company believes this policy is effective in contributing to increasing shareholder returns.

The performance milestones are set annually, with a certain level of consultation with key management personnel to ensure buy-in. The measures are specifically tailored to the area each individual is involved in and has a level of control over. The performance milestones target areas the Board believes hold greater potential for group expansion and profit, covering financial and non-financial as well as short and long-term goals. The level set for each performance milestone is based on the Group’s production plans and respective industry standards.

Performance in relation to the performance milestones is assessed annually, with bonuses being awarded depending on the degree to which the milestone has been achieved. Following the assessment, the performance milestones are reviewed by the remuneration committee in light of the desired and actual outcomes, and their effectiveness in achieving the Group’s goals and shareholder returns. The performance milestones are then set for the following year.

During the reporting period directors and executives were issued with options and shares. The Board believes that this is an appropriate way to attract persons of experience and ability to the Group; foster and promote loyalty by providing an incentive to remain in the Group’s employment in the long term; and to recognise the ongoing ability of key management personnel to contribute to the performance and success of the Group.

Performance Conditions Linked to Remuneration

The Group seeks to emphasise reward incentives for results and continued commitment to the Group through the provision of various cash bonus reward schemes, specifically the incorporation of incentive payments based on the achievement of performance milestones and continued employment with the Group. Incentive payments result from where the Group achieves production plans. This condition provides management with a performance target which focuses upon asset development and growth, with short term production goals, to build a diversified and profitable minerals business utilising existing Group resources.

The performance related proportions of remuneration based on these targets are included in the Compensation of Key Management Personnel table. The objective of the reward schemes is to both reinforce the short and long-term goals of the Group and provide a common interest between management and shareholders. There has been no alteration to the terms of the bonuses paid since grant date.

The satisfaction of the performance conditions are evidenced by execution of contracts or agreements and whole of Board assessment and approval. The Board does not believe that performance conditions should include a comparison with factors external to the Group at this time.

ANNUAL REPORT For the year ended 30 June 2010

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4. DIRECTORS’ REPORT (continued)

Compensation of Key Management Personnel for the year ended 30 June 2010.

The following table discloses the remuneration of the Key Management Personnel (Directors and Company Executives) of the Company. The information in this table is audited.

Executive Director Mr M Rosenstreich 1 Non-Executive Directors Mr D Boyer 2 Mr C McGown 3 Mr P Treasure 4 Mr K Rodgers 5 Total Directors Company Executives Ms S Hunter 6 Dr T Murphy 7 Mr L Henley 8 Mr K Denwer Mr B Hamilton 9 Mr B Burdett 10 Total Company Executives	Short- term benefits (salary and leave) Short- term benefits (perfor- mance bonus) Post- Employ- ment benefits (super- annuation) Non cash benefits Term- ination benefits Share- based pay- ments (shares/ options) Total remunera- tion repre- sented by performance bonus Total remunera- tion repre- sented by shares/ options Total $ $ $ $ $ $ % % $
	2010 335,539 50,000 14,461 1,590 - 124,500 9.5 23.7 526,090
	2009 280,000 - 20,000 1,892 - - - - 301,892
	2010 75,000 - - - - 40,500 - 35.1 115,500
	2009 72,500 - - - - - - - 72,500
	2010 57,500 - - - - 33,750 - 37.0 91,250
	2009 55,000 - - - - - - - 55,000
	2010 50,000 - - - - 33,750 - 40.3 83,750
	2009 29,167 - - - - - - - 29,167
	2010 - - - - - - - - -
	2009 10,000 - - - - - - - 10,000
	2010 518,039 50,000 14,461 1,590 - 232,500 6.1 28.5 816,590
	2009 446,667 - 20,000 1,892 - - - - 468,559
	2010 99,001 - - - - 20,250 - - 119,251
	2009 81,979 - - - - - - - 81,979
	2010 - - - - - - - - -
	2009 22,936 - 2,064 203 - - - - 25,203
	2010 124,154 12,000 11,318 546 46,631 - 6.2 - 194,649
	2009 165,255 - 14,745 2,419 - 5,250 - 2.8 187,669
	2010 152,636 8,000 11,744 2,747 - 49,025 3.6 21.9 224,152
	2009 113,000 - 24,500 7,557 - - - - 145,057
	2010 213,309 - 11,393 512 - 23,000 - 9.3 248,214
	2009 - - - - - - - - -
	2010 167,026 - 9,641 2,620 - 29,000 - 13.9 208,287
	2009 - - - - - - - - -
	2010 756,126 20,000 44,096 6,425 46,631 121,275 0.0 12.1 994,553
	2009 383,170 - 41,309 10,179 - 5,250 - 2.8 439,908

Note 1 – Included in 2010 short-term benefits are bonuses paid during the year of $50,000 (2009: nil) which were approved by the Board and were based on the successful achievement of performance milestones relating to the company’s production plans.

Note 2 – During 2010 $75,000 (2009: $72,500) of Mr D Boyer’s short-term benefits were paid to Boyer Exploration and Resource Management Pty Ltd of which Mr D Boyer is a Director and employee.

Note 3 – During 2010 $37,500 (2009: $47,500) of Mr C McGown’s short-term benefits were paid to Taurus Funds Management Pty Ltd until 31 March, 2010 as Mr C McGown is an associate of that Company. Thereafter, $20,000 (2009: nil) of Mr C McGown’s short-term benefits were paid to Resource Investment Capital Advisors Pty Ltd of which Mr C McGown is a Director and employee.

Note 4 – During 2010 $50,000 (2009: $29,167) of Mr P Treasure’s short-term benefits were paid to Metals Finance Limited of which Mr P Treasure is a Director and employee.

Note 5 – During 2010 nil (2009: 10,000) of Mr K Rodgers’ short-term benefits were paid to a wholly owned subsidiary of Intec Ltd of which Mr K Rodgers is a Director and employee.

Note 6 – Ms Hunter’s short-term benefits of $65,561 (2009: $81,979) were paid to Norvest Corporate Pty Ltd until 31 December, 2009 as Ms Hunter is an associate of that Company. Thereafter, $33,440 (2009: nil) of Ms Hunter’s short-term benefits were paid to Hunter Corporate Pty Ltd of which Ms Hunter is the Managing Director and employee.

Note 7 – Dr T Murphy’s short-term benefits were paid until his resignation from the Executive on 31 August 2008.

ANNUAL REPORT For the year ended 30 June 2010

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4. DIRECTORS’ REPORT (continued)

Note 8 – Mr L Henley’s short-term benefits were paid until his resignation on 9 April, 2010.

Note 9 – Mr B Hamilton commenced employment as Bass’ Chief Financial Officer on 17 September, 2009.

Note 10 – Mr B Burdett commenced employment as Bass’ General Manager Operations - Tasmania on 1 November, 2009.

Other than the Executive Directors and Company Executives, no other person is concerned in, or takes part in, the management of the Company; or has authority and responsibility for planning, directing and controlling the activities of the entity. As such, during the financial year, the Company did not have any person, other than Directors and Company Executives, that would meet the definition of “Key Management Personnel” for the purposes of AASB124 or “Company Executive” for the purposes of section 300A of the Corporations Act 2001 (“Act”). Remuneration details of the Company Secretary are disclosed as section 300A(1B)(a) of the Act defines a “Company Executive” to specifically include a secretary of the entity.

The fair value of the options is calculated at the date of grant using the Black-Scholes model and allocated to each reporting period equally over the period from grant date to vesting date. Details of the inputs used for these calculations are included in Note 29. The value disclosed above is a portion of the fair value of the options allocated to this reporting period.

Shareholders approved on 10 August 2006 the aggregate remuneration for all Non-executive Directors at an amount of $250,000 per annum. This amount does not include the value of options provided to Non-executive Directors.

Employment Contracts

The Managing Director, Mr Mike Rosenstreich, is retained via an employment contract dated 22 September 2008 and is valid to 30 June 2011. This agreement provides for a total package amount inclusive of prescribed superannuation and for participation in the Company’s Share Purchase Plan and Employee Share Option Plan. The cash remuneration inclusive of superannuation paid under the agreement from 1 July 2010 is $350,000 base salary plus incentives of $50,000 and is subject to annual review which includes setting short term incentive milestones.

Company Executives other than Ms S Hunter are employed under contracts, with no fixed term and a minimum of two months’ notice period. Ms S Hunter is employed under a service agreement with Hunter Corporate Pty Ltd. This agreement is able to be terminated by giving two months’ written notice.

ANNUAL REPORT For the year ended 30 June 2010

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4. DIRECTORS’ REPORT (continued)

Options Issued as Part of Remuneration

Options are issued to Directors and Executives as part of their remuneration. The options are not issued based on performance criteria, but are issued to Directors and Executives of Bass Metals Ltd to increase goal congruence between Executives, Directors and shareholders.

Executive Director Mr M Rosenstreich Mr M Rosenstreich Mr M Rosenstreich Mr M Rosenstreich Non-Executive Directors Mr D Boyer Mr D Boyer Mr C McGown Mr C McGown Mr P Treasure Company Executives Ms S Hunter Ms S Hunter Ms S Hunter Mr L Henley Mr L Henley Mr L Henley Mr L Henley1 Mr K Denwer Mr K Denwer Mr K Denwer	Vested number Granted number Grant date Value per option at grant date Exercise price First exercise date Last exercise date
	850,000 850,000 22/12/2006 22.3 cents 27.5 cents 22/12/2006 22/12/2011 300,000 300,000 07/12/2009 14.3 cents 26.0 cents 07/12/2009 31/12/2012 - 300,000 07/12/2009 13.8 cents 28.5 cents 31/12/2010 31/12/2012 - 300,000 07/12/2009 13.4 cents 30.5 cents 31/12/2011 31/12/2012 300,000 300,000 22/12/2006 22.3 cents 27.5 cents 22/12/2006 22/12/2011 300,000 300,000 07/12/2009 13.5 cents 30.0 cents 07/12/2009 31/12/2012 225,000 225,000 22/12/2006 22.3 cents 27.5 cents 22/12/2006 22/12/2011 250,000 250,000 07/12/2009 13.5 cents 30.0 cents 07/12/2009 31/12/2012 250,000 250,000 07/12/2009 13.5 cents 30.0 cents 07/12/2009 31/12/2012 125,000 125,000 31/12/2006 18.4 cents 37.5 cents 31/12/2007 31/12/2011 100,000 100,000 31/12/2007 16.9 cents 51.0 cents 31/12/2008 31/12/2012 150,000 150,000 07/12/2009 13.5 cents 30.0 cents 07/12/2009 31/12/2012 100,000 100,000 31/12/2007 16.9 cents 51.0 cents 31/12/2008 31/12/2012 125,000 125,000 18/04/2008 9.6 cents 37.5 cents 18/04/2008 02/11/2011 125,000 125,000 01/05/2009 4.2 cents 37.5 cents 01/05/2009 02/11/2011 - 100,000 16/10/2009 16.8 cents 42.5 cents 16/10/2010 16/10/2012 - 130,000 16/10/2009 16.8 cents 42.5 cents 16/10/2010 16/10/2012 100,000 100,000 27/10/2009 18.6 cents 25.0 cents 01/09/2009 01/09/2013 100,000 100,000 27/10/2009 16.3 cents 35.0 cents 01/09/2009 01/09/2013

Executive Director
Mr M Rosenstreich
Mr M Rosenstreich
Mr M Rosenstreich
Mr M Rosenstreich
Non-Executive Directors
Mr D Boyer
Mr D Boyer
Mr C McGown
Mr C McGown
Mr P Treasure
Company Executives
Ms S Hunter
Ms S Hunter
Ms S Hunter
Mr L Henley
Mr L Henley
Mr L Henley
Mr L Henley1
Mr K Denwer
Mr K Denwer
Mr K Denwer

Vested
number
Granted
number
Grant date
Value per
option at
grant date
Exercise
price
First
exercise
date
Last
exercise
date

850,000
850,000
22/12/2006
22.3 cents
27.5 cents
22/12/2006
22/12/2011
300,000
300,000
07/12/2009
14.3 cents
26.0 cents
07/12/2009
31/12/2012
-
300,000
07/12/2009
13.8 cents
28.5 cents
31/12/2010
31/12/2012
-
300,000
07/12/2009
13.4 cents
30.5 cents
31/12/2011
31/12/2012
300,000
300,000
22/12/2006
22.3 cents
27.5 cents
22/12/2006
22/12/2011
300,000
300,000
07/12/2009
13.5 cents
30.0 cents
07/12/2009
31/12/2012
225,000
225,000
22/12/2006
22.3 cents
27.5 cents
22/12/2006
22/12/2011
250,000
250,000
07/12/2009
13.5 cents
30.0 cents
07/12/2009
31/12/2012
250,000
250,000
07/12/2009
13.5 cents
30.0 cents
07/12/2009
31/12/2012
125,000
125,000
31/12/2006
18.4 cents
37.5 cents
31/12/2007
31/12/2011
100,000
100,000
31/12/2007
16.9 cents
51.0 cents
31/12/2008
31/12/2012
150,000
150,000
07/12/2009
13.5 cents
30.0 cents
07/12/2009
31/12/2012
100,000
100,000
31/12/2007
16.9 cents
51.0 cents
31/12/2008
31/12/2012
125,000
125,000
18/04/2008
9.6 cents
37.5 cents
18/04/2008
02/11/2011
125,000
125,000
01/05/2009
4.2 cents
37.5 cents
01/05/2009
02/11/2011
-
100,000
16/10/2009
16.8 cents
42.5 cents
16/10/2010
16/10/2012
-
130,000
16/10/2009
16.8 cents
42.5 cents
16/10/2010
16/10/2012
100,000
100,000
27/10/2009
18.6 cents
25.0 cents
01/09/2009
01/09/2013
100,000
100,000
27/10/2009
16.3 cents
35.0 cents
01/09/2009
01/09/2013

Note 1 – Mr L Henley’s interests lapsed when he resigned on 9 April, 2010.

No options have been exercised during the financial period.

Share Options

At the date of this report unissued ordinary shares of the Company under option are:

Grant Date 22 December 2006 31 December 2006 31 December 2007 18 April 2008 1 May 2009 1 September 2009 1 September 2009 16 October 2009 7 December 2009 7 December 2009 7 December 2009 7 December 2009	Date of expiry Exercise price	Number under option
	22 December 2011 27.5 cents 31 December 2011 37.5 cents 31 December 2012 51.0 cents 02 November 2011 37.5 cents 02 November 2011 37.5 cents 1 September 2013 25.0 cents 1 September 2013 35.0 cents 16 October 2012 42.5 cents 31 December 2012 30.0 cents 31 December 2012 26.0 cents 31 December 2012 28.5 cents 31 December 2012 30.5 cents	1,375,000 225,000 425,000 125,000 125,000 100,000 100,000 1,275,000 950,000 300,000 300,000 300,000
		5,600,000

ANNUAL REPORT For the year ended 30 June 2010

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4. DIRECTORS’ REPORT (continued)

Directors’ Interest

The relevant interest of each Director in the shares and options over shares issued by the Company at the date of this report are as follows:

Director Mr D Boyer Mr M Rosenstreich Mr C McGown Mr P Treasure	Ordinary Shares Options Direct Indirect Direct Indirect
	1,405,557 216,779 600,000 - 1,468,897 - 1,750,000 - 18,337 1,634,009 - 475,000 - 26,413,445 - 250,000

Company Performance

Comments on performance are set out in the review of operations.

Significant Changes in the State of Affairs

During the year the Group commenced the development of the Hellyer Mine Project; which has involved the refurbishment of the Hellyer Mill and the commencement of mine development related to the Fossey deposit.

Likely Developments and Expected Results

The likely developments in the operation of the Group and the expected results of those operations in future financial years are as follows.

The Group will continue to:

Develop the Hellyer Mine Project, which includes the commencement of concentrate production activities.
Maintain a strategic land position in Tasmania incorporating a full spectrum of targets from advanced drill ready prospects to conceptual large scale anomalies.
Assess opportunities to expand its business via development of its existing assets and potential project acquisitions both within Australia and overseas.

Environmental Regulation

The Group is subject to environmental regulation in respect of its exploration activities. The Group makes every effort to comply with the relevant regulations and has not been advised by the regulatory authority of any breaches in relation to the regulations within the States it operates.

Meetings of Directors

The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June 2010 and the number of meetings attended by each Director.

Director	Directors’	Meetings	Hedge Committee	Hedge Committee
	A	B	A	B
Mr D Boyer	10	10	-	-
Mr M Rosenstreich	10	10	5	5
Mr C McGown	10	10	5	5
Mr P Treasure	8	10	-	-
A – meetings attended
B – number of meetings	entitled to attend

The full Board met as the Audit Committee, Nomination Committee and the Remuneration Committee on an as required basis during the year ended 30 June 2010. The Board formed a separate Audit Committee on 1 July 2010. The members of the Audit Committee are Mr McGown (Chairman of the Committee), Mr Boyer, Mr Treasure and Ms Hunter.

Mr Hamilton, Chief Financial Officer, also attended all the Hedge Committee meetings.

ANNUAL REPORT For the year ended 30 June 2010

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4. DIRECTORS’ REPORT (continued)

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 Group, or to intervene in any proceedings to which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or part of the proceedings.

No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under Section 237 of the Corporations Act 2001.

Indemnification and Insurance of Directors and Officers

Indemnification

The Company has agreed to indemnify current Directors and officers and past Directors and officers against all liabilities to another person (other than the Company or a related body corporate), including legal expenses that may arise from their position as directors and officers of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.

Insurance

The Directors have not included details of the amount of the premium paid in respect of the Directors’ and officers’ liability insurance contract, as such disclosure is prohibited under the terms of the contract.

Events Subsequent to Reporting Date

No matters or circumstances have arisen, since the end of the financial year, which significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in subsequent financial years.

Non-audit Services

The Board of Directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons:

all non-audit services are reviewed and approved by the Managing Director prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and
the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES110 : Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

The following fees were paid/payable to Grant Thornton for non audit services provided during the year ended 30 June 2010:

Amounts received or due and receivable by Grant Thornton for: Consulting - Taxation services	2010 $ 18,750
	18,750

Auditors Independence Declaration

Section 307C of the Corporations Act 2001 requires the Company’s auditors, Grant Thornton Audit Pty Ltd, to provide the Directors with a written Independence Declaration in relation to their audit of the financial report for the year ended 30 June 2010. This written Auditor’s Independence Declaration is attached to the Auditor’s Independent Audit Report to the members and forms part of this Directors’ Report.

ANNUAL REPORT For the year ended 30 June 2010

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4. DIRECTORS’ REPORT (continued)

Signed in accordance with a resolution of Directors.

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M Rosenstreich Managing Director

West Perth, Western Australia 10 September, 2010

ANNUAL REPORT For the year ended 30 June 2010

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STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2010

Note Continuing operations Sales revenue 2 Cost of sales 3 Gross profit Net gain on acquisition of Hellyer operating infrastructure and mining lease 2 Other income 2 Other expenses 3 Share based payment expenses 3 Finance costs 3 Profit/(loss) before income tax Income tax (expense)/income 4 Profit/(loss) after income tax for the period Other comprehensive income for the period, net of income tax Total comprehensive income/(loss) for the period Profit/(loss) attributed to: Members of the parent entity Total comprehensive income attributed to: Members of the parent entity Basic earnings per share (cents) 5 Diluted earnings per share (cents) 5	Consolidated 2010 $ 2009 $ 18,193,121 23,807,499 (14,060,325) (16,418,190)
	4,132,796 7,389,309 1,249,853 16,692,878 1,045,400 1,469,964 (6,932,354) (5,132,200) (372,847) (113,666) (79,890) (51,148)
	(957,042) 20,255,137 551,008 (1,132,814)
	(406,034) 19,122,323
	- -
	(406,034) 19,122,323
	(406,034) 19,122,323
	(406,034) 19,122,323
	(0.30) 18.46 (0.30) 17.32

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

ANNUAL REPORT For the year ended 30 June 2010

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STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2010

Note CURRENT ASSETS Cash and cash equivalents 6 Trade and other receivables 7 Inventories 8 Derivative financial assets 9 Other assets 10 Total Current Assets NON-CURRENT ASSETS Trade and other receivables 7 Plant and equipment 11 Mine properties 12 Capitalised exploration and evaluation 14 Other financial assets 16 Deferred tax assets 22 Total Non-Current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 17 Borrowings 18 Derivative financial liabilities 19 Provisions 20 Contingent consideration 21 Total Current Liabilities NON-CURRENT LIABILITIES Provisions 20 Contingent consideration 21 Deferred tax liabilities 22 Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital 23 Option reserve 24 Retained profits TOTAL EQUITY	Consolidated 2010 $ 2009 $ 9,471,543 4,544,337 4,719,522 5,788,318 527,048 1,057,637 148,370 5,747 61,976 180,887
	14,928,459 11,576,926
	2,765,392 1,717,457 26,656,530 24,264,659 17,756,958 10,924,932 13,564,128 11,949,001 179,277 - 5,444,367 4,180,605
	66,366,652 53,036,654
	81,295,111 64,613,580
	5,064,678 2,090,470 - 156,267 - 52,511 1,607,642 1,840,902 915,928 -
	7,588,248 4,140,150
	5,254,460 5,234,071 1,878,485 2,756,319 10,014,208 10,767,862
	17,147,153 18,758,252
	24,735,401 22,898,402
	56,559,710 41,715,178
	37,172,160 22,294,441 1,172,478 799,631 18,215,072 18,621,106
	56,559,710 41,715,178

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

ANNUAL REPORT For the year ended 30 June 2010

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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2010

Consolidated Balance at 01 Jul 2008 Total comprehensive income/(loss) for the period Transactions with owners, recorded directly in equity Shares issued during the year Share issue costs Share options issued during the period in accordance with AASB 2 - Share based payments Total contributions by and distributions to owners Total transactions with owners Balance at 30 June 2009 Balance at 01 Jul 2009 Total comprehensive income/(loss) for the period Transactions with owners, recorded directly in equity Shares issued during the year Share issue costs Tax benefit relating to share issue costs Share options issued during the period in accordance with AASB 2 - Share based payments Total contributions by and distributions to owners Total transactions with owners Balance at 30 June 2010	Issued Capital Retained Profits/ (Accumulated Losses) Option Reserve Total Equity
	$ $ $ $ 22,097,969 (501,217) 685,965 22,282,717
	- 19,122,323 - 19,122,323 10,125 - - 10,125 186,347 - - 186,347 - - 113,666 113,666
	196,472 - 113,666 310,138
	196,472 19,122,323 113,666 19,432,461
	22,294,441 18,621,106 799,631 41,715,178
	22,294,441 18,621,106 799,631 41,715,178
	- (406,034) - (406,034) 15,331,014 - - 15,331,014 (721,850) - - (721,850) 216,555 - - 216,555 52,000 - 372,847 424,847
	14,877,719 - 372,847 15,250,566
	14,877,719 (406,034) 372,847 14,844,532
	37,172,160 18,215,072 1,172,478 56,559,710

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

ANNUAL REPORT For the year ended 30 June 2010

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STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2010

Note Cash flows from operating activities Cash receipts in the course of operations Cash payments in the course of operations Payments of security deposits Receipts of research and development offset Interest received Interest paid Receipts from/(payments for) derivative financial instruments Net cash provided by operating activities 27(a) Cash flows from investing activities Purchase of plant and equipment Payment for Hellyer operating infrastructure and mining lease Payments for exploration and evaluation Payments for development of mineral properties Payments for Hellyer mining lease guarantee (Proceeds)/payments for derivative financial instruments Net cash (used in) investing activities Cash flows from financing activities Proceeds from issue of shares Repayments of borrowings Costs of share issues Net cash provided by/(used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 6	Consolidated 2010 $ 2009 $ 21,728,748 20,309,931 (13,556,013) (10,985,516) - (86,765) - 338,986 475,798 334,410 (44,270) (54,563) - 4,071,455
	8,604,263 13,927,938 (2,519,086) (167,167) - (4,010,000) (3,873,326) (4,177,657) (10,324,624) (4,282,650) (1,005,560) (1,000,000) (416,983) -
	(18,139,579) (13,637,474) 15,331,015 - (146,643) (175,696) (721,850) -
	14,462,522 (175,696) 4,927,206 114,768 4,544,337 4,429,569
	9,471,543 4,544,337

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

ANNUAL REPORT For the year ended 30 June 2010

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1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

This financial report includes the consolidated financial statements and notes of Bass Metals Ltd and its controlled entity (“Consolidated” or “Group”).

Basis of Preparation

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated.

The financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

(a) Principles of Consolidation

A controlled entity is an entity over which Bass Metals Ltd has the power to govern the financial and operating policies so as to obtain benefits from its activities. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are considered.

A list of controlled entities is contained in note 36 to the financial statements.

As at reporting date, the assets and liabilities of the controlled entity have been incorporated into the consolidated financial statements as well as their results for the year then ended.

All inter-group balances and transactions between entities in the consolidated group, including any unrealised profits or losses, have been eliminated on consolidation.

Business combinations

Business combinations occur where control over another business is obtained and results in the consolidation of its assets and liabilities. All business combinations are accounted for by applying the purchase method.

The purchase method requires an acquirer of the business to be identified and for the cost of the acquisition and fair values of identifiable assets, liabilities and contingent liabilities to be determined as at acquisition date, being the date that control is obtained. Cost is determined as the aggregate of fair values of assets given, equity issued and liabilities assumed in exchange for control together with costs directly attributable to the business combination. Any deferred consideration payable is discounted to present value.

Goodwill is recognised initially at the excess of cost over the acquirer’s interest in the net fair value of the identifiable assets acquired and liabilities assumed. If the independently assessed fair value of the acquirer’s interest is greater than cost, the surplus is immediately recognised in profit or loss.

(b) Income Tax

The income tax (expense)/income for the year comprise current income tax (expense)/income and deferred tax (expense)/income.

Current income tax (expense) charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax (liabilities)/assets are therefore measured at the amounts expected to be (paid) or recovered from the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Current and deferred income tax (expense)/income is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.

ANNUAL REPORT For the year ended 30 June 2010

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1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rate that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

(c) Cash & Cash Equivalents

For the purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on hand and in banks, and money market investments readily convertible to cash within two working days, net of outstanding bank overdrafts.

(d) Trade and Other Receivables

All trade debtors are recognised at the amounts receivable as they are due for settlement no more than 30 days from the date of recognition.

Collectability of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. An appropriate provision for impairment is raised where some doubt as to collection exists.

(e) Inventories

Inventories are measured at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventory on hand by the method most appropriate to each particular class of inventory, with the majority being valued on a first in first out basis. Net realisable value represents the estimated selling price less all estimated costs of completion.

(f) Financial Instruments

Initial Recognition and Measurement

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention.

Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below.

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity is no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

Classification and Subsequent Measurement

Finance instruments are subsequently measured at either fair value, amortised cost using the effective interest rate method, or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where applicable, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted.

ANNUAL REPORT For the year ended 30 June 2010

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1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Amortised cost is calculated as follows:

(i) the amount at which the financial asset or financial liability is measured at initial recognition;

(ii) less principal repayments;

(iii) plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and

(iv) less any reduction for impairment.

The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss.

The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments.

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

Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of short term profit taking, where they are derivatives not held for hedging purposes, or designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Realised and unrealised gains and losses arising from changes in fair value are included in profit or loss in the period in which they arise.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method.

(iii) Financial liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method.

Derivative Instruments

Derivative instruments are measured at fair value. Gains and losses arising from changes in fair value are taken to the Statement of Comprehensive Income unless they are designated as hedges.

Fair Value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Impairment of Financial Assets

At each reporting date, the Group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant or prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the Statement of Comprehensive Income.

(g) Plant & Equipment

Plant and equipment is measured at cost less where applicable, any accumulated depreciation and impairment losses.

ANNUAL REPORT For the year ended 30 June 2010

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1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Depreciation is calculated on the straight line method and is brought to account over the estimated useful lives of all plant and equipment from the time the asset is held ready for use, other than for ore processing equipment. The depreciation rates used are:

Office equipment 20.00% Computer equipment 33.33% Exploration equipment 20.00%

Ore processing equipment is depreciated on a units of production basis consistent with the equipments consumption pattern. As the equipment has been in care and maintenance since acquisition, no depreciation has been expensed to date.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.

An asset’s carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposal are determined by comparing proceeds with the carrying amount.

(h) Impairment of Non-Financial Assets

At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the Statement of Comprehensive Income.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates that recoverable amount of the cash-generating unit to which the asset belongs.

(i) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to the Group, are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

(j) Mine Properties

Mine properties represent the accumulation of all exploration, evaluation and development expenditure incurred in respect of areas of interest in which mining has commenced or in the process of commencing. When further development expenditure is incurred in respect of mine property after the commencement of production, such expenditure is carried forward as part of the mine property only when substantial future economic benefits are thereby established, otherwise such expenditure is classified as part of the cost of production.

Amortisation is provided on a unit of production basis (other than restoration and rehabilitation expenditure detailed below) which results in a write off of the cost proportional to the depletion of the proven and probable mineral reserves.

ANNUAL REPORT For the year ended 30 June 2010

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1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The net carrying value of each area of interest is reviewed regularly and to the extent to which this value exceeds its recoverable amount, the excess is either fully provided against or written off in the financial year in which this is determined.

The Group provides for environmental restoration and rehabilitation at site which include any cost to dismantle and removal of certain items of plant and equipment. The cost of an item includes the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs when an item is acquired or as a consequence of having used the item during that period. This asset is depreciated on the basis of the current estimate of the useful life of the asset.

In accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets an entity is also required to recognise as a provision the best estimate of the present value of expenditure required to settle the obligation. The present value of estimated future cash flows is measured using a current market discount rate.

(k) Capitalised Exploration and Evaluation Expenditure

Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

Accumulated costs in relation to an abandoned area are written off in full against profit or loss in the year in which the decision to abandon the area is made.

When production commences, the accumulated costs for the relevant area of interest are transferred to Mine Properties and amortised over the life of the area according to the rate of depletion of the economically recoverable reserves (refer to Mine Properties above).

A regular review for impairment is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Costs of site restoration are provided over the life of the facility from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of the mining permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on a discounted basis.

Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site.

(l) Trade and Other Payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(m) Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

(i) Employee Benefits

Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to reporting date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. Those cash flows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cash flows.

ANNUAL REPORT For the year ended 30 June 2010

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1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The Group operates equity-settled share-based payment employee share and option schemes. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using a Black-Scholes pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. Issues of employee options are brought to account through the Statement of Comprehensive Income. At the time of exercise, the amounts receivable from employees are recognised in the Statement of Financial Position as share capital.

(n) Revenue and Other Income

Revenue is measured at the fair value of the consideration received or receivable.

(i) Ore Sales

Revenue from the sale of ore is recognised when the product has been delivered and:

risk has been passed to the customer;
the quantity of the product can be determined with reasonable accuracy; and
the selling price can be determined with reasonable accuracy.

Sales revenue represents gross proceeds receivable from the customer. Sales are initially recognised at an estimated value when the product has been delivered. Adjustments are made to reflect variations in the metal price, assay, weight and currency between the time of delivery and the time of final settlement of sales proceeds.

(ii) Interest

Interest earned is recognised as and when it is receivable, including interest which is accrued and is readily convertible to cash within two working days. Accrued interest is recorded as part of other debtors.

(iii) Other Income

Other income is recognised as and when it is receivable and has been recorded as part of other receivables if it has not yet been received.

All revenue is stated net of the amount of goods and services tax (GST).

(o) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Statement of Financial Position are shown inclusive of GST.

Cash flows are presented in the Statement of Cash Flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

(p) Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

ANNUAL REPORT For the year ended 30 June 2010

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1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

All other borrowing costs are recognised in the Statement of Comprehensive Income in the period in which they are incurred.

(q) Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

(r) Critical Accounting Estimates and Judgements

The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group.

Key estimates and assumptions made in preparation of these financial statements are described below:

Impairment of Non-financial Assets

The Group assesses impairment at each reporting date by evaluating conditions specific to the entity that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Valuein-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

Recoverability of Assets

Certain assumptions are required to be made in order to assess the recoverability of assets. Key assumptions include the future price of commodities, future cash flows, an estimated discount rate and estimates of ore reserves. In addition, cash flows are projected over the life of mine, which is based on proved and probable ore reserves. Estimates of ore reserves in themselves are dependent on various assumptions, in addition to those described above, including cut-off grades. Changes in these estimates could materially impact on ore reserves, and could therefore affect estimates of future cash flows used in the assessment of recoverable amount.

Determination of Ore Reserves and Remaining Mine Life

The Group estimates its ore reserves and mineral resources based on information compiled by Competent Persons (as defined in the 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Resources (the JORC Code)). Reserves determined in this way are taken into account in the calculation of depreciation, amortisation, impairment, deferred mining costs, rehabilitation and environmental expenditure.

In estimating the remaining life of the mine for the purposes of amortisation and depreciation calculations, due regard is given, not only to remaining recoverable metals contained in proved and probable ore reserves, but also to limitations which could arise from the potential for changes in technology, demand, and other issues which are inherently difficult to estimate over a lengthy time frame.

Where a change in estimated recoverable metals contained in proved and probable ore reserves is made, depreciation and amortisation is accounted for prospectively.

The determination of ore reserves and remaining mine life affects the carrying value of a number of the Group’s assets and liabilities including deferred mining costs and the provision for rehabilitation.

Provision for Restoration and Rehabilitation

Certain assumptions are required to be made in determining the amount expected to be incurred to settle its obligations in relation to restoration and rehabilitation of the mine site. Key assumptions include the amount and timing of future cash flow estimates.

Share-based Payment Transactions

The consolidated entity 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 using either the Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.

ANNUAL REPORT For the year ended 30 June 2010

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1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Estimation of Useful Lives of Assets

The consolidated entity’s management determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment. The useful lives could change significantly as a result of technical innovations or some other event. Management will increase the depreciation and amortisation charge where useful lives are less than previously estimated lives, or it will write off or write down technically obsolete or nonstrategic assets that have been abandoned or sold.

Recovery of Deferred Tax Assets

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

Long Service Leave Provision

As discussed in note 1, the liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, attrition rates and pay increases through promotion and inflation have been taken into account.

(s) Adoption of New and Revised Accounting Standards

During the current year the Group adopted all of the new and revised Australian Accounting Standards and Interpretations applicable to its operations which became mandatory.

The adoption of these standards has impacted the recognition, measurement and disclosure of certain transactions. The following is an explanation of the impact the adoption of these standards and interpretations has had on the financial statements of the Group.

AASB 3: Business Combinations

In March 2008 the Australian Accounting Standards Board revised AASB 3 and as a result, some aspects of business combination accounting have changed. The changes apply only to business combinations which occur from 1 July 2009.

Recognition and measurement impact

Recognition of acquisition costs — The revised version of AASB 3 requires that all costs associated with a business combination be expensed in the period in which they were incurred. Previously such costs were capitalised as part of the cost of the business combination.

Measurement of contingent considerations — The revised AASB 3 requires that contingent considerations associated with a business combination be included as part of the cost of the business combination. They are recognised at the fair value of the payment calculated having regard to probability of settlement. Any subsequent changes in the fair value or probability of payment are recognised in the Statement of Comprehensive Income except to the extent where they relate to conditions or events existing at acquisition date, in which case the consideration paid is adjusted. The previous version of AASB 3 allowed such changes to be recognised as a cost of the combination impacting goodwill.

Measurement of non-controlling interest — For each business combination, the acquirer must measure any noncontrolling interest in the acquiree either at the fair value of the non-controlling interest (the full goodwill method) or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. Under the previous version of AASB 3 only the latter option was permitted.

Recognition of contingencies — The revised AASB 3 prohibits entities from recognising contingencies associated with a business combination, unless they meet the definition of a liability.

Business combinations achieved in stages — The revised AASB 3 requires that where a business combination is achieved in stages, any previously held equity interest is to be remeasured to fair value and the resulting gain or loss, being the difference between fair value and historical cost, is to be recognised in the Statement of Comprehensive Income. The previous version of AASB 3 accounted for each exchange transaction separately, using cost and fair value information at the date of each exchange to determine the amount of any goodwill associated with the acquisition. It was therefore possible to compare the cost of each individual investment with the fair value of identifiable net assets acquired at each step.

ANNUAL REPORT For the year ended 30 June 2010

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1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Disclosure impact

The revised AASB 3 contains a number of additional disclosure requirements not required by the previous version of AASB 3. The revised disclosures are designed to ensure that users of the Group’s financial statements are able to understand the nature and financial impact of any business combinations on the financial statements.

As the Group did not have a business combination occurring subsequent to 1 July 2009, these amendments did not have an impact on the Group’s financial report.

AASB 8: Operating Segments

In February 2007 the Australian Accounting Standards Board issued AASB 8 which replaced AASB 114: Segment Reporting. As a result, some of the required operating segment disclosures have changed with the addition of a possible impact on the impairment testing of goodwill allocated to the cash generating units (CGUs) of the entity. Below is an overview of the key changes and the impact on the Group’s financial statements.

Measurement impact

Identification and measurement of segments — AASB 8 requires the ‘management approach’ to the identification measurement and disclosure of operating segments. The ‘management approach’ requires that operating segments be identified on the basis of internal reports that are regularly reviewed by the entity’s chief operating decision maker, for the purpose of allocating resources and assessing performance. This could also include the identification of operating segments which sell primarily or exclusively to other internal operating segments. Under AASB 114, segments were identified by business and geographical areas, and only segments deriving revenue from external sources were considered.

The adoption of the ‘management approach’ to segment reporting has resulted in the identification of reportable segments largely consistent with the prior year.

Under AASB 8, operating segments are determined based on management reports using the ‘management approach’, whereas under AASB 114 financial results of such segments were recognised and measured in accordance with Australian Accounting Standards. This has resulted in changes to the presentation of segment results, with inter-segment sales and expenses such as depreciation and impairment now being reported for each segment rather than in aggregate for total group operations, as this is how they are reviewed by the chief operating decision maker.

Impairment testing of the segment’s goodwill

AASB 136: Impairment of Assets, para 80 requires that goodwill acquired in a business combination shall be allocated to each of the acquirer’s CGUs, or group of CGUs that are expected to benefit from the synergies of the combination. Each cash generating unit (CGU) which the goodwill is allocated to must represent the lowest level within the entity at which goodwill is monitored, however it cannot be larger than an operating segment. Therefore, due to the changes in the identification of segments, there is a risk that goodwill previously allocated to a CGU which was part of a larger segment could now be allocated across multiple segments if a segment had to be split as a result of changes to AASB 8.

Management have considered the requirements of AASB 136 and determined the implementation of AASB 8 has not impacted the CGUs of each operating segment.

Disclosure impact

AASB 8 requires a number of additional quantitative and qualitative disclosures, not previously required under AASB 114, where such information is utilised by the chief operating decision maker. This information is now disclosed as part of the financial statements.

AASB 101: Presentation of Financial Statements

In September 2007 the Australian Accounting Standards Board revised AASB 101 and as a result, there have been changes to the presentation and disclosure of certain information within the financial statements. Below is an overview of the key changes and the impact on the Group’s financial statements.

ANNUAL REPORT For the year ended 30 June 2010

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1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Disclosure impact

Terminology changes — the revised version of AASB 101 contains a number of terminology changes, including the amendment of the names of the primary financial statements.

Reporting changes in equity — the revised AASB 101 requires all changes in equity arising from transactions with owners, in their capacity as owners, to be presented separately from non-owner changes in equity. Owner changes in equity are to be presented in the statement of Changes in Equity, with non-owner changes in equity presented in the Statement of Comprehensive Income. The previous version of AASB 101 required that owner changes in equity and other comprehensive income be presented in the Statement of Changes in Equity.

Statement of Comprehensive Income — the revised AASB 101 requires all income and expenses to be presented in either one statement, the Statement of Comprehensive Income, or two statements, a separate income statement and a Statement of Comprehensive Income. The previous version of AASB 101 required only the presentation of a single income statement.

The Group’s financial statements now contain a Statement of Comprehensive Income.

Other comprehensive income — The revised version of AASB 101 introduces the concept of ‘other comprehensive income’ which comprises of income and expenses that are not recognised in profit or loss as required by other Australian Accounting Standards. Items of other comprehensive income are to be disclosed in the Statement of Comprehensive Income. Entities are required to disclose the income tax relating to each component of other comprehensive income. The previous version of AASB 101 did not contain an equivalent concept.

AASB 123: Borrowing Costs

In June 2007 the Australian Accounting Standards Board revised AASB 123 and as a result, there have been changes to the treatment of borrowing costs. The option to immediately expense borrowing costs directly attributed to the acquisition, construction or production of a qualifying asset has been removed. The revised AASB 123 requires capitalisation of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. In accordance with the transitional provisions of the amended AASB 123, the Group has adopted the Standard on a prospective basis. Therefore, borrowing costs have been capitalised on qualifying assets with a commencement date on or after 1 January 2009.

(t) New Accounting Standards for Application in Future Periods

The AASB has issued new and amended standards and interpretations that have mandatory application dates for future reporting periods. The Group has decided against early adoption of these standards. A discussion of those future requirements and their impact on the Group follows:

ANNUAL REPORT For the year ended 30 June 2010

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1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

New / revised	Superseded	Explanation of amendments	Effective date	Impact of new standard	Application
pronounce-	pronounce-		(i.e. annual	on the financial report	date for
ment	ment		reporting	(standard has not been	Group
			periods ending	early adopted)
			on or after)
Accounting Standards
AASB 9	AASB 139	AASB 9 introduces new	31 December	AASB 9 amends the	1 July 2013
Financial	Financial	requirements for the	2013	classification and
Instruments	Instruments:	classification and measurement		measurement of financial
	Recognition	of financial assets. AASB 9		assets; as the entity has
AASB 2009-	and Measurement	uses a single approach to determine whether a financial		minimal financial assets held at fair value the
11 Amendments to Australian Accounting	(part)	asset is measured at amortised cost or fair value, replacing the many different rules in AASB 139 and removes the		effect on the financial report is unlikely to be significant.
Standards arising from		impairment requirement for financial assets held at fair
AASB 9		value.
AASB 124	AASB 124	This revision amends the	31 December	Since the entity is not a	1 July 2011
Related Party	Related Party	disclosure requirements for	2011	government related
Disclosures	Disclosures	government related entities and		entity; there is not
		the definition of a related party.		expected to be any
AASB 2009-				changes arising from this standard.
12
Amendments
to Australian
Accounting
Standards
arising from
AASB 124.
AASB 2009-5	N/a	The amendments to some	31 December	Given the number of	1 July 2010
Further		Standards result in accounting	2010	standards amended by
Amendments		changes for presentation,		AASB 2009-5, the entity
to Australian		recognition or measurement		is assessing the impact
Accounting		purposes, while some		on the financial report
Standards		amendments that relate to		however any impact is
arising from		terminology and editorial		unlikely to be significant.
the Annual		changes are expected to have
Improvements		no or minimal effect on
Project [AASB		accounting except for the
5, 8, 101, 107,		following:
117, 118, 136		The amendment to AASB 117
& 139]		removes the specific guidance
		on classifying land as a lease so
		that only the general guidance
		remains. Assessing land leases
		based on the general criteria
		may result in more land leases
		being classified as finance
		leases and if so, the type of
		asset which is to be recorded
		(intangible vs. property, plant
		and equipment) needs to be
		determined.
		The amendment to AASB 101
		stipulates that the terms of a
		liability that could result, at
		anytime, in its settlement by the
		issuance of equity instruments
		at the option of the counterparty
		do not affect its classification.
		The amendment to AASB 107
		explicitly states that only
		expenditure that results in a
		recognised asset can be
		classified as a cash flow from

ANNUAL REPORT

For the year ended 30 June 2010

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New / revised	Superseded	Explanation of amendments	Effective date	Impact of new standard	Application
pronounce-	pronounce-		(i.e. annual	on the financial report	date for
ment	ment		reporting	(standard has not been	Group
			periods ending	early adopted)
			on or after)
		investing activities.
		The amendment to AASB 118
		provides additional guidance to
		determine whether an entity is
		acting as a principal or as an
		agent. The features indicating
		an entity is acting as a principal
		are whether the entity:
		► has primary responsibility for
		providing the goods or service;
		► has inventory risk;
		► has discretion in establishing
		prices;
		► bears the credit risk.
		The amendment to AASB 136
		clarifies that the largest unit
		permitted for allocating goodwill
		acquired in a business
		combination is the operating
		segment, as defined in IFRS 8
		before aggregation for reporting
		purposes.
		The main change to AASB 139
		clarifies that a prepayment
		option is considered closely
		related to the host contract
		when the exercise price of a
		prepayment option reimburses
		the lender up to the approximate
		present value of lost interest for
		the remaining term of the host
		contract.
		The other changes clarify the
		scope exemption for business
		combination contracts and
		provide clarification in relation to
		accounting for cash flow
		hedges.
AASB 2009-8	Interpretation	This Standard makes	31 December	As the entity does not	1 July 2010
Amendments	8 and	amendments to Australian	2010	undertake significant
to Australian	Interpretation	Accounting Standard AASB 2		group cash-settled
Accounting	11.	_Share-based Payment_and		share-based transactions
Standards –		supersedes Interpretation 8		the new standard is
Group Cash-		_Scope of AASB 2_and		unlikely to have a
settled Share-		Interpretation 11_AASB 2 –_		significant impact on the
based		Group and Treasury Share		financial report.
Payment		Transactions.
Transactions
[AASB 2]		The amendments clarify the
		accounting for group cash-
		settled share-based payment
		transactions in the separate or
		individual financial statements of
		the entity receiving the goods or
		services when the entity has no
		obligation to settle the share-
		based payment transaction.

ANNUAL REPORT

For the year ended 30 June 2010

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New / revised	Superseded	Explanation of amendments	Effective date	Impact of new standard	Application
pronounce-	pronounce-		(i.e. annual	on the financial report	date for
ment	ment		reporting	(standard has not been	Group
			periods ending	early adopted)
			on or after)
		The amendments clarify the
		scope of AASB 2 by requiring
		an entity that receives goods or
		services in a share-based
		payment arrangement to
		account for those goods or
		services no matter which entity
		in the group settles the
		transaction, and no matter
		whether the transaction is
		settled in shares or cash.
AASB 2009-9	AASB 1 First	AASB 2009-9 makes	31 December	As this is not the first	1 July 2010
Amendments	Time adoption	amendments to ensure that	2010	year of adoption of
to Australian	of Australian	entities applying Australian		IFRSs, these
Accounting	Equivalents to	Accounting Standards for the		amendments will not
Standards –	International	first time will not face undue		have any impact on the
Additional	Financial	cost or effort in the transition		entity’s financial report
Exemptions	Reporting	process in particular situations.
for First-time	Standards
Adopters	(June 2007)
AASB 2009-	AASB 132	AASB 2009-10 makes	31 January	As the entity does not	1 July 2010
10	Financial	amendments which clarify that	2011	have any rights, options
Amendments	Instruments:	rights, options or warrants to		or warrants to acquire
to Australian	Presentation	acquire a fixed number of an		their own equity
Accounting		entity’s own equity instruments		instruments, these
Standards –		for a fixed amount in any		amendments will not
Classification		currency are equity instruments		have any impact on the
of Rights		if the entity offers the rights,		entity’s financial report.
Issues		options or warrants pro rata to
		all existing owners of the same
		class of its non-derivative
		equity instruments.
AASB 2009-	Interpretation	This standard amends AASB 1	30 June 2011	As the entity is not a first-	1 July 2010
13	19	to allow a first-time adopter to		time adopter of IFRS,
Amendments		use the transitional provisions		this standard will not
to AASB 1		in Interpretation 19.		have any impact.
arising from
Interpretation
19
AASB 2010-	AASB 1: First-	These amendments principally	30 June 2011	As the entity is not a first-	1 July 2010
01	time adoption	give effect to extending the		time adopter of IFRS,
Limited	of Australian	transition provisions of AASB		this standard will not
exemption from	Accounting Standards	2009-2 Amendments to Australian Accounting		have any impact.
comparative AASB 7 disclosures for first time adopters	AASB 7 Financial instruments: Disclosures	Standards – Improving Disclosures about Financial Instruments to first-time adopters of Australian Accounting Standards.
(Amendments
to AASB 1
and AASB 7)
AASB 2010-	N/a	This Standard gives effect to	30 June 2014	The standard is not likely	1 July 2013
02		Australian Accounting		to have a significant
Amendments		Standards – Reduced		impact on the financial
to Australian		Disclosure Requirements.		report other than
Accounting Standards		AASB 1053 provides further information regarding the		disclosure requirements.
arising from reduced		differential reporting framework and the two tiers of reporting
disclosure		requirements for preparing
requirements.		general purpose financial statements.

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ANNUAL REPORT

For the year ended 30 June 2010

New / revised	Superseded	Explanation of amendments	Effective date	Impact of new standard	Application
pronounce-	pronounce-		(i.e. annual	on the financial report	date for
ment	ment		reporting	(standard has not been	Group
			periods ending	early adopted)
			on or after)
AASB 2010-03	N/a	Limits the scope of the	30 June 2011	The standard is not likely	1 July 2010
Amendments to		measurement choices of non-		to have a significant
Australian		controlling interest at		impact on the financial
Accounting Standards		proportionate share of net assets in the event of		report other than disclosure requirements.
arising from the Annual		liquidation. Other components of NCI are measured at fair value.
Improvements		Requires an entity (in a
Project		business combination) to
[AASB 3, AASB 7, AASB 121, AASB 128, AASB 131, AASB 132 &		account for the replacement of the acquiree’s share-based payment transactions (whether obliged or voluntarily), i.e. split between consideration and post combination expenses.
AASB 139]		Clarifies that contingent
		consideration from a business
		combination that occurred
		before the effective date of
		AASB 3 Revised is not restated.
		Eliminates the requirement to
		restate financial statements for
		a reporting period when
		significant influence or joint
		control is lost and the reporting
		entity accounts for the
		remaining investment under
		AASB 139. This includes the
		effect on accumulated foreign
		exchange differences on such
		investments.
AASB 2010-	N/a	Emphasises the interaction	31 December	The standard is not likely	1 July 2011
04		between quantitative and	2011	to have a significant
Further		qualitative AASB 7 disclosures		impact on the financial
Amendments to		and the nature and extent of		report other than
Australian		risks associated with financial		disclosure requirements.
Accounting		instruments.
Standards
arising from the Annual Improvements Project [AASB 1, AASB 7, AASB 101, AASB 134 and		Clarifies that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements.
Interpretation
13]
		Provides guidance to illustrate
		how to apply disclosure
		principles in AASB 134 for
		significant events and
		transactions
		Clarify that when the fair value
		of award credits is measured
		based on the value of the
		awards for which they could be
		redeemed, the amount of
		discounts or incentives
		otherwise granted to customers
		not participating in the award
		credit scheme, is to be taken
		into account.

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ANNUAL REPORT

For the year ended 30 June 2010

New / revised	Superseded	Explanation of amendments	Effective date	Impact of new standard	Application
pronounce-	pronounce-		(i.e. annual	on the financial report	date for
ment	ment		reporting	(standard has not been	Group
			periods ending	early adopted)
			on or after)
AASB 1053	N/a	This Standard establishes a	30 June 2014	The standard is not likely	1 July 2013
Application of		differential financial reporting		to have a significant
Tiers of		framework consisting of two		impact on the financial
Accounting		Tiers of reporting requirements		report, as the Group
Standards		for preparing general purpose		would be considered to
		financial statements:		be a Tier 1 entity.
		(a) Tier 1: Australian Accounting
		Standards; and
		(b) Tier 2: Australian Accounting
		Standards – Reduced
		Disclosure Requirements.
		Tier 2 comprises the
		recognition, measurement and
		presentation requirements of
		Tier 1 and substantially reduced
		disclosures corresponding to
		those requirements.
		The following entities apply Tier
		1 requirements in preparing
		general purpose financial
		statements:
		(a) for-profit entities in the
		private sector that have public
		accountability (as defined in this
		Standard); and
		(b) the Australian Government
		and State, Territory and Local
		Governments.
		The following entities apply
		either Tier 2 or Tier 1
		requirements in preparing
		general purpose financial
		statements:
		(a) for-profit private sector
		entities that do not have public
		accountability;
		(b) all not-for-profit private
		sector entities; and
		(c) public sector entities other
		than the Australian Government
		and State, Territory and Local
		Governments.

ANNUAL REPORT For the year ended 30 June 2010

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New / revised	Superseded	Explanation of	Effective date	Example disclosure	Likely impact
pronouncement	pronouncement	amendments	(i.e. annual	of impact of new
			reporting	standard on the
			periods ending	financial report (if
			on or after)	standard is not early
				adopted)
Australian
Accounting
Interpretations
Interpretation 19	N/A	This interpretation	30 June 2011	As the entity has not	1 July 2010
Extinguishing		addresses the accounting		renegotiated any
Financial		by an entity when the		financial liabilities into
Liabilities with		terms of a financial liability		equity instruments
Equity		are renegotiated and		this interpretation is
Instruments		result in the entity issuing		not expected to have
		equity instruments to a		any impact on the
		creditor to extinguish all or		entity’s financial
		part of the financial		report.
		liability. These
		transactions are
		sometimes referred to as
		‘debt for equity swaps’.
AASB 2009-14	N/A	This amendment to	31 December	As the entity does not	1 July 2010
Prepayments of a		Interpretation 14	2011	have a defined benefit
Minimum		addresses the unintended		pension plan this
Funding		consequences that can		amendment to
Requirement		arise from the previous		Interpretation 14 is
(Amendments to		requirements when an		not expected to have
Interpretation 14)		entity prepays future		any impact on the
		contributions into a		entity’s financial
		defined benefit pension		report.
		plan.

ANNUAL REPORT For the year ended 30 June 2010

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2. Revenue

		Note	Consolidated	Consolidated
			2010	2009
			$	$
(a)	Sales revenue
	Ore sales		18,193,121	23,807,499
	Total sales revenue		18,193,121	23,807,499
(b)	Net gain on acquisition of Hellyer
	operating infrastructure and mining lease	13	1,249,853	16,692,878
(c)	Other income
	Interest received		526,038	336,978
	Net gain on derivative financial instruments		-	1,082,986
	Joint venture establishment fee		2,686	50,000
	Mill operations extension fee		50,220	-
	Other revenue		466,456	-
	Total other income		1,045,400	1,469,964
Profit/(loss) for the Year
The	profit/(loss) for the year is stated after taking into	account the following:
Expenses
			Consolidated
			2010	2009
			$	$
(a)	Cost of sales
	Production costs		5,734,869	4,472,260
	Amortisation of mine closure and restoration		95,274	611,330
	Amortisation of mining properties		4,299,118	6,152,980
	Royalties		541,531	1,420,262
	Treatment charges		2,165,426	2,637,040
	Mining contractor net profit incentive		1,224,107	1,124,318
	Total cost of sales		14,060,325	16,418,190
(b)	Other expenses
	Employee benefit expense		1,344,613	760,653
	Contracting and consulting expense		458,600	505,815
	Operating lease expense		130,358	116,139
	Other administration expense		900,616	499,681
	Depreciation – plant & equipment		126,254	97,791
	Impairment of capitalised exploration and
	evaluation expenditure		1,839,691	2,110,400
	Exploration expenditure expensed		194,526	163,346
	Hellyer operating infrastructure – care and
	Maintenance		1,715,847	878,375
	Net loss on derivative financial instruments		221,849	-
	Total other expenses		6,932,354	5,132,200
(c)	Share based payments
	Share based payments		372,847	113,666
(d)	Finance costs
	Finance costs		79,890	51,148
	Total expenses		21,445,416	21,715,204

3. Profit/(loss) for the Year

ANNUAL REPORT For the year ended 30 June 2010

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4. Income Tax Expense

The prima facie tax on profit/(loss) before income tax is reconciled as follows:

(a) The components of tax expense comprise: Current tax Deferred tax Recoupment of prior year tax losses not previously brought to account Under/(over) provision in respect of prior years (b) The prima facie tax on profit/(loss) before income tax at 30% (2009 : 30%) Add tax effect of: Non-deductible expenditure Equity based payments Less tax effect of: Research and development Gain on acquisition of Hellyer operating infrastructure and mining lease Add tax effect of: Opening deferred tax balance brought to account Previously unrecognised tax losses now recognised as a deferred tax asset Previously unrecognised tax losses now being recouped Under/(over) provision in respect of prior years Income tax expense (income) attributable to loss from ordinary activities before tax The applicable weighted average effective tax rates are as follows:	Consolidated 2010 $ 2009 $ - - (552,175) 3,410,813 - (2,277,999) 1,167 -
	(551,008) 1,132,814
	(287,113) 6,076,541 11,751 3,006 111,854 34,100 (13,710) - (374,957) (5,045,678)
	(552,175) 1,067,969 - 4,040,020 - (1,697,176) - (2,277,999) 1,167 -
	(551,008) 1,132,814
	25.0% 5.6%

The increase in the weighted average effective tax rates is partially due to the initial recognition of deferred tax balances consistent with the Company’s accounting policy as set out in note 1(b).

ANNUAL REPORT

For the year ended 30 June 2010

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5. Earnings Per Share

(a) Basic Earnings Per Share Profit/(loss) for the period Weighted average number of ordinary shares used in the calculation of basic earnings per share Basic earnings per share (cents) (b) Diluted Earnings Per Share Profit/(loss) for the period Weighted average number of ordinary shares used in the calculation of basic earnings per share Effect of weighted average share options on issue Weighted average number of ordinary shares (diluted) at 30 June Diluted earnings per share (cents) 6. Cash and Cash Equivalents Cash at bank and in hand Short-term bank deposit	Consolidated 2010 $ 2009 $ (406,034) 19,122,323 136,692,409 103,599,762
	(0.30) 18.46
	2010 $ 2009 $ (406,034) 19,122,323 136,692,409 103,599,762 5,025,543 6,806,898
	141,717,952 110,406,660
	(0.30) 17.32
	Consolidated 2010 $ 2009 $ 69,731 125,609 9,401,812 4,418,728
	9,471,543 4,544,337

The effective interest rate on short-term bank deposits at 30 June 2010 was 5.16% (2009: 3.00%); a majority of these deposits are at call.

Included in cash and cash equivalents is a restricted amount of $1,010,000 (2009: $1,010,000) on deposit as credit support for short dated forward sales agreements.

7. Trade and Other Receivables

Current Trade receivables Other receivables Operating lease bonds GST receivable Non-current Tenement security deposits1 Operating lease bonds (non-current) Hellyer operating infrastructure guarantees1 Loan to key management personnel2	Consolidated 2010 $ 2009 $ 4,062,664 5,779,245 9,498 6,953 2,120 2,120 645,240 - 4,719,522 5,788,318 2,626,340 1,620,780 18,652 18,652 48,400 48,400 72,000 29,625
	2,765,392 1,717,457

Note 1: Tenement security deposits and Hellyer operating infrastructure guarantees are held in fixed term deposits. These amounts are not available for use and thus do not constitute cash assets. Included in the tenement security deposits for the Group is a $2,000,000 guarantee placed with the Minister of Resources Tasmania for the Hellyer mining lease.

Note 2: Further information relating to the loan to key management personnel is set out in Note 33.

Further information relating to the maturity analysis of trade and other receivables is set out in Note 32(b(ii)).

ANNUAL REPORT For the year ended 30 June 2010

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8. Inventories

Inventories
At cost Finished goods - ore to be delivered Stores – Hellyer Mill	Consolidated 2010 $ 2009 $ 269,967 784,930 257,081 272,707
	527,048 1,057,637

9. Derivative Financial Assets

Current Derivative financial instruments – at fair value1	Consolidated 2010 $ 2009 $ 148,370 5,747
	148,370 5,747

Note 1: Fair value is determined in markets actively trading commodity contracts. The fair value is obtained from quoted market bid prices. Further information relating to the derivatives is set out in Note 32.

10. Other Assets

Current Prepayments	Consolidated 2010 $ 2009 $ 61,976 180,887
	61,976 180,887

11. Plant & Equipment

Plant and Equipment - Ore Processing At cost Accumulated depreciation Plant and Equipment – Hellyer Mill refurbishment At cost Accumulated depreciation Plant and Equipment - Other At cost Accumulated depreciation Total Plant and Equipment	Consolidated 2010 $ 2009 $ 24,094,797 24,056,143 (576) -
	24,094,221 24,056,143
	2,142,907 - - -
	2,142,907 -
	782,264 454,099 (362,862) (245,583)
	419,402 208,516

	26,656,530 24,264,659

ANNUAL REPORT For the year ended 30 June 2010

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11. Plant & Equipment (continued)

Movements in carrying amounts

The carrying amounts of each class of plant and equipment between the beginning and end of the current and last financial year are set out below:

Consolidated Note Balance at 1 July 2008 Additions Additions through business combination 13 Disposals Depreciation expense Transfer to plant and equipment Balance at 30 June 2009 Consolidated Balance at 1 July 2009 Additions Disposals Depreciation expense Balance at 30 June 2010	Plant and Equipment Ore Processing Plant and Equipment Hellyer Mill Refurbishment Plant and Equipment Other Leased Plant and Equipment Total
	$ $ $ $ $ - - 134,566 45,776 180,342 - - 130,982 - 130,982 24,056,143 - - - 24,056,143 - - (5,017) - (5,017) - - (86,642) (11,149) (97,791) - - 34,627 (34,627) -
	24,056,143 - 208,516 - 24,264,659
	Plant and Equipment Ore Processing Plant and Equipment Hellyer Mill Refurbishment Plant and Equipment Other Leased Plant and Equipment Total
	$ $ $ $ $ 24,056,143 - 208,516 - 24,264,659 38,654 2,142,907 337,524 - 2,519,085 - - (960) - (960) (576) - (125,678) - (126,254)
	24,094,221 2,142,907 419,402 - 26,656,530

There were no impairment losses recognised during the current or prior reporting periods.

ANNUAL REPORT

For the year ended 30 June 2010

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12. Mine Properties

Hellyer Tailings Dam At cost Accumulated depreciation Hellyer Operating Infrastructure – Mill Closure and Restoration At cost Accumulated depreciation Que River Capital Infrastructure At cost Accumulated depreciation Que River Mine Closure and Restoration At cost Accumulated depreciation Que River Mine Development At cost Accumulated depreciation Fossey Capital Infrastructure At cost Accumulated depreciation Fossey Mine Closure and Restoration At cost Accumulated depreciation Fossey Mine Development At cost Accumulated depreciation Total Mine Properties	Consolidated 2010 $ 2009 $ 9,000,000 9,000,000 - -
	9,000,000 9,000,000
	1,143,285 1,143,285 (95,274) -
	1,048,011 1,143,285
	663,273 663,273 (663,273) (596,946)
	- 66,327
	1,118,930 1,118,930 (1,118,930) (1,118,930)
	- -
	12,451,984 7,913,786 (11,431,256) (7,198,466)
	1,020,728 715,320
	1,741,321 - - -
	1,741,321 -
	483,285 - - -
	483,285 -
	4,463,613 - - -
	4,463,613 -
	17,756,958 10,924,932

ANNUAL REPORT

For the year ended 30 June 2010

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12. Mine Properties (continued)

The carrying amounts of each class of mine properties between the beginning and end of the current financial year are set out below:

Consolidated Note Balance at 1 July 2008 Additions Additions through business combination 13 Transfer from capitalised exploration and evaluation Amortisation expense Balance at 30 June 2009 Balance at 1 July 2009 Additions Transfer from capitalised exploration and evaluation Amortisation expense Balance at 30 June 2010	Hellyer Tailings Dam Hellyer Operating Infra- structure – Mill Closure and Restoration Que River Capital Infra- structure Que River Mine Closure and Restoration Que River Mine Develop- ment Fossey Capital Infra- structure Fossey Mine Closure and Restoration Fossey Mine Develop- ment Total
	$ $ $ $ $ $ $ $ $ - - 383,646 338,400 2,501,567 - - - 3,223,613 - - 61,233 272,930 3,988,181 - - - 4,322,344 9,000,000 1,143,285 - - - - - - 10,143,285 - - - - - - - - - - - (378,552) (611,330) (5,774,428) - - - (6,764,310)
	9,000,000 1,143,285 66,327 - 715,320 - - - 10,924,932
	Hellyer Tailings Dam Hellyer Operating Infra- structure – Mill Closure and Restoration Que River Capital Infra- structure Que River Mine Closure and Restoration Que River Mine Develop- ment Fossey Capital Infra- structure Fossey Mine Closure and Restoration Fossey Mine Develop- ment Total
	$ $ $ $ $ $ $ $ $ 9,000,000 1,143,285 66,327 - 715,320 - - - 10,924,932 - - - - 4,119,691 1,741,321 483,285 4,463,613 10,807,910 - - - - 418,508 - - - 418,508 (95,274) (66,327) - (4,232,791) - - - (4,394,392)
	9,000,000 1,048,011 - - 1,020,728 1,741,321 483,285 4,463,613 17,756,958

13. Business Combinations

Prior period acquisition

On 10 December 2008, Hellyer Mill Operations Pty Ltd, a wholly-owned controlled entity, entered into a binding conditional sales agreement with Intec Ltd to acquire the Hellyer operating infrastructure and mining lease.

The agreement included a cash payment of $4.01 million plus a processing royalty of $2.50/tonne contingent upon the quantity of ore processed through the Hellyer Mill, capped at $5 million.

On 19 February 2009, the shareholders resolved in favour of the proposed transaction and on the 12 March 2009, the formal execution of the sales agreement occurred.

In addition to the above cash settlement, Hellyer Mill Operations Pty Ltd placed a $1 million bank guarantee with Mineral Resources Tasmania in June 2009 prior to the transfer of the Hellyer mining lease. This amount is secured by a fixed term deposit and does not form part of the following purchase consideration.

Note Fair Value $ Cost of acquisition Cash consideration paid to Intec Ltd Contingent consideration recognised at the present value of the probable future royalty payments 21	$ (4,010,000) (2,756,319)
	(6,766,319)

ANNUAL REPORT For the year ended 30 June 2010

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13. Business Combinations (continued)

The Group provisionally recognised the fair values of the identifiable assets and liabilities of Hellyer Mill Operations Pty Ltd based upon the best information available as of the reporting date. At that date management had not yet decided whether to adopt the tax consolidation regime, and had provisionally calculated the tax cost bases of the assets and liabilities acquired in determining the fair value of the deferred tax assets and liabilities on acquisition.

Management finalised their determination in March 2010, and elected not to adopt the tax consolidation regime. As a result, a final re-assessment of the tax cost bases was required.

As a consequence, an adjustment to gain on acquisition of $1,249,853 has been recognised in the current reporting period, in addition to the initial recognition of $16,692,878 in the prior reporting period, resulting in a total net gain on acquisition of $17,942,731 at acquisition date.

The following assets and liabilities were acquired as part of the transaction and reflect their revised fair values at acquisition date.

Note Plant and equipment – ore processing 11 Inventory 8 Mine properties 12 Mining lease Total value of assets acquired Deduct Liabilities assumed or created: Provisions 20 Deferred income tax assets/(liabilities) 22 Total amount of liabilities Net assets acquired Gain on acquisition Acquisition costs – stamp duty Net gain on acquisition 2	Fair Value $ 24,056,143 251,000 10,143,285 1	$ 24,835,097 18,068,778 (126,047)
	34,450,429 (5,224,395) (4,390,937)
	(9,615,332)
		17,942,731

The above accounting gain has resulted from the group applying the Business Combinations accounting standard AASB3. Fair values for the above assets have been based on the Independent Experts Report included in the Notice of General Meeting to Shareholders dated 19 February 2009.

14. Capitalised Exploration and Evaluation Expenditure

The Group has mineral exploration costs carried forward in respect of
areas of interest currently in the phase of exploration and evaluation:
Balance at the beginning of the period
Expenditure capitalised for the period
Write-off resulting from relinquished tenements
Transfer to mine properties for development of Que River
Write-off of project evaluation expenditure
Write-off on tenements not relinquinshed1
Balance at the end of the period

Consolidated
2010
$
2009
$
11,949,001
10,403,093
3,873,326
3,656,308
(1,774,624)
(1,604,830)
(418,508)
-
(65,067)
(201,457)
-
(304,113)

13,564,128
11,949,001

Note 1: The above write off on tenements not relinquished is as a result of a review on the carrying values of tenements in which Venture Minerals can earn an interest in as detailed in note 15.

ANNUAL REPORT For the year ended 30 June 2010

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14. Capitalised Exploration and Evaluation Expenditure (continued)

Ultimate recoupment of costs carried forward in respect of areas of interest in the exploration and evaluation phase is dependent on successful development and commercial exploitation, or alternatively, sale of respective areas at an amount at least equivalent to the carrying value.

15. Interests in Tenements

Agreements have been entered into with third parties, whereby Bass can earn an interest in exploration areas by expending specified amounts in the exploration areas. The Group’s percentage interests in the future output, having fulfilled its obligations are as follows:

Partner Venture Minerals Limited Venture Minerals Limited Clancy Exploration Limited Clancy Exploration Limited	Licence EL31/2003 Heazlewood EL36/2003 Whyte River ELA28/2009 ELA20/1010	Interest
		100% 100% 75% 75%

*Venture Minerals Limited have earned an entitlement to a 70% earn in interest in the above mentioned exploration areas by making or incurring a total expenditure of not less than $650,000 in connection with the exploration for iron, tin and tungsten on the Joint Venture Tenements (Sole Funding) within three (3) years of the date of satisfaction of the conditions precedent in the agreements. Bass retains a 100% right to all other commodities on the tenements. Pioneer Resources Limited retains a 2% net smelter royalty.

16. Other Financial Assets

Non-current Capitalised finance costs Borrowing costs incurred at cost	Consolidated 2010 $ 2009 $ 179,277 -
	179,277 -

Bass Metals Ltd has secured a $12 million project finance facility with RMB Resources Limited for the development of the Hellyer Mine Project. The loan is offered on standard commercial and banking terms for a facility of this type with five principal repayments to be fully repaid by 30 June 2012. The above costs relate to transaction costs in establishing the project finance facility.

17. Trade and Other Payables

Current Unsecured liabilities:- Trade payables Sundry payables and accrued expenses GST payable Amounts payable to related entity	Consolidated 2010 $ 2009 $ 3,203,761 1,173,453 1,860,917 722,419 - 194,598 - -
	5,064,678 2,090,470

18. Borrowings

Current Loan1	Consolidated 2010 $ 2009 $ - 156,267
	- 156,267

Note 1: The Loan was provided by Hunter Premium Funding Limited for payment of insurance premiums and was for a fixed amount repayable in full by February 2010. The debt is secured by insurance policies purchased under the agreement.

ANNUAL REPORT For the year ended 30 June 2010

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19. Derivative Financial Liabilities

Note Current Derivative financial instruments – at fair value1 32	Consolidated 2010 $ 2009 $ - 52,511
	- 52,511

20. Provisions

The carrying amounts and class of provisions between the beginning and end of the current financial year are set out below:

Consolidated Note Balance at 1 July 2008 Additions Additions through business combination 13 Balance at 30 June 2009 Balance at 1 July 2009 Additions Additions through business combination Amounts used during the period Increase/(decrease) in the discounted amount arising because of time and the effect of a change in the discount rate Balance at 30 June 2010 Analysis of total provisions Current Non-current	Hellyer Operating Infrastructure Closure and Restoration Que River Mine Closure and Restoration Fossey Mine Closure and Restoration Short-term Employee Benefits Long-term Employee Benefits	Mine Contractor Incentive Payment Total
	$ $ $ $ $ - 846,000 - 24,432 3,574 - 272,930 - 19,054 6,102 5,224,395 - - - - 5,224,395 1,118,930 - 43,486 9,676	$ $ - 874,006 678,486 976,572 - 5,224,395 678,486 7,074,973
	5,224,395 1,118,930 - 43,486 9,676 - - 483,285 132,316 3,560 - - - - - - - - (78,995) - (466,456) - - - -	678,486 7,074,973 (286,581) 332,580 - - - (78,995) - (466,456)
	4,757,939 1,118,930 483,285 96,807 13,236	391,905 6,862,102
		2010 $ 2009 $ 1,607,642 1,840,902 5,254,460 5,234,071
		6,862,102 7,074,973

Provision for Infrastructure Closure and Restoration

A provision has been recognised for the costs to be incurred for the restoration of the Hellyer Mill site used for the processing of ore. It is anticipated that the Mill site will require restoration within 12 years. A discount rate adjusted to reflect the risk inherent in the mining operations has been applied.

Provision for Mine Closure and Restoration

A provision has been recognised for the costs to be incurred for the restoration of the Que River and Fossey mine sites used for the exploration of base metals. It is anticipated that the mines will require restoration within 12 and 3 years respectively. A discount rate adjusted to reflect the risk inherent in the mining operations has been applied.

Provision for Mine Contractor Incentive Payment

A provision has been recognised for an incentive royalty to be paid to the mine contractor in relation to the Que River mining operation. The purpose of the incentive royalty is to provide an opportunity for the project manager, by contributing to the efficient and economic performance of the mining operation, to be rewarded through a profit interest based payment.

ANNUAL REPORT For the year ended 30 June 2010

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21. Contingent Consideration

Current Note Contingent consideration1 13 Non-current Contingent consideration1 13	Consolidated 2010 $ 2009 $ 915,928 -
	1,878,485 2,756,319

Note 1: The contingent consideration represents the present value of royalties payable on the probable quantity of ore to be processed through the Hellyer Mill.

22. Tax

Consolidated Deferred Tax Assets Provisions Share issue costs Plant and equipment Other Unused tax losses Balance at 30 June 2009 Deferred Tax Liability Plant and equipment Capitalised exploration expenditure Mine Properties Balance at 30 June 2009 Consolidated Deferred Tax Assets Provisions Share issue costs Plant and equipment Other Unused tax losses Balance at 30 June 2010 Deferred Tax Liability Plant and equipment Capitalised exploration expenditure Mine Properties Inventories Other Balance at 30 June 2010	Opening Balance Charged to Income Charged to Equity Business Combination1 Closing Balance $ $ $ $ $ - 312,319 - 1,567,319 1,879,638 - - 120,726 - 120,726 - 18,270 - - 18,270 - 178,047 - - 178,047 - 1,983,924 - - 1,983,924
	- 2,492,560 120,726 1,567,319 4,180,605
	- (4,711) - (5,085,816) (5,090,527) - (3,555,042) - - (3,555,042) - - - (2,122,293) (2,122,293)
	- (3,559,753) - (7,208,109) (10,767,862)
	Opening Balance Charged to Income Charged to Equity Business Combination1 Closing Balance $ $ $ $ $ 1,879,638 (301,672) - - 1,577,966 120,726 (105,796) 216,555 - 231,485 18,270 6,928 - - 25,198 178,047 (90,889) - - 87,158 1,983,924 1,538,636 - - 3,522,560
	4,180,605 1,047,207 216,555 - 5,444,367
	(5,090,527) 42,525 - 925,268 (4,122,734) (3,555,042) (500,559) - - (4,055,601) (2,122,293) 28,582 - 367,996 (1,725,715) - (3,706) - (43,411) (47,117) - (63,041) - - (63,041)
	(10,767,862) (496,199) - 1,249,853 (10,014,208)

Refer to Note 13 “Business Combinations” for further information.

ANNUAL REPORT For the year ended 30 June 2010

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23. Issued Capital Consolidated 170,505,386 (2009 : 103,648,803) fully paid ordinary shares	2010 $ 2009 $ 37,172,160 22,294,441

Ordinary shares

The Group has 170,505,386 (2009: 103,648,803) fully paid ordinary shares.

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Group in proportion to the number of fully paid ordinary shares.

On a show of hands every holder of ordinary shares present at a meeting, in person or by proxy, is entitled to one vote and upon a poll each share is entitled to one vote.

The Company has no authorised share capital and the shares have no par value.

Options

For information relating to the Company employee option plan, including details of options issued, exercised and lapsed during the financial year-end, refer to Note 29 Share Based Payments.
For information relating to share options issued to key management personnel during the financial year, refer to Note 33 Key Management Personnel.

Capital management

Management controls the capital of the Group by monitoring performance against budget to provide the shareholders with adequate returns and ensure the Group can fund its operations and continue as a going concern.

The Group’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets.

There are no externally imposed capital requirements.

Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.

There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year.

ANNUAL REPORT For the year ended 30 June 2010

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23. Issued Capital (continued)

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

At the beginning of the year
Issued during the year
•Ordinary shares issued at 13 cents pursuant to the
employee share plan on 23 January 2009
•Ordinary shares issued at 14.5 cents pursuant to
the employee share plan on 1 May 2009
•Ordinary shares issued at 23 cents pursuant to the
employee share plan on 13 November 2009
•Ordinary shares issued at 29 cents pursuant to the
employee share plan on 13 November 2009
•Ordinary shares issued at 23 cents being tranche 1
of the $10 million share placement issued on 7
December 2009
•Ordinary shares issued at 23 cents being part of the
non-renounceable rights issue issued on 29
December 2009
•Ordinary shares issued at 23 cents being tranche 2
of the $10 million share placement issued on 14
January 2010
•Ordinary shares issued at 23 cents being part of the
non-renounceable rights issue shortfall issued on 14
January 2010
•Ordinary shares issued at 23 cents being part of
tranche 2 of the $10 million share placement issued
on 22 January 2010
Less share issue costs
Current and previously unrecognised tax benefit relating
to share issue costs
Balance at the end of the year

2010
Number of
Shares
$
2009
Number of
Shares
$

103,648,803
22,294,441
103,573,803
22,097,969
-
-
50,000
6,500
-
-
25,000
3,625
100,000
23,000
-
-
100,000
29,000
-
-
15,207,320
3,497,684
-
-
19,149,281
4,404,335
-
-
28,270,941
6,502,316
-
-
3,929,041
903,679
-
-
100,000
23,000
-
-
-
(721,850)
-
-
-
216,555
-
186,347

170,505,386
37,172,160
103,648,803
22,294,441

24. Option Reserve

The option reserve records items recognised as expenses on valuation of employee share options and as consideration for acquiring tenements or rights to participate in joint ventures. An analysis of movements in this reserve is provided in the Statement of Changes in Equity.

Option reserve	Consolidated 2010 $ 2009 $ 1,172,478 799,631
	1,172,478 799,631

Further information in relation to the option reserve is set out in note 29.

ANNUAL REPORT For the year ended 30 June 2010

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25. Capital and Leasing Commitments

(i) Operating Lease Commitments Non-cancellable operating leases contracted for but not capitalised in the financial statements Payable – minimum lease payments Not later than 12 months Between 12 months and five years	Consolidated 2010 $ 2009 $ 151,274 112,424 318,196 121,891
	469,470 234,315

The Group has entered into the following operating leases:

(a) A non-cancellable property lease for office space occupied in West Perth. The lease has a three-year term expiring on the 31 August 2011, with rent payable in advance. Contingent rental provisions within the lease agreement require that minimum lease payments shall be subject to annual rent review increased by the greater of CPI or the Market Rent. An option exists to renew the lease for an additional two years. The lease was entered into on the 10 September 2008.
(b) A non-cancellable equipment lease for photocopying equipment at premises occupied in West Perth. The lease has a three-year term and was entered into on the 15 September 2008. Lease payments are payable in advance.
(c) A non-cancellable equipment lease for plant in service at the Hellyer Mill site. The lease has a two-year term expiring on the 31 March 2012, with rent payable in advance. An option exists to purchase the unit at any time during the first 12 month lease period.

(ii) Capital Expenditure Commitments

Exploration Tenements

In order to maintain current rights of tenure to exploration tenements, the Group is required to outlay rentals and to meet the minimum expenditure requirements of Mineral Resources Tasmania. These obligations are not provided for in the financial statements and are payable:

Not later than 12 months Between 12 months and five years Greater than five years	Consolidated 2010 $ 2009 $ 546,000 507,050 1,780,000 2,061,000 - -
	2,326,000 2,568,050

26. Operating Segments

Segment information

The operating segments identified are based on geographical location, different risk profiles and performance assessment criteria.

Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and are also similar with respect to the following:

the products sold/and or services provided by the segment;
the manufacturing or production processes.

ANNUAL REPORT For the year ended 30 June 2010

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26. Operating Segments (continued)

Reportable segments

Tasmanian Operations - Mining

The Tasmanian Operations - Mining segment produces ore from its Tasmanian mining operations, containing zinc, lead, copper, silver and gold.

Tasmanian Operations- Processing

The Tasmanian Operations - Processing segment includes the Hellyer Mill and associated infrastructure and is anticipated to treat ore generated by the Group’s mining operations as well as from third parties.

Exploration

The exploration segment covers activities related to the identification and discovery of new and additional mineral resources.

Basis of accounting for purposes of reporting by operating segments

Accounting policies adopted

Unless stated otherwise, all amounts reported to the Board of Directors with respect to operating segments are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group.

Inter-segment transactions

Inter-segment loans receivable and payable are recognised at the consideration to be received/paid and are eliminated.

Segment assets

Where an asset is used across multiple segments, the asset is allocated to the segment that has greatest influence over the asset economic value. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location.

Unallocated items

The following items of revenue, expense and assets are not allocated to operating segments as they are not considered part of the core operations of any segment:

corporate costs;
interest revenue and expense;
share based payments;
derivates;
income tax expense;
deferred tax assets (except for those relating to the closure provision for the Hellyer Mill).

Comparative information

This is the first reporting period in which AASB 8: Operating Segments has been adopted. Comparative information has been re-stated to conform to the requirements of the Standard.

ANNUAL REPORT For the year ended 30 June 2010

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26. Operating Segments (continued)

Operating Segments 2009 Tasmanian Operations – Mining $ Revenue Sales to external customers 23,807,499 Other revenue from external customers 8,872 Total segment revenue 23,816,371 Depreciation and amortisation 6,764,310 Reportable segment profit/(loss) before income tax 7,345,509 Reportable segment assets 2,066,577 Additions to non-current assets: Plant and equipment - Mine properties 4,322,344 Capitalised exploration and evaluation - Reconciliation of reportable segment revenues, profit or loss, and assets Revenues Total revenue for reportable segments Unallocated amounts: Other revenue Net gain on derivative financial instruments Net gain on acquisition of Hellyer operating infrastructure and mining lease Interest revenue Consolidated revenue Profit or loss Total profit/(loss) for reportable segments Unallocated amounts: Other profit/(loss) Other corporate expenses Net gain/(loss) on derivative financial instruments Net gain on acquisition of Hellyer operating infrastructure and mining lease Share based payments Write off of project evaluation expenditure Consolidated profit/(loss) before income tax Assets Total assets for reportable segments Unallocated amounts: Cash and cash equivalents Trade and other receivables Plant and equipment Derivative financial assets Other assets Deferred tax assets Consolidated total assets	Tasmanian Operations – Mining $ 23,807,499 8,872	Tasmanian Operations- Processing Exploration Total $ $ $ - - 23,807,499 - - 8,872
	23,816,371	- - 23,816,371
	6,764,310	- - 6,764,310
	7,345,509	(859,871) - 6,485,638
	2,066,577	37,122,750 12,085,337 51,274,664
	- 4,322,344 -	24,187,125 - 24,187,125 10,143,285 - 14,465,629 - 3,656,308 3,656,308
		Total $ 23,816,371 41,128 1,082,986 16,692,878 336,978 41,970,341 6,485,638 408,405 (2,028,619) 1,082,985 16,692,878 (113,666) (2,272,484) 20,255,137 51,274,664 4,542,837 5,786,198 159,564 5,747 231,283 2,613,286 64,613,579

ANNUAL REPORT

For the year ended 30 June 2010

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26. Operating Segments (continued)

Operating Segments 2010 Tasmanian Operations – Mining $ Revenue Sales to external customers 18,193,121 Total segment revenue 18,193,121 Depreciation and amortisation 4,299,118 Reportable segment profit/(loss) before income tax 4,194,114 Reportable segment assets 8,658,191 Additions to non-current assets: Plant and equipment - Mine properties 11,226,418 Capitalised exploration and evaluation - Reconciliation of reportable segment revenues, profit or loss, and assets Revenues Total revenue for reportable segments Unallocated amounts: Other revenue Net gain on acquisition of Hellyer operating infrastructure and mining lease Interest revenue Consolidated revenue Profit or loss Total profit/(loss) for reportable segments Unallocated amounts: Other profit/(loss) Other corporate expenses Net gain/(loss) on derivative financial instruments Net gain on acquisition of Hellyer operating infrastructure and mining lease Share based payments Write off of project evaluation expenditure Consolidated profit/(loss) before income tax Assets Total assets for reportable segments Elimination of inter-segment assets Unallocated amounts: Cash and cash equivalents Trade and other receivables Plant and equipment Derivative financial assets Other assets Deferred tax assets Consolidated total assets	Tasmanian Operations – Mining $ 18,193,121	Tasmanian Operations- Processing Exploration Total $ $ $ - - 18,193,121
	18,193,121	- - 18,193,121
	4,299,118	95,274 - 4,394,392
	4,194,114	(1,811,121) - 2,382,993
	8,658,191	40,102,887 13,685,336 62,446,414
	- 11,226,418 -	2,181,561 - 2,181,561 - - 11,226,418 - 3,873,326 3,873,326
		Total $ 18,193,121 519,362 1,249,853 526,038 20,488,374 2,382,993 1,045,400 (3,006,375) (221,849) 1,249,853 (372,847) (2,034,217) (957,042) 62,446,414 (10,764) 9,471,543 4,728,166 341,769 148,370 152,628 4,016,985 81,295,111

ANNUAL REPORT For the year ended 30 June 2010

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26. Operating Segments (continued)

(a) Geographical Region

The Group operates within one geographical region of Australia.

(b) Major Customers

The Group supplies a single external customer in the mining segment who accounts for 95% (2009: 94%) of external revenue.

27. Cash Flow Information

(a) Reconciliation of cash flows from operations with profit/(loss) after income tax

Operating profit/(loss) after income tax
Non-cash flows in profit:
Depreciation and amortisation
Provision for employee benefits
Provision for mine contractor incentive payment
Contingent consideration
Increase/(decrease) in the discounted amount for infrastructure
closure and restoration
Non-current asset write-off
Share option expense
Amortisation of deferred tax assets relating to share issue
costs
Gain on acquisition of Hellyer operating infrastructure and
mining lease
Net loss on derivative financial instruments
Unrealised gain on derivatives
Change in operating assets and liabilities net of the
effects of business combination acquisition:
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease on other assets – closure and
restoration
(Increase)/decrease on other financial assets
(Increase)/decrease in provision for restoration
(Increase)/decrease in other assets – derivatives
(Increase)/decrease in deferred tax assets relating to items
affecting the income statement
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Increase/(decrease) in deferred tax liability
Net cash provided by operating activities

Consolidated
2010
$
2009
$
(406,034)
19,122,323
4,520,646
6,862,100
135,876
25,155
(286,581)
678,486
38,094
-
(466,456)
-
1,840,651
5,017
372,847
113,666
216,555
65,621
(1,249,853)
(16,818,925)
416,983
-
(195,134)
-

4,937,594
10,053,443
1,187,707
(2,328,139)
530,589
(37,975)
(483,285)
-
(179,277)
-
483,285
(272,930)
-
2,754,698
(1,263,762)
(2,492,560)
2,974,208
2,443,150
(78,995)
248,498
496,199
3,559,753

8,604,263
13,927,938

(b) Non-cash financing and investment transactions

Issue of 100,000 shares to Mr B Hamilton for $23,000 through the granting of a loan by the Company under Share Purchase Plan.
Issue of 100,000 shares to Mr B Burdett for $29,000 through the granting of a loan by the Company under Share Purchase Plan.

ANNUAL REPORT For the year ended 30 June 2010

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28. Contingent Liabilities

At the end of the financial period the group had no contingent liabilities.

29. Share Based Payments

The following share-based payment arrangements existed at 30 June 2010.

(i) Bass Metals Ltd Share Purchase Plan

The Bass Metals Ltd Share Purchase Plan was approved by shareholders at an annual general meeting held on 27 November 2007. The Directors of the Company may in their absolute discretion make offers of shares and, on behalf of the Company, make corresponding loans to an eligible employee of the Company to which the Board has resolved that the Share Purchase Plan shall for the time being apply. The Board may, subject to any approvals of shareholders of the Company required by law, and at intervals determined by the Board, invite any eligible employee to participate in the Share Purchase Plan.

Participation is optional and subject to the Rules of the Plan. Offers made under the Share Purchase Plan are not renounceable. Shares offered under the Plan are offered at market value or, if the Board determines, for an amount equal to: (market value x N - $1.00)/N where N is the number of shares offered to the participant. The market value of a share subscribed for or acquired under the Plan is determined by the weighted average price at which the shares are traded on the ASX in the one week period up to and including the date of entitlement to that Share, or if there were no transactions on the Exchange in relation to the Shares during the relevant one week period (i) the last price at which an offer was made on the ASX in that period or (ii) if (i) does not apply, the arms length value assessed by an independent registered Company auditor or otherwise calculated in a manner approved by the Commissioner of Taxation.

There are currently 300,000 shares issued under this Plan.

(ii) Bass Metals Ltd Employee Share Option Plan

The Bass Metals Ltd Employee Share Option Plan was approved by shareholders at an annual general meeting held on 27 November 2007. The Directors of the Company administer the Employee Share Option Plan and in their absolute discretion determine to whom the securities will be offered, the number to be offered and any performance criteria that may apply before options may be exercised.

Options may not be offered to a Director or associates except where approval is given by shareholders at a general meeting of shareholders.

No consideration is payable by an eligible person for a grant of an Option, unless the Board decides otherwise. Subject to the Rules of the Plan and to the ASX Listing Rules, the Company (acting through the Board) may offer Options to any eligible person at such times and on such terms as the Board considers appropriate. Options may be exercised at any time during the period commencing on the issue date and ending no later than five years from the date of issue. Options issued under the Plan will automatically lapse in 30 days or such longer period as the Board determines in the event that the eligible person either resigned voluntarily from employment with the Company or is dismissed in certain circumstances.

Options issued under this Plan carry no dividend or voting rights.

On exercise, each option is convertible to one ordinary share within 10 business days of the receipt of the exercise notice and payment of the exercise price in Australian dollars. Amounts received on the exercise of options are recognised as share capital.

ANNUAL REPORT For the year ended 30 June 2010

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29. Share Based Payments (continued)

Set out below is a summary of options granted under the Employee Share Option Plan.

Outstanding at the beginning of the year (exercise price 37.5 cents, expiry 2 November 2011) Granted Forfeited Exercised Expired Outstanding at year-end Outstanding at the beginning of the year (exercise price 37.5 cents, expiry 31 December 2011) Forfeited Exercised Expired Outstanding at year-end Outstanding at the beginning of the year (exercise price 51 cents, expiring 31 December 2012) Forfeited Exercised Expired Outstanding at year-end Outstanding at the beginning of the year (exercise price 42.5 cents, expiry 16 October 2012) Granted Forfeited Exercised Expired Outstanding at year-end Outstanding at the beginning of the year (exercise price 25.0 cents, expiry 01 September 2013) Granted Forfeited Exercised Expired Outstanding at year-end Outstanding at the beginning of the year (exercise price 35.0 cents, expiry 01 September 2013) Granted Forfeited Exercised Expired Outstanding at year-end	2010 Number of Options 2009 Number of Options 250,000 125,000 - 125,000 - - - - - -
	250,000 250,000
	350,000 400,000 (125,000) (50,000) - - - -
	225,000 350,000
	525,000 665,000 (100,000) (140,000) - - - -
	425,000 525,000
	- - 1,455,000 (180,000) - - - - -
	1,275,000 -
	- - 100,000 - - - - - -
	100,000 -
	- - 100,000 - - - - - -
	100,000 -

ANNUAL REPORT For the year ended 30 June 2010

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29. Share Based Payments (continued)

(iii) Total Unlisted Options

Outstanding at the beginning of the year Granted Forfeited Exercised Expired Outstanding at year-end Exercisable at year-end	2010 2009 Number of Options Weighted Average Exercise Price$ Number of Options Weighted Average Exercise Price$
	2,500,000 0.350 2,790,00 0.350 3,505,000 0.348 125,000 0.375 (405,000) 0.431 (415,000) 0.370 - - - - - - - -
	5,600,000 0.342 2,500,000 0.350
	3,775,000 0.322 2,500,000 0.350

The above table includes both employee and key management personnel share options.

Options outstanding at 30 June 2010 had a weighted average exercise price of $0.342 (2009 $0.350) and a weighted average remaining contractual life of 2.1 years (2009: 2.7 years). Exercise prices range from $0.250 to $0.510 in respect of options outstanding at year end. The Company share price at year end was $0.165.

The weighted average fair value price for options granted during the year was $0.348 (2009 $0.375). This price was calculated by using a Black-Scholes option pricing model applying the following inputs at grant date:

Options issued Grant date Expiry date Weighted average exercise price Weighted average life of the option Underlying share price Expected share price volatility Risk free interest rate

300,000 07/12/2009 31/12/2012 $0.260 2.5 years $0.260 80.0% 4.92%

Options issued Grant date Expiry date Weighted average exercise price Weighted average life of the option Underlying share price Expected share price volatility Risk free interest rate

300,000 07/12/2009 31/12/2012 $0.285 2.5 years $0.260 80.0% 4.92%

Options issued Grant date Expiry date Weighted average exercise price Weighted average life of the option Underlying share price Expected share price volatility Risk free interest rate

300,000 07/12/2009 31/12/2012 $0.305 2.5 years $0.260 80.0% 4.92%

Options issued Grant date Expiry date Weighted average exercise price Weighted average life of the option Underlying share price Expected share price volatility Risk free interest rate

950,000

07/12/2009 31/12/2012 $0.300 2.5 years $0.260 80.0% 4.92%

ANNUAL REPORT For the year ended 30 June 2010

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29. Share Based Payments (continued)

Options issued 1,455,000 Grant date 16/10/2009 Expiry date 16/10/2012 Weighted average exercise price $0.425 Weighted average life of the option 2.3 years Underlying share price $0.330 Expected share price volatility 80.0% Risk free interest rate 5.29% Options issued 100,000 Grant date 27/10/2009 Expiry date 01/09/2013 Weighted average exercise price $0.350 Weighted average life of the option 3.2 years Underlying share price $0.305 Expected share price volatility 80.0% Risk free interest rate 5.33% Options issued 100,000 Grant date 27/10/2009 Expiry date 01/09/2013 Weighted average exercise price $0.250 Weighted average life of the option 3.2 years Underlying share price $0.305 Expected share price volatility 80.0% Risk free interest rate 5.33%

Historical volatility has been the basis for determining expected share price volatility as it assumed that this is indicative of future tender, which may not eventuate.

The life of the options is based on the expiry date. Included under share option expense in the Statement of Comprehensive Income is $372,847 (2009: $113,666) and relates, in full, to equity-settled share-based payment transactions.

30. Events after the Balance Sheet Date

The financial report was authorised for issue on 10 September 2010 by the Board of Directors.

The Group continues to develop the Hellyer Mine Project and is incurring capital expenditure consistent with the project budget approved by the Board. During September 2010, the Board also executed the $12 million project finance facility with RMB Resources Limited to complete the capital funding requirements of the project. Consistent with the terms of that agreement, the Group is in the process of satisfying certain conditions in preparation for drawing on that facility; including the issuing of options to the financier and the execution of a base metal hedging program.

There has not been any other matter or circumstance not otherwise dealt with in the financial report that has significantly affected or may significantly affect the Group.

31. Related Party Transactions

Transactions between related parties are as follows:

(a) Key Management Personnel

(i) Taurus Funds Management Pty Ltd, an entity related to Mr C McGown, was paid $35,400 (2009: $3,623) for management consulting, and was reimbursed at cost for expenditure made on behalf of the Group.
(ii ) Boyer Exploration and Resource Management Pty Ltd, an entity related to Mr D Boyer, was paid $16,721 (2009: $20,812) for exploration and management consulting, and was reimbursed at cost for expenditure made on behalf of the Group.
(iii ) Metals Finance Corporation, an entity related to Mr T Treasure, was paid $9,510 (2009: $nil) for reimbursement at cost for expenditure made on behalf of the Group.

ANNUAL REPORT For the year ended 30 June 2010

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31. Related Party Transactions (continued)

(iv) Intec Hellyer Metals Pty Ltd, an entity related to Mr K Rodgers, was paid $nil (2009: $47,183) for reimbursement at cost for expenditure made on behalf of the Group and for site costs for use of utilities whilst he was a Director.

No balance is outstanding at 30 June 2010 in relation to the abovementioned related parties.

Additional disclosures relating to the remuneration and shareholdings of key management personnel are set out in the Remuneration Report and Note 33 respectively.

(b) Subsidiary

The Company has provided its wholly owned subsidiary Hellyer Mill Operations Pty Ltd with a loan for the acquisition of Hellyer operating infrastructure, payment for the Hellyer mining lease guarantee and care and maintenance expenses. The current amount outstanding at 30 June 2010 is $10,688,726 (2009: $6,334,972). Loans provided to subsidiaries are interest free and have no fixed payment term.

32. Financial Risk Management

a. Financial Risk Management Policies

The Group’s financial instruments consist of at call and short term deposits with banks, accounts receivable and payable, borrowings, leases and derivatives.

Derivatives are used by the Group for hedging purposes. During the financial year these instruments included short dated Australian Dollar (AUD) denominated lead and zinc forward sales. The Group does not speculate in the trading of derivative instruments.

(i) Treasury Risk Management

A Hedge Committee consisting of the Managing Director, the Chief Financial Officer and a Non-executive Director, with experience in financial markets, meet on a regular basis to analyse financial risk exposure and to evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. The Board is provided with regular updates of the Group’s financial instruments.

The Committee’s overall risk management strategy seeks to assist the Group in meeting its financial targets, whilst minimising potential adverse effects on financial performance.

The Group operates under policies approved by the Board of Directors. Risk management policies are approved and reviewed by the Board on a regular basis. These include the use of hedging derivative instruments.

(ii) Financial Risk Exposures and Management

The main risks the Group is exposed to through its financial instruments and operations are interest rate risk, foreign currency risk, liquidity risk, credit risk and price risk.

Interest rate risk

Short term borrowings interest rate risk is mitigated as 100% of the debt is at a fixed rate. For further details on interest rate risk refer to Note 32 (b)(iv).

Foreign currency risk

The Group is exposed to fluctuations in foreign currencies arising from the sale of ore and purchase of goods and services in currencies other than the Group’s functional currency. Refer to Note 32 (b)(i) for further details.

ANNUAL REPORT For the year ended 30 June 2010

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32. Financial Risk Management (continued)

Liquidity risk

The Group manages liquidity risk by monitoring forecast cash flows and investing in financial instruments which under normal market conditions are readily converted to cash.

Credit risk

The maximum exposure to credit risk at reporting date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the Statement of Financial Position and notes to the financial statements.

There are no amounts of collateral held as security at 30 June 2010.

Credit risk is managed on a Group basis and reviewed regularly by the Group. It arises from exposures to customers as well as through certain derivative financial instruments and deposits with financial institutions.

The Group monitors credit risk by actively assessing liquidity of counter parties:

Only banks and financial institutions with a high rating are utilised for derivative financial instruments; and
All potential customers are assessed for credit worthiness taking into account their size, market position and financial standing.

The credit risk for counterparties included in trade and other receivables and financial assets at 30 June 2010 are detailed below:

Trade and other receivables Trade receivables - counterparties not rated1 Other receivables - counterparties not rated2	Consolidated 2010 $ 2009 $ 4,062,664 5,779,245 3,422,250 1,726,530 7,484,914 7,505,775

Note 1 - Bass Metals Ltd currently only has trade receivables with Minerals and Metals Group Ltd and minor accounts for recharging of expenses.

Note 2 – Other receivables exclude prepayments as detailed in note 7.

Financial assets – Derivative financial instruments AA - rated counterparties Financial liabilities – Derivative financial instruments AA - rated counterparties	148,370 5,747
	148,370 5,747
	- 52,511
	- 52,511

Note: The above are based on long term Fitch ratings as at 30 June 2010.

Credit risk for derivative financial instruments arises from the potential failure by counter parties to the contract to meet their obligations.

Price Risk

The Group is exposed to commodity price risk through its Que River mining operations. The Group manages this risk by entering into AUD lead and zinc forward sales. The amount and nature of hedging has been determined and administered by the Hedge Committee in line with the Company’s Financial Risk Management Policy Statement.

ANNUAL REPORT For the year ended 30 June 2010

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32. Financial Risk Management (continued)

b. Financial Instruments

(i) Derivative Financial Instruments

Derivative financial instruments are used by the Group to hedge exposure to exchange rate and price risk associated with ore sales under the ore sales agreement with Minerals and Metals Group.

Consolidated AUD Zinc forward sales contracts Settlement Less than 6 months AUD Lead forward sales contracts Settlement Less than 6 months Total commodity price options	2010 $ Average Commodity Price $ 2009 $ Average Commodity Price $
	104,317 2,108 AUD / t 5,369 1,897 AUD / t

	44,054 2,064 AUD / t (52,511) 1,998 AUD / t
	148,371 (47,142)

The Group uses short dated AUD denominated lead and zinc forward sales for hedging.

AUD call / USD put foreign exchange options Settlement Less than 6 months 6 months to 1 year Greater than 1 year Total foreign exchange options Total options	2010 $ Average Exchange Rate $ 2009 $ Average Exchange Rate $ - - 378 0.96 AUD/USD - - - - - - - -
	- 378
	148,371 (46,764)

(ii) Financial instrument composition and maturity analysis

The tables below reflect the undiscounted contractual settlement terms for financial instruments of a fixed period of maturity, as well as management’s expectations of the settlement period for all other financial instrument. As such, the amounts may not reconcile to the Statement of Financial Position.

ANNUAL REPORT For the year ended 30 June 2010

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32. Financial Risk Management (continued)

Consolidated 30 June 2009 Financial Assets: Cash & cash equivalents Trade and other receivables Derivative financial instruments Total Financial Assets Financial Liabilities: Trade and other payables Short-term borrowings Derivative financial instruments Total Financial Liabilities 30 June 2010 Financial Assets: Cash & cash equivalents Trade and other receivables Derivative financial instruments Total Financial Assets Financial Liabilities: Trade and other payables Short-term borrowings Derivative financial instruments Total Financial Liabilities	Weighted Average Effective Interest Rate	Fixed Interest Rate Maturing Floating Interest Rate Within Year 1 to 5 Years Over 5 Years Non- interest bearing Total
	3.00% 3.57% 4.59% Weighted Average Effective Interest Rate	$ $ $ $ $ $ 4,544,337 - - - - 4,544,337 - - 1,717,457 - 5,788,318 7,505,775 - - - - 5,747 5,747
		4,544,337 - 1,717,457 - 5,794,065 12,055,859
		- - - - 2,090,470 2,090,470 - 156,267 - - - 156,267 - - - - 52,511 52,511
		- 156,267 - - 2,142,981 2,299,248
		Fixed Interest Rate Maturing Floating Interest Rate Within Year 1 to 5 Years Over 5 Years Non- interest bearing Total
	5.16% 5.68%	$ $ $ $ $ $ 9,471,543 - - - - 9,471,543 - - 2,765,392 - 4,719,522 7,484,914 - - - - 148,370 148,370
		9,471,543 - 2,765,392 - 4,867,892 17,104,827
		- - - - 5,064,678 5,064,678 - - - - - - - - - - - -
		- - - - 5,064,678 5,064,678

The above weighted average effective interest rates are as at 30 June 2010.

ANNUAL REPORT For the year ended 30 June 2010

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32. Financial Risk Management (continued)

The above weighted average effective interest rates are as at 30 June 2010.

Trade and other receivables are expected to be received as follows:

Less than 6 months 6 months to 1 year 1 to 5 years Over 5 years	Consolidated 2010 $ 2009 $ 4,717,402 5,786,198 2,120 2,120 2,765,392 1,717,457 - -
	7,484,914 7,505,775

There are no balances within trade and other receivables that contain assets that have been impaired and are past due. The Company’s ore sales to MMG Australia Limited make up the majority of trade and other receivables expected to be received in less than six months. It is expected these balances will be received when due.

Trade and other payables are expected to be paid as follows:

Less than 6 months 6 months to 1 year 1 to 5 years Over 5 years	Consolidated 2010 $ 2009 $ 5,064,678 2,090,470 - - - - - -
	5,064,678 2,090,470

(iii) Net Fair Values

The net fair values of the Group’s at call and short term deposits with banks, accounts receivable and payable, borrowings, leases and derivatives are all in line with the carrying values.

No financial assets and financial liabilities are readily traded on organised markets in standardised form other than derivative financial instruments.

Aggregate net fair values and carrying amounts of financial assets and financial liabilities at reporting date are as follows:

Consolidated

Consolidated Financial Assets Cash and cash equivalents Loans and receivables Derivative financial instruments	2010 2009
	Carrying Amount Carrying Amount
	$ $ 9,471,543 4,544,337 7,484,914 7,505,775 148,370 5,747
	17,104,827 12,055,859

The fair values of financial assets are comparable to the carrying amount.

Financial Liabilities At amortised cost: Trade and other payables Borrowings Derivative financial instruments	2010 2009
	Carrying Amount Carrying Amount
	$ $ 5,064,678 2,090,470 - 156,267 - 52,511
	5,064,678 2,299,248

ANNUAL REPORT For the year ended 30 June 2010

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32. Financial Risk Management (continued)

The fair values of financial liabilities are comparable to the carrying amount.

The financial instruments recognised at fair value in the Statement of Financial Position have been analysed and classified using a fair value hierarchy reflecting the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following levels:

quoted prices in active markets for identical assets and liabilities (Level 1);
inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

Consolidated 2009 Financial Assets: Financial assets at fair value through profit or loss: - Derivative instruments Financial Liabilities: Financial liabilities at fair value through profit or loss: - Derivative instruments Consolidated 2010 Financial Assets: Financial assets at fair value through profit or loss: - Derivative instruments Financial Liabilities: Financial liabilities at fair value through profit or loss: - Derivative instruments	Level 1 Level 2 Level 3 Total $ $ $ $ 5,747 - - 5,747
	5,747 - - 5,747
	52,511 - - 52,511
	52,511 - - 52,511
	Level 1 Level 2 Level 3 Total $ $ $ $ 148,370 - - 148,370
	148,370 - - 148,370
	- - - -
	- - - -

(iv) Sensitivity Analysis

Interest Rate Risk, Foreign Currency Risk and Price Risk

The Group has performed a sensitivity analysis relating to its exposure to interest rate risk, foreign currency risk and price risk at reporting date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks.

ANNUAL REPORT For the year ended 30 June 2010

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32. Financial Risk Management (continued)

Interest Rate Sensitivity Analysis

At 30 June 2010, the effect on profit and equity as a result of changes in the interest rate with all other variables remaining constant would be as follows:

	Consolidated
	2010	2009
	$	$
Change in profit
Increase in interest rate by 1% (100 bps)	119,826	58,263
Decrease in interest rate by 1% (100 bps)	(119,826)	(58,263)
Change in equity
Increase in interest rate by 1% (100 bps)	119,826	58,263
Decrease in interest rate by 1% (100 bps)	(119,826)	(58,263)

Foreign Currency Risk Sensitivity Analysis

At 30 June 2010, the effect on profit and equity as a result of changes in the value of the Australian Dollar to the US Dollar, with all other variables remaining constant is as follows:

	Consolidated
	2010	2009
	$	$
Change in profit
Increase in AUD to USD by 5%	(951,918)	(1,235,731)
Decrease in AUD to USD by 5%	951,918	1,235,731
Change in equity
Increase of AUD to USD by 5%	(951,918)	(1,235,731)
Decrease in AUD to USD by 5%	951,918	1,235,731

Price Risk Sensitivity Analysis

At 30 June 2010, the effect on profit and equity in Australian Dollars as a result of changes in the price risk, with all other variables remaining constant would be as follows:

	Consolidated
	2010	2009
	$	$
Change in profit
Increase in zinc price by $200 USD/tonne	705,499	1,275,426
Increase in lead price by $200 USD/tonne	486,017	674,964
Decrease in zinc price by $200 USD/tonne	(705,499)	(1,275,426)
Decrease in lead price by $200 USD/tonne	(486,017)	(674,964)
Change in equity
Increase in zinc price by $200 USD/tonne	705,499	1,275,426
Increase in lead price by $200 USD/tonne	486,017	674,964
Decrease in zinc price by $200 USD/tonne	(705,499)	(1,275,426)
Decrease in lead price by $200 USD/tonne	(486,017)	(674,964)

ANNUAL REPORT For the year ended 30 June 2010

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33. Key Management Personnel

This note should be read in conjunction with the remuneration section of the Directors’ Report.

(i) Details of Key Management Personnel

Chairman – Non-executive

Mr D Boyer (from 2 August 2004)

Executive Director

Mr M Rosenstreich (from 15 December 2004)

Non-executive Directors

Mr C McGown (from 7 July 2004) Mr P Treasure (from 2 December 2008)

Other Key Management Personnel

Mr L Henley – Financial Controller (resigned on 9 April 2010) Dr T Murphy – Exploration Manager (resigned from the Executive 31 August 2008) Mr B Hamilton – Chief Financial Officer (from 17 September 2009) Ms S Hunter – Company Secretary (from 28 September 2006) Mr K Denwer – Exploration Manager (from 1 September 2008) Mr B Burdett – General Manager Operations – Tasmania (from 3 November 2009)

Refer to the Remuneration Report contained in the Directors’ report for details of the remuneration paid or payable to each member of the Group’s Key Management Personnel for the year ended 30 June 2010.

The totals of remuneration paid to Key Management Personnel of the Group during the year are as follows:

Short-term employee benefits (salary and leave) Short-term employee benefits (performance bonus) Post-employment benefits Non-cash benefits Termination benefits Share-based payments	Consolidated 2010 $ 2009 $ 756,126 383,170 20,000 - 44,096 41,309 6,425 10,179 46,631 - 121,275 5,250
	994,553 439,908

ANNUAL REPORT For the year ended 30 June 2010

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33. Key Management Personnel (continued)

(ii) Shareholdings of Key Management Personnel

Shares held directly and indirectly in the Company:

2009 Mr D Boyer Mr M Rosenstreich Mr C McGown Mr P Treasure Dr T Murphy Mr L Henley Mr K Denwer 2010 Mr D Boyer Mr M Rosenstreich Mr C McGown Mr P Treasure Mr L Henley1 Dr T Murphy2 Mr B Hamilton Ms S Hunter Mr K Denwer Mr B Burdett	Balance at the start of the period On exercise of options On market transactions Employee share purchase plan Balance at the end of the period 1,290,000 - - - 1,290,000 1,246,251 - 60,000 - 1,306,251 1,351,915 - - - 1,351,915 - - 21,611,000 - 21,611,000 50,000 - - - 50,000 25,000 - - 25,000 50,000 - - - 50,000 50,000
	3,963,166 - 21,671,000 75,000 25,709,166
	Balance at the start of the period On exercise of options On market transactions Employee share purchase plan Balance at the end of the period 1,290,000 - 332,336 - 1,622,336 1,306,251 - 162,646 - 1,468,897 1,351,915 - 300,431 - 1,652,346 21,611,000 - 4,802,445 - 26,413,445 50,000 - - - 50,000 50,000 - - - 50,000 - - - 100,000 100,000 - - 17,500 - 17,500 50,000 - - - 50,000 - - - 100,000 100,000
	25,709,166 - 5,615,358 200,000 31,524,524

Note 1 – These were Mr L Henley’s relevant interest when he resigned on 9 April, 2010.

Note 2 – Dr T Murphy resigned from the Executive on 31 August 2008. These were Dr T Murphy’s relevant interest when he resigned from the company on 16 June, 2010.

All equity transactions with key management personnel, which relate to the Company’s listed ordinary shares, have been entered into on an arm’s length basis.

(iii) Loans to Key Management Personnel

The loans to key management personnel during the year are as follows:

2009 Dr T Murphy Mr L Henley Mr K Denwer	Balance at the start of the period Additional loans Repayment of loans Balance at the end of the period
	$ $ $ $ 5,500 8,000 - 13,500 6,000 3,625 - 9,625 - 6,500 - 6,500
	11,500 18,125 - 29,625

ANNUAL REPORT For the year ended 30 June 2010

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33. Key Management Personnel (continued)

2010	Balance at the	Additional	Repayment of	Balance at the
	start of the	loans	loans	end of the
	period			period
	$	$	$	$
Mr L Henley	9,625	-	(9,625)	-
Dr T Murphy	13,500	-	-	13,500
Mr B Hamilton	-	23,000	-	23,000
Ms S Hunter	-	-	-	-
Mr K Denwer	6,500	-	-	6,500
Mr B Burdett		29,000	-	29,000
	29,625	52,000	(9,625)	72,000
Under the terms of the employee share option plan no interest is			payable in respect of the above loans. Based
on fringe benefits tax benchmark interest rate of 5.85% (2009: 9.00%) the following amounts would have been
charged on an arm’s length basis for the period outstanding during the year.
			2010	2009
			$	$
Mr L Henley			437	527
Dr T Murphy			759	203
Mr B Hamilton			844	-
Ms S Hunter			-	-
Mr K Denwer			380	340
Mr B Burdett			1,064	-

All loans granted under this plan are unsecured and are made for either a period of 10 years, until the employee repays the loan, the Company forgives the loan or until the employee ceases his employment with the Company, whichever occurs first.

(iv)

Options held by Key Management Personnel

Details of options over ordinary shares provided as compensation to each key management personnel of the Company are set out below. When exercised each option is convertible to one ordinary share in Bass Metals Ltd.

2009 Directors Mr D Boyer Mr M Rosenstreich Mr C McGown Company Executives Ms S Hunter Ms S Hunter Mr L Henley Mr L Henley	Balance at start of the period Issued during the period Exercised during the period Lapsed during the period Balance at the end of the period Vested and exercisable at the end of the period
	300,000 - - - 300,000 300,000 850,000 - - - 850,000 850,000 225,000 - - - 225,000 225,000
	1,375,000 - - - 1,375,000 1,375,000
	125,000 - - - 125,000 125,000 100,000 - - - 100,000 100,000 125,000 125,000 - - 250,000 250,000 100,000 - - - 100,000 100,000
	450,000 125,000 - - 575,000 575,000

ANNUAL REPORT For the year ended 30 June 2010

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33. Key Management Personnel (continued)

2010 Directors Mr D Boyer Mr M Rosenstreich Mr C McGown Mr P Treasure Company Executives Mr L Henley Mr B Hamilton Ms S Hunter Mr K Denwer Mr B Burdett	Balance at start of the period Issued during the period Exercised during the period Lapsed during the period Balance at the end of the period Vested and exercisable at the end of the period
	300,000 300,000 - - 600,000 600,000 850,000 900,000 - - 1,750,000 1,150,000 225,000 250,000 - - 475,000 475,000 - 250,000 - - 250,000 250,000
	1,375,000 1,700,000 - - 3,075,000 2,475,000
	350,000 - - (350,000) - - - - - - - - 225,000 150,000 - - 375,000 375,000 - 330,000 - - 330,000 200,000 - - - - - -
	575,000 480,000 - (350,000) 705,000 575,000

34. Remuneration of Auditors

Amounts received or due and receivable by Grant Thornton Audit Pty Ltd for: Audit or review of the financial reports Consulting - Taxation services Consulting – Other Services by Grant Thornton Corporate Finance (NSW) for: Consulting – Independent Experts Report and due diligence services	Consolidated 2010 $ 2009 $ 57,035 41,382 18,750 18,678 - 14,795
	75,785 74,855

	- 60,490

ANNUAL REPORT For the year ended 30 June 2010

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35. Parent Entity Disclosure

Financial Position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued capital Retained earnings Reserves Option reserve Total equity Financial performance Profit/(loss) for the year Other comprehensive income Total comprehensive income/(loss) Capital expenditure commitments Exploration tenements Not later than 12 months Between 12 months and five years Greater than five years	2010 $ 2009 $ 14,414,123 11,121,318 35,945,048 22,154,368
	50,359,171 33,275,686
	5,635,350 4,113,468 4,538,012 3,564,718
	10,173,362 7,678,186
	37,172,160 22,294,441
	1,841,171 2,503,428 1,172,478 799,631
	40,185,809 25,597,500
	(662,257) 3,004,645 - -
	(662,257) 3,004,645
	546,000 507,050 1,780,000 2,061,000 - -
	2,326,000 2,568,050

36. Controlled Entity

Bass Metals Ltd subsidiary for the financial period is:

Hellyer Mill Operations Pty Ltd which is incorporated in Australia – 100% interest (2009: 100%).

ANNUAL REPORT For the year ended 30 June 2010

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Directors Declaration

In the opinion of the Directors of Bass Metals Ltd (the “Company”):
a. The financial statements and notes and the remuneration disclosures that are contained in sections of the Remuneration Report in the Directors’ report, set out on pages 33 to 38 are in accordance with the Corporations Act 2001, including:
- i. Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of its performance, for the financial year ended on that date; and
- ii. Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001;

iii. Complying with International Financial Reporting Standards as disclosed in Note 1.

b. The remuneration disclosures that are contained in the Remuneration Report in the Directors’ Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures ; and
c. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing Director and Chief Financial Officer for the financial year ended 30 June 2010.

Signed in accordance with a resolution of the Directors of the Company.

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M Rosenstreich Managing Director

West Perth, Western Australia 10 September 2010

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Grant Thornton Audit Pty Ltd ABN 94 269 609 023

10 Kings Park Road West Perth WA 6005 PO Box 570 West Perth WA 6872

T +61 8 9480 2000 F +61 8 9322 7787 E [email protected] W www.grantthornton.com.au

Independent Auditor’s Report To the Members of Bass Metals Ltd

Report on the financial report

We have audited the accompanying financial report of Bass Metals Ltd (the “Company”), which comprises the statement of financial position as at 30 June 2010, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes to the financial report 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 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 are 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. The directors also state, in the notes to the financial report, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s responsibility

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

Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia.

Liability limited by a scheme approved under Professional Standards Legislation

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An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error.

In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

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

Independence

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

Auditor’s opinion

In our opinion:

a the financial report of Bass Metals Ltd is in accordance with the Corporations Act 2001, including:
i giving a true and fair view of the consolidated entity’s financial position as at 30 June 2010 and of it’s performance for the year ended on that date; and
ii complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and
b the financial report also complies with International Financial Reporting Standards as disclosed in the notes to the financial statements.

Report on the remuneration report

We have audited the Remuneration Report included in pages 33 to 38 of the directors’ report for the year ended 30 June 2010. 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.

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Auditor’s opinion on the remuneration report

In our opinion, the Remuneration Report of Bass Metals Ltd for the year ended 30 June 2010, complies with section 300A of the Corporations Act 2001.

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GRANT THORNTON AUDIT PTY LTD Chartered Accountants

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M J Hillgrove Director – Audit & Assurance

Perth, 10 September 2010

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Grant Thornton Audit Pty Ltd ABN 94 269 609 023

10 Kings Park Road West Perth WA 6005 PO Box 570 West Perth WA 6872

T +61 8 9480 2000 F +61 8 9322 7787 E [email protected] W www.grantthornton.com.au

Auditor’s Independence Declaration To the Directors of Bass Metals Ltd

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Bass Metals Ltd for the year ended 30 June 2010, I declare that, to the best of my knowledge and belief, there have been:

a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b no contraventions of any applicable code of professional conduct in relation to the audit.

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GRANT THORNTON AUDIT PTY LTD Chartered Accountants

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M J Hillgrove Director – Audit & Assurance

Perth, 10 September 2010

Liability limited by a scheme approved under Professional Standards Legislation

100

ANNUAL REPORT For the year ended 30 June 2010

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7. ADDITIONAL INFORMATION

The following additional information is required by the ASX Listing Rules. The information is current as at 1 September 2010.

(a) Distribution schedule and number of holders of equity securities as at 1 September 2010

	– 1,000	1,001 –	5,001 –	10,001 –	100,001 –	Total
		5,000	10,000	100,000	and over
Fully Paid Ordinary	51	328	293	938	246	1,856
Shares (BSM)
Unquoted Options –	0	0	0	0	3	3
27.5c 22/12/11
Unquoted Options –	0	0	0	1	1	2
37.5c 31/12/11
Unquoted Options –	0	0	0	5	0	5
51c 31/12/12
Unquoted Options –	0	0	0	0	1	1
37.5c 02/11/11
Unquoted Options –	0	0	0	1	0	1
25.0c 01/09/13
Unquoted Options –	0	0	0	1	0	1
35.0c 01/09/13
Unquoted Options –	0	0	0	20	1	21
42.5c 16/10/12
Unquoted Options –	0	0	0	0	4	4
30.0c 31/12/12
Unquoted Options –	0	0	0	0	1	1
26.0c 31/12/12
Unquoted Options –	0	0	0	0	1	1
28.5c 31/12/12
Unquoted Options –	0	0	0	0	1	1
30.5c 31/12/12

The number of holders holding less than a marketable parcel of fully paid ordinary shares (BSM) as at 01 September 2010 is 212.

101

ANNUAL REPORT For the year ended 30 June 2010

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7. ADDITIONAL INFORMATION (continued)

(b) Twenty largest holders of quoted equity securities as at 1 September 2010

The names of the twenty largest holders of fully paid ordinary shares (ASX code: BSM) as at 1 September 2010 are:

Rank	Name	No. Shares	% of Issued
		Held	Capital
1	METALS FINANCE LIMITED	26,413,445	15.49
2	ANZ NOMINEES LIMITED	11,438,830	6.71
3	HSBC CUSTODY NOMINEES	4,571,508	2.68
4	MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED <BERNDALE	3,265,625	1.92
	A/C>
5	ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD <CUSTODIAN	2,257,150	1.32
	A/C>
6	NATIONAL NOMINEES LIMITED	2,238,372	1.31
7	REMOND HOLDINGS PTY LIMITED	2,117,527	1.24
8	FORBAR CUSTODIANS LIMITED <FORSYTH BARR LTD-NOMINEE	1,960,467	1.15
	A/C>
9	DAMPLIN INVESTMENTS PTY LTD	1,818,887	1.07
10	IONIKOS PTY LTD	1,560,673	0.92
11	PIAT CORP PTY LTD	1,500,000	0.88
12	MR MICHAEL ROSENSTREICH & MS WENDY ROSENSTREICH	1,397,623	0.82

13	MR DAVID DONALD BOYER	1,387,223	0.81
14	BERNE NO 132 NOMINEES PTY LTD <376804 A/C>	1,304,347	0.76
15	CITICORP NOMINEES PTY LIMITED	1,280,358	0.75
16	DBS VICKERS SECURITIES (SINGAPORE) PTE LTD <CLIENT	1,263,000	0.74
	ACCOUNT>
17	MR RICHARD KEITH HAMILL + MS SUSAN BELLE HAMILL	1,200,000	0.70

18	DOUGLAS FINANCIAL CONSULTANTS PTY LTD	1,173,914	0.69
19	MR DAVID DAWSON	1,150,000	0.67
20	GRIMWOOD NOMINEES PTY LTD	1,063,334	0.62
	Total	70,362,283	41.25

Stock Exchange Listings – Listings have been granted for all ordinary fully paid shares of the Company on issue on ASX Limited and the Deutsche Börse, Berlin and Frankfurt exchanges.

(c) Substantial shareholders

Substantial shareholders in Bass Metals Ltd and the number of equity securities over which the substantial shareholder has a relevant interest as disclosed in substantial holding notices given to the Company are listed below:

Name	No. Shares	% of Issued
	Held	Capital
METALS FINANCE LIMITED	26,413,445	15.49
ANZ NOMINEES LIMITED	11,438,830	6.71

102

ANNUAL REPORT For the year ended 30 June 2010

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7. ADDITIONAL INFORMATION (continued)

(d) Unquoted Securities

The number of unquoted securities on issue as at 1 September 2010 were as follows:

Unquoted Securities	Number on	Exercise	Expiry Date
	Issue	Price
Unquoted Options	1,375,000	27.5c	22/12/11
Unquoted Options	225,000	37.5c	31/12/11
Unquoted Options	425,000	51.0c	31/12/12
Unquoted Options	125,000	37.5c	2/11/11
Unquoted Options	125,000	37.5c	02/11/11
Unquoted Options	100,000	25.0c	01/09/13
Unquoted Options	100,000	35.0c	01/09/13
Unquoted Options	1,275,000	42.5c	16/10/12
Unquoted Options	950,000	30.0c	31/12/12
Unquoted Options	300,000	26.0c	31/12/12
Unquoted Options	300,000	28.5c	31/12/12
Unquoted Options	300,000	30.5c	31/12/12

(e) Names of persons holding more than 20% of a given class of unquoted securities (other than securities issued under an employee option scheme) as at 1 September 2010

Security	Name	Number of Securities	% of Class
Unquoted Options	D. Boyer	300,000	21.8%
– 27.5c 22/12/11
Unquoted Options	M. & W. Rosenstreich	850,000	61.8%
– 27.5c 22/12/11
Unquoted Options	M. & W. Rosenstreich	300,000	100%
– 26c 31/12/12
Unquoted Options	M. & W. Rosenstreich	300,000	100%
– 28.5c 31/12/12
Unquoted Options	M. & W. Rosenstreich	300,000	100%
– 30.5c 31/12/12
Unquoted Options	D. Boyer	300,000	31.6%
– 30c 31/12/12
Unquoted Options	Metals Finance Limited	250,000	26.3%
– 30c 31/12/12
Unquoted Options	Ionikos Pty Ltd	250,000	26.3%
– 30c 31/12/12

(f) Restricted Securities as at 1 September 2010

There are no restricted securities on issue as at 1 September 2010.

(g) Voting Rights

All fully paid ordinary shares carry one vote per ordinary share without restriction.

Unquoted options have no voting rights.

(h) Company Secretary

The Company Secretary is Ms Susan Hunter.

(i) Registered Office

The Company’s Registered Office is 16 Thelma Street, West Perth, Western Australia, 6005. Telephone +61 8 6315 1300.

(j) Share Registry

The Company’s Share Registry is Computershare Investor Services Pty Ltd of Level 2, 45 St Georges Terrace, Perth WA 6000. Telephone 1300 557 010.

103

ANNUAL REPORT For the year ended 30 June 2010

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7. ADDITIONAL INFORMATION (continued)

(k) On-Market Buy-back

The Company is not currently performing an on-market buy-back.

(l) Interests in Mining Tenements

The Companies interests in mining tenements are as follows:

Tenement	Interest
EL31/2003 Heazlewood	100%
EL36/2003 Whyte River	100%
EL48/2003 Mt Block	100%
EL24/2004 Bulgobac River	100%
EL28/2009 Lake Margaret	75%
EL20/1010 Sock Creek	75%
CML 103M/1987 Hellyer Mine Lease	100%*
ML 68M/1984 Que River Mine Lease	100%
Hellyer 10W/1980 Access Easement to QRML	100%
RL11/1997 Mt Charter Retention	100%

This tenement is held through a sublease between Bass Metals Ltd and Hellyer Mill Operations Pty Ltd which entitles the Company to all the sub surface mining rights.

104

AI assistant

GREENWING RESOURCES LTD — Annual Report 2010

65029_rns_2010-09-12_bd148a41-e925-47df-bbf5-9c6aacaa716b.pdf

ABN 31 109 933 995

Table of Contents

1. CORPORATE DIRECTORY

DIRECTORS

COMPANY SECRETARY

REGISTERED OFFICE

LEGAL ADVISORS

FINANCIAL RISK ADVISORY

SHARE REGISTRY

AUDITORS

STOCK EXCHANGE LISTINGS

Chairman’s Letter

Dear Fellow Shareholder

Organic Growth

Transactional Growth

The Future

2. REVIEW OF OPERATIONS

2.0 OVERVIEW

2. REVIEW OF OPERATIONS (continued)

2.1. SUSTAINABILITY

2.1.1 OCCUPATIONAL HEALTH AND SAFETY

2.1.2 ENVIRONMENTAL MANAGEMENT

2.1.3 HUMAN RESOURCES

2.2 TASMANIAN OPERATIONS

2.2.1 HELLYER MINE PROJECTS – (Cu-Pb-Zn-Ag & Au)

2. REVIEW OF OPERATIONS (continued)

2. REVIEW OF OPERATIONS (continued)

Table 1: HOP Technical & Financial Summary

Table 2: Commodity price & FX assumptions utilised in the HOP & DFS

2. REVIEW OF OPERATIONS (continued)

d. Base Metal Concentrate Sales & Marketing

2. REVIEW OF OPERATIONS (continued)

2.2.2 QUE RIVER MINE - (Cu-Pb-Zn-Ag & Au)

a. Mining Activities

Table 3: Production Comparison – Mined vs. Predicted FY2010

b. Ore Sales

c. Operating Performance

Revenue

Operating Margin

Table 4: Unit Operating Profit – per tonne of ore sold

2. REVIEW OF OPERATIONS (continued)

d. Que River Mine Outlook

2.2.3 SPECIAL PROJECTS

a. Hellyer Tailings Retreatment Project

b. Gold Recovery Project

2. REVIEW OF OPERATIONS (continued)

2.2.4 TASMANIAN ORE RESERVES AND MINERAL RESOURCES

a. Ore Reserves

Table 7: Tasmanian Ore Reserves as at 30 June 2010 – 5% Pb+Zn cut-off

Table 7a: Tasmanian Mining Inventory as at 30 June 2010 – 5% Pb+Zn cut-off

2. REVIEW OF OPERATIONS (continued)

b. Massive Sulphide Resources

Table 8: Combined Polymetallic Massive Sulphide Mineral Resources as at 30 June 2010 – 5% Pb+Zn cut-off

Table 9: Hellyer Tails Combined Mineral Resource Estimate – 23 June 2009

d. Mt Charter Gold-Silver Resource

Table 10: Summary of Mt Charter Mineral Resource at a 0.7g/t Au cut-off - 30 October 2006

2. REVIEW OF OPERATIONS (continued)

2.3 EXPLORATION

2.3.1 OVERVIEW

2.3.2 HELLYER – MT CHARTER CORRIDOR (HMCC) BASS METALS LTD 100%

2. REVIEW OF OPERATIONS (continued)

Figure 4: Geology of the Hellyer – Mt Charter Corridor and prospects

2. REVIEW OF OPERATIONS (continued)

b. Que River Mine Lease (ML 68M/1987) (Bass Metals Ltd 100%)

Figure 5: D-Zone soil anomaly and schematic geology

2. REVIEW OF OPERATIONS (continued)

2.3.3 REGIONAL EXPLORATION

2. REVIEW OF OPERATIONS (continued)

2.4. COMPETENT PERSONS STATEMENTS

2.4.1 EXPLORATION RESULTS

2.4.2 MINERAL RESOURCES AND ORE RESERVES

2.4.3 TECHNICAL DETAIL

2. REVIEW OF OPERATIONS (continued)

2.5. APPENDICES: ORE RESERVE AND MINERAL RESOURCE ESTIMATE CHECKLISTS

Appendix 1: Checklist of Assessment and Reporting Criteria- Fossey Mineral Resource and Ore Reserve Estimate

2. REVIEW OF OPERATIONS (continued)

2. REVIEW OF OPERATIONS (continued)

GREENWING RESOURCES LTD Annual Report 2010